Eastern Bankshares Inc
NASDAQ:EBC
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Eastern Bankshares Inc
Earnings Call Analysis
Q3-2023 Analysis
Eastern Bankshares Inc
Eastern announced major strategic initiatives, including the sale of Eastern Insurance and a merger with Cambridge Trust. The insurance sale is expected soon with a merger completion target of early 2024. Alongside these developments, the company has exuded confidence by increasing its quarterly dividend from $0.10 to $0.11 per share.
The cost of funds increased at a slower rate, yet higher-cost deposit shifts persist. Eastern projects modest commercial loan growth and single-digit consumer and mortgage loan growth. Operational efficiency is believed to improve post-merger, and efforts continue to ensure a competitive cost edge.
Asset quality remains robust with negligible credit losses and low nonperforming loans, contributing to a sturdy balance sheet with strong regulatory and GAAP capital levels. The merger with Cambridge Trust is expected to offer a stronger future earnings growth platform, and management is looking forward to leveraging the combined entities’ capabilities.
Net income for the quarter stood at $59.1 million, or $0.36 per share. The company benefited from a one-time tax valuation allowance elimination of roughly $15 million. The net interest margin was steady, and capital ratios were strong with the CET1 ratio at 16%. The tangible book value reached $10.14 per share.
There was an identifiable increase in nonperforming loans, though at low levels, with management staying confident in their long-term customer relations and credit strategy. Specific provisioning covered expected losses on certain office sector loans. Three problematic office loans had reserves set against them anticipating losses from impending sales.
A 28% tax rate is expected for Q4, with challenges predicted for funding in the municipal sector and pressure on net interest margin and income. Nonetheless, modest loan growth is forecasted for Q4. The Cambridge Trust merger is anticipated to create 20% earnings accretion and a combined entity with solid capital levels, market share, and balance sheet status.
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Hello, and welcome to Eastern Bankshares, Inc, third 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. Any forward-looking statements 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 and non-GAAP financial measures, please refer to the company's earnings press release, which can be found at investor.easternbank.com. Please note, this event is being recorded. [Operator Instructions] Thank you.
I would now like to turn the call over to Bob Rivers, Chair and CEO.
Great. Thank you, Julie. Good morning, everyone, and thank you for joining our third quarter earnings call. I'm joined today by Jim Fitzgerald, our Chief Administrative Officer and Chief Financial Officer, who will review our financial results shortly.
The third quarter marked a very significant event for Eastern as we further advanced our strategic initiatives with the simultaneous announcement on September 19 of the sale of Eastern Insurance to A.J. Gallagher and the agreement to merge with Cambridge Trust. Both transactions are on track with the anticipated time lines communicated last month. We expect to close on the sale of Eastern Insurance next week and have filed all of the bank regulatory applications for the approvals required for the Cambridge Trust merger, which is expected to be completed in the first quarter of 2024.
In addition, both the teams at Eastern and Cambridge Trust are engaged in planning the integration and a seamless transition for affected customers. We are also very pleased to announce our Board approved a 10% increase in our dividend from $0.10 per share to $0.11 per share, which will be paid in December, demonstrating our confidence in both our strategic direction and our operating results. In the midst of these 2 significant transactions, we produced strong operating results during the quarter.
As Jim mentioned on the September 19 call, the insurance sale required us to account for Eastern Insurance as a discontinued operation in Q3 and also helped us realize some tax benefits that we weren't able to realize previously, all these items caused our results to look different than earlier quarters. We have worked hard to provide transparency so that you can see the underlying results. We experienced a slower increase in our cost of funds in the third quarter, although like many banks, we continue to see the shift out of lower-cost deposits into higher cost deposits and we expect that to continue in Q4 and into 2024.
