Eastern Bankshares Inc (EBC) 2024 Q3 法說會逐字稿

Hello and welcome to the Eastern Bank shares Inc third quarter, 2024 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 receives 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.

Any forward-looking statement made during this call represent management's views and estimates as of today and the company undertakes no obligation to update these statements as a result of new information or future events during the call the company will also discuss both GAAP and certain non GAAP financial measures for a reconciliation of GAAP to the non GAAP financial measures. Please refer to the company's earnings press release which can be found at investor.Easternbank.com. Please note that this event is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the start followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the start to thank you. I'd now like to turn the call over to Robert F. Rivers, Executive Chair and Chair of the Board of Directors. Please go ahead.

Thank you, Lorey and good morning, everyone. Thanks for joining our third quarter earnings call with me today is Eastern CEO Denis Shehan, our new CFO David Rosato and James Fitzgerald, our former CFO, who's continuing to serve as a senior advisor to our management team and our board of directors.

The third quarter marked a transformational moment in Eastern's history as we closed on our merger with Cambridge Trust completed our integration, expanded our leadership team and board and look forward to the future as a newly combined more robust organization.

This combination represents a powerful step forward in achieving our strategic vision, positioning us as a stronger, more competitive institution and the greater Boston region's leading local full service bank offering comprehensive personal commercial and private banking solutions in addition to personalized wealth management offerings. Whereas our larger competitors focus on a wider geography.

Our commitment is to Eastern Massachusetts and Southern New Hampshire, as well as other areas of as well as other areas of New England, which is demonstrated not only by a management team that lives and raises our families here but makes strategic lending and community investments entirely within the markets we serve time and again, we hear from our customers that a point of differentiation is our deep understanding of local markets and communities.

Although we have grown larger to have the talent and technology to better serve and compete for our customers business, we remain at our core, a true community bank understanding that we can only be as strong as our customers, our colleagues and the communities. We serve as recent evidence of this Eastern during the the past quarter was named the number one SBA lender in Massachusetts for the sixth consecutive year, ranked among the '10 most charitable companies in Massachusetts by the Boston Business Journal for the 13th time and was recognized by disability in as a 2024 best place to work for disability inclusion.

And the Eastern Bank Foundation was once again recognized among the top leading women led organizations in Massachusetts by the women's edge, of course, to deliver all of this requires a total team effort from my 2000 colleagues at Eastern, who in addition to very successfully transitioning our banking and wealth management customers to new systems, also completed a major upgrade of our online and mobile banking platform. It is their incredibly hard work, dedication and commitment to our customers and each other, which make these results possible in order to deliver greater value for our shareholders and support for our communities.

With that, I'll hand it over to Denis. We'll discuss the business in more detail before handing it off to David to discuss our financial results.

Thank you, Robert. Please note we have posted a slide presentation on our website and we encourage you to review the slides as David and I will reference a number of them in our commentary.

I want to reiterate Rob's comments about our colleagues at Eastern. I'm incredibly proud of the work our team has completed during the quarter across our banking wealth and operational divisions with the Margin and conversion behind us. We can now focus on realizing the benefits of the merger and the growth opportunity ahead.

We're the largest community bank serving the attractive greater Boston, Eastern Massachusetts and New Hampshire markets with the fourth largest deposit market share within the greater Boston MSA which includes Southern New Hampshire.

In addition, our combined wealth management business with over $8 billion in assets under management makes us the largest bank owned investment advisor in Massachusetts and the 12th largest in the state overall.

We're excited to bring the fuller suite of wealth management and banking services to our client base and to the market. I'll spend greater time in the future. Speaking to why our position is compelling and in giving you a greater sense of the capability of our firm. But I know you'd like to understand in detail how we performed on the merger. So let's get into that.

I'm sure you can understand there are a number of differences in interest rates, the economy and otherwise, since the merger was announced in September 2023 and this is an important backdrop to the variances from the original merger model guidance slide 6 gives an overview in short without performance, we outperformed the original guidance on deal charges earnings per share accretion and cost saves importantly capital in the form of either tangible book value or tangible common equity are significantly better than originally projected due to a combination of a smaller balance sheet and rate changes over the past year.

