Q4 2023 Eastern Bankshares Inc Earnings Call

[music].

Hello, and welcome to the Eastern Bancshares, Inc. Fourth quarter 2023 earnings Conference call.

Speaker Change: Today's call will include forward looking statements.

Speaker Change: Statements about eastern's future financial and operating results.

Management: Business strategies and plans as well as other opportunities and potential risks that management foresees.

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

Management: And are subject to risks and uncertainties that may cause actual results or the timing of events to differ materially from the views expressed today.

Management: More information about such risks and uncertainties as set forth under the caption forward looking statements in the earnings press release as well as under risk factors section and other disclosures in the company's periodic filings with the Securities and Exchange Commission.

Management: Forward looking statements made during this call represent managements views and estimates as of today.

Management: And the company undertakes no obligation to update these statements as a result of new information of future events.

Management: During the call. The company will also discuss both GAAP and certain non-GAAP financial measures.

Management: For a reconciliation of GAAP to non-GAAP financial measures. Please refer to the company's earnings press release, which can be found at Investor day Eastern Bank Dot Com. Please note. This event is being recorded all lines that are placed on mute to prevent any background noise.

Management: 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 on the telephone keypad. If you would like to withdraw your question Press Star followed by the number two thank you I would now like to turn the conference over to Bob Rivers share and feel please go ahead.

Bob Rivers: Thank you Julie good morning, everyone and thank you for joining our fourth quarter earnings call I Hope in 2024 is off to a good start.

Bob Rivers: With me today is Jim Fitzgerald, and chief administrative and Chief Financial Officer.

Review our financials.

As I reflect on the year 2023, it was a year of strategic repositioning for Easter.

Jim Fitzgerald: Yeah, well in navigating uncertain environment.

While remaining focused.

Jim Fitzgerald: We have emerged from 2020 through better and stronger despite all the years challenges I believe we are well positioned for success in 2004 and beyond.

Jim Fitzgerald: As we entered 2023 eastern and all banks are facing a big challenge with higher interest rates changing customer preferences, which placed a greater emphasis on liquidity and general economic headwinds as we all know these conditions led to the failures of a few U S banks, marking a very tumultuous time for our industry.

Jim Fitzgerald: We responded quickly and boldly to this environment by restructuring our first.

Bob Rivers: Restructuring our securities portfolio in the first quarter the sale allowed us to immediately improve both our funding position and our earnings outlook.

Bob Rivers: We look back at this transaction, we are very pleased with the outcomes and very glad to get it early when the industry headwinds became apparent.

Bob Rivers: After the securities repositioning.

Jim Fitzgerald: We move forward to sell our insurance agency business.

Jim Fitzgerald: <unk> insurance group is two was a very difficult decision as eastern insurance has been a core part of Easter and a significant piece of our culture.

Jim Fitzgerald: Transaction, which closed in the fourth quarter exceeded our expectations evaluation premium was very significant and the transactions further strengthened our financial foundation with enhanced liquidity and capital.

Jim Fitzgerald: This transaction also allowed us to think opportunistically about the future.

While we were working on the insurance sale, we were able to.

Bob Rivers: Come to an agreement with Denis Sheahan in the Cambridge Bancorp Board on the merger we announced in September.

Denis Sheahan: The merger with Cambridge meets all of our acquisition criteria and powerful ways. It is an in market merger with an extremely attractive partner that we know well and have long respected for their strong banking franchise and leading wealth management platform.

Bob Rivers: Combination strengthens our market position in core markets solidifies, our leading position among banks headquartered in the greater Boston area more than doubles, our wealth business and significantly enhances our financial performance metrics.

Bob Rivers: As a result of these strategic transactions, we entered 2024 with great optimism strength and excitement for our future. Although we recognize we need to finish the job and obtained both shareholder and regulatory approval for the merger. We believe we are on track for both and look forward to closing early in the second quarter.

Jim Fitzgerald: As Jim will detail, we expect the first half of 2024, he be focused on the preparation closing and banking conversion of Cambridge.

Jim Fitzgerald: The strategic benefits of the transaction will be clear in our second half results when the noise settles down. This is very exciting for us when we went public in 2020. Our goal is to deploy the capital raised in ways that would allow us to generate very competitive returns and build a leading independent Boston banking franchise.

Jim Fitzgerald: We are confident the second half of 2024 will demonstrate success.

Jim Fitzgerald: Both these ambitions and we look forward to communicating our updates and results along the way.

Jim: The differences between the start of 2023 and that a 2024, our vivid contrast.

Jim: Very much look forward to executing on all of our plants with Cambridge as our partner and are confident that we will achieve the financial targets. We laid out back in September Jim will go through those in more detail shortly.

Jim: As I turn it over to Jim to discuss all of this in more detail I offer my analyst gratitude and appreciation for our dedicated colleagues at eastern for persevering through one of the busiest and most stressful years of our careers, but nonetheless, one of the most successful at Easter as we better position the company financially and strategically.

Jim Fitzgerald: Through their extraordinary efforts in so many ways. They repeatedly demonstrated unfailing support for our customers partners and each other through often challenging economic circumstances, while putting us in a position for what we believe will be a very successful 2024.

Jim: I'd also like to.

Jim Fitzgerald: Again recognize our former eastern insurance colleagues as you can see from our financial results. The value that was created by their hard work over a long period of time resulted in exceptional valuation for their business and gain for our shareholders. We are confident that a J Gallagher is a great employer for our former colleagues at east.

Jim: <unk> and we wish them, the very best and now I will turn it over to Jim.

Great. Thank you Bob and good morning, everyone.

Jim: As Bob mentioned, the fourth quarter closed a very busy year for us with the securities repositioning in early 2023, the sale of eastern insurance late in the year.

Jim: The announcement of the merger with Cambridge in September.

Jim: Sale of Eastern insurance closed in the fourth quarter and is included in our results. It had a very large and positive impact with a gain of $295 million after tax which led to improved capital ratios. The net cash proceeds of about $500 million had a positive impact on our liquidity position as well.

Denis Sheahan: All in all we continue to be pleased with the execution of the transaction, which exceeded all of our expectations.

In addition to the gain and the movement of insurance results to discontinued operations Q4 had some additional noise with the FDIC special assessment of $10 8 million and some higher compensation expenses I will go through those through my remarks.

