Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the Eastern Bankshares, Inc.

Second Quarter 2023 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 risks and uncertainties that may cause actual results or the timing of events to differ materially from the views expressed today.

More information about such risks and uncertainties is set forth under the caption forward-looking statements in the earnings press release as well as in the Risk Factors section and other disclosures in the company's periodic filings with the Securities and Exchange Commission. a during today represent no and update statements made estimates views obligation statements information these of new as the as forward-looking this events. managements call and to or Any future of result company undertakes

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

have Please the recorded. For press be can a release to measures, placed Thank note event Instructions] refer being non-GAAP been investor.easternbank.com. is this a you. lines to session. question-and-answer speaker's reconciliation background of to mute please All which After found financial [Operator noise. be GAAP remarks, prevent the earnings on at company's will there any the

I turn Bob conference would Chair to like over the to go and now ahead. Rivers, CEO. Please

Bob Rivers

everyone second and joining morning, for Good quarter call. you our thank Joanne. you, earnings Thank

always, by joined Chief Officer. Fitzgerald Administrative Chief today Financial our Officer and I'm As Jim

for the repositioning outlook, our feel our and earnings good improvements about we results. operating be challenging demonstrated improved and seen immediately quarter balance Although, that our can respects, quarter. we environment our in quarter in impactful some our strengthened very the particular, first second that this banks results sheet remains were In in securities

during interest In guidance the Our basis first with well. as revenues the quarter our and XX margin were line net operating from is in improved total, quarter quarter. points our last higher than

to a allowed able our funding billion stronger wholesale were profile. and we reduce shrink base sheet earnings to us which addition, our and the balance In quarter, by $X asset during create

we few steps potentially the environment the more expect and quarters to are so have prepared. next challenging we we While well taken become ensure that continue over to

the metrics increased the quarter indicators asset quality leading outlook. quarter, loan moved allowance to our although and for in example, improved both our consistent be that higher and losses credit with we provision For our traditional in

higher continue keep the some time. believe also will deposits will that Fed for competition heightened and for for rates longer We the

through sale overall our primarily contain quarter. able securities the reduction quarter were cost Although, funds we the that was the of last to wholesale due in to funds of

a to We to deposits cost see continue. cost continue and to that migration deposits lower trend expect from higher

We improve position further forward. to funding for will our move we as look opportunities overall

next position we focus market competitive to created and position and the ourselves and for this failure Silicon is model so improve market. primary share First can of has strategy Valley few quarters our in in Republic gain environment. The significant term both Our our

than that differently Although, operate they clear market very to we is is us. there opportunity did

commercial and we hear will we we Our open the needs have with our that year rest the phases for growth business cycle. expect customers' Jim all for strong growth you desire lower That our to the said, very loan think and growth was meet further. slower of it quarter describe as throughout been the demonstrates business in is of consistent long-term

to For the opportunities outlook. on and our upcoming quarters we improve will to focus sheet continue earnings balance

provide help Boston. As environment gain as community becomes will strengths and further those our market share the more bank in leading position opportunities potentially us the to strengthen challenging Greater

and quarter this very future and results growth feel performance. our with pleased regarding are we confident again, Once Eastern's

business have community of most as and to well continued to who partners goes as Eastern XXX strong and through the that years credit the customers always, As support. their partner and to reliable continue for my ensure X,XXX community colleagues remains we our past for and this financial the been

over turn to And it now I'll Jim.

Jim Fitzgerald

at year. a closer I'll morning and look then high-level and the Great. the then first on income of Thanks Bob, comments statement good and rest sheet balance for the take provide the our some quarter outlook everyone.

portfolios, we levels especially our environment with deposit reviewing The costs, and faced results, continues well the to of headwinds all are asset core markets. we're interest maintaining results environment, we produced we growth future mentioned, quality loan given signs strong of and very positioned for challenges quarter, create operating watch for our good we Bob Despite feel as rate while industry. for very our carefully this confident the by are in economy. weakening this overall a As pleased for funding very quarter. We our