The balance sheet is smaller than projected as we decided to sell the Cambridge Trust Securities portfolio and pay off borrowings which resulted in an even healthier balance sheet.

This decision along with the lower fair value marks associated with the changes in interest rates. Since announcement shown in slide 7 resulted in lower earnings per share in the quarter. As compared to street estimates on the credit front. We took a hard look at Ambridge loans and you will note increased reserves in the commercial real estate category particularly office which we feel are appropriate at this stage of the cycle.

The company's overall allowance for loan losses was prudently expanded to 1.4% in the quarter.

We take an aggressive approach in reserving for potential challenges. As an example, Our reserve For total investor office loans represent 8% of loans in that category.

So in summary, regarding the merger, client retention has been terrific. We feel good about where we are relative to original expectations, capital is stronger, and asset quality is well marked and accounted for.

David will provide some detail regarding an outlook for Q4 and I preface it by saying the financial metrics of Eastern are markedly stronger than pre merger and rest at top of balance sheet with very strong capital and liquidity providing capacity for future earnings growth. And finally, I'm pleased to report that our board has approved a 9% dividend increase to '12 percents per share. David,

Thank you, Denis. I'll start with the financial review of the Cambridge merger before moving into the full results for the third quarter. As a reminder, the merger closed early in the third quarter on July 12th.

As Denis mentioned, we are, we are on track to successfully achieve the merger related financial targets that were announced just over a year ago as part of the merger closing, we mark to market the Cambridge balance sheet slide. Seven outlines the final purchase accounting adjustments relative to estimates at time of announcement, most came in as expected, but I'll walk through a few key differences.

The interest rate for fair value mark on loans was $250 million at closing significantly lower than the 413 million estimated a year ago. The credit mark on PCD loans was $56 million at closing. The credit mark is the result of a very thorough review of all Cambridge loans. The increase from expectations a year ago was driven mainly by office commercial real estate loans. Given the challenges for that sector in the current environment, I'll pro I'll provide additional color later in my remarks on asset quality.

As Denis mentioned, Eastern sold all of Cambridges investments in the days after the closing and used the proceeds to eliminate Cambridge wholesale fund the original securities mark of $172 million . Therefore, therefore, will not be accreted into income. This equates to '29 million to 34 million per annum.

On slide 8, we have provided an estimated schedule of accretion and amortization for the fair value marks that will impact earnings going forward. Most notable is the accretion of the discount on acquired loans. As a reminder we will create into income, the $250 million interest rate mark on loans plus the 33 million credit mark on non PCD loans which totals $283 million over the lives of those loans.

We expect this will create income of approximately '12 million to '14 million each quarter. For the next year.

We have modeled the loan accretion schedule based on the best information we have available. But as you know, actual accretion recognized will be subject to loan prepayments over time, those prepayment rates will be based on changes in market interest rates.

If rates decline, we'd expect to see faster prepayments in certain loan categories creating accelerated recognition of the associated discount. However, it's important to remember that all, although these loans are marked to current rate levels, the underlying interest rates on the loans are relatively low.

This means that rates would have to fall pretty far from where they are today before borrowers have incentive to refinance and pay off fixed rate loans.

For this reason, we believe we have strong protection against prepayment risk on these assets and the income stream should have a higher level of predictability.

Consistent with all aspects of this merger, Eastern is committed to continuing and growing the strong relationships that Cambridge has fostered with its customers as the legacy Cambridge loans pay down over time, creating a reduction in increase in income. The acquired loans will be replaced with new loans at market yields continuing to drive interest income in the bottom half of slide 8, we also provide expected amortization of the core deposit intangible and wealth intangibles which will be included in non interest expense combined. We expect these non cash expenses to be about $7 million per quarter over the next few quarters.

