Eastern Bankshares(US:EBC)2023-11-02 16:00Financial Performance - Net income for the three months ended September 30, 2023, was $63.5 million, a 20.2% increase from $52.8 million for the same period in 2022[278]. - Net loss for the nine months ended September 30, 2023, was $94.2 million, a 164.7% decrease from net income of $145.6 million for the same period in 2022[278]. - Operating net income for the three months ended September 30, 2023, was $52.1 million, a decrease of 2.8% from $53.6 million for the same period in 2022[279]. - Net income from continuing operations for Q3 2023 was $63,464,000, compared to $52,808,000 in Q3 2022, reflecting a year-over-year increase of 20.5%[311]. - Operating net income (non-GAAP) for Q3 2023 was $52,085,000, slightly down from $53,602,000 in Q3 2022, indicating a decrease of 2.8%[311]. - Total revenue from continuing operations (GAAP) for Q3 2023 was $156,362,000, down from $171,703,000 in Q3 2022, representing a decline of 8.9%[312]. - Noninterest income on an operating basis (non-GAAP) for Q3 2023 was $20,678,000, compared to $21,503,000 in Q3 2022, a decrease of 3.8%[312]. - Net income for the three months ended September 30, 2023, was $63.5 million, a 20.2% increase from $52.8 million in the same period of 2022[390]. - Net interest income for Q3 2023 was $141,581 thousand, compared to $155,851 thousand in Q3 2022, reflecting a decrease of 9.1%[408]. Asset and Loan Portfolio - Total assets decreased from $22.6 billion at December 31, 2022, to $21.1 billion at September 30, 2023[276]. - Total loans increased to $13,919.3 million as of September 30, 2023, from $13,575.5 million as of December 31, 2022[336]. - Total commercial and industrial loans were $3.1 billion as of September 30, 2023, representing 22.2% of total loans[283]. - Total commercial real estate loans increased to $5.4 billion as of September 30, 2023, representing 38.8% of total loans[283]. - Total residential real estate loans amounted to $2.6 billion, representing 18.4% of total loans, compared to $2.5 billion and 18.1% as of December 31, 2022[285]. - Total consumer home equity loans were $1.2 billion as of September 30, 2023, representing 8.6% of total loans, compared to 8.8% as of December 31, 2022[288]. - Gross loans increased by $343.7 million, or 2.5%, to $13.9 billion at September 30, 2023, compared to $13.6 billion at December 31, 2022[333]. - The commercial real estate portfolio increased by $241.6 million from December 31, 2022, to September 30, 2023, primarily due to a $251.9 million increase in commercial real estate investment loan balances[334]. - The residential real estate portfolio increased by $90.0 million during the nine months ended September 30, 2023, driven by fewer sales of originated loans and $32.0 million in loan purchases[334]. Deposits and Funding - Deposits decreased by $1.55 billion, or 8.2%, to $17.42 billion as of September 30, 2023, from $18.97 billion at December 31, 2022[317]. - Total deposits decreased by $1.6 billion, or 8.2%, to $17.4 billion at September 30, 2023, primarily due to industry-wide competition and a decline in brokered certificates of deposit[380]. - Demand deposits fell by $1.1 billion (17.0%) and interest checking deposits decreased by $896.3 million (19.6%) during the same period[379]. - The bank's total borrowings decreased by $25.5 million to $715.4 million at September 30, 2023, primarily due to a reduction in FHLB short-term advances[385]. - The company had $394.1 million in brokered certificates of deposit as of September 30, 2023, indicating a strategy to maintain additional sources of liquidity[459]. Noninterest Income and Expenses - Noninterest income decreased by $0.4 million, or 1.9%, to $19.2 million for the three months ended September 30, 2023, primarily due to $2.7 million in losses on sales of commercial and industrial loans[422]. - For the nine months ended September 30, 2023, noninterest income decreased by $318.8 million to a net loss of $264.5 million, largely due to a $330.7 million increase in losses on sales of securities available for sale[424]. - Total noninterest expense increased by $6.0 million, or 6.2%, to $101.7 million for the three months ended September 30, 2023, driven by a $2.9 million rise in professional services and a $2.6 million increase in other noninterest expenses[426]. - For the nine months ended September 30, 2023, noninterest expense rose by $21.5 million, or 7.8%, to $297.6 million, primarily due to a $13.7 million increase in salaries and employee benefits[428]. Loan Losses and Credit Quality - The allowance for loan losses increased by $12.9 million, or 9.1%, to $155.1 million, representing 1.12% of total loans as of September 30, 2023, up from 1.05% at December 31, 2022[362]. - Non-performing loans (NPLs) increased by $8.9 million, or 23.0%, to $47.5 million at September 30, 2023, representing 0.34% of total loans[345]. - Potential problem loans increased by $123.1 million, or 65.8%, to $310.1 million at September 30, 2023, accounting for 2.2% of total loans[353]. - The provision for loan losses was $7.3 million for Q3 2023, compared to $6.5 million for Q3 2022, indicating an increase of 12.3%[416]. Strategic Initiatives - The company reclassified its insurance agency business as held for sale in September 2023, indicating a strategic shift[273]. - The company announced a definitive merger agreement to acquire Cambridge Bancorp for approximately $528.1 million, expected to close in Q1 2024[292]. - The company entered into an agreement to sell its insurance agency business for a gross purchase price of $515.0 million, closing on October 31, 2023[294]. - The company completed a balance sheet repositioning by selling a portion of its AFS securities portfolio for total proceeds of $1.9 billion in Q1 2023[298]. Economic Outlook - As of September 30, 2023, the allowance for loan losses was influenced by a forecast predicting a mild contraction in the U.S. economy in Q4 2023, with an expected unemployment rate increase and steady GDP[417]. - The downside economic scenario projected a 2.6% annualized decline in GDP for Q4 2023, leading to an estimated increase in the allowance for loan losses by approximately $11.5 million[418].