Operator: Hello, and welcome to the Eastern Bank Shares quarter. Earnings, This call would include a look at the state of Eastern's future financial and operational, business strategies, and well as other opportunities and potential risks that man, working reflect management and are subject to risk and uncertainty, Stamikowsky, and the timing of events to differ maturely from the views expressed. Information about such risks and uncertainties is set forth under the caption for the King Statement, earnings press release, as well as in the RISK Factor, and Securities and Exchange Commission, Any forward-looking statements made during this call represent management's estimates as a whole, and the company undertakes no obligation to update this paper as a result of new information or future events.

Denis Sheahan: First I'll touch on some highlights of the quarter.

Denis Sheahan: Net income for the quarter was $318 $5 million or $1 95 per diluted share and was driven by the gain on the insurance transaction of $295 million, which is slightly higher than we projected at the time of the announcement back in September.

Denis Sheahan: The transaction improved our TCE ratio by over three percentage points and our CET one ratio by two five percentage points from Q3.

Denis Sheahan: The combination of the cash proceeds from the sale and strong deposit performance in the quarter allowed us to reduce our brokered deposits and FH there'll be advances by $1 billion.

Denis Sheahan: And we ended the quarter with a nominal amount of wholesale funding.

Denis Sheahan: As I mentioned deposit performance was stronger in the quarter than we had expected and better than the prior couple of quarters.

Operator: During the call, the company will also discuss both GAAP and certain non-GAAP financial measures, the reconciliation of GAAP to the non-GAAP financial measure, and please refer to the company's earnings. I found that and registered that Eastern Bank back... This event is being recorded, lines have been placed on mute to prevent any background noise. This will be a question and answer session. If you would like to ask a question during this time, followed by the number one on the telephone, If you'd like to withdraw your question, press the star followed by the number.

Denis Sheahan: Excluding brokered deposits are core deposits increased by over $500 million in the quarter. We continued to see migration out of lower cost accounts into higher cost but at a.

Denis Sheahan: Lower rate in the prior quarters.

Loan growth continues to be slow primarily due to market conditions. Although we have had a cautious approach while the environment has stabilized.

Denis Sheahan: Loan growth in the quarter was 115% on an annualized basis.

Denis Sheahan: Although we experienced an increase in nonperforming loans and charge offs in the quarter overall levels continued to be modest.

Julie: Thank you. Rivers, Chairperson and CEO. Thank you, Julie.

Denis Sheahan: We've had very good success in resolving problems as they come up of the three office loans that moved to NPL status in the third quarter, which we had mentioned as part of our Q3 results.

Bob Rivers: Good morning, everyone, and thank you for joining our fourth quarter earnings call. I hope your year 2024 is off to a good start. With me today is Jim Fitzgerald, our Chief Administrative and Chief Financial Officer, who will review our financials in a few minutes. As I reflect on the year 2023, it was a year of strategic repositioning for East, to remain nimble in navigating in a certain environment while remaining focused on our strategic priorities. We have emerged from 2023 better and stronger despite all the year's challenges and believe we are well positioned for success in 2024 and beyond, as we answer 2020. Eastern and Allbacks were facing a big challenge with higher interest rates, changing customer preferences, which placed a greater emphasis on liquidity, and general economic headway.

Denis Sheahan: One property has been sold one is under contract for sale and what is currently being marketed.

Denis Sheahan: And additional new NPL in Q4 is also undergoing a sales process of the collateral and is under contract for sale.

Denis Sheahan: Sales prices are in line with our expectations and in line with our provision levels in the third and fourth quarters.

Denis Sheahan: Our board approved a dividend of <unk> 11 per share that is payable on March 15th to shareholders of record on March 1st 2024.

Turning to the balance sheet assets were essentially unchanged from the third quarter at $21 1 billion.

Denis Sheahan: Loans were up slightly by $50 million to $14 billion in overall deposits were up by $170 million to $17 6 billion.

Bob Rivers: As you all know, these conditions led to the failures of a few U.S. banks, marking a very tumultuous time for our industry. We responded quickly and boldly to this environment by restructuring our securities portfolio in the first quarter. The sale allowed us to immediately improve both our funding position and our earnings outlook. When we look back at this transaction, we are very pleased with the outcome and very glad we did it early, when the industry headwinds became apparent after the security's repositioning. We move forward to sell our insurance agency. This, too, was a very difficult decision, as Eastern Insurance had been a core part of Eastern and a significant piece of our culture.

Denis Sheahan: As mentioned, we were able to reduce our wholesale funds in the quarter by over $1 billion and our cash position was up $84 million to $700 million.

Denis Sheahan: Securities increased by $140 million due to the impact of lower rates and improve and an improved valuation, which was partially offset by principal runoff.

Shareholders' equity was up by $528 million, primarily due to the insurance gain.

Denis Sheahan: Earnings and the improvement in OCI.

Denis Sheahan: We're very pleased with where the balance sheet ended the year I think our capital and liquidity should provide us with a very with a competitive advantage over time.

Bob Rivers: The transaction, which closed in the fourth quarter, exceeded our expectations. The valuation premium was very significant, and the transaction further strengthened our financial foundation with enhanced liquidity and capital. It also allowed us to think opportunistically about the future. While we were working on the insurance sale, we were able to come to an agreement with Dennis Sheehan and the Cambridge Bank Corp board on the merger we announced in September. The merger with Cambridge meets all of our acquisition criteria in powerful ways.

Denis Sheahan: As mentioned and as was expected the fourth quarter earnings had a lot of noise. The insurance gain was recorded in discontinued operations and was $295 million after tax.

Denis Sheahan: This led to net income of $318 5 million or.

Or $1 95 per diluted share.

Denis Sheahan: For the year the insurance gain offset this I'm sorry for the year the insurance gain offset the securities loss.

Bob Rivers: It is an in-market merger with an extremely attractive partner that we know well and have long respected for their strong banking franchise and leading wealth management platform. The combination strengthens our market position in core markets, solidifies our leading position among banks headquartered in the greater Boston area, more than doubles our wealth business, and significantly enhances our financial performance. As a result of these strategic transactions, we entered 2024 with great optimism, strength, and excitement for our future. Although we recognize we need to finish the job and obtain both shareholder and regulatory approval for the merger, we believe we are on track for both and look forward to closing early in the second quarter. As Jim will detail, we expect the first half of 2024 to be focused on the preparation, closing, and banking conversion of Cambridge, but the strategic benefits of the transaction will be clear in our second half results when the noise settles down. It is very exciting.

