Eastern Bankshares, Inc. Q2 FY2022 Earnings Call

Hello, and welcome to the Eastern Bankshares, Inc. Second Quarter 2022 Earnings 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, 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. Any forward-looking statements made during this call represent management's views and estimates only as of today. While the company may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so even if management's views or estimates change, and you should not rely on such statements as representing management's views due to any technical difficulty subsequent to today. During the call, the company will also discuss certain non-GAAP financial measures. For a reconciliation of such non-GAAP financial measures to the comparable GAAP figures, please refer to the company's earnings press release, which can be found at investor.easternbank.com. Please note, this event is being recorded. I'd now like to turn the call over to Bob Rivers, Chair and CEO. Please go ahead, sir.

Great. Well, thank you, Sergio, and good morning, everyone. And thank you for joining our second quarter earnings call of 2022. Joining me today is Jim Fitzgerald, our Chief Administrative Officer and Chief Financial Officer. Our results during the second quarter continued to be strong, reflecting the benefits of investments we've made over the past year to strengthen our franchise within one of the most attractive markets in the United States. Despite the uncertainty brought about by COVID and the shift to remote work, the impacts of higher inflation in the specter of recession, Greater Boston is considered by many among the best-performing office markets in the country, bolstered by high diversity in industry sectors, relatively low reliance on large tenants and the tailwinds of strong demand for life sciences space. In addition to the financial leverage generated by the Century Bank acquisition eight months ago, the effects of which are reflected in our operating net income for the quarter, which was 42% higher than the prior quarter. We're seeing early signs that recent staffing additions to enhance our commercial lending capabilities are contributing to commercial loan growth, net of PPP loans, which accelerated to a 10% annualized rate in the quarter. Since most of these new hires joined us in the past few months, we have yet to realize their full production potential and we believe they're joining our already highly talented team, which bodes well for the quarters ahead. Some of these new additions are senior leaders who also bring added expertise in networks within emerging areas of our commercial lending activities. These expanded capabilities further add to those in the higher education and healthcare sectors, which we acquired through the Century transaction and in which we are gaining traction as well. As we have stated in the past, given these factors and a continued strong pipeline, we believe we are still on track for high single-digit growth in our commercial loan portfolios for the year. Residential and consumer lending balances also grew sequentially at double-digit rates on an annualized basis, reflecting the solid Greater Boston economy and our own increased emphasis on driving higher growth in these categories. In addition, due to our longstanding discipline with respect to deposit pricing in the face of rising interest rates, our already low cost deposit base of just 6 basis points actually declined by 1 basis point during the quarter, resulting in our net interest margin widening by 20 basis points, our largest single expansion in a quarter since 2018. Net of the transfer of about $300 million in cannabis and money service business deposits in early April, our total deposit balances increased slightly during the quarter and as of quarter-end was comprised of almost 60% checking account balances and 98% core deposits. We continue to be thoughtful about our branch locations and how they can expand and strengthen our strong deposit franchise and community outreach. Most recently, we opened a branch in Needham, Massachusetts, which complements our network in Boston's affluent Western suburbs. Overall, after taking Eastern public and completing the largest acquisition in our long history while supporting our customers and communities in the midst of some of the darkest days in the pandemic, we believe we are beginning to hit our stride in driving greater operating performance and delivering value to our shareholders. As always, these results reflect the hard work and tremendous commitment of my 2,100 Eastern colleagues with whom I am privileged to work and whom I thank for all they do every day to serve our customers, our communities, and each other. Once again, thank you for joining us today and for your interest in Eastern. And now I'll turn things over to Jim for an in-depth review of our financial performance and our outlook for the remainder of 2022.

