Eastern Bankshares (EBC) 27 Jan 232022 Q4 Earnings call transcript

Hello, and welcome to the Eastern Bankshares, Inc. Fourth Quarter 2022 Earnings Conference Call. Today's call will include forward-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 foresees. Such forward-looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward-looking statements.

Listeners are referred to the disclosures set forth under the caption forward-looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission for more information about such risks and uncertainties. during of represent today. made estimates views statements as only forward-looking this management's call and Any

company obligation While as management's forward-looking management's not point to the rely statements subsequent company views of at disclaims the may and statements today. some any in elect or estimates on the date you even such do views so, to to change, update specifically if any should future, representing as

discuss the the measures. will non-GAAP During also certain call, financial company

a financial non-GAAP to please being such on would prevent been mute note question-and-answer Please to the company's of the After press figures, turn any reconciliation a event can recorded. [Operator to the Please ahead. Instructions]. CEO. over Chair now measures comparable GAAP and have at noise. Rivers, refer I to there earnings go is For lines that Bob this like placed investor.easternbank.com. the to All background session. be call release, which will found speaker’s remarks

million, we call Together, to higher posted good for than all record work X,XXX income you, Fitzgerald, off Thank call. and start of is new We XX% is this by year. in everyone today your colleagues for XXXX. good net you a Officer me With morning's quarter thank XXXX their a our Jim our hope such and in fourth I'd Chief my Chief joining thanking like Financial earnings Administrative year at and $XXX.X Officer. of Good successful Eastern previous start, making record to for our Joanna. morning, XXXX

including other the loan of of continued many upgrade the accomplishments. a Century bottom Bank, this the technology as equity number agencies, our of the outstanding notable and insurance of quality, originations, home is platforms always, commercial asset As the two achievements, integration of significant as record result well of completion acquisition product line

in Business The Business Massachusetts consecutive year Administration companies our recognized the the For and the Small in for again among Small charitable was Journal tenth example, Eastern XXth by Top by most time. Business ranked Lender region as was once the XX the for top Boston

with tremendous All is their franchise of to and commitment. hard the our this, underlying work a strength of along testament

I'll I funds outflows turn financial basis earlier the our our than fourth near-term to some rate for high-level first an XXXX. industry, a increased Jim Like and on in The experienced an proved deposit for quarter a moment, in-depth through that upward quickly over environment cost we due more difficult of of review, it the the to quarter to the be wanted In an Reserve comments and XXXX our results hikes but to aggregate fourth of outlook. deposits Federal year. by XXX of repricing points provide

respond with to keep needs customers our pricing It's and to retain of us to close been competitive for to customer attract relationships. and important the long-term

fourth to our very point expect net the quarter, a carefully, expect trends to landscape not and reprieve over near saw competitive watching are contract. decline from the six We funding margin interest difficult margin a more We basis the our the in term. we but continue in do

Given as we profitability environment, into prioritizing over growth. look the XXXX, current are we

XXXX. rate with expect and to overall consideration the growth the demand. be of softening higher loan year our to and reduce marginal an into We rates single low following in expect an required in commercial taking extremely Coupled in in cost we the XXXX loan interest market economy successful higher digits funds our returns,

diversified commercial over our proud the portfolio we relationships are and We customer of years. the have Eastern built loan many at

of very of with our signs any are in all deterioration, metrics We QX. remain credit pleased credit carefully watching but for

healthy. Our very reserves are and capital levels

a be to taking We what in to steps more realign we will adjust XXXX. expect many challenging and are year

reduced significantly have we detail, more in guidance. our cover expense will Jim As

With our in accordingly. the reduced and the our expense the across pulled budgets board and outlook, change have we growth back environment

expenses next to and We as unfold. quarters the evaluate few will months continue

to We side. other well position am this for our successfully have will I our the over our confident, us Jim. very as strong keep company navigated way And now we through manage through of way worked before way and success. times it Boston the turn and our environment long-term challenging have to as in fundamentals market our poised I'll