Denis Sheahan: Earlier in the year and knit and net income was $232 2 million or $1 43 per diluted share.

Net interest income was $133 3 million in the fourth quarter down from $137 2 million in the prior quarter.

Denis Sheahan: The reduction of $3 9 million in the quarter was due to higher interest expense the reduction quarter to quarter was two 8% and overall net interest income was slightly above last quarter's guidance.

Denis Sheahan: The FTE net interest margin was $2 six 9% down from $2 77 in the third quarter. The decline in the margin was due to a faster increase in funding costs of 20 basis points.

Bob Rivers: While earning assets were up one basis point. The primary reason loan yields were only up one basis point quarter to quarter with some interest recoveries that were recorded in Q3 and made our commercial loan yields higher than it would otherwise have been.

Bob Rivers: When we went public in 2020, our goal was to deploy the capital raised in ways that would allow us to generate very competitive returns and build the leading independent Boston banking franchise. We are confident the second half of 2024 will demonstrate success in our Philippines ambitions, and we look forward to communicating our updates and results along the way. The differences between the start of 2023 and that of 2024 are a vivid contrast.

Bob Rivers: The loan loss provision was $5 2 million and I'll cover reserve levels, shortly when I get to asset quality.

Bob Rivers: Operating noninterest income.

Bob Rivers: Was $21 8 million in the quarter up from 27 in the $20 7 million in the third quarter as.

Bob Rivers: As we discussed on the last call. The third quarter included some small losses on sales of commercial loans.

Bob Rivers: Excluding that all operating line items were in line with the prior quarter.

Bob Rivers: I very much look forward to executing on all of our plans with Cambridge as our partner and are confident that we will achieve the financial targets we laid out back in September. Jim will go through those in more detail shortly. As I turn it over to Jim to discuss all of this in more detail, I offer my endless gratitude and appreciation for our dedicated colleagues at Eastern for persevering through one of the busiest and most stressful years of our careers, but nonetheless one of the most successful at Eastern as we better position the company financially and strategically. Through their extraordinary efforts in so many ways, they repeatedly demonstrated unfailing support for our customers and community partners, and each other, through often challenging economic circumstances, while I'd also like to again recognize our former Easton Insurance colleagues. As you can see from our financial results, the value that was created by their hard work over a long period of time resulted in an exceptional valuation for their business and gain for our shareholders. We are confident that A.J.

Bob Rivers: Noninterest expense was $121 million in the quarter and $117 4 million on an operating basis.

Bob Rivers: Included in operating expenses were $10 $8 million special assessment from the FDIC and $4 5 million of the operating portion of salary and employee benefits that are higher than where we expect them to be going forward I'll provide more comments on our expenses going forward when I get to the outlook.

Denis Sheahan: As I mentioned in prior quarters, our tax rate was impacted by the securities loss and the insurance gain the tax expense in the quarter on the operating results was $2 3 million.

Bob Rivers: Yeah.

Bob Rivers: We experienced a slight increase in nonperforming loans in the quarter from 47 5 million to $52 6 million.

As a percentage of loans Npls move modestly from 34 basis points to 38 basis points.

Denis Sheahan: Net charge offs in the quarter were 11 4 million or 32 basis points.

Denis Sheahan: With essentially no net charge offs in the first three quarters of the year full year net charge offs were nine basis points.

Jim Fitzgerald: Gallagher is a great employer for our former colleagues at Easton Insurance, and we wish them the very best. Thank you, Bob, and good morning, everyone. As Bob mentioned, the fourth quarter closed a very busy year for us with the securities repositioning in early 2023, the sale of Eastern Insurance late in the year, and the announcement of the merger with Cambridge in September. The sale of Eastern Insurance closed in the fourth quarter and is included in our results. It had a very large and positive impact, with a gain of $295 million after tax, which led to improved capital ratios. The net cash proceeds of about $500 million had a positive impact on our liquidity position as well. All in all, we continue to be pleased with the execution of the transaction, which exceeded all of our expectations. In addition to the gain and the movement of insurance results to discontinued operations, Q4 had some additional noise with the FDIC special assessment of $10.8 million and some higher compensation expense. I will go through those in my remarks.

Denis Sheahan: Provision expense was $5 2 million, bringing the allowance for loan losses at the end of the quarter to $149 million or one point <unk>, 7% of total loans and the allowance covered nonperforming loans by nearly three times.

Denis Sheahan: We've been very active in resolving problem loans of the three office Npls from the third quarter, all are being resolved by a property sales.

Denis Sheahan: One was sold in the fourth quarter.

Denis Sheahan: One is under contract and expected to sell this quarter and the final one is being marketed.

Denis Sheahan: Additionally, we had one new non office NPL in the fourth quarter that we also expect to resolve this quarter by a property sale.

All of the sales prices have been in line with our expectations and in line with the provisions or charge offs, we recorded in Q3 and Q4.

Denis Sheahan: We updated our office portfolio page and added some more disclosure on our multifamily in shared national credit portfolios in the presentation.

Jim Fitzgerald: First, I'll touch on some highlights of the quarter. Net income for the quarter was $318.5 million, or $1.95 per diluted share, and was driven by a gain on the insurance transaction of $295 million, which is slightly higher than we projected at the time of the announcement back in September. The transaction improved our TCE ratio by over 3 percentage points and our CET1 ratio by 2.5 percentage points from Q3. The combination of the cash proceeds from the sale and strong deposit performance in the quarter allowed us to reduce our broker deposits and FHLB advances by $1 billion, and we ended the quarter with a nominal amount of wholesale funding. As I mentioned, deposit performance was stronger in the quarter than we had expected and better than the prior couple of quarters, including broker deposits or core deposits which increased by over $500 million in the quarter.

We appreciate the input we received from a variety of investors and analysts and hope that the added information is helpful.

Denis Sheahan: We provide the outlook on two pages one for eastern pre merger and then a page specific to Cambridge.

Denis Sheahan: Eastern on a standalone basis, we expect the first and second quarters of 2024 to be similar to Q4 of 2023.

Denis Sheahan: We experienced better deposit performance in Q4 than we anticipated and we expect that to help stabilize net interest income around current levels.

Denis Sheahan: We could see some modest margin declines in early 2024, but believe the margin levels are stabilizing as well.