I'll now move into our results for the third quarter. Beginning on slide, nine, we reported a GAAP net loss of $6 million in the third quarter due to non reoccurring merger items. Primarily the day to non PCD loan reserve expense of $40.9 million as well as the 30.5 million in M&A expenses on an operating basis. Net income was 49.7 million or '25 cents per share.

This higher level of operating earnings is driven by a larger balance sheet. A higher margin which increased 30 base 33 basis points in the quarter to 297.

On the fee income side, our wealth revenues more than doubled to $14.9 million in the third quarter.

The balance sheet remains very strong, tangible book value per share ended the quarter at $12.17.

Our board approved a penny raise in the quarterly dividend and we repurchased 836,399shares of stock at an average price of $15.8 for a total of 12.6 million in the quarter.

Asset quality also remains strong. Although non-performing loans increased to $125 million the increase was due to PCD loans that have been conservatively reserved for, I'll discuss as the quality more later in my remarks.

Transitioning to the income statement for the quarter slide '10 provides a summary of both GAAP and operating results and return metrics as I mentioned our GAAP loss of 6 million for the quarter was driven by merger items. Operating net income of $49.7 million was $13 million higher than in the prior quarter. An increase of 36% there was considerable noise in the quarter due to the merger which appeared in three places.

The provision for credit losses included $40.9 million reserve on non P CD Cambridge loans, non interest income included $3 million fixed asset write down that was in other non interest income.

A non interest expense contained $27.6 million of expenses concentrated in salaries and benefits.

Please see slide 33 for, for a full breakout of M&A cost during the quarter. Note that our operating tax rate for the quarter was modestly elevated at 24.6% percent. And I'll provide an update on the tax rate we expect going forward when I cover our outlook in a few minutes.

Moving to the margin on slide '11. It's important to remember that we had a partial quarter of impact of the merger beginning on July 13th for September. Our margin on a FTE basis was 305. We are encouraged by the recent margin growth and expect additional rate cuts by the fed to provide benefit especially if the yield curve normalizes towards a traditional upward sloping shape, total non interest income on slide '12 was $33.5 million in the third quarter and 32.9 million on an operating basis.

Remember in Q2, we had an early deposit termination payment of $7.8 million which skewed our results, wealth fees increased from 6.7 million to 14.9 million in the third quarter. Driven by the increase in assets under management from Cambridge. As well as strong market performance.

Deposit service charges were 8.1 million in the third quarter. An increase of $200,000. Please note that certain deposit service charges were temporarily waived for our new Cambridge customers subtracting approximately $300,000 in income for the quarter. These fees will be reinstated in mid Q4.

Moving to slide '13 total non-interest expense was $159.8 million and 130.9 million on an operating basis.

There were two primary drivers to the link quarter. Change in operating expenses.

First salaries and benefits on an operating basis increased $15.4 million due to the addition of colleagues from Cambridge.

Second, we saw an increase in amortization expense of $5.7 million due to the amortization of the core deposit and wealth management intangibles.

As I mentioned earlier, we have the vast majority of merger related related cost base reflected in Q3 results.

The balance sheet on slide '14 shows the level of deposits, loans, borrowings and investments, post merger. The balance sheet is extremely healthy with 25.5 billion in total assets. A tangible common equity ratio of 10.7% a loan to deposit ratio in the mid 80s and essentially no wholesale funding.

We added approximately 3.9 billion in loans and 3.7 billion in deposits from Cambridge organic growth in the quarter was slow but essentially flat loan levels and a decline in deposits driven by seasonality.

We are optimistic about our local economy. The inflection point we are at in the rate cycle and our prospects prospects for growth. Moving into 2025 moving to deposits and loans on slides. '15 and 16, the key quarter over quarter changes related to Cambridge while or organic activity remain use.

We added high quality deposits through the merger. We continue to have approximately 50% of our total deposits and checking accounts and our total deposit cost is very well contained at 182 basis points. Demonstrating the strength of the combined deposit franchise on the loan side, we added 2.3 billion of commercial loans and another billion and a half in residential loans from Cambridge.