The in the while liquidity, capital portfolio our very securities robust and maintaining earnings strengthened quarter the repositioning improved of first levels. our path,

better for and attributes environment improve growth these prospects withstand and of All position success our time. expect us will today's we over to

borrowings margin assets. to of our improvement basis. the than X% from equivalent point reduced expanded at total quarter quarter interest second second $XXX of We've experienced the our to fully in our We million X.XX% X.XX% million a $XXX margin tax as in basis or end by a XX net on the less

diluted ended share on second quarter, also per and $XX.X nearly $X.XX the of Net levels an enhancements share quarter cash We first meaningful operating basis. $X.XX quarter the very diluted $XX.X the were liquidity $XXX and repositioning. was from with million demonstrating on operating million per income at in basis. Earnings an million

very remained essentially the a XXX%. $X sound just points of non-performing bringing coverage to reserve million XX million loans, to non-performing decline or no reserve quality Asset of charge-offs loans build quarter of $XX basis in total nearly loans with in and a

led X.X% on mortgage was XX% As growth loan quarter, basis annualized commercial the presence X%. continue expand and consumer growth to of our an we loan growth market by and approximately in loan of which was

X, a to of approved XX of $X.XX September on Our shareholders per share payable Board XXXX. September record dividend on

balance I'll of now review a to sheet. the turn

billion quarter primarily the $X.X $XX.X from and quarter reduction down ended to the Assets due prior a billion cash in at borrowings.

operating balances and due $X.X the bank failures, we by As reduce the created held at the uncertainty March to April and to cash we May. happy we're environment levels those high as very XX last on billion at in late call, mentioned quarter's stabilized our into

million sheet first the $X.X just billion second due quarter quarter prioritize to balance level The end cash We under strong in under the ended of $X QX. ended from to the Securities the with down billion primarily cash we paydowns. in was at $X.X as quarter $XXX maintaining just liquidity. continue down from billion,

in ended increasing loans in commercial $XX million loans. $XXX quarter $XX Loans $XXX in an residential million the million quarter, loans to of the $XX at prior consumer increase primarily billion and from million due

in deposits million the higher $XX decrease Total continue Borrowings see quarter interest-bearing shift million. earnings. in by and offset a AOCI the at by Shareholders' growth partially deposits. to in towards million and $XXX to the decreased decreased rate $XXX in equity by we mix decreased quarter $XXX million retained due quarter ended

review. million million, basis net X.XX% quarter. the an in while per X.XX% in in The $XXX.X was share. prior asset million or were was from quarter costs the quarter. was the prior was diluted margin per liability interest-bearing $X.XX for were million up diluted quarter interest XX XX up Moving operating interest yields net the income increase and $XXX.X to up basis the the earnings points income $XX.X $X.XX $XX.X GAAP income net or share Net from points. Interest-earning

As well on on expense offset loans the were you from slide as income reduction by investment improvements costs. cash chart in can the see borrowing margin in as increase waterfall and X, the deposit came and an partially

quarter. basis from costs see was and funds due during the our the cost interest-bearing X.XX% quarter increase were you in on XX of the side, repositioning was XX can the funding the June to basis wholesale This the of month for prior the nine. which points was prior in reduction quarter. in took stable the top QX slide X.XX% the than The the slower the X.XX% that the Deposit of place increase up point quarter. of was liabilities as On in

was losses loan $X.X for Provision the provision million no up quarter essentially from in QX. in

of million investor and overall office three in growth primarily we in space. also we in quarter $XXX to points, higher due mentioned, quarter by had the loan ACL increased factors the our risk As the basis

up quarter $XX.X $XX.X Non-interest had year. XX% strong million $XX.X income and Eastern million for was an of basis. operating million from the same on with quarter last another quarter the Insurance revenues

quarter. operating was mentioned income in QX. expense we've on insurance the being $XXX.X in prior the basis there Non-interest GAAP from million quarter. to an basis insurance million in our is increases As non-interest revenues carriers bulk incentive other received on a All from seasonal the $XXX.X the showed nature and items payments line of with a past

eight, data and for other FDIC quarter. expenses larger and $X.X costs the included on sheet processing on all of totaled marketing in $X.X costs. an losses increase million in provision higher as the we commitments. salaries increase As The and slide in as effects increase well occupancy credit outlined an increase off-balance insurance million benefits in the of premium The

over comments in the effective are that last There quarter. I'll the have year an than on have of for was based on complexities the guidance outlook. our was expectation tax tax rate the quarter quarter, during rate. the the rate repositioning some securities higher from XX% expense our which rest that some of impacted last Tax

similar loans of is XXX%. nominal to we low to Non-performing the sound to several $XX.X are coverage at reserve net continues quality very and Asset our million NPLs quarters prior be over QX. charge-offs levels very in experienced