Thank you, Bob, and good morning, everyone. As Bob mentioned, we're pleased with our second quarter results. We think they demonstrate very strong earnings momentum and include many of the benefits we had projected from the Century transaction last year, as well as the positive impact to our net interest income from higher interest rates. The outlook for interest rates has changed from our last call and we've updated our outlook based on those changes, and we'll also talk about how the outlook impacts our interest rate risk management later in my remarks. Net income was $51.2 million for the quarter or $0.31 per diluted share. Operating net income was $52.5 million or $0.32 per diluted share. Operating net income for the second quarter was 42% higher than the same quarter of 2021. Net interest income was very strong in the second quarter, rising 8% from the prior quarter as the net interest margin increased 21 basis points from Q1. Higher rates improved our asset yields by 21 basis points, and our cost of funds was essentially unchanged from Q1. We also had a strong quarter of loan growth in all of our major portfolios with commercial loans up 10% quarter-to-quarter. Excluding PPP loans, residential mortgages were up 11% and consumer loans were up 13%. Each of these percentages are on an annualized basis. Our Board approved a dividend of $0.10 per share payable on September 15th to shareholders of record on September 2, 2022. We repurchased 4.2 million shares under our share repurchase program in the quarter, up from $2.9 million in Q1. The average purchase price for the shares, excluding commission costs, was $19.24 in the second quarter. First, I'll make some comments on the balance sheet. Assets were down $500 million from $22.8 billion to $22.4 billion in the quarter as deposits were lower by $200 million. This was due in part to the transfer in early April of the cannabis and money services deposits we acquired from Century. Cash and securities were down $800 million, offset by loan growth of just over $200 million. The securities portfolio was down $287 million, primarily due to lower market values. All major loan categories were up for the quarter. Commercial loans, excluding PPP loans were up $219 million or 10% annualized, residential loans were up $53 million or 11% annualized and consumer loans, driven by home equity loans, were up $43 million or 13% annualized. PPP loans were down $99 million in the quarter and the total PPP portfolio only had $42 million remaining at June 30th. As mentioned above, deposits were down $229 million in the quarter, which reflected the transfer of the cannabis and money services deposits of $300 million in early April. Average deposits were down just under $500 million in the quarter, which we outlined on Page 12 of the presentation and also reflect the cannabis transfer. Shareholder equity decreased $289 million in the quarter due to the impact of the reduction in accumulated other comprehensive income and share repurchases in the period, partially offset by an increase in retained earnings. Turning to earnings, as I mentioned, GAAP net income was $51.2 million or $0.31 per diluted share and operating earnings were $52.5 million or $0.32 per diluted share. We feel our results reflect very strong progress in many key areas. Net interest income of $137.8 million was $9.6 million or 8% higher than Q1 and benefited from the increase in interest rates in March and in the second quarter. Asset yields were up 21 basis points in the quarter and quarter-over-quarter and funding costs were essentially unchanged. Our deposit costs were 6 basis points in the quarter, down 1 basis point from Q1. This combination of higher asset yields and stable funding costs allowed our net interest margin to expand by 21 basis points from 2.42% to 2.63%. The provision for loan loss was $1.1 million in the second quarter compared to a reserve release of $500,000 in Q1 and a release of $3.3 million in Q2 of 2021. Noninterest income on an operating basis was $48 million in Q2. Insurance revenues were $24.7 million in the second quarter, up 4% from the prior year quarter and down from $28.7 million in Q1, which is when we receive a higher portion of our revenue-sharing payments from insurance carriers. Other operating line items were generally in line with either the prior quarter or prior year. The value of rabbi trust assets was down $7.3 million due primarily to declines in the stock market. This was partially offset by $1.3 million in gains from building sales, which resulted in nonoperating noninterest revenue of negative $6.1 million. Noninterest expense was $111.1 million in the second quarter. On an operating basis, noninterest expense was $114.4 million compared to $110.9 million in Q1 due primarily to an increase in salaries and benefits expense. We had a full quarter of expense for the equity plan in Q2 compared to one month's expense in Q1 and a slightly higher incentive compensation expense compared to Q1. Occupancy, data processing, and professional fees were all slightly lower in the second quarter compared to the first quarter, and were partially offset by increases in marketing expenses. I'll include a few comments later in my remarks on the outlook for expenses. The tax rate in the second quarter was slightly higher than Q1 and we provide guidance for the full year tax rate on the outlook slide. Our marginal tax rate is higher than the average tax