We are enthusiastic about the transition for the Cambridge customers which went seamlessly and we are making concerted efforts to continue to welcome and serve those customers who are new to Eastern.

Moving to the credit impacts of Cambridge on slide '19.

The allowance increased from 111 basis points last quarter to 143 basis points this quarter and stands at $253,821,000.0 million.

The build was comprised of $56 million of the day one. Cambridge PCD reserves which were recorded to the allowance with the offset to goodwill.

Additionally, we booked a day two provision on non PCD loans of 41 million.

The Legacy Eastern provision was $6 million in line with the past several quarters and charge off totaled $5 million.

Let's now take a closer look at the acquired loans and how we assess the credit impact of the Cambridge portfolio. Beginning on slide 20 the combined credit mark on PCD and non PCD loans was estimated at $44 million at the time of announcement, first $89 million at closing the P CD pool of loans was expanded over the last year, primarily due to deterioration in the office market.

Over the past year, distress office property sales have increased. Giving us a clearer picture of values slide '20 shows the total unpaid principal balance of PCD loans was 353 million or 9% of total Cambridge loans.

We recorded $56 million of reserves associated with these P CD loans via a gross up of the allowance that was recorded through goodwill slide. '22 highlights our pre investor office exposure post merger which totals $900 million or 5% of total loans. Unchanged from legacy Eastern's percentage criticized and classified investor office loans increased to $178 million for about 20% of total investor office loans. We have reserves totaling $72 million or 8% against our $900 million of investor office loans.

When looking at overall asset quality on slide, '23 non performing loans increased to $125 million or 70 basis points of total loans driven by the addition of Cambridge PCD loans legacy Eastern levels of non-performing loans remain stable from recent quarters that charge us for $5.1 million in the quarter or '12 basis points of total loans.

We feel very comfortable with the allowance of $254 million provides very strong coverage for the loan portfolio. Moving now to our outlook which is for Q4 only. We expect to provide 2025 guidance in January. Once we work through our annual budget process for Q4, we expect loan balances to be relatively flat while we don't anticipate much loan growth in Q4. we are seeing a build in commercial lending pipelines. A positive leading indicator cater for future growth, deposits typically exhibit seasonal declines late in the year and we have the maturity of $185 million deposit acquired from Century Bank that is maturing in mid November.

We expect net interest margin, net interest income of $175 to $180 million and net interest margin to be between 3 and 3.5. As I mentioned earlier, we expect declines in short term rates to benefit the margin and net interest income going forward. Approximately 20% of the loan book net of pas resets on short term interest rate.

We expect data on our interest bearing deposits to be 40 to 50% on the way down. Inclusive of our CD. Book operating non interest income is expected to be in the range of $33 to $34 million .

Operating non-interest expense is expected to be between $131 $132 million with fully achieved cost saves. This includes intangible amortization about $7 million. We also anticipate 2 to $3 million in non operating M&A expenses in Q4.

Lastly, we expect the tax rate to normalize for the full year in the range of 22 to 23%.

That concludes our comments for the quarter, and we'll now open the line for your questions.

Thank you. And at this time, I would like to remind everyone in order to ask the question, simply press the start followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star two. We'll pause for just a moment to compile the Q&A roster.

And your first question comes from the line of Mark Fitzgibbon with Piper Sandler. Please go ahead.

Hey guys, good morning and congratulations on the deal. It's rare that we see anybody bring in deal charges below their initial projections. So great job. I guess my first question, David to follow up on a couple of points that you made on loan pipelines. You said they were strong. I wondered if you could share with us the size of the pipeline and the the complexion of it.

Sure Mark, but Denis will Explain on this.

Hi Mark. Good morning. So yeah, the commercial loan pipeline is at its third highest level this year. Now, admittedly that's coming off a fairly low level at the end of June, but I'll just give you the, the two numbers. The end of June, our pipeline was $228 million. It's now 438 million . So, you know, we're, we're optimistic that that will continue to grow heading into the New Year and it's certainly certainly better than it was at the end of June

And Denis. Is that mostly commercial real estate or is it a even mix of C&I and CRE or what, what

Does that look

Like A good mix of commercial real estate C&I and community development lending, you know, very active in, in all three businesses. And we're, we're certainly that we're just seeing some early seeds of increase activity and hopefully we'll continue into the new year.