Bob, Great. morning good all. Thank and you,

challenging Net mentioned, $X.XX per QX was operating share. results $XX.X diluted income also million $XX.X share, and our million Bob very solid or diluted and environment. As but results, per reflect $X.XX earnings were a or competitive operating

use pension operating high incurred and unusually results. number due As were payout the GAAP sum to required previously in disclosed, lump for our between QX our expense nonrecurring expense million primarily pretax of the of to a levels and settlement accounting This is XXXX. for difference responsible we plan in $XX

basis of in income XX points. operating from $XX.X in of Our $X.XX points in $X.X basis to XX interest-earning compared liabilities million QX. income with XX million basis QX, interest QX a interest-bearing the $XXX share increase per in basis equivalent or our QX compares asset quarter, yield in was exceeded in of increased net with QX. tax fully and a interest decline which Net points X.XX% The X.XX% of net on The the $X.XX cost from margin million per share $XX.X was million X%. down and

quarter. X.X%, growth in an growth $XXX equities. consumer quarter million, primarily loan growth in Embrace loan all the in loan $XXX Mortgage $XXX was experienced of was our annualized including major XX% and or million our home million was was which portfolios annualized We Commercial loan growth basis. on from in relationship the

charge-offs which to net of at points loans QX and very very XX sound low of levels. with Asset basis one nonperforming with a quality loans, of consistent basis total both continued be point are

fourth program the XXth dividend per shares most XXXX. share repurchases March of the of $X.XX shareholders share million Our of Board in X, payable quarter, share a record our these repurchased quarter. March early of approved on X.X We in were under to repurchase

on balance some the sheet. make comments now I'll

Total million ended and $XX.X at were in billion than $XXX billion, $XX.X assets. the million ended million in an quarter increasing we QX QX. of $XXX approximately the end the and $XXX wholesale deposits $XX.X the as quarter increases deposit flows million of increased customer QX, increase The appreciation reductions of due Borrowings outflows outflows with quarter by in down from increased $XXX and $XXX offset at which quarter, deposits and quarter $XX the share at included million higher $XXX of Total $XX $XXX and deposits. The from brokered million $XXX Shareholders' cash end equity was the the were of million in increased million of to billion in loans. million. of Assets $XXX portfolio loans to improved the the retained increases market and repurchases. borrowings and sales fund million by broker securities used in offset million the totaled deposits and the quarter. in AOCI, were the earnings

as borrowings was of yields. Moving customer FHLB well increases including rate The more than The to interest the basis was diluted liabilities were income down geared $X.XX points earnings X% was than GAAP $X.X increased as review, was deposit the $XX.X prior funding operating or interest million QX. basis diluted million six points, from retention share. Net quarter. income the basis cost XX quickly XX to XX million mentioned, quarter. to million towards and as margin X.XX%, up demand share The points of points use cost as of during costs earnings increased net $XX.X basis per net or lower core total due $XXX of I deposits, or $X.XX overall interest-bearing deposits, asset the basis points XX per

Page The changes beta in Page is provision. million as in We've costs The was interest-bearing a million compared the on detail added modest that evolving QX. $X.X provision shows Similar $X was percentage provide more how to new on driver, X points of presentation the of quarter. detail three net as The million to margin loan loans the attributing the loan increased interest basis of interest XX for rise graph of quarter the of income QX, allowance the over in a monthly growth $XX the million well. on losses $XX.X total and on some tables presentation the and net liability these the cycle. on

Noninterest income generally quarter Insurance million was quarter QX. the from down X% prior XXXX revenues up an the with or quarter, noninterest the the $XX were $X.X prior operating in either operating same QX. and on year line in Other were basis in line items from $XX of quarter. million million income

presentation, we and and losses security A trust compared disclosed to B there the sales QX. QX in was reduction in As in assets rabbi non-operating Appendix in from the a