Denis Sheahan: If we do see some fed rate reductions in 2024 that will benefit both net interest income and the margin, but that will have a greater impact in late 2024, and the full year of 2025.

Denis Sheahan: We expect that the credit picture this year will be similar to Q3 and Q4 of 2023.

Jim Fitzgerald: We continue to see migration out of lower cost accounts into higher costs, but at a slower rate than the prior quarters. Loan growth continues to be slow primarily due to market conditions, although we have had a cautious approach while the environment has stabilized. Loan growth in the quarter was 1.5% on an annualized basis. Although we experienced an increase in non-performing loans and charge-offs in the quarter, overall levels continue to be modest. We've had very good success in resolving problems as they come up.

Denis Sheahan: We expect trends to start to normalize and that will lead to increases in nonperforming loans.

Denis Sheahan: We expect these to be contained.

Denis Sheahan: We believe our active management of loans as they become more vulnerable will help us work through the resolution process like what we have seen over the last two quarters.

Denis Sheahan: On the expense front as I mentioned certain expenses were elevated in Q4 and will not recur going forward. We expect to start the first quarter with a run rate of operating expenses between 102 on $103 million, which is in line with the guidance of last quarter.

Jim Fitzgerald: Of the three office loans that moved to NPL status in the third quarter, which we had mentioned as part of our Q3 results, one property has been sold, one is under contract for sale, and one is currently being marketed. An additional new NPL in Q4 is also undergoing a sales process for the collateral and is under contract for sale. The sales prices are in line with our expectations and in line with our provision levels in the third and fourth quarters. Our board approved a dividend of $0.11 per share that will be payable on March 15th to shareholders of record on March 1st, 2024. Turning to the balance sheet, assets were essentially unchanged from the third quarter at $21.1 billion.

Denis Sheahan: However, we have two major projects. In addition to Cambridge that we're completing in the first half of 2024 that will create long term benefits, but will cause elevated expenses in the first and second quarter.

Bob Rivers: First of these is we are moving our corporate headquarters in Boston.

Bob Rivers: The themes are as you would expect we're moving to less space with a lower aggregate cost than what we currently have.

<unk> also modern and well designed and will be more aligned with our hybrid working model.

Denis Sheahan: We move in the early early in the second quarter and will have elevated occupancy expense in Q1, and Q2 as we pay for moving costs and the lease overlap.

Jim Fitzgerald: Loans were up slightly by $50 million to $14 billion, and overall deposits were up by $170 million to $17.6 billion. As mentioned, we were able to reduce our wholesale funds in the quarter by over $1 billion, and our cash position was up $84 million to $700 million. Securities increased by $140 million due to the impact of lower rates and improved valuation, which was partially offset by principal runoff. Shareholders' equity is up by $528 million, primarily due to the insurance gain, earnings, and the improvement in AOCI.

Denis Sheahan: We are also updating our online and mobile banking platforms, and we will gradually be transitioning customers in Q1 and Q2.

Denis Sheahan: We're very excited about the upgrade but we'll have some overlap of cost as we transition the product.

Denis Sheahan: The impact of these is expected to be $3 million. Each in the first two quarters of 2024 for a total of approximately $6 million both projects will be completed by the end of the second quarter.

Denis Sheahan: Although these projects will cause some elevated costs in the short term, we expect both to provide long term benefits.

Denis Sheahan: We expect the tax rate to normalize in 2024, and the 22% to 23% range.

Jim Fitzgerald: We're very pleased with where the balance sheet ended the year. I think our capital and liquidity should provide us with a competitive advantage over time. As mentioned, and as was expected, the fourth-quarter earnings had a lot of noise. The insurance gain was recorded in discontinued operations and was $295 million after tax.

Denis Sheahan: Turning to the outlook with Cambridge, we continue to be very excited about the opportunity and confident the combined franchise will be a market leader in all respects.

Denis Sheahan: As a reminder, the SEC declared our S. Four effective on January 12, and this shareholder meetings are set for February 28th.

Jim Fitzgerald: This led to net income of $318.5 million, for $1.95 per diluted share, for the year. The insurance gain offset the securities loss earlier in the year, and net income was $232.2 million, or $1.43 per diluted share. Net interest income was $133.3 million in the fourth quarter, down from $137.2 million in the prior quarter. The reduction of $3.9 million in the quarter was due to higher interest expense; the reduction quarter-to-quarter was 2.8 percent, and overall net interest income was slightly above last quarter's guidance. The FTE net interest margin was 2.69%, down from 2.77% in the third quarter. The decline in the margin was due to a faster increase in funding costs of 20 basis points, while earning assets were up one basis point.

Denis Sheahan: We continue to work with our regulators and expect to provide updates as we move forward.

Denis Sheahan: Along with the Cambridge team, we've made significant progress in planning for the integrations.

Denis Sheahan: Banking integration is planned for the second quarter and the wealth integration is scheduled for Q3.

Denis Sheahan: We believe both conversion plans are tracking very well.

Denis Sheahan: We have spent considerable time reviewing and updating all of the financial information we outlined at the announcement last September and we provide an update on slide 19.

Denis Sheahan: As you can see we have confidence in our ability to meet or exceed just about all of the key financial metrics.

Denis Sheahan: And are still working through our capital management planning.

Denis Sheahan: Pro forming our pro forma operating metrics with Cambridge are significant improvements to our Standalone financial metrics.

Denis Sheahan: Confident that the combination with Cambridge will provide us with a richer more profitable business mix and our larger operating platform that will allow us to accelerate the financial improvements we talked about when we went public in 2020.

Jim Fitzgerald: The primary reason loan yields were only up one basis point, quarter to quarter, was some interest recoveries that were recorded in Q3 and made our commercial loan yield higher than it would otherwise have been. The loan loss provision was $5.2 million, and I'll cover reserve levels shortly when I get to asset quality. Operating non-interest income was $21.8 million in the quarter, up from $20.7 million in the third quarter. As we discussed on the last call, the third quarter included some small losses on sales of commercial loans, excluding that all operating line items were in line with the prior quarter. Non-interest expense was $121 million in the quarter and $117.4 million on an operating basis.

In particular, the expected improvement in the net interest margin and run rate earnings are very significant and put at eastern a position at the end of 2024 that would have taken a number of years to deliver as a standalone entity.

Denis Sheahan: We realized we need to execute well and that it will take until the second half of the year to start delivering these results, but we are comfortable with the projections and very confident in our financial and strategic direction.