Okay, great mark. I was, go ahead.

No, no, please, David. Sorry.

I was, I was just going to add that, you know, to normal. We've been inwardly focused on the completion of the merger. And the bringing on of our colleagues, I think the other positive aspect to this is just a sense in the market among customers of the fed beginning an easing cycle and demand starting to build as well.

Okay, great. And then I I heard your comments and the discussion around purchase accounting adjustments and that slide 8 was helpful. It sounds like you expect the net interest margin to sort of gradually rise across 2025. Can you help us think about where the margin might be able to get to by the end of the year assuming we follow the forward curve?

So what I would I would say a couple of things, I would say we're modestly liability sensitive when we think about parallel changes in interest rates.

But we're more liability sensitive if the shape of the yield curve becomes normalized or more upward sloping. So which is the much more likely path of interest rates? So yes, instead of specific margins, I the way I would think about it is if you had a parallel rate and moves every '25 basis point move is worth about a basis point. But if the short end of the curve falls relative to long rates, every '25 basis points is worth about four basis points, almost four times as impactful.

Okay, great. And then I, I wondered if you could share with us how much of the $85 million increase in non performing loans was PCD related versus sort of other stuff that might have come from, say the eastern side,

Hi $85 million increase. So, so, I mean, certainly the biggest component of the increase in non performers in the quarter mark were, you know, the, the Cambridge loans that the PCD loans from Cambridge and most of that was office, I think the vast majority of those loans were office. And I think it's, it's worth sharing with you how, you know, the process that our team went through in evaluating those loans, but also broadly the investor office category, in its entirety, you know, we recognize that the office market has certainly deteriorated in this past year and knowing that our team did a very thorough review, we've re underwritten all office loans over $5 million. You know, through the second and the third quarter, we did it, it was a massive effort by our team, our team is in close contact with our borrowers and have a very good sense of what's happening with each loan. So that again, it reunderwritten every loan over $5 million and every quarter, we review each credit to determine if they were appropriately risk rated and reserved and the result of this. And clearly with the Cambridge office portfolio which has seen some deterioration here of this year, we established a very strong reserve against those office loans. And as as we mentioned in our comments, overall, we've been 8% reserve against the total investor office book at the end of the quarter and our reserve as noted is at 1.4% at the end of the quarter. So very strong actions, we believe we have fully accounted for the risk in these loans at the end of the quarter.

Great. Thank you.

Your next question comes from the line of David Delmonte with KBW. Please go ahead.

Hey, good morning, everyone. Hope everybody's doing well and, and thanks for taking my questions here. I guess just with regards to expenses, I think you noted you got, you know, the majority of the cost saves out. Just looking for a little bit of, of of commentary as we kind of go into '25. Do you feel like there's additional opportunities to extract some savings from the expense base?

Hi Damon Delmonte.

Hi, David.

It's, the, an, the short answer is maybe, I, I can't say my response a little bit for, for two reasons. I'm just short of only being here for three months. I'm still learning the organization and spent most of that time, you know, coming up to speed on, on the Cambridge transaction and the purchase County work we just shared with you. But secondly, we're just starting, we're at the beginning of the budget cycle. So I haven't worked through one of those, neither has Denis. So I think by January, when we're talking about the fourth quarter and giving guidance for the full year, we'll have a lot better clarity because we'll know the organization better at that point.

Okay, fair enough. And then, you know, with regards to the capital, obviously, Tangible book value and, capital ratios came in stronger, just given the change in the, in the marks with the deal closing, just kind of wondering what your thoughts are on the buyback. I saw you were active this quarter. And then also, do you have any thoughts on potential securities restructuring just given the the greater capital flexibility?