QX. while for exposures. provision our later On on and $XXX.X include the expenses QX, on all expense credit to and expenses operating in sheet marketing losses the expense in and due the in noninterest in expense costs, the settlement mentioned QX. were QX to million noninterest compared processing comments occupancy, $XXX.X I'll million loan presentation. in from to was previously was Other higher an the higher. in and million data outlook Including $XXX.X million services, quarter increase down off-balance credit professional pension some for pension benefits, was basis, compared $XXX.X Salaries were expense an

XX.X%. tax of the items, quarter timing all primarily and for some the XX% due to The was rate rate in was tax XXXX

charge-offs were sound. Through the to very of very is to are zero. the XXX%. Asset over net quality at continues NPLs very close our to levels, quarter, end low fourth be reserve coverage and NPLs

our carefully to continue portfolios. We monitor all of

as see at any and credit have we signals signals, several early those on We process, of review part warning significant early our don't this warning point. items of based concern

to mentioned will credit processes economy we and the our earlier, diligently. we review portfolio Bob expect and As continue soften,

and page wanted to make our comments. review additional I some outlook

As mentioned, net expectations to margin. liquidity there's the interest related greater environment, the for in specifically uncertainty in

of quarters, than We expect a over to outlook makes uncertainty liquidity and subject continue the to quarters. few wider margin this next challenging prior error the our conditions

be would similar on in We in expect mortgage due expecting to to loan for new rates growth We and the higher originations. of are XXXX impact consumer growth low single the commercial digits a range. loan

decline net margin in points interest-bearing until the and added XX, of six We environment tables interest on Page funding. as declines showing costs including deposit and QX as stabilizes. increase basis funding total, deposit a some well experienced costs expect the further the in wholesale We new

be million between XXXX income noninterest $XXX our to and expect million. $XXX for We

interest in our prior discussing due deposit reductions on levels. mortgage calls, and expect as and in recall rate might interest to service well overdraft pressures due fees as to conditions you charges practices, We which swap us market rate in changes

operating of of million. our from the million This guidance million. guidance $XXX for is of range million $XX QX to expense expect to reduction a noninterest million lowering $XXX to XXXX in are it We be $XXX and a $XXX

time this continue at Given environment, the expenses we're our of cautious all forward. have to budgets. uncertain expense undertaken to We'll move very levels actions and assess adding about reduce we as

and into loss expect provision economic softening loan will an projected recession, to likely loan of economy impact Most all to forecasts a turn we in our asset monitor expected continue on quality will accordingly. a slowdown is that levels. have growth The modest

I in liquidity levels. be In due million QX XXXX. As of depend we repurchases million in pace conditions considering before activity repurchase loan conditions, liquidity the Share will had provision particular, mentioned to at we'll earlier $XX for earlier, and on the market looking growth. to was improve share $X capital,

long customers In a and questions. And period the for closing, very will and of our find the balance great core deposit for time, our they on relationships we're we're continue short-term those focus be Thanks. Joanna, Eastern, to appropriate retention future. to have expect deposit to confident of value net we in margin. interest ready between source been continue a Over and

Instructions]. [Operator you. Thank

Lee J.P. First question Janet Morgan. at go comes from ahead. Please

good Hi, morning.

Janet. morning Good

I of more I a get uncertainty, deposit know but on to forecast, your hard there's cost. color just to want lot it's

XXX% said modeling you the I level prior cycle than the interest-bearing higher in XX% quarter, second deposit data. of think the for you were

have that think I Do gets to cycle beta? XX%. around deposit updated view due you any So interest-bearing on that

two think things. I Janet, So

with talk back, welcome First and all, to you congratulations. it's nice of and

betas over -- learned quarter a as wasn't all think respond that is One and continue from the to as fourth And the we've to cycle a the we've it's be that's little to was we've learn and applicable third harsher we environment. prior history the what to we to that. do and think don't think well to experienced. I provide the that that looking we're I we different in all velocity at this pages information to What would what so of this articulated cycle, faster. this at thing quarter, you particular, extrapolating show -- is and but history the parts here, point. It's year we a the this the things through added couple but few that end researched that to going change did on that of and we challenge was that say of tried of to