In spite of the increase in costs, we continue to be confident that our lower cost deposit portfolio will be a long-term competitive advantage. We have worked very hard to keep our wholesale funding levels at modest levels and we think an efficient balance sheet is in our long -- in our shareholders' long-term interest. Excluding the sale of the shared national credit loans we described in the presentation, core commercial loan growth in Q3 was modest, and we expect it to stay that way for the next few quarters.
We are finding loan demand to be limited as our customers are being cautious in part due to the higher level of interest rates. We also expect consumer and mortgage loan growth in the single digits over the next few quarters. With the pending sale of Eastern Insurance, there is more visibility into the expense profile of the bank on a stand-alone basis. We believe that we have made significant progress on the efficiency goals we set at the time of our IPO in 2020, for both our efficiency ratio and expense to assets ratio and expect further improvement as we combine with Cambridge Trust.
Our asset quality metrics continue to be very strong in Q3 with credit losses below 1 basis point and continuing low levels of nonperforming loans. We continue to manage our exposure to the office sector and provide details on the portfolio in the presentation. Our balance sheet strength continues to be a focus and a source of strength. Both our regulatory and GAAP capital levels are strong relative to requirements as compared with many of our peers. Our loan deposit portfolios are of high quality and our wholesale funding levels at 5% of assets are low.
We will continue to look for ways to strengthen the balance sheet even further over time, but believe this strength is a competitive advantage. Looking ahead, we are very excited about the future opportunities as we merge with Cambridge Trust, our enhanced market position, increased scale and capabilities, along with significantly larger wealth management and private banking businesses will provide a stronger platform for future growth in earnings than we have historically had. We look forward to providing you additional details as we move through the regulatory approval process in closing.
As I conclude my remarks, I express my thanks and deepest appreciation to all of our Eastern Insurance Group colleagues for their many contributions to Eastern's overall success and culture over the past 21 years. And as their planned transition to A.J. Gallagher approaches, we send our best wishes for continued success. I have every confidence they will continue to excel leveraging Gallagher's market-leading capabilities and we look forward to partnering with them in serving our mutual clients.
And once again, I especially thank Eastern Insurance's President and CEO, Tim Lodge, and his executive team for their many contributions to Eastern and for leading the team through this process. Finally, I also want to thank our Chief Credit Officer, Dan Sullivan, for his 27 years of service to Eastern as he retires this month and wish him a very happy and healthy retirement.
Dan was the architect of our credit process and culture at Eastern, a long-time strength of our company, with delinquency rates, levels of nonperforming loans and net credit losses regularly among the lowest of our peers. Dan joined us in 1996 as our very first Chief Credit Officer when Eastern had just $2.1 billion in assets with 28 branches, helping to lead our transformation from a savings bank to one with a loan portfolio that is now over 70% commercial, quite a legacy.
I'm delighted to share that Matthew Osborne, former Head of our commercial real estate and community development lending teams and a 25-year veteran at Eastern has assumed Dan's role as our Chief Credit Officer, creating a seamless transition for our teams. As a result, Greg Buscone, who leads our middle market lending and international banking teams will become our Chief Commercial Banking Officer. Each of these promotions is representative of long times thoughtful succession planning as well as the tremendous talent and bench strength within our organization.
Once again, we are pleased with our results this quarter and feel very confident regarding Eastern's future growth and performance. As always, most of the credit for this goes to my 2,100 colleagues, who continue to ensure that Eastern remains the strong and reliable financial and community partner we have been for the past 205 years, as well as to our customers and community partners for their business, support and partnership.
And with that, I'll turn it over to Jim.
Great. Thank you, Bob, and good morning, everyone. As Bob mentioned, it was a very busy third quarter for us with the insurance transaction and the merger with Cambridge announced together in mid-September. Both are very important strategic transactions for us and combined will lead to a stronger balance sheet, enhanced market share and a platform for future earnings growth that we are very excited about.
As I mentioned on the call in September, the transactions do create some short-term noise in our results. The sale of the insurance operations requires us to account for Eastern Insurance as a discontinued operation and to restate our prior period results accordingly. In some ways, this is helpful as it provides an early view of what we will look like going forward without Eastern Insurance, although we recognize it's a change from what we've presented historically.
