Eastern’s Merger Boosts Earnings, But Margin Gains Expected Later

Date of Call: Jan 23, 2026

Financials Results

• Revenue: Not explicitly provided in transcript (net interest income of $237.4M or $243.4M FTE provided)
• EPS: $0.46 per diluted share (GAAP net income); operating earnings of $0.44 per diluted share, up 19% YOY
• Gross Margin: Not applicable for a bank; margin of 361 basis points, up 14 bps from 347 prior quarter
• Operating Margin: Not explicitly provided as a percentage; operating ROA of 130 bps, up 24 bps YOY; operating efficiency ratio of 50.1%, improved from over 57% prior year quarter

Guidance:

• Loan growth for 2026 anticipated to be 3%-5%.
• Deposit growth for 2026 anticipated to be 1%-2%.
• Net interest income expected to be $1.2B-$1.5B; FTE margin expected to be $365-$375.
• Provision expense expected to be $30M-$40M.
• Operating non-interest income expected to be $190M-$200M (assumes no market appreciation).
• Operating non-interest expense expected to be $655M-$675M.
• Full-year tax rate on operating basis expected to be ~23%.
• CET1 ratio to be managed towards 12%.

Business Commentary:

Financial Performance and Growth Strategy:

• Eastern Bankshares reported net income of $99.5 million or $0.46 per diluted share for Q4 2025, with operating earnings increasing 28% in the quarter.
• The growth was driven by the merger with HarborOne, strong organic loan growth, and a record level of wealth assets under management.

Loan Growth and Commercial Lending:

• Total loans increased by 25% linked quarter, primarily due to the addition of $4.5 billion from HarborOne, with organic loan growth excluding the merger impact being $1 billion or 5.6% for the full year.
• The growth was driven by strong commercial lending results, particularly in commercial and industrial lending and commercial real estate.

Wealth Management and Assets Under Management:

• Wealth assets reached a record high of $10.1 billion, including assets under management of $9.6 billion, driven by market appreciation and positive net flows.
• The integration of Eastern and Cambridge Wealth teams contributed to the momentum in wealth management.

Capital Management and Shareholder Returns:

• Eastern repurchased 3.1 million shares for $55.4 million in Q4, representing 26% of the total authorization announced in October.
• The focus on returning excess capital to shareholders is supported by strong capital ratios, with a CET1 ratio of 13.2%.

Deposit Growth and Cost Management:

• Total deposits increased by 21% from Q3, largely due to the addition of $4.3 billion from HarborOne, and ended the quarter at $25.5 billion.
• The company anticipates deposit costs to remain slightly elevated but aims to manage them towards historical beta targets of 45%-50% relative to Fed actions.

Sentiment Analysis:

Overall Tone: Positive

• "2025 was a terrific year for Eastern, highlighted by a 62% increase in operating earnings... The merger with Harbor One was another important milestone... We are excited about the organic growth opportunities we see... We are encouraged by the momentum in wealth and optimistic about the growth opportunities." "We are pleased by the strength of quarterly trends across several key financial metrics... We believe that focusing on meaningful organic growth and returning excess capital... will deliver meaningful value to shareholders."

Q&A:

• Question from Freddie Strickland (Hovde): Just wanted to drill down on the margin... is the idea that we maybe see the core margin relatively flat near term... and then maybe we see more expansion later in the year?
  Response: Yes, margin forecast is flat initially then ramps up marginally each quarter, accelerating in the back half of the year, based on market forwards of two rate cuts.

• Question from Damon Delmonte (KBW): So just curious on the outlook for the provision of $30 million-$40 million... are you sensing there’s some softness which is leading you to kind of step that up?
  Response: Guidance is similar to prior year, but company leans conservative and hopes to outperform; no material shift in credit trends or concerns.

• Question from Gregory Szin (Piper Sandler): Would you be able to break out the growth between market appreciation and the net flows?
  Response: Wealth AUM growth of ~$200M in Q4 was ~$200M from net flows and market appreciation; strong referral momentum building.

• Question from Laurie Hunsicker (Seaport Research Partners): When in the quarter did you guys do the whole investment portfolio repositioning on HarborOne?
  Response: Repositioning done in the first couple of days of November.

• Question from Janet Lee (TD Cowen): For your fee income, could there be where do you see better upside?
  Response: Fee income guide assumes no market appreciation; upside potential if S&P 500 rises. Harbor One mortgage banking could become 8%-10% of total fee income; company would benefit from lower rates but not counting on it.