Okay.

out page your of I pay keep but still deposit as to different did the the So managing rates lower than deposit to like yes, the it peer on peers preference trying in totally deposit cycle your deposits into planning last are quarters? cycle. market NIM that preference to manage or your from cycle, outflows the look that retain plan mean, up or prior closer the stay costs very I is in the few better of and than you same much terms you is on costs totally you industry, very, deposits your below your But your and of next terms in lives, like or stop your terms understand,

Sure, It's act, it's first right. it's of a all, a difficult it's difficult balancing answer, question. a balancing but -- to act. It's

many how two future the looking and reprice and and many said, had value we we've and relationship balancing have price nature as We through those relationships. are deposits. through, to and those important are act much that watching similar a have of very a we're many, very long-term as our margin our them. obviously long those customers time, It's repriced And way balancing relationships rates that value for very higher, I to appreciate of are of we just as to We the it things between continue a before. to we're Those going very deposit. much and that the the -- act we well, it's gone we've

-- yields, of and in deposits -- is I So CDs continue higher next going pronounced. deposit considering the part seeing But deposits, noninterest-bearing basically, a deposit of think like brokered planning you the quarters? like -- in the where the we leaving your use plug your you everyone base just like seeing broker if your of a customers are I forward most going hole, what was are seeing everyone like more case, outflows is the bit little in few back the to customer terms of plan outflows. I to if is mean, search out this Is like outflows in that to in you're the that function

-- there. So -- in I are think let of questions me there of a answer a couple couple

Let me a bit. unpack it little

from seen commercial segments; have we So of our outflows customer most particular. in municipal and

impact. On a a had cost we've little stable obviously deposits bit to got rates Again, would helped more to be, little cost we've from a the than higher otherwise there, keep that's promotional are steadier deposits than past, deposits. has seen customers, lower retain cost side, shift but in and a they but the deposits consumer we've higher

forward, it, pricing think, watching just we're I making we as go. decisions carefully going monitoring. We're

it's the act net short-term customer but which important, between As relationships. considerations, are long-term interest a also balancing margin very the I said,

any deposit give is of might growth, I guidance terms know your off the that the well can can but I slide, any as of a Okay. of XXXX, rough in decline range this for you provide shot, goal range guys terms sort deposits give growth is in on pulled us have there you NII there as of XXXX? from you that the or

we in that expect which materials you is margin. is the the outlook, we do have I put further think what that contraction our in Janet,

third on in deposit think, the given pretty as quarter, times, and it As QX well. costs six year you, we've throughout the and information we basis of said good points in the I was a number

all what of that's and our So part that's provided. outlook we've

Okay, alright, thanks for taking my questions.

Thank Janet. you

Thank you.

from at Piper comes Please Mark question Fitzgibbon Sandler. Next ahead. go

morning. good guys, Hey

are how Mark, you?

Good. Fed out, little assuming margin to does try question bottoming a your a that the falls to Jim, forward differently. get margin just the the follow-up bit of curve? at show modeling kind Where

Yes.

it's little to -- be a it's get a as tried We market, continue we're times, we've more challenging. say things bit very difficult. couple So -- think in things -- we a competitive to think Mark, it's of

very Beyond end any we the as information. I information of any We've to hard give the of not see. we're to that, And you over through get more what the year. easier it's you expecting That's provided said, the couple next that quarters.

is the And guys and Okay. plans secondly, there we any size shrink AFS in book market, when see then bond book trying to the the reduce rallies losses you or and contemplated that down? selling to take are of

good It's thanks. Mark, a No. question.