We provide details on the results for Eastern Insurance that are contained in discontinued operations on Page 7 of the earnings presentation. In addition to the core results, there were $10.7 million of transaction-related charges that occurred in Q3. Excluding those costs, EIG's results were in line with expectations. One reminder is that discontinued operations are not included in our operating net income, which makes comparisons with the overall expectations difficult.
In addition, the insurance transaction allowed us to eliminate a tax valuation allowance of approximately $15 million that we set up as part of the security sale in Q1. Although this was very positive and an additional economic benefit of the transaction, it's a onetime event.
I'll provide some comments on our tax rate later in my remarks. As Bob mentioned, both transactions are progressing very well. We expect the sale of EIG to occur next week as anticipated and have submitted all the regulatory applications for approval for the Cambridge merger. I'll follow up with some specific comments on both transactions when I discuss our outlook. We are very pleased to announce a 10% increase in our dividend from $0.10 to $0.11 per share, which is payable in December. We have a high degree of confidence in our strategic direction and our operating earnings and believe this dividend reflects that confidence.
Starting with some highlight. Net income for the quarter was $59.1 million or $0.36 per share. Operating earnings were $52.1 million or $0.32 per share. Net income includes both a loss of $4.4 million from discontinued operations and a tax benefit of $16.2 million, which was driven by the elimination of the $15 million tax valuation allowance I mentioned. Also, as I mentioned, the loss on discontinued operations is due to transaction costs incurred in the sale of Eastern Insurance.
The net interest margin of 2.77% was relatively stable quarter-to-quarter, down just 3 basis points from Q2. Deposit costs were well contained, up 11 basis points in the quarter from 1.22% to 1.33% and interest-bearing deposit costs were up 18 basis points from 1.71% to 1.89%. Total assets declined approximately $400 million from June 30, due primarily to declines in cash and securities.
Capital levels remain very strong with a CET1 ratio of 16% and a fully marked tangible equity to tangible assets ratio, which includes unrealized losses on HTM securities of 8.5%. In the quarter, core commercial loan growth, which excludes the sale of shared national credits I'll discuss shortly, was just under 2%, which was down from earlier in the year, but consistent with our expectations.
Residential mortgage growth was 6% annualized in the quarter and consumer loan growth was 2%. Asset quality remained very strong with essentially no net loan charge-offs and NPLs were up from Q2 but still a very low 34 basis points of loans. I'll have more to add on the details behind these headlines as I go through my remarks.
Starting with the balance sheet. Assets declined by $400 million during the quarter to $21.1 billion. Cash declined $265 million as we lowered the amount of on-balance sheet cash we have been holding. Securities were lower by $268 million due to runoff and lower market values and loans were down by $54 million due to the sale of the shared national credit loans I just mentioned.
Deposits were down $757 million due to reductions in broker deposits of $306 million, the maturity of a $230 million noncore term deposit from the Century acquisition and a seasonal decrease in municipal deposits of $375 million. Borrowings increased by $364 million to replace maturing brokered CDs. We made this shift to short-term borrowings to more easily facilitate the pay down of wholesale funding when we receive the cash from the EIG sale next week.
Shareholders' equity declined by $80 million due to a decrease in AOCI, partially offset by retained earnings. And book value ended the quarter at $13.87 per share and tangible book value ended the quarter at $10.14 per share. Net income was $59.1 million or $0.36 per diluted share and operating net income was $52.1 million or $0.32 per diluted share.
As I mentioned, there are significant number of items that created noise and I will try to point them out in my review. Net interest income was $137.2 million, down $4.4 million from the prior quarter. As I mentioned, the net interest margin was 2.77%, which was down 3 basis points from Q2. The decline in net interest income was primarily due to the reduced size of the balance sheet. As we outline on Page 8, loan yields were up 16 basis points on average in the quarter while total interest earning assets were up 10 basis points, in part due to the reduction in cash I mentioned earlier.