Denis Sheahan: Thank you and truly we're ready to open up for questions.

Denis Sheahan: Thank you at this time I would like to remind everyone in order to ask a question. Please press the number one on your telephone keypad will pause for a moment to compile the Q&A roster.

Jim Fitzgerald: Included in operating expenses were the $10.8 million special assessment from the FDIC and $4.5 million of the operating portion of salary and employee benefits that are higher than where we expect them to be going forward. I'll provide more comments on our expenses going forward when I get to the outlook. As I mentioned in prior quarters, our tax rate was impacted by the securities loss and the insurance gain. The tax expense in the quarter on the operating results was $2.3 million.

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

Denis Sheahan: Good morning.

Mark Thomas Fitzgibbon: Mark here.

Mark Thomas Fitzgibbon: Sounds like you guys are pretty confident that you'll get approval in early second quarter on the Cambridge deal.

Mark Thomas Fitzgibbon: Given that other banks have been waiting much longer for approvals.

Mark Thomas Fitzgibbon: Gives you that level of confidence.

Mark Thomas Fitzgibbon: Sure Mark.

Mark Thomas Fitzgibbon: I am sorry, joking and hopefully you'll lap with me I anticipated that to be your first question. So thank you.

I think on a serious note.

Mark Thomas Fitzgibbon: We have very strong communications and relationships with our regulators. They obviously have a job to do well.

Jim Fitzgerald: We experienced a slight increase in non-performing loans in the quarter from $47.5 million to $52.6 million. As a percentage of loans, NPLs moved modestly from 34 basis points to 38 basis points. Net charge-offs in the quarter were 11.4 million, or 32 basis points. With essentially no net charge-offs in the first three quarters of the year, full-year net charge-offs were nine basis points. Provision expense was $5.2 million, bringing the allowance for loan losses at the end of the quarter to $149 million, or 1.07 percent of total loans, and the allowance covered non-performing loans by nearly three times.

Mark Thomas Fitzgibbon: We've supplied all the information both in the initial application in on all the follow ups.

Mark Thomas Fitzgibbon: And we understand that they have a job to do and but we'll continue to communicate with them as I said in previous calls. This timeline is very comparable and similar to what we experienced in the century transaction and as we have further updates we will provide them.

Mark Thomas Fitzgibbon: Okay, and then I wondered if you could possibly give us an updated tangible book value estimate.

Bob Rivers: With Cambridge, obviously, given the movement, we've had in rates since the announcement.

Bob Rivers: You would think that the tangible book value would be much higher than the 2016 original estimate any any comments there.

Bob Rivers: Sure.

Bob Rivers: Yes.

Jim Fitzgerald: We've been very active in resolving problem loans. Of the three office NPLs from the third quarter, all are being resolved by a property sale. One was sold in the fourth quarter; one is under contract and expected to sell this quarter, and the final one is being marketed. Additionally, we had one new non-office NPL in the fourth quarter that we also expect to resolve this quarter via property sales. All of the sales prices have been in line with our expectations and in line with the provisions of charge-offs we recorded in Q3 and Q4. We updated our office portfolio page and added some more disclosure on our multifamily and shared national credit portfolios in the presentation.

Bob Rivers: I'd say this mark.

Bob Rivers: As you as you would expect and would now we've updated all of our analysis continuously since September spent.

We spent a lot of time using year end data. The 12 31, both for marketing our loans to market and and all of the various assets and liabilities.

At this point I'm not sure it makes sense to provide some of that because rates have changed since then that rates will continue to change.

Bob Rivers: We do anticipate this question and understand the interest in it and I think what we are.

Bob Rivers: Say on that is let's think about how best to provide some updates along the way again, we're a little bit nervous because things are going to change between now and closing we don't want certain numbers to be over interpreted but let us come back on how we could.

Jim Fitzgerald: We appreciate the input we received from a variety of investors and analysts and hope that the added information has helped. We provide the outlook on two pages, one for Eastern, pre-merger, and then a page specific to Cambridge. For Eastern on a standalone basis, we expect the first and second quarters of 2024 to be similar to Q4 of 2023. We experienced better deposit performance in Q4 than we anticipated, and we expect that to help stabilize net interest income around current levels. We could see some modest margin declines in early 2024, but we believe the margin levels are stabilizing as well. If we do see some Fed rate reductions in 2024, that will benefit both net interest income and the margin, but that will have a greater impact in late 2024 and the full year 2025.

Bob Rivers: Help out with that but also provided in a way that we think makes sense.

Denis Sheahan: Okay, and then wondering if you could share any thoughts around sort of growth for loans.

Denis Sheahan: Excluding the impact of Cambridge and also fees.

Denis Sheahan: Sure.

Denis Sheahan: I think on the start with loans.

It continues to be a challenging market for loan growth.

Denis Sheahan: We don't see that changing in the next quarter or two.

Denis Sheahan:

Denis Sheahan: We're very confident that our lending teams both here at eastern and when we combined with Cambridge, theyre going to be market leaders and should be well positioned but the loan growth that we had in the fourth quarter, which was call. It one 5% so very much in line with the low single digits that we've been talking about for the last couple of quarters and I think as we.

Denis Sheahan: Look out a couple of quarters. So now that's the same levels, we would anticipate.

Jim Fitzgerald: We expect that the credit picture this year will be similar to Q3 and Q4 of 2023. We expect trends to start to normalize, which will lead to increases in non-performing loans, but we expect these to be contained. We believe our active management of loans as they become more vulnerable will help us work through the resolution process as we have seen over the last two quarters. On the expense front, as I mentioned, certain expenses were elevated in Q4 and will not recur going forward. We expect to start the first quarter with a run rate of operating expenses between $102 and $103 million, which is in line with the guidance for the last quarter.

Denis Sheahan: One of our jobs here financially is to get the balance sheet in as good a position as possible and we feel like we're making very good strides there. So when the market does turn we will be.

Denis Sheahan: Very capable of going in as I said, we have very strong lending teams, but at this point that low single digits is what we would continue to guide to.

Denis Sheahan: And then fees anything our fees.

Denis Sheahan: Obviously the.

Denis Sheahan: Fixed store there is the wealth fees that are coming over from Cambridge, and really changes our income statement in a very positive way.

Denis Sheahan: Way from wealth, which I think was your specific question there is.

Denis Sheahan: Very what I would consider low single digit growth in those other accounts deposit services et cetera.