rate. And as projected earnings increase, the average rate will increase as well. Asset quality continues to be sound. For the first half of 2022, charge-offs were essentially equal to recoveries and both were very, very modest. COVID modifications continue to perform as expected and are down to approximately $20 million. There was an increase in nonperforming loans of approximately $25 million due to a movement to nonaccrual in one syndicated credit facility. The credit facility is in workout and we're optimistic it will be resolved without a loss over the next few quarters. Away from that one credit, there was very little change from Q1. As I just noted, the provision for loan loss was $1.1 million compared to a release in Q1 of $500,000. Even with the increase in NPLs, the ratio of reserve to NPLs remained above 200%. I wanted to review our outlook on Page 16 and make some additional comments. Last quarter, when we provided our outlook for 2022, we had incorporated seven 25 basis points increases by the Fed in our forecast. We are now assuming an upper bound for the Fed funds target of 3.5% by year-end 2022, which we believe aligns with the consensus view. With that rate forecast, we would expect net interest income of $570 million to $590 million in 2022. This is up from the prior outlook of $530 million to $550 million, an increase of $40 million. As we outlined on Page 14 of the presentation, the current rate environment creates some different dynamics than we've had over the last few years. The increase in rates is clearly helping our net interest income. As I just outlined, we expect that to continue throughout the rest of the year and into 2023 where the impact will be felt for the full year, assuming rates remain relatively unchanged in 2023. The combination of higher rates, our naturally asset-sensitive balance sheet and general economic uncertainties require us to start protecting for downside rate scenarios. To that end, we initiated a hedging program in Q2 to convert $1 billion of our variable rate assets to a fixed rate and would expect to do more of that in Q3. I wanted to note there are two primary drivers of our asset sensitivity. The first is our low-cost non-maturity deposits that are long-duration liabilities, and the second is our high level of variable rate loans that have short-term repricing intervals. We have historically used balance sheet swaps to reduce our asset sensitivity and are very comfortable continuing with that strategy. There's no change in our guidance on noninterest income from last quarter as we still expect $180 million to $190 million for 2022. We did change our overdraft practices starting on July 1st that we previewed last quarter, and that reduction is included in this guidance. There's no change in our operating noninterest expense guidance as we still expect between $445 million and $460 million for 2022. As expected, we are watching wage inflation pressures carefully. We have taken some recent steps to increase wages for many of our branch and operations colleagues to help retain and attract workers. We also experienced wage pressure when we recruit for replacements. But we are still comfortable with the expense guidance we provided earlier in the year. As I mentioned previously, we expect a slightly higher tax rate for 2022 due in part to higher earnings levels. We had a very strong quarter for loan originations on all of our major portfolios in Q2. We continue to expect commercial loan growth to be in the mid to high single digits over time. Although, as you can see from our Q1 and Q2 results, it can be a little volatile quarter-to-quarter. We expect this growth to be more visible now that PPP loans have a relatively small impact. We do expect that over time, higher interest rates and a potential weakening economy may impact our commercial loan growth expectations, and we will update as we see any changes over the coming quarters. We have been interested in reducing the size of our investment portfolio over the last year. After considering a few options, we have entered into a flow agreement that enables us to purchase residential loans from Embrace Home Loans. Embrace is located in Rhode Island and has processed our originations and supported our mortgage efforts since 2016. The flow arrangement provides a means for us to purchase a portion of their originations for our balance sheet. We have started the process with a goal of redirecting the securities portfolio cash flow of approximately $80 million a month into loans. We don't expect too much of an impact on our balance sheet in Q3, but we'll provide an update on progress as the year develops. Our expectation is that we will see a reduction in the securities portfolio and a similar size increase in the residential mortgage loan portfolio as this program develops. We expect the deposit environment to get more challenging as the year progresses. Although we didn't experience any deposit cost increase in the second quarter, we expect costs will begin to increase. We did see our average deposits decline quarter-over-quarter and expect volumes to continue to be challenging. We're close to completing the 5% share repurchase authorization that received regulatory approval last November. Future repurchase activity beyond that is subject to regulatory approval, and if approved, would be based on market conditions. We'll continue to be very thoughtful about our use of capital.