Interest-bearing liability costs were up 20 basis points and deposit costs were up 11 basis points as well. We provided a waterfall chart on Page 8 to show the changes from Q2 to Q3, and we also show the 5-quarter trend for the net interest margin. The loan loss provision was $7.3 million and included specific reserves for 3 nonperforming office loans that I will describe in more detail later in my remarks.
Noninterest income was $19.2 million and $20.7 million on an operating basis. This excludes the insurance revenue that's been reclassified to discontinued operations. As is outlined on Page 9, deposit service charges, trust, debit card and other fees are in line with last quarter and combined are up 8% from the prior year quarter. We took the opportunity to sell approximately $200 million of shared national credit loans out of our commercial loan portfolio at a $2.7 million loss during the quarter.
The sale of these loans triggered a release of associated reserves bringing the economic loss close to breakeven. The reason for the sale is very straightforward. We expect funding conditions to remain tight for the foreseeable future and this preserves some balance sheet capacity for our core lending customers. One additional note on this is that the loss is included in our operating results.
As you can see on Page 9 of the presentation, excluding this loss, operating noninterest income was essentially the same as Q2. Noninterest expense was $101.6 million or $98.7 million on an operating basis. As I've mentioned a few times, this excludes the expenses of Eastern Insurance, which were moved to discontinued operations. Q3's operating expense of $98.7 million is very similar to Q2 and an increase of 2% over the prior year, as we continue to focus on efficiency.
To repeat 1 of the comments Bob made, we have made significant progress on our expense efficiency since the IPO in 2020 and we look forward to creating more efficiencies as we merge with Cambridge in 2024. Our tax line includes several components from the securities loss on sale earlier in the year. As I mentioned, the insurance sale allows us to eliminate a $15 million valuation allowance we had set up back in Q1. Also because year-to-date, we are in a loss position, there are limited taxes on our overall results as well. When we record the insurance gain in Q4, we will be applying a higher tax rate, both on the gain and our operating results. I'll add some more comments on our taxes when I go over our outlook.
Switching gears to asset quality. We continue to be very focused on the challenges in commercial real estate in general and the office sector, in particular but we remain very confident in our long-term approach to dealing with customers, which serve us well throughout the rest of this cycle in all economic cycles. Saw an increase in nonperforming loans from $31 million to $48 million in the quarter. As a percentage of loans, the increase was from 22 basis points to 34 basis points. These are very low levels that we expect to see normalized higher up over time.
Included in the increase were 3 investor office properties that totaled $26 million. We are working with the borrowers and expect these loans to move through the sale process over the next several quarters. Included in the provision for the quarter of $7.3 million, were specific reserves against these 3 loans to cover our expected losses from the sale process.
Actual charge-offs for the quarter were less than 1 basis point. Aside from the office portfolio, all other loan categories are performing well and our credit metrics are in a very strong position. We updated the office portfolio presentation and included as Page 15 in the presentation and added some data that we haven't provided previously. We have $96 million of criticized and classified assets in the office portfolio, of which $26 million are the 3 new NPLs I just mentioned.
Additionally, we have $100 million of loans that will mature before Q4 of '24 or approximately 14% of all investor office CRE. The $100 million of loan maturities is also a reasonable proxy for the annual maturities for the years after 2024 as well. Our expectations for the office portfolio remain the same. It's a challenging environment for all office properties, but especially those in urban markets and particularly those in the Boston Financial District. We will work with our borrowers as they work through the challenges and try and get to the other side. If they can't or won't do that, we'll protect our interest and manage to work out to optimize our proceeds.
As I mentioned, we provided specific reserves for the 3 office properties this quarter and we'll report on the progress of those assets as we move through the next few quarters. We'll also continue to report on the level of criticized and classified assets in the office portfolio as well.