quarter. Through continue leading watch the on second were were prior and of end metrics We indicators portfolios. credit a for the traditional to they loan both weaker stronger the the of the economy quarter impact in our than our

add the I the prudent it office to and we as Appendix of normalize included it snapshot felt quarter levels time. our B We our credit mentioned, of to the we expect updated to second though over reserve trends presentation. As portfolio in in

much change monitor quarter As during on closely slide, to asset indicated been although the this there hasn't continue class. the we

very on loans As performing estate our very, overall portfolio in commercial investor well. portfolio no we office non-performing XX, have real mentioned our slide we is and

outlook I wanted our on which slide a comments included to on is few provide XX.

in in low consumer for loan We the a growth growth to commercial expect no mortgage year of little the have second year. second to the loans half and and the to half the single-digits of slow

outlook performance. year operating range from to million up income for first We're million to prior for due of strong the the increasing $XXX to a non-interest the half full $XXX our outlook

item some We in our line levels the of other year. expect items the of non-interest will over expense closer return to rest QX the that

million of that to non-interest operating non-interest and for for expect prior year. higher be between would our the our the our nonoperating at We was expense million $XXX guidance range $XXX for

We the of year second to the the XX% expect rate tax half for between and XX%. be

could on as be Although the we it quarter-to-quarter. volatile slide note

modestly be income XXXX. than net level to of margin the be our lower our net the and year of for full interest to to in expect range X.X% interest We X.X%

forecast of increase points based Our this saw from that forward XX a on Fed early we was week. the as assumed July, curve which basis rate the

very we're In quarter results in closing, for with pleased difficult a the remains environment. our what

We our as challenging the sheet to environment to overall strength optimistic look funding profile take well opportunities we any very and continues. will improve balance opportunities are positioned continue be for of to and advantage

And for your Joanna, Thank you. open we're line the to ready questions.

Operator

Damon of at go ahead. line you. [Operator KBW. the DelMonte Instructions] question Thank First comes from Please

Damon DelMonte

Hey good everybody morning everybody. doing is hope well today. I

of wanted worth first the to margin question kind you off at of so two you or like if a Jim, start of just range that quarters' kind So puts with on so. margin the outlook in XXX, look

XXX kind go into going it's you couple think you And that? steady of the hold to do quarters? the down kind So the at some level, puts of over and or next do margin of what drift expect that to are this of takes

Jim Fitzgerald

Yeah.

on you is ago. Damon, think, with a outlook was said. say somewhat we we today XXX what and it my be the slide remarks I to margin than rate and quarter XXX expect in so, between the The higher as along

go the If look different. was and at forward that at back you curve time

why bit little reduction we we're a as XXX and a XXX. since outlook then, the between up be are seeing there. margin is But a our of modest expect little which said we to rates in bit So

Damon DelMonte

the have? try holding your on planning and/or borrowings are reduce Are in little longer, thoughts on what do a you And while that brokered coming you expect the quarters? $XXX to cash or CDs million that Okay. you for to of

Jim Fitzgerald

although, down balance come bit we are prioritizing to that sheet liquidity. expect would I little a

think the that failures coming that I important. was it's through bank obvious

little year we come a So ago. we it higher expect than did say levels to a cash we but hold bit, down of would still

Damon DelMonte

Got it.

growth digits loan and moderating I then, low-single much And commercial other of guess, the in just of not portfolio. the kind in other areas with Okay. growth in

at, bit to quarter? a little we did be build level that to you Do should provision this level expect you've or you adequately gotten higher You similar to of feel of reserve quarter. this kind the like, that want

Jim Fitzgerald

by would question good Right. at quarters loan if this quarter It's a driven prior amount So look you answer considerable I provision and our two-parts, is that, right? growth. Damon.

call, million loan that the So this we it growth allowance and had a quarter attracts and $XXX of goes higher provision. worth through

said, the and We buildup to had we So the to portfolio I fine-tuning. which had that past color happens would consider component loan that more provision comes The anticipate will ACL on of change will that as the guided I if depend would the future size you come of environment. what down the what accordingly. consider quarter, is this we growth on we what hard I would overall any a given give It's fine-tuning. a in down

Damon DelMonte

Got it.

my for Okay. taking Great. question. Thanks

Jim Fitzgerald

Thanks, Damon.