Your first question comes from Janet Lee from JPMorgan.

I want to start with the deposit data. So I understand the historically low deposit beta for you guys. Is the sort of around 18% of interest-bearing deposit beta in the right ballpark for what you guys experienced in the prior rising rate cycle? And would you expect your terminal interest-bearing deposit beta in this cycle to behave any differently versus that prior one?

I think back in time, precisely when we did disclose our historical deposit beta, it was slightly higher than the number you referenced, but very similar. And that was from the time period basically 2015 or '16 through the end of '18 or into 2019, and the beta was in the 20% range at that time. The one thing I always want to note about that is in 2019, the Fed reversed course, actually started to lower rates and then the pandemic happened in 2020. So there was a huge acceleration. So internally, we feel like that's a little bit of an optimistic number, quite honestly, because if rates continue to rise, the beta would have been higher. So for our internal purposes, we assume a higher beta than that historical number, roughly 150% of that.

Is that what you're assuming for terminal or is that what you're assuming in the 2022 NII guide?

Terminal, you might have to define for me since I'm not clear what you mean by that.

So would you expect 150% higher interest-bearing deposit beta versus the prior 20% range and that being achieved by the end of 2022 or that leads and flows through, say, like mid-2023 or basically beyond the end of 2022?

So I think we're at July of 2022, in the second quarter, we didn't have any increases. So I don't expect that to be in place by the end of this year. We used that 150% of that 20% beta really over time. So we would extend well past 2022. Rates move very quickly here. It's pretty hard to calibrate those kinds of calculations in the short term.

And on your asset sensitivity, so as you're trying to reduce that to protect from potential rate downside scenarios. Can you give us an update on your NII sensitivity in terms of how much annualized NII you would get from a 25 basis point rate increase in Fed funds?

So we're about to do our 10-Q next week. We'll have information in there. We do a number of scenarios; that one isn't one of them. So I don't think I can answer that question, but we will provide the normal disclosures in the 10-Q next week.

And on deposits growth. So I get that it's getting more challenging to grow deposits given what the Fed is doing. But it looks like you guys still managed to grow deposits modestly on a period-end basis after accounting for the $300 million cannabis deposits. So how should we think about the magnitude of the decline in deposits and the back half of 2022? And how should I think about the mix of noninterest-bearing deposits to total going from the current 35%?

I appreciate your question, Janet. Eastern has a strong track record in gathering deposits. Our cost of funds and deposit growth over a significant timeframe compare favorably to our industry peers. However, we have seen a significant shift in deposits over the past month or two. While we experienced robust deposit growth in 2020 and 2021, it's likely that future growth will be more challenging. We're unsure of how this will develop, but we indicated that our historical deposit growth may not be a reliable indicator moving forward. We anticipate difficulties in growing deposits. Overall, our deposit mix looks strong when we examine it holistically rather than focusing on individual categories. As interest rates rise, we expect to see shifts in our deposit mix, with funds moving from transaction-related accounts to more interest-sensitive accounts like money market deposit accounts. This trend has occurred in previous cycles, as higher rates lead to increased attention on deposits. This factor is included in our outlook for net interest income, and we expect similar trends to continue beyond 2022.

My last question on loan growth. The color you gave on the flow agreement, that was helpful. So is it fair to assume that the resi growth in the back half of 2022 might slow down a little bit versus what you experienced in the second quarter? And then can you continue growing the consumer balances and maintain this pace through the back half of 2022? How should I just think about the overall residential and consumer loan growth for the full year 2022?

Let me break this down step by step. I'll start with home equity. Like many in the industry, we experienced strong growth in home equity products in the second quarter, which was encouraging. While we don't anticipate maintaining the same high growth rate we saw this quarter, we do expect dollar growth to continue. Though it's a relatively small portfolio, the 15% or 13% growth rate came from a small base. We foresee ongoing progress in the home equity area, and I would emphasize dollar growth over percentage growth for this category. Moving forward, I'll categorize the residential portfolio into two components. We only recently initiated the partnership with Embrace, so that data isn't included in our historical numbers. The growth in residential loans this quarter and last quarter came primarily from our organic origination team at Eastern. I do think the growth rate may decrease slightly, but the dollar growth we observed in the second quarter seems sustainable for the remainder of the year. Embrace will be a new addition, and as we move forward, we'll make it clearer how it fits into residential loans. Regarding growth projections, I plan to focus on the cash flow from the securities portfolio, aiming to redirect those flows into residential loans. Therefore, we anticipate more growth in that loan category, driven by our relationship with Embrace. Since we just started in July, it will take time for applications to turn into originations. As we approach the third quarter, we aim to provide transparency so you can track our progress.

Your next question comes from Mark Fitzgibbon.

First, I wondered if you could share with us, trust and investment advisory revenues held up really well this quarter. And I'm curious where AUM stands and what your flows look like this quarter?