reacting The all But fluid communicate. environment, carefully answer as just things think we'll difficult. changes. we -- I in the and point, things. when assessing a this we'll assessing very is we can I it's decisions, we're watching time that have We're very this way And talk environment. only at see it's

So many -- things being things are no at this but open consideration, to certainly -- all we're things time. plans under

Okay. insurance sense? questions M&A, in couple reason of that? are M&A pretty dearth to financial sort little Any in M&A a more around if quiet Mass, geographies been bit, given it's for on the just targets your deal front. made a Eastern bank also, you of getting extending a guys And then a particular the open-minded And

Mark. Sure,

take come within that geography current continues. As for or acquisitions focused Certainly, adjacencies footprint immediate That you and we've outside opportunities bank and a fall to we'll our -- if we have look. insurance know, other along, acquisitions. they of continue

for to have consider we but be reasons, will a We less certainly, those past, those. tend in interested we in of the number

is of pipeline we potential a the at. it's really matter We very requirements, to but look our deals. of acquisitions, pricing. Oftentimes, of a just relative challenging have of it's terms something pricing extensive to take the In very continue return a insurance always pace

you. Thank

Thank you.

Point. Hunsicker Compass comes from Next at go ahead. Laurie Please question

Yeah, margin, morning. stick seeing move Jim. the hi just deposits Bob was? X%. where then the in deposits and the Mark Janet about CDs, is us you December franchise refresh very very, question spot back maybe certainly, you on margin your help on markets your and maybe Maybe strong and how Good and money where can deposit way, jumped core broker and broker us were, to the you the Can high take those think obviously margin asking another the

morning. Good Laurie. Sure,

broker this Historically, I So question, challenging broker think limited many them. environment we've used environment, wholesale times. said In had used it's borrowings. as the deposit and a haven't we've we we've deposits,

to continue and was in margin on decisions The FTE we low structure, make cost So on sheet at based December an balance XXXs etcetera. basis. the

that's helpful. Okay,

so deposits? nothing broker And how that pull want to quantify you in much to of of down terms

I'm Laurie? the what sorry, was question

Just now cap broker your think big at Is X% are deposits there how base. that? right, thinking it of terms in broker about deposit deposits thinking how become, any should XX% could you we or about of

this way, much, customers. question alternatives look Yes, deposits repriced It's I our and our would continue at been than customer all to challenging preference more with to much is a We've -- market. answer our the pricing of customer so own deposits. use broker

those with existing at preference preference growth the deposits pricing to is our replace for forward. the and be But use to source primary going it disclosed. grow of we've deposits. we look you was, as customers in that to and what quarter mentioned our and would our brokered and and our Our existing brokers the grow strategies continue structures was as of fourth The velocity changes did

it. Got it. Got

expense on expenses, last is change then where you from were outlook your dramatic a And Okay. quarter.

from, substantial, that might level million is thinking about $XX can how very or a through are is reduction take closures, you us branch come where high that you the that? So

strong it's a a on is environment very Sure. company. very for We Laurie, pretty path. And reduction. XXXX year the right, sharp were growth good The you're a changed.

everywhere. coming reduction from the is So basically

Some in growth back that we of plans had. it's pulling on

things to time. of we're this tightening. it's deciding -- doing didn't we Some that on at weren't looking as General important and at belt they us

some that the the in expense things But other real other we estate opportunities. really looking you expect in the extent, reduction we as saw go We and needed to pulling light are reassess back, would cases fourth environment. new environment of forward was in big the change branches quarter, the to a many initial said, and all we I at our that knew in and

thinking helpful. should That's Tax okay. Great, rate, we for that how about be XXXX?

question. I at -- quarter, guiding good say for And updated that I guidance XX% got we're you. we've I would and third of XX% be Right, think the would what end think my to the

insurance still $X that revenue about Okay. us a you month your around a are question quarter that or any or And strongest had thinking build know typically March linked in little can would increase to strongest here for fee insurance, see million help quarter. Maybe then a bit in we income, then I you and a thoughts is rather $X we think million maybe to that? drop