Turning to our outlook. We are looking forward to closing the insurance transaction next week. It's a very significant milestone, and we anticipate the gain to be approximately $260 million or in line with our prior guidance. We expect to have a 28% tax rate against the gain and also for our Q4 results. Typically, Q4 is a seasonally low period for funding in our municipal business and leads to higher levels of wholesale funding requirements as we experienced in 2022. This will put additional pressure on our net interest margin and net interest income in Q4 and early 2024. We expect the net interest margin to decline in Q4 to the mid-260s and for net interest income to be between $127 million and $132 million.
We expect operating noninterest income to be very similar to Q3 and to be in a range between $22 million and $25 million. We expect operating noninterest expenses to be $4 million to $5 million higher in Q4 due to higher marketing costs, some timing issues and some typical year-end items. Similar to this quarter, we expect to prioritize the strength of the balance sheet as we move forward. We continue to expect modest loan growth in Q4 and we will seek to keep wholesale borrowings as low as practical and to keep our capital levels robust.
We believe focusing on our balance sheet strength will position us well for when the environment improves. As noted in our earnings release, our share repurchase authorization expired in the third quarter and there are restrictions on our ability to repurchase shares while the merger with Cambridge is pending. We look forward to seeking another repurchase authorization when allowable and also look forward to resuming our share repurchase activity.
In closing, we believe we have a major opportunity in front of us with the Cambridge Trust merger. The combined company is expected to produce 20% earnings accretion in a very challenging environment, have significant levels of both regulatory and GAAP capital, a leading market share in some very attractive markets and a fully marked acquired balance sheet. The IRR for the transaction is 20%. We are very focused on the execution of the merger including the required regulatory and shareholder approvals, and report next quarter with an update as we approach the closing.
Thank you very much. And Julie, you can open up the lines for questions.
[Operator Instructions] Your first question comes from Mark Fitzgibbon from Piper Sandler.
Maybe I could start off with a couple of questions around the SNCs. I was impressed by the price that you were able to sell those at, if my math is correct, sort of $0.985 on the dollar. I guess I was curious to whom did you sell them, maybe not specifically the buyer, but the type of buyer. And what do you have left in terms of the SNC portfolio?
Sure. No, good question, Mark. And without getting into precision, your assumption on the economics are pretty good. So good job on your part there. There's a pretty active market for that. I don't know who the buyer was or we think they were banks, but there's an active market for those assets. As we looked at the portfolio, those were the ones that made the most sense to us to sell, so I don't anticipate more of that, that's how I interpret part of your question. So we evaluated that pretty carefully, and those are the assets that made the most sense to us.
And roughly, how much do you have in remaining SNCs, Jim?
I'm going to have to follow up. Let me -- rather than go off to see [indiscernible]. We can follow up on that mark.
Okay. Fair enough. And then the $4 million to $5 million of year-end expenses that you referenced in your guidance, what is in that exactly?
Sure. So no -- that's a fair question. So if you break it down, marketing, we always do a lot of marketing in Q4. So we expect our marketing expenses to be $2 million higher than what they were in Q3, so that's a big component of it. Not to get too gritty, but our provision for off-balance sheet commitments is pretty volatile. It was volatile high in the first half of the year, it was volatile low and was actually negative in the third quarter, and we expect it to kind of revert to the mean in the fourth quarter. So that's another factor. And then the residual a couple of million dollars is just year-end sort of typical year-end expenses that get recorded at year-end.
Okay. And then on those 3 office loans, I wondered if you could share with us what the vacancy rates look like on those and maybe LTVs and debt service at origination.
Sure. So all 3 -- each 1 is a little bit different, but I think to answer your question, the characteristics are similar for all 3. All 3 of the buildings were sold well before the pandemic, the loan -- the original LTVs were 60%. They are battling vacancies now and cash flow issues. And we are working -- as I said, we are working with the borrowers to try and execute sales in those. And as I also said, we put some specific reserves up against all 3 of those to cover what we think will be the expected losses.