Jim Fitzgerald: However, in addition to Cambridge, we have two major projects that we are completing in the first half of 2024 that will create long-term benefits but will cause elevated expenses in the first and second quarters. First of these is moving our corporate headquarters to Boston. Their themes are, as you would expect, we're moving to less space with a lower aggregate cost than what we currently have. The space is also modern and well-designed and will be more aligned with our hybrid working model.

Denis Sheahan: Away from wealth Theres not that much going on in those other line items.

Denis Sheahan: Thank you.

Denis Sheahan: Thanks Mark.

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

Laurie Hunsicker: Yeah, Hi, Thanks, good morning, all.

Laurie Hunsicker: Good morning Laurie.

Laurie Hunsicker: If we could just go back to sort of pro forma the deal maybe a different way to ask it is.

Laurie Hunsicker: Help us to think about pro forma in <unk>.

Laurie Hunsicker: Paul.

Laurie Hunsicker: Sure.

Jim Fitzgerald: We move early in the second quarter, and we'll have elevated occupancy expense in Q1 and Q2 as we pay for moving costs and the lease overlap. We are also updating our online and mobile banking platforms and will gradually be transitioning customers in Q1 and Q2. We're very excited about the upgrade, but we'll have some overlap of costs as we transition the product. The impact of these is expected to be three million dollars each in the first two quarters of 2024 for a total of approximately six million dollars. Both projects will be completed by the end of the second quarter. Although these projects will cause some elevated costs in the short term, we expect both to provide long-term benefits. We expect the tax rate to normalize in 2024 in the 22 to 23% range.

Laurie Hunsicker: So I think I may give a similar answer to mark So Laurie as you know.

Laurie Hunsicker: The announcement was September 19th.

Laurie Hunsicker: I think the rates that were used for that where September 15, something very close to that.

Laurie Hunsicker: Rates are lower rates were lower at 12 31 than they were in.

Laurie Hunsicker: At that time period in September and the things that you would expect to happen did happen right. The mark to market was a little bit lower that reduced the amount of the intangibles. Obviously since then rates have moved up a little bit and.

Laurie Hunsicker: It's not something you can track every day, there's a process involved there I think.

Denis Sheahan: <unk> to the spirit, we set with Marc I understand the question and we want to be helpful. There little reluctant to put information out that's going to be scale by the time you get it and then change even further between now and closing, but we'd be very open to thinking about.

Bob Rivers: Sharing things and providing information that would be helpful. Just want to make sure. It doesn't sort of create unintended consequences as I said by the time I'm a little bit afraid by the time, we get to information, it's going to be scale, which would be the case. If we were giving you a 12 31 numbers, so but very happy to think about that and come back.

Jim Fitzgerald: Turning to the outlook with Cambridge, we continue to be very excited about the opportunity and confident the combined franchise will be a market leader in all respects. As a reminder, the SEC declared our S-IV effective on January 12, and the shareholder meetings are set for February 28. We continue to work with our regulators and expect to provide updates as we move forward. Along with the Cambridge team, we've made significant progress in planning for the integration. Banking integration is planned for the second quarter, and the wealth integration is scheduled for Q3. We believe both conversion plans are tracking very well.

Jim Fitzgerald: Within a short period of time to see what we can do.

Okay. Okay. So I guess, probably youre going to have a similar answer that in terms of.

Thinking about accretion impact on net interest income and margin.

Jim Fitzgerald: Yes, I mean, it's definitely different.

Jim Fitzgerald: I appreciate all of your <unk>.

Jim Fitzgerald: Questions and interest on that and we are thinking through how we want to ultimately disclose all of that so your questions are very helpful that weigh on your insights.

Jim Fitzgerald: We have spent considerable time reviewing and updating all of the financial information we outlined in the announcement last September, and we provide an update on slide 19. As you can see, we have confidence in our ability to meet or exceed just about all of the key financial metrics and are still working through our capital management planning. Pro forma operating metrics with Cambridge are significant improvements to our stand-alone financial metrics. We are confident that the combination with Cambridge will provide us with a richer, more profitable business mix and a larger operating platform that will allow us to accelerate the financial improvements we talked about when we went public in 2020. In particular, the expected improvement in the net interest margin and run rate earnings is very significant and would put Easter in a position at the end of 2024 that would have taken a number of years to deliver as a stand-alone entity.

Jim Fitzgerald: So we're thinking through that and we'll come back on that as well that would be part of the total answer.

Jim Fitzgerald: Okay, and then just to clarify when you talked in your comments about it.

Bob Rivers: Modest margin decline for the first half of 2024 that was obviously exclusive of accretion income.

Bob Rivers: Is that correct that was that eastern.

So that definitely yes, Laurie that was the comments I was making there were stable net interest income and stabilizing margin at eastern pre closing.

Okay. Okay.

Laurie Hunsicker: Okay. That's helpful and then can.

Laurie Hunsicker: Can you just help us think about.

Laurie Hunsicker: And maybe what's the spot margin for the month of December.

Laurie Hunsicker: Same as the quarter to six nine.

Laurie Hunsicker: Okay, and then what was the timing in the quarter in terms of the reduction in borrowings and I think tobey.

Laurie Hunsicker: Robert and I think with that yes, when in the quarter.

Jim Fitzgerald: We realize we need to execute well and that it will take until the second half of the year to start delivering these results, but we are comfortable with the projections and very confident in our financial and strategic direction. Thank you, and Julie, we're ready to open up for questions. Thank you.

Laurie Hunsicker: Yeah.

Jim Fitzgerald: One lumpy item lumpy is that not a technical term, obviously, but the AIG proceeds were call. It November <unk>.

Denis Sheahan: That was approximately $500 million, so that was a component of it the other day positive.

Denis Sheahan: Other reductions were really due to deposit inflows that took place throughout the quarter.

Operator: At this time, I would like to remind everyone, in order to ask a question, please press the number one on your telephone keypad. We'll pause just for a moment to compile the Q&A. Your first question comes from..., from Piper Sandler. Please go ahead. Good morning.

Okay, Great and then just going back to U R.

Denis Sheahan: The class B office non performers.

Denis Sheahan: Can you just yet.

Denis Sheahan: The four credits can you just take us through the one that was sort of what was the balance and then what ultimately ended up being the right down there.