AUM is down. I don't have the precise amount that it's down. I did see your note and anticipated that question. And I think there's a couple of things that happened; there's some timing things about when fees are charged. And we don't see anything different than what you would expect in fees. The AUM is down, not as much as the market because there are fixed-income assets in there, etc. But the fees are down a little bit quarter-to-quarter. And our own internal view that was in line with what we expected. They were growing up until the market reversal at the end of the year. So there's a little bit of a catch-up in some of that and we do have some trust assets that are a little bit less sensitive to market moves than the asset management side of that. But we didn't see anything there that was surprising to us.

And then secondly, Jim, I wondered if you could give us any more color around that nonaccrual sort of what industry it was, and what the collateral backing it looks like any timing on resolution?

So as you mentioned, it's a syndicated credit where we're a participant; it's local; it's in workouts. Workouts always take a little bit more time than anyone would like, but we believe that the workout process will happen. It may take a couple of quarters, but it will be resolved, and we don't anticipate a loss.

And then last question I had is, I wonder if you could just give us a little more detail on the relationship with Embrace home loans. I assume you've given them kind of the types of loans that you want to buy. What sort of pricing arrangement have you made with them for the loans that you flow?

And just for those on the phone who aren't aware of this relationship, Embrace is an independently owned mortgage company in Rhode Island. We have outsourced our process into them back in 2016, and it has been a very successful relationship. We have what we would call a risk acceptance criteria for our mortgage loan products. We've provided that to them. There's a limitation on states that we’ll accept originations from. But the goal is to make it look and feel as much like an Eastern originated product as possible from a credit perspective. We are in some states that we don't do business in today, but most of those are very close to home.

And pricing, Jim?

So there's a daily pricing formula based on Federal Home Loan Bank rates with a spread. And there's a premium paid to Embrace for both the interest rate and also, we are servicing the loans here at Eastern.

Your next question comes from Laurie Hunsicker from Compass Point Research.

Just staying with Embrace here. So this is a national footprint, you said most of it though will be focused in New England. Am I hearing that right?

Yes, the East Coast, Laurie. So there's a number of states beyond New England, but it's generally speaking, all in the East Coast and generally speaking, closer to home, but not just in New England.

And then what is the FICO you're targeting, and what is the FICO in terms of how low you go?

So as I said, we have what we call a risk acceptance criteria. It's the same criteria that we use for our own originations. So there's no change in credit appetite here or anything like that. And in some ways, it's a little bit tighter than their own criteria. But the expectation and belief and confidence is that these originations, the credit quality will look like our own portfolio, absent the fact that they're not just from Massachusetts, as I said earlier.

So your average FICO then, I probably don't have a complete refresh number, but then that puts you in like the mid-$700, $750, $760, is that right?

I don't know the answer to that question, Laurie. We can follow up. But the credit quality of our residential book is quite high. We can follow up with some particulars on that. I don't know it off the top of my head.

And then just one more question on this. Is there a plan to also capture the customer, capture the deposit relationship, or how do you think about that?

So as I mentioned, we're servicing the loans, so we would have that customer relationship. We're in very early days here, very early beginnings of the program. So we'll try and figure that stuff out over time, but we will be servicing the loans and have the relationship from that perspective.

And then jumping over to your net interest income, within your $138 million of net interest income, how much of that was accretion income, merger accretion income?

Very little, Laurie. I think I remember this conversation back when we closed the Century transaction. And the overall impact on an annualized basis in the early years post-Century was less than $2 million or $3 million. It's a very small number. The annualized impact of the accretion of the marks, let me be more clear.

Just checking, I know it was the reversal. So if I look at your margin then just ex PPP, because you had 11 basis points in last quarter and 5 basis points on PPP this quarter, so your core margin was really up 27 basis points, just remarkable. Can you help us think about especially with the $1 billion hedge that you just put on, how we should be thinking about margin just as we look to September? And I certainly appreciate the guide that you've given us, but just some moving parts that would be super helpful to kind of understand that piece.

I'll try. As we outlined in the outlook, we anticipate a significant increase from the previous forecast, $40 million for this year. When examining our margin, it was somewhat confusing due to Century and also the PPP, as you pointed out. The increase from $242 million to $263 million is noted, although we don't have a specific number for what we expect in the second half of the year; however, we do see ongoing improvement. One of our strategic challenges, as discussed in previous calls, is to enhance that margin, which we find very encouraging. We hope the guidance on the net interest income can assist you with those calculations.

I mean, yes, I can back into it. So okay, that's great. I appreciate your guidance. Finally, can you just give us a little bit of a refresh on sort of the warning signals starting to flash, where we stand on office in terms of how you see things, what your balance is there, any details you can give us? And then same question on leveraged lending. Can you give us a refresh on those two categories?