Okay. And then last question. You all seem fairly confident that you'll be able to close the Cambridge deal at the end of the first quarter, given that a lot of other banks have had an excruciatingly long approval process recently, what gives you confidence that you'll be able to close it so quickly?
Yes. No, it's -- it's a good question. I understand the question. Sometimes I get surprised because if you look at our track record for deals, the Century one being the most recent, it's really the same time line. So it's similar to Century, it's an in-market transaction. We have very good regulatory relations as does Cambridge, as did Century. And as we have -- we're aware of the sort of slowness in some particular transactions, but we have very constant communication with our regulators and have set the dates and expect to complete on that timetable. As I said, if you go back and look at the Century, it's really -- it's a different time of the year, but it's the same time line.
Your next question comes from Damon DelMonte from KBW.
I just want to start off with a little bit on the topic of credit here and kind of looking at the reserve level and I know the build was specific to these 3 office loans. But just kind of wondering what your thoughts are going forward with the provision line kind of given the pullback in loan growth and what you're seeing elsewhere in the portfolio and the potential need to build reserves further from here?
Sure. No, fair question. And we -- as we talked previous quarters and certainly similar to others. Loan growth is a big factor in provisioning levels, right? If you look specifically at Eastern, if you look at when we had much faster loan growth last year, we had much higher provisions and the correlation is pretty clear from that. We do expect modest loan growth over the quarter, the fourth quarter and into the first quarter of next year. That will be a factor.
Our CECL methodology is very consistent and it's the same quarter-to-quarter. It starts with an economic forecast. To date, the economic outlook continues to be reasonably good, and that's a factor. If that were to change, then obviously, the CECL calculations would change. But over the last couple of quarters and what we see through literally October, whatever today's date 27, the economic outlook is still pretty strong. So we don't see the provision levels that we've seen both in '22 and '23 and the correlation with loan growth is what we would expect over the next quarter or two.
Okay. That's helpful. And then with respect to the office portfolio and kind of the like 38% is in the Boston Cambridge area? Are there any other properties or locations that are showing early signs of stress that have kind of popped up on the radar? Or do you think these 3 loans were just unique situations and not indicative of a broader weakening?
Yes. No, very good question, Damon, there's a lot there. Let me sort of unpack it a little bit out of time. So I think we do provide the statistics about Boston and Cambridge and not to get local here, but Cambridge is very different than Boston. There's a lot going on in Cambridge and we expect that to continue. If you look at the portfolio, generally, it is the Boston Financial District, where these 3 assets were and where the issues we expect to be concentrated. That's not to say there won't be issues in other places and we're carefully monitoring all of that. But the issues that were specific to these 3 loans that I described on Mark's question were very specific to the financial district. That's why we continue to monitor the entire portfolio very, very carefully.
Your next question comes from Laurie Hunsicker from Seaport Research Partners.
Hoping that I could just circle back where Damon was. So the 38% that you gave on your $717 million book, that's Boston and Cambridge, do you have the split as to what's just Boston Financial District?
We haven't provided that, Laurie. So we'd have to review that. I don't know it this second. We are very focused on the financial district and that's where these 3 loans were from, as I mentioned. We can [ talk this ] internally about providing a little bit more information on that specifically.
Great. Okay. And then just going back to the $26 million in nonperformers. What was the split there on those 3 properties in terms of Class A, Class B, Class C?
Yes. So I get a little worried about the Class A, Class B and Class C because different people have different definitions. But I think they would all be Class B types and they were all in the financial district in Boston.
Okay. Great. And then can you share with us what actually triggered the nonperforming status, i.e., did they hit a maturity wall? Or was it just something else?