Mark Thomas Fitzgibbon: Morning, Mark. It sounds like you guys are pretty confident that you'll get approval in the early second quarter on the Cambridge deal. Given that other banks have been waiting much longer for approvals, what gives you that level of confidence? True, Mark. I'm sort of joking, and hopefully, you'll laugh with me.

Denis Sheahan: The one under contract same thing the one being marketed whats the balance what's the what's the near line. If you could just break out the sports that we have that and then that the new one that came in is that also classy.

Denis Sheahan: Yeah. So let me there's a lot there let me try and go through slowly so I'm going to focus first on the the three non performers from last quarter that were office.

Bob Rivers: I anticipated that to be your first question, so thank you. I think, on a serious note, we have very strong communications and relationships with our regulators. They obviously have a job to do.

Denis Sheahan: And they were all in the financial district in Boston. So your memory is very good there.

Denis Sheahan: The one that sold.

Jim Fitzgerald: We've supplied all the information, both in the initial application and all the follow-ups. And we understand that they have a job to do, but we'll continue to communicate with them. As I said in previous calls, this timeline is very comparable and similar to what we experienced in the Century transaction. And as we have further updates, we'll provide them. And then I wondered if you could possibly give us an updated tangible book value estimate with Cambridge. Obviously, given the movement we've had in rates since the announcement, you would think that the tangible book value would be much higher than that 1016 original estimate. Tour, I would say this, Mark. As you would expect and would know, we have updated all of our analysis continuously since September. We spent a lot of time using year-end data, the 1231, both for marking the loans to market and all of the various assets and liabilities.

Denis Sheahan: What I can provide the information that was a $9 million loan the charge off was $4 million.

Denis Sheahan: And that closed in the fourth quarter.

Denis Sheahan: The one that's under contract for sale is a little bit of a smaller loan.

And we will provide the details on that when it actually closes.

The third office portfolio non performer from the third quarter as being marketed that's a slightly larger loan I don't remember that number the loan balance off the top of my head, but it's larger it's the largest of the three.

Denis Sheahan: The new nonperforming loan in Q4 was not an office property. It was just a commercial real estate loan.

It was approximately a $15 million loan then we do expect to resolve it this quarter.

Denis Sheahan: Okay. Okay, and then the three I guess you gave US you gave us.

Denis Sheahan: Last quarter $26 million.

Denis Sheahan: Was that.

Denis Sheahan: Was that 26 million net of the $4 million in charge offs.

Jim Fitzgerald: At this point, I am not sure it makes sense to provide some of that information because rates have changed since then, and rates will continue to change. We do anticipate this question and understand the interest in it. I think what we would say on that is let us think about how best to provide some updates along the way. Again, we are a little bit nervous because things are going to change between now and closing. We do not want certain numbers to be over-interpreted, but let us come back on how we could help out with that but also provide it in a way that we think makes sense. And then, wondered if you could share any thoughts around the sort of growth for loans, excluding the impact of Cambridge and also fees, tour. I think I'll start with loans.

Denis Sheahan: At that time it was growth. So the charge offs came later the $26 million was the principal balance out.

Denis Sheahan: Perfect great. Thanks, I'll leave it there.

Laura: Thanks, Laura.

Laura: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Laura: Your next question comes from Damon Delmonte from Kv W. Please go ahead.

Laura: Hey, good morning, everyone. Thanks for taking my question this morning.

Great Jim.

Damon Delmonte: Hey, Hi, just a question on expenses.

Damon Delmonte: Hey, Hi, just a question on expenses.

Damon Delmonte: I got the commentary on the first two quarters of the year, we will have an additional 3 million each for those two projects you have going on but when we look at the underlying base. I think you said it was like 100 to 103.

Damon Delmonte: What kind of.

Damon Delmonte: Growth are you expecting off of that base.

Jim Fitzgerald: It continues to be a challenging market for loan growth, but we see that changing in the next quarter or two. We're very confident that our lending teams, both here at Eastern and when we combine with Cambridge, are going to be market leaders and should be well positioned. But the loan growth that we had in the fourth quarter, which was called one and a half percent, is very much in line with the low single digits that we've been talking about for the last couple of quarters. And I think as we look out a couple of quarters from now, that's the same level as we'd anticipate. I think, you know, one of our jobs here at Financial is to get the balance sheet in as good a position as possible.

Damon Delmonte: Again, putting that the two items that to $3 million items aside.

Damon Delmonte: David So the first two quarters would be start at that level 100 to one of three pretty modest growth from there.

David So: In fact, very those would really be pretty close to run rates for the full quarter, obviously, Cambridge is coming in and Thats going to.

David So: Confused that a little bit but.

David So: If you annualize the 102 to 103 you'd be very close to the year end to the annualized number that we expect would expect without Cambridge.

David So: Got it okay. That's helpful.

David So: And then the commentary around the outlook for credit and.

David So: Kind of a more of a normalization.

Jim Fitzgerald: And we feel like we're making very good strides there. So when the market does turn, we'll be very capable of going. And as I said, we have very strong lending teams. But at this point, those low single digits is what we would continue to guide to. And then fees, anything? Fees, obviously, the big story there is the wealth fees that are coming over from Cambridge and really changing our income statement in a very positive way. Away from wealth, which I think was your specific question, there's what I would consider low single-digit growth in those other accounts, deposit services, et cetera.

David So: How would you characterize a normalized net charge offs year for you guys.

David So: [laughter].

I'm laughing.

David So: You've got a good backlog.

David So: A few years for that probably right yeah, no I think.

David So: And what we believe here is that.

David So: We were at very low level when the industry right. We're at very low levels for a long period of time, when we look at our current levels and let's just call it non performers.

David So: <unk>.

David So: 40 ish basis points, maybe maybe a touch higher than that and charge offs for the year of call. It nine to 10 basis points.

David So: We would expect both of those metrics to migrate up a little bit but in a contained way. We don't we don't see large increases in them.

Jim Fitzgerald: Away from wealth, there's not that much going on in those other line items. Thank you. Thanks, Mark. Your next question comes from Laurie Hunstaker, research partner. Please go ahead. Yeah, hi, thanks. Good morning. Morning, Lori.

David So: But they were at very low levels for a very long period of time and as you know the.

David So: The environment is clearly changing and and we would expect those to move upward, but again contained is the word we're using internally. So it's hard to give you a number.