Contradiction Point 1

Capital Allocation and Mergers & Acquisitions Outlook

Contradiction on strategic focus between organic growth and potential acquisitions, impacting long-term growth strategy perception.

Could you explain the rationale behind the decision not to pursue acquisitions, as mentioned in the outlook section on page 20, last bullet? - Laurie Hunsicker (Seaport Research Partners)

2025Q4: The company is entirely focused on organic growth... No plans for additional mergers in the near term. - Denis Sheahan(CEO)

Any comments on the slide presentation from Cambridge Trust? - Mark Fitzgibbon (Piper Sandler & Co.)

2025Q3: The focus is squarely on executing the strategy... not on commenting on specific external disclosures. - Denis Sheahan(CEO)

Contradiction Point 2

Net Interest Margin (NIM) Expansion Outlook

Contradiction on the drivers and certainty of margin expansion, affecting financial performance expectations.

Will core margin remain flat in the near term as the company focuses on deposit growth and retaining Harbor One deposits, with expansion expected later in the year? - Freddie Strickland (Hovde)

2025Q4: The margin forecast is for the core margin to be relatively flat initially, then ramp up marginally each quarter, accelerating in the back half of the year. - David Rosato(CFO)

Will the margin remain stable in Q4 and increase into 2026, or will competitive deposit pressures negatively impact it? - Damon Del Monte (Keefe, Bruyette, & Woods, Inc.)

2025Q3: The two key drivers are: 1) Net discount accretion is a wildcard... 2) Deposit costs face competitive pressure... For the full year, the original margin expansion outlook from April remains valid. - R. Rosato(CFO)

Contradiction Point 3

Outlook for Non-Performing Loans (NPLs) and Credit Trends

Contradiction on whether credit trends are stable or require a more conservative provision, impacting risk assessment and capital requirements.

Why is the provision of $30 million-$40 million higher than this year's realized amount, and is it due to softness? - Damon Delmonte (KBW)

2025Q4: The provision guidance is similar to last year, and the company hopes to outperform it. There is no material shift or concern in credit trends; the increase is based on a conservative outlook, not on any new negative credit signals. - David Rosato(CFO) and Denis Sheahan(CEO)

Will there be more securities portfolio restructurings in upcoming quarters, excluding HarborOne-related actions? What caused the ~$40 million decrease in NPLs this quarter: loan sales or payoffs? Are you open to expanding beyond Rhode Island, such as into Connecticut or New York, following the HarborOne deal? - Mark Fitzgibbon (Piper Sandler)

2025Q2: The NPL reduction was driven by the Managed Asset Group resolving 5 credits through payoffs, not sales. - R. Rosato(CFO)

Contradiction Point 4

Strategy Regarding Securities Portfolio Restructuring and Capital Allocation

Contradiction on the priority of using capital for buybacks versus potential securities restructuring, affecting shareholder returns and capital management strategy.

What led to the decision not to pursue acquisitions? - Laurie Hunsicker (Seaport Research Partners)

2025Q4: The company is entirely focused on organic growth within its existing footprint... Returning excess capital to shareholders via share repurchases is seen as the best use of capital. - Denis Sheahan(CEO)

Are further securities portfolio restructurings (excluding HarborOne) expected in upcoming quarters, what caused the ~$40 million NPL decline (loan sales/payoffs), and is expansion beyond Rhode Island (e.g., Connecticut, New York) under consideration post-HarborOne deal? - Mark Fitzgibbon (Piper Sandler)

2025Q2: A future securities restructuring is possible but is on the back burner due to the merger and the expiring current authorization. Priority is on share buybacks post-merger. - R. Rosato(CFO)

Contradiction Point 5

Share Repurchase Strategy During Merger Process

Contradiction on whether company will be active in buying back shares during the merger process, impacting shareholder perception and stock dynamics.

Can you explain the rationale behind the decision not to pursue acquisitions mentioned in the latest report? - Laurie Hunsicker (Seaport Research Partners)

2025Q4: The company is entirely focused on organic growth... Returning excess capital to shareholders via share repurchases is seen as the best use of capital. - Denis Sheahan(CEO)

Will the company continue to actively support the shares or pause due to the ongoing deal completion? - Damon Del Monte (KBW)

2025Q1: The company will be out of the market since it will be using an equity component in consideration at least until after HarborOne's shareholder approval. - R. Rosato(CFO)