Sure. So these are -- again, every loan -- every situation is slightly different. But I think in general, to answer the question the way you asked it, these are buildings that had lease issues, at least leases had come up. They had vacancies in the building, which led to deteriorating cash flow, and they had the borrowers have elected not to support the assets. Our strategy in that situation generally is to work with the borrowers to try and sell the buildings and as appropriate manner as possible to optimize price but also timing. And that's what happened really in all 3 of these cases.
Got it. Got it. And then just in terms of thoughts on selling some office, some of your peers sold office loans in the third quarter. including 1 who took a $0.37 haircut, how do you think about selling these? Are you actively trying to sell them? Or what can you share with us there?
Yes. So I would say our managed asset team who does a very good job here. Every time they get an asset and the same would be true for these 3 very and this didn't just these issues just didn't appear late in the third quarter. They've been monitoring these loans for a period of time. But to answer the question, they do an asset-by-asset review and figure out the optimal strategy. They include things like note sales, as you referenced, the benefits being it moves out quickly. Sometimes price is less than one would like there. But for each individual asset based on the facts and circumstances that strategy is developed. In the cases of these 3, it's to take the buildings themselves through the sale process. That's how we thought we would optimize our proceeds.
Got it. Got it. And then just sort of 1 last question on this. The $717 million investor CRE book, what is the specific reserve you have against that? Is it just on the 3 loans, i.e. the $7 million or is there more there?
So we have specific reserves against the 3 loans that we've been talking about and you just referenced. And in addition to that, the CECL calculation that we do has a lot of risk factors for all commercial real estate and included in there are certain attributes that we think the office portfolio has but it's in the general reserve in that way. So I think the way you're asking the question, it's really just the specific reserves on these 3 assets.
That's [indiscernible] million. Okay. Great. That's helpful. And then just going back to the SNC sale, can you help us think about when in the quarter that occurred or impact the margin in the quarter? Or how much in net interest income it did or didn't contribute. Just trying to understand and then if you also have a spot margin for the month of September, that would be helpful.
Yes. So I'll probably start there because it's pretty consistent -- it's very consistent with our guidance for Q4. So the closing margin was in the 260s, again, consistent with our guidance. To answer your question, the SNC sales wasn't 1 loan, it was multiple loans and they happened over the quarter. It tended to be a little bit earlier in the quarter.
The one thing I always get worried about doing 1 specific month on the margin, there's always lots of ins and outs, and September happens to be a seasonally lower month for municipal deposits. So September has a little bit more in borrowings than the months of August and July. And also there's a day count difference not to get too greedy, but there's a day count July and August at 31 days, which may not sound like much, but can have an impact as well. But to answer your question, the exit margin was in the 260s and very comparable to the guidance we gave for Q4.
Okay. And then just any -- I don't know. Do you have a rate on where the next were? Maybe that's the better way to ask it?
I don't have it as I'm sitting here now, we can think about that and they were just -- the one thing I can say is they were variable loans priced over SOFR, variable loans price over SOFR.
Okay. Okay. And then last question on CATC on their office. Can you provide us with any update on their book, I think it's around $285 million. if you have any new update or just any other color you could add on their office book and how you're thinking about it.
So sure. I think I'll probably repeat some of the things that we've said in the past, we're at point in the process where Cambridge is still a very independent company. So I don't feel like we can say too much more than we've said. But when we did extensive due diligence on the -- on all their loans but also the office portfolio.
In many ways, it's similar to Easterns meaning it's concentrated in our markets. It does have some exposure to Boston, but it's got exposure outside of Boston as well. And in many ways, it looks a lot like the Eastern portfolio. I will say, we carefully reviewed it in due diligence, talked about at the time of the announcement, not just our due diligence process but also some of the purchase accounting that we assumed there. which included an evaluation of the office portfolio. I think 1 of your questions as we get closer to closing, we'll be giving updates generally and be happy to include more on that subject as we get closer.
And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks.
Great. So thanks, everyone, for your interest and your questions today, and best wishes for the remainder of the year. Happy holidays.
This concludes today's conference call. You may now disconnect.