Our office portfolio is currently just under $1 billion. It consists of three primary sectors: around $100 million is in medical offices, a third is in combined retail office, and the remainder is traditional office space. We have minimal office space in Boston. We conduct thorough reviews of all our portfolios, and recently we focused on our office segment. Following this review, I can confidently say that we have a strong customer base and great sponsors, which is a result of our hard work to build these relationships. While we recognize that this area is experiencing challenges, we feel positive about our clients and their capacities. It's important to note that our overall exposure includes those three sectors, providing us with reasonable diversification. We don't have a separate leveraged lending group, but we do support customers involved in activities like acquisitions and taking on additional leverage for business objectives. Therefore, it's challenging to provide the information you're looking for since we are not focused on leveraged lending in the way you've asked.

And then just on office, do you have an updated LTV there?

I don't. The LTVs we disclose in our public documents are all, we think, very appropriate and the office would be very similar to those.

And then Bob, just one last question to you. If you can talk a little bit about your M&A appetite here, how you're thinking about things? Obviously, the Century deal went very, very well, but interest rate marks are very painful on a buyer's tangible book. Can you just refresh us in terms of how you view M&A currently, what you're seeing out there, what makes sense to you?

I mean, certainly, we're very interested in any opportunities that might come our way. We're ready to engage organizationally and undertake those as they arise. Certainly, we're going to evaluate each opportunity on its financial merits and whether it be the impact of interest rate marks, the impact on any dilution to our tangible book value, we're very careful and sensitive to. So again, we'll evaluate them as they come across. But certainly, we remain interested in engaging in those conversations. But for now, we're really encouraged that we have this opportunity to really lean into our organic results. We've been building the engine here, particularly in the commercial lending groups. You can see the results of those starting to pay off. So we're very excited about our prospects in that regard. And really after a period of a couple of years where we were very busy with both the IPO and the integration of Century to really have a year that's cleaner, if you will, to focus fully and entirely on continuing to build the organization's capability, is really just a tremendous opportunity for us and one that we're taking advantage of.

Your next question comes from Damon DelMonte from KBW.

Just a lot of great questions asked and answered. So just a couple of follow-ups here. Credit obviously remains strong, absent the one Shared National that moved into nonperforming status. But as you kind of look at some of the underlying trends in the Greater Boston market and New England market. How are you feeling about provision level going forward? Do you feel that you're going to be able to keep it similar to this quarter's level, or do you think you're going to need to start to incorporate some measures of factors related to economic uncertainty? And I know you haven't adopted CECL, I know that comes up at the end of the year, but just kind of what your thoughts there.

We adopted CECL on January 1st of this year, and I will address your question in two parts. Regarding CECL, we have a cautiously optimistic view of the local economy where we have lent. There is uncertainty and volatility in the market today, more than there was six months ago, but Boston is performing well. We believe our lending practices, history, and customer base are strong enough to withstand potential volatility. We are aware of recession fears, as reported in various publications, and have incorporated that into our outlook. Overall, we feel positive about the fundamental credit situation. While there are always concerns about credit, particularly in the office portfolio, we are confident in our customers within that space. When it comes to the provision and CECL, it's challenging to predict. CECL relies on economic forecasts, and the one we and most banks used for this quarter anticipated a slowdown without predicting a recession. How that forecast changes in the coming quarters will be influenced by external factors beyond our control. Our underwriting statistics are prudent and robust, and we do not foresee any significant issues. However, the provision based on CECL remains hard to determine due to these external influences. This quarter, the allowance for credit losses remained relatively constant, slight decreases occurred, and some loan growth led to the $1 million provision we reported.

And then, I guess, secondly, obviously, very active with the buyback this quarter. Should you guys exhaust that during this back half of the year? What are your thoughts on seeking out approval for a new buyback, or is that something that you would wait until 2023, '24?

We are very close to using up the initial 5% authorization. What we stated in my remarks and in the presentation is all we can share right now, Damon, which is that it requires regulatory approval. We respect the process and understand their need to follow it. Therefore, we will not provide any further updates until we have more information to share.

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

Well, thanks, everyone, for joining the call, for your interest, to your questions, and have a great rest of the summer.

This concludes today's conference call. You may now disconnect.