Operator

Thank Piper the ahead. you. comes Mark from The question of at line next go Please Sandler. Fitzgibbon

Mark Fitzgibbon

Good morning. Hey guys.

Jim Fitzgerald

morning. Good Mark,

Mark Fitzgibbon

Jim, other implies of of $XXX the you'll decline soften to in call up? the But on million quarters guide commissions. of your the some some of for where quarter things insurance of your fee are income expect two fees have million you high-end guidance, it sort know of $XX a last year. I areas the what

Jim Fitzgerald

It insurance, Mark. primarily is

over starts over year. high down quarterly the it So at course if of out the the you course very look and of moves years year, the and the prior the trends

there Some quarter well. in anomalies as payments fourth the some of that's and are insurance

not So is that in primarily insurance essentially primarily, -- reduction the line. all it's

Mark Fitzgibbon

I contemplating any balance you curious, if Secondly, was additional sheet moves? are restructuring

Jim Fitzgerald

I Certainly say first the to think Mark, significant. that. quarter pretty like we actions we nothing at balance look sheet but opportunities sorts I don't of anything. anticipate all wouldn't were continue

said edges those generally. sheet and be and we profile said, I balance I expect continue will look improve very would funding the for the around to Bob modest. As ways very, the But to

Mark Fitzgibbon

the that office in say or Okay. Do dollar or either XXXX? amount a you mature sense XXXX have of reprice for loans

Jim Fitzgerald

steady. come back on time steady not lumpy. that we to would It's come back It's over can as it's We we or can and provide that. whether on that, not

Mark Fitzgibbon

given get can done lastly, all. in transactions in you're at some this if then industry I your wondered kind transactions in And on has M&A you the recently, market? changed environment thinking think of Do

Jim Fitzgerald

can and well. comment -- as We're Bob

We'll were align as the to I interesting to love students you time understand of know. take that. things circumstances and we'd game. think better. Facts acquisition and Those do always we're the transactions them and

hard really very transaction to PacWest say So, those some had looked the it's comment -- attributes. certainly, than like it were other clever

Bob Rivers

certainly make us we're an for that work find strategically, in works stay Mark interested if contact we and potential mean a the with can have we'd And interest. I numbers situation opportunities in and partners. we active can certainly

Mark Fitzgibbon

Thank you.

Operator

you. Thank

Your ahead. question the next from go Janet of Lee at JPMorgan. comes line Please

Janet Lee

Hello. Good morning.

Jim Fitzgerald

morning, Janet. Good

Janet Lee

I I understand want to prior understand comment. sure -- the make I want that to

and steady for NII could should rest the NII your account, of sensitivity NIM Fed versus cutting trajectory into the would So of XXXX, the for rates XXXX start your the your NIM be fairly trajectory? quarter what second taking in mean that and

Jim Fitzgerald

guidance too any provided XXXX yet, haven't at Janet, a we Janet. this point. So of for much it's target moving

we comments haven't in I of think this quickly. I the yet. environment rest we for what on said, And slide XXXX as the put articulated out obviously, my moving the is and and was put for what anything I very year

Janet Lee

bottom of much guess bearing if total? Like it you Fair. Okay. your Like And today? would deposits where your below to non-interest it's guess, to there? would your I difficult be could but as what make a dip as guess XX% best have know very to percentage

Jim Fitzgerald

guess those we And the word. space. predictions are Janet, like is hard really the continue -- and watch it's watch to watch. really you we'll trends to that not It's trends hard the to in make right something

Janet Lee

versus high up still Okay. plan your And given any apologies this near-term already peers? for very repurchases share capital came levels but if

Bob Rivers

as One didn't Sure. evaluate. evolving is share is interrelated it continue we time those -- any capital repurchases something didn't Similar to to we three on share we reported is market three -- three what is are liquidity. we've we subjects and and repurchases said but really over two as And criteria. report conditions

record track really but we're forward. longer in, And if we'll look And it's as something, three and a over time confident interested of period feel conditions our capital obviously to decisions going make very market we need those criteria communicate liquidity you we about. at that

Janet Lee

Okay. Thanks my taking for questions.

Operator

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

Bob Rivers

again interest rest thank your wishes best you and of questions, Well, for for a your summer. Great. great and

Operator

This today's conference you. concludes call. Thank

now disconnect. may You

Eastern Bankshares (EBC) 28 Jul 232023 Q2 Earnings call transcript