I a big the and now. would two at the many That's was there's technical internally particular, -- absolutely we noticeable to quarter the called linked and revenues Sure. It's not that first prior changes. look I would But used wouldn't of look -- suggest at increase the quarters, a a you're of is seasonal quite I do right, be insurance at there's there the year, first linked quarter. sharing. look a increase. a that's when very term profit and in is, -- lot What seasonality I of realized, Laurie what -- -- wouldn't because quarter but the in

year rather So because than seasonality. the year I linked this that at seen that look use growth you've at the and of and would look prior that rates quarter

but Got about drop you, looking quarter, the thoughts at quarter, linked that? just I'm on again any guess, December any okay. And I the thoughts a in

No.

prior year, think I is was in of benchmark. X% again, the line expectations, our which, it appropriate it and think much very I the ahead with was

million anything was aside it, the specific I of And question loan then anything $X in specific set a got reserve $XX loss that just no that it? there charge-offs, Was had it, on last realize okay. rest Got provisioning. growth, was million, you

basis of modest factors a changes ACL as as -- of loans the I points. consider I provision were up No, that in describe sort would three percentage our itself it would

modest. the very quarter. know So no there problems items specific were no in I specific or

for Okay, Thanks great. taking my questions.

Great, thank you.

you. Thank

Please comes from go DelMonte KBW. question Damon at ahead. Next

good morning everybody is well Hey, today. doing Hope guys.

Good morning.

had Great, bit sticking to on color I differently. you things, XX morning. yield wanted a about up margin been Could going more side the with gone asset loan this on earning topic the it's pretty there quarter? the provide basis points comment XX only little popular kind why assets of of because loans this wasn't up in points, lift little yield a basis

So I move. think, Damon, was that's the the rate basis We about interesting because securities we looked yields in at quarter -- we Obviously, our and up that were thought fixed our of think didn't the line line at we provide sort that variable moves fixed view we rate variable when is basis was and the portfolio is the assets look But expectations. XX loan with itself. in interest-earning that our the been points when loan -- yields. with on the information thought the and in XX below why amount are of expectations. That's points the has we the that hedged,

relationship, that that, could you active just then us was loan just And Okay. quarter are Home an still onetime? give the Embrace like on a with update this -- or you is

Yes.

really was for a time right, goal we but do. it, and but growth stopped -- be were at what of million pipeline early no described we of QX we particular, as discontinued didn't liquidity few what The here, third reasons, we of in of origination quarter, about modest the relation that's the little the -- of up, changing trying a -- the that just There very at in mortgages. At quarter, but it. severe the had a into end primarily in a $XXX So straggler there's very, quarter. and closed the to residential the will we quick the fourth because history, landscape second was QX. end we The built bit

it. Got

the area? provide just estate office real And as commercial an Okay. with Boston just regard greater is exposure in then update space you lastly, to your what can and to

Sure.

-- total and this we think, in consistent this prior is So -- calls I question. with, on

component the and things There are have If little think that than less either retail commercial you a $XXX the risks I total strip portfolio look our for of a at exposure, but Most as occupied little office my million. owner early have it, is which is customers it obviously a issues the bit warning bit signals and/or is portfolio outside different, cause at out some not of any this of said We're our but remarks, itself. carefully, in of point. all much I watching portfolio city. us in see of Boston don't the to significant very to

answered. had, asked Got Well okay. thanks, everything all I else that’s been it, has you. and Thank

you. thank Great,

Thank you. will to There over are Bob turn back this no closing further call questions now the at time. for I Rivers remarks.

when this thank talking our quarter morning. we'll Great. you first forward your for April your and again questions results. We Well, interest of look to with you at report end the

call. conference today's concludes This you. Thank

disconnect. now may You