Yeah, so we, you can see the numbers we, we bought just under $13 million of stock. We, we spent the quarter mostly being price sensitive rather than volume sensitive. You can see our execution was about a dollar below the, the vwap. You're right, we certainly have plenty of excess capital. Hopefully, it supports the loan growth, the pipelines that, that Denis was talking about. But the reality is we, we still can execute on buybacks. We still think our stock is, is a very good value and we are talking about whether it makes sense to do a securities restructuring or not. The, so that's an active discussion at our alco committees. And we may or we may not as, as everyone on the call knows there's, there's pros and cons to those transactions. But it's that we're actively thinking about it.

Great. I appreciate that color. And then just lastly, you know, the cash balances at the end of the quarter were a little bit higher than, last quarter. Just kind of curious as to how we think about. the average earning asset base going forward. Do, does the cash stay on the balance sheet? Does it, you know, there'll be an outflow of deposits that have to be used to fund that or, you know, would it be reinvested in security? Just kind of, you know, you guys are short 3.4 billion of earning assets. Just kind of what's a, what's a good target, you know, over the coming quarters.Thanks

Sure, thanks. So cash is up $130 million. I think link quarter, it's just shy or right around $900 million part. So while I just said, we're thinking about securities restructuring, our alco is also thinking about just security purchases to utilize some of that cash. So the goal is organic loan growth, we just telegraph, we expect flat loan growth in Q4. But we're feeling better about Q5. I'm sorry, not Q 5 2025 though.

We're just, you know, at the beginning of our, our planning for 2025 the we did call out the expected maturity from legacy century deposit. If you recall, that's a similar deposit to what happened in Q2, Q2 is an early termination. We received a $7.8 million prepayment penalty. We won't, that won't happen in November because it's just what we expected to go to a maturity. So a little bit of that cash will fund that. Plus we have, we'll have some seasonal deposit outflows but not all of that. We're still sitting on a very healthy cash position. That will A fund loan growth. B probably lead to some, some modest additional security purchases.

Got it. Okay, great. That's helpful. That's all that I had for now. Thank you.

Thanks Damon.

Thanks Damon.

And your next question comes from the line of Laurie Havener Hunsicker with Seaport Research. Please go ahead.

Great. Hi, thanks. Good morning. And just, acro Mark's congratulations. Yeah, wondered wonder though if we could start with office. Just some specifics. So the commercial non accruals that you give of 105 million. Can you just share with us the breakdown of CRE versus C&I versus business banking and then very specifically of that 105 million . How much is, is office not performers?

So, Laurie, we're, you know, we're not going to go into detail on specific non accruals, specific categories. But what we I'm happy to, to talk about is and share with you is in terms of you know, the, the, the PCD loan, the increase in the PCD loans was largely office at Cambridge where the, the, as you can understand, given the environment and the weakening in office overall, the office was the largest category there that at end had significant reserves assigned against it.

Okay. Right. So, well, so you don't have, you're not disclosing how much you have in office, non performers.

Yes.

Am I just going to assume that that your, your PCD, commercial real estate, the 204 million us, whatever Eastern legacy was, is all About a third of the PCD loans to 204 million were office. And that's the category that had the most significant reserve against it.

Right. Totally, totally understand that. Just, I mean, for tracking purposes, I'm just trying to understand what the office performers are or maybe we can come back to that. So, so I, I guess can you help me think about of your 178 million the the criticized and classified office, how much of that is coming due here in coming quarters? And then just any color on those loans in terms of vacancy rates, how you're thinking about that?