Operator: If we could just go back to sort of the pro forma deal, maybe a different way to ask it is, can you help us to think about the pro forma? Tangible. Sure, so I think I may give a similar answer to Mark. So Laurie, as you know, the announcement was September 19th. I think the rates that were used for that were September 15th, or something very close to that; rates are lower. Rates were lower at 1231 than they were at that time period in September. And, you know, the things that you would expect to happen did happen, right?

But we don't see big increases there contained is a word I would say one more time.

David So: Got it okay.

David So: I think that's all that I had thank you very much.

David So: Thanks, Tim.

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

Well. Thank you for your interest and your questions and we look forward to sharing more with you.

Bob Rivers: During our next earnings call at the end of April.

Bob <unk>: Have a great day.

Bob <unk>: This concludes today's conference call you may now disconnect. Thank you.

Jim Fitzgerald: The mark to market was a little bit lower, which reduced the amount of the intangibles. Obviously, since then, rates have moved up a little bit. And, you know, it's not something you can track every day.

Jim Fitzgerald: There's a process involved there, but I think, you know, similar to the spirit we said with Mark, I understand the question, and we want to be helpful there. I'm a little reluctant to put information out that's going to be stale by the time you get it and then change even further between now and closing, but we'd be very open to thinking about sharing things and providing information that would be helpful. Just want to make sure it doesn't sort of create unintended consequences.

Bob <unk>: Hum.

Bob <unk>: Hum.

Bob <unk>: Hum.

Bob <unk>: Sure.

Bob <unk>: [music].

Jim Fitzgerald: As I said, I'm a little bit afraid, by the time we get you information, it's going to be stale, which, you know, would be the case if we were giving you 1231 numbers. So, but very happy to think about that and come back, you know, within a short period of time to see what we can do. Okay, okay. So I guess you're probably going to have a similar answer then in terms of thinking about accretion impact on net interest income and margin. Yes, I mean it's really different. We appreciate all of your questions and interest in that, and we are thinking through how we want to ultimately disclose all that, so your questions are very helpful in that way, and your insights, so we're thinking through that, and we'll come back on that as well. Okay, and then just to clarify, when you talked in your comments about, you know, modest margin decline for the first half of 2024, that was Is that correct? That was at Eastern, so definitely yes, Lori.

Jim Fitzgerald: The comments I was making there were stable net interest income and stabilizing margin at Eastern pre-closure. Gotcha. Okay. Okay. That's helpful. Can you just help us think about, um, or maybe what's the spot margin for the month of December? Same as the quarter, 2.69.

Jim Fitzgerald: And then what was the timing in the quarter in terms of the reduction in borrowings and FHLB? I'm, Yeah, the one lumpy item, lumpy is not a technical term obviously, but the EIG proceeds were, call it November 1st, and that was approximately $500 million, so that was a component of it. The other reductions were really due to deposit inflows that took place throughout the quarter. And then just going back to you, you're the Class B office non-performers. Can you test the..., those four credits? Can you just take us through the one that was sold? What was the balance, and then what ultimately ended up being the right decision down there? The one under contract, same thing, the one being marketed, what's the balance? What's the new one?

Jim Fitzgerald: If you could just break out those four so we have them, and then the new one that came in, is that also class-based? Yeah, so let me know. There's a lot there. Let me try and go through this slowly. So I'm going to focus first on the three non-performers from last quarter that were in office, and they were all in the financial district in Boston. So your memory is very good there. The one that sold is the one I can provide the information on.

Jim Fitzgerald: I was a $9 million loan. The charge-off was $4 million, and that closed in the fourth quarter.

Jim Fitzgerald: The one that's under contract for sale is a little bit of a smaller loan. And you know, we'll provide the details on that when it actually closes. The third office Portfolio non-performer from the third quarter is being marketed. That's a slightly larger loan. I don't remember that number the loan balance off the top of my head, but it's larger. It's the largest of the three. The new non-performing loan in Q4 was not an office property; it was just a commercial real estate loan.

Jim Fitzgerald: It was approximately a $15 million loan, and we do expect to resolve it this quarter. Okay, and then the three I guess you gave us last quarter $26 million. Was that $26 million net of the $4 million in charge-off? At that time, it was gross, so the charge drops came later.

Jim Fitzgerald: The $26 million was the principal balance, yeah. Perfect. Great. Thanks. I'll leave it there.

Operator: Thanks, Laura. As a reminder, if you'd like to ask a question... Star 1, on your telephone. My next question comes from Damon Delmonte from KBW. Please go ahead. Hey, good morning, everyone.

Damon Delmonte: Thanks for taking my question this morning. Great. Hi.

Jim Fitzgerald: Just a question on the expenses. I got the commentary on, you know, the first two quarters of the year. We'll have an additional $3 million each for those two projects you have going on. But when we look at the underlying base, I think you said it was like $102 million or $103 million. What kind of growth are you expecting from that? You know, again, putting the two items, the two $3 million items aside, Damon, so the first two quarters would start at that level, $102 million, $103 million, pretty modest growth from there. In fact, those would really be pretty close to run rates for the full quarter.

Jim Fitzgerald: Obviously, Cambridge is coming in, and that's going to confuse that a little bit, but if you annualize the 102 to 103, you'd be very close to the annualized number that we would expect without Cambridge. Got it. Okay. That's helpful. Um, and then, you know, the commentary around the outlook for credit and, um, have more of a normalization. How would you characterize a normalized net charge-off year for you guys? I'm laughing, but that's got to go back a few years for that, probably, right?

Jim Fitzgerald: Yeah, no, I think what we believe here is that we were at very low levels. We in the industry, right? We were at very low levels for a long period of time. When we look at our current levels, and let's just call them non-performers, you know, again, 40-ish basis points, maybe a touch higher than that, and charge-offs for the year of, call it, nine to ten basis points. We would expect both of those metrics to migrate up a little bit, but in a contained way. We don't see large increases in them, but they were at very low levels for a very long period of time, and as you know, the environment is clearly changing, and we would expect those to move upward. But again, contained is the word we use internally, so it's hard to give you a number, but we don't see big increases there.

Jim Fitzgerald: Contain is the word I would say one more time, uh, that's all that I had. Thank you very much. Thanks, Tim. And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks. Well, thank you for your interest and your questions, and we look forward to sharing more with you during our next earnings call at the end of April. Have a great day. This concludes today's conference call. You may now disconnect. Thank you. This makes a whatever difference, but hey, I can't blow your future up, can I?