So, Laurie, I would start from, from the, the starting point of we closed this transaction. We have the ability to do all these fair value marks PCD non PCD. So it's and since deal announcement, there, there was one distressed property sale prior to the deal announcement and then starting late in the third quarter and then fourth quarter of last year into this year, you're starting to see more distressed sales which translates into it's much easier to ascertain values in commercial real estate and especially in the office. So we had the benefit when we went through the purchase accounting to have substantially better knowledge than when the deal was announced. And the reality is office weakened over that time period, commercial real estate weakened over that time period. And hopefully we're starting to see some signs of stabilization. So that it is kind of our her view as we approach this, Denis called out and I called out in our script, 8% total reserve against investor office of $900 million. Very healthy reserve. So on page '22 we break out what are very small future maturities, right? $61 billion this quarter, $74 million in the next quarter. So within that $61 million for example, there is one loan on non accrual, but it's fully reserved for no additional loss expected. The rest of the loans are accruing. If you go through second quarter of '25 to $70 million there's no concern about any of those loans. They're all accruing. There's no special reserves, we expect all to be paid off that maturity. So point being our reserves at 143 basis points though are up link quarter are merger driven and we're standing by our reserve levels. The only other point I would add is if you walk through and just think about Legacy Eastern in Q3 net charge off the $5 million and $6 million reserve. That portfolio has been our credit teams here have been. Well on top of that through this whole cycle, I mean, I'll speak for myself as, as a newcomer here going through my first Cecil committee, my first allowance committee and observing the teams and the process.

Very impressed. And that gives me in a short period of time, an awful lot of confidence around the credit understanding of the market, the understanding of our portfolio. You heard Denis in his comments, talking about re underwriting all of our loans, commercial loans in Q1 and Q2 Standard Practice here.

Right? And so, and I appreciate that, I appreciate all the details you guys given your deck It's so helpful. So sorry, just '11 more office question here. So, of the 61 million that is maturing next quarter I had in my notes that half of that actually was from an Eastern credit EBC. So, I guess maybe can you just help us think about that, that 30 million loan and you said it's fully reserved, any color in terms of vacancy rates, any color in terms of, is that going to be extended or how should we be thinking about that?

So it

Wasn't an $11 million loan payment, David right?

Yes. Yes. There's $11 million loan on non-accrual fully reserved for I think what you said Laurie was just to clarify some of I did not say or mean to say that all those maturities were coming from Cambridges portfolio. It's more legacy Eastern Porto,

Right? Okay. Okay. Your, your forward guide and I appreciate that you're going to refresh us in January. Just just two things. Number one, your, net interest income and margin guide that does include the accretion schedule you laid out in slide. Eight.

Yes.

Okay. And then tax rate and this sort of just a more general question sort of as, as we look to next year, how should we be thinking about it because there's such a wild swing. In other words, there, are we thinking maybe you're back to the 21% that Eastern was Legacy or, you know, CATC added a higher tax rate. Just any helpful guidance you can give there on tax rate looking forward beyond fourth quarter would be helpful.

Yeah, I, I think next year is going to look basically like what we have on the page, probably 22% to 23%. Again. You know, we haven't gone through the budget. You know, taxes, post-merger can be a little complicated. We're still have some outstanding tax issues from, from years before nothing.

So just normal stuff, you know, takes three years to, to close every tax year. So we could have some variability in Q4. But I think this '20 to 22% to 23% is pro I'm thinking of that at least today is probably a run rate for a bunch of quarters forward.

Great, thanks David. And then this last question Denis to you, can you help us think a little bit about M&A you've completed this deal? Just how you, how you see how you see M&A in Eastern.

Thank you.

So thanks Laurie. So, you know, our focus is on the, the integration of the Cambridge merger and even go thinking back to the century merger, there's a lot of opportunity for us to capitalize on. So our primary focus is going to be on organic growth. But that said, I would, you know, I'm, we're all very, very pleased with how the team work so well on the integration of, of the Cambridge merger, there's a lot of capability at this firm. And I'm very confident that if an opportunity were to arise, if we get a call about a merger opportunity that this team would be able to engage on it very, very effectively. But again, our, our primary focus is organic growth.

Great. Thanks.

Thank you.

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

Well, thanks everyone for your interest and your questions and we look forward to sharing more with you during our next earnings call at the end of January until then best wishes for a happy and healthy holiday season.

Thank you. And this concludes today's conference call. Thank you all for participating. You may now disconnect.