Eastern Bankshares Q3 2025 Earnings Transcript

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DATE

Friday, October 24, 2025 at 9:00 a.m. ET

CALL PARTICIPANTS

Executive Chair — Bob Rivers

Chief Executive Officer — Denis Sheahan

Chief Financial Officer — David Rosato

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TAKEAWAYS

Operating Earnings -- $74.1 million in operating earnings, up 44% compared to Q3 2024 (operating basis), reflecting growth in commercial lending and improved profitability.

Operating Return on Assets (ROA) -- 1.16% operating return on assets, up 34 basis points compared to Q3 2024.

Operating Return on Average Tangible Common Equity (ROTCE) -- 11.7% operating return on average tangible common equity, up 300 basis points compared to Q3 2024, supported by higher revenues and expense management.

Net Interest Income (NII) -- $200.2 million for Q3 2025, $200.2 million, a 1% decrease compared to Q2 2025, reflecting lower net discount accretion and higher deposit costs.

Net Interest Margin (NIM) -- 3.47% net interest margin, down 12 basis points from 3.59% in Q2 2025; excluding net discount accretion, margin would have been flat quarter over quarter.

Noninterest Income -- $41.3 million in noninterest income, down $1.6 million compared to Q2 2025, primarily due to lower investment returns for employee retirement benefits.

Assets Under Management (AUM) -- $9.2 billion in assets under management, a record high driven by market appreciation and modest positive net flows, with net positive flows of over $50 million.

Loan Growth -- Total loans increased $239 million, or 1.3% linked quarter, led by $133 million in commercial real estate (CRE) and $104 million in commercial and industrial (C&I) lending.

Deposit Trends -- Period-end deposits were $21.1 billion, a decrease of less than 1% compared to Q2 2025; checking balances declined, offset by increases in money market and CD balances.

Tangible Book Value Per Share -- $13.14 per share as tangible book value at quarter end, up 5% compared to June 30, 2025 and up 10% compared to the beginning of the year.

Efficiency Ratio -- Improved operating efficiency ratio to 52.8% from 59.7% compared to Q3 2024, showing effective expense control.

Share Repurchase Authorization -- Board approved a new program for up to 11.9 million shares, representing 5% of shares outstanding after the Harbor One merger.

Merger Update -- Regulatory approvals for Harbor One merger were received; closing is scheduled for November 1, with plans to realize previously stated cost savings and one-time charges.

Asset Quality -- Net charge-offs to average loans at 0.13%; reserve for loan losses at $233 million or 1.26% of loans as of quarter end; criticized and classified loans increased to $495 million or 3.82% of total loans.

Office CRE Exposure -- Investor office loans decreased $15 million to $813 million (4% of total loans), with $138 million in criticized/classified status (17% of office loans) as of quarter end; lab/life science exposure limited to $99 million, all accruing.

Dividend -- Board approved a $0.13 per share dividend payable in December 2025, indicating ongoing commitment to shareholder returns.

Spot Margin -- September spot margin reported at 3.48%, one basis point higher than the quarterly average.

Deposit Funding -- Management affirmed that the bank remains fully deposit funded, with essentially no wholesale funding utilized.

SUMMARY

Eastern Bancshares (NASDAQ:EBC) management confirmed that the Harbor One merger will close on November 1 and reiterated all previously disclosed integration assumptions, including transaction structure and financial targets for the combined entity. Executives stated that loan growth momentum was sustained by strategic hiring and an increased commercial relationship manager headcount.

Chief Financial Officer David Rosato said, "we remain fully deposit funded with essentially no wholesale funding, which further enhances our balance sheet strength," underlining the bank's funding position.

On share repurchases, management emphasized renewed capital return: "We are very pleased the Board authorized a new 5% share repurchase program of up to 11.9 million shares, to be effective after completion of the Harbor One merger." according to Denis Sheahan.

Regarding expense outlook, David Rosato advised, "I think we were a little inflated on the comp line this quarter. I think that will tend to settle down in Q4. There's been a little uptick in tech expense that will probably be consistent."

For margin sustainability, Rosato noted, "Our thinking is that the original margin expansion and numbers that we put out back in April for the combined institution are still good numbers," maintaining prior guidance on core margin stability post-merger.

Concerning the increase in office CRE nonperformers, management disclosed that the rise was due to a single loan now at 85% occupancy and indicated no broader deterioration in the segment.

Strategic M&A remains a low-priority item, with management stating, "We have no plans, you know, in terms of additional mergers in the near term" according to Denis Sheahan, emphasizing integration focus and organic growth as top priorities.

INDUSTRY GLOSSARY

C&I (Commercial and Industrial): Loans extended to businesses for general corporate purposes, distinct from real estate-backed lending.

CRE (Commercial Real Estate): Loans secured by income-producing property such as office buildings, apartments, or retail centers.

Net Discount Accretion: Recognition of income earned when purchased loans or securities are valued below their face amount and are paid down or mature.

Spot Margin: The net interest margin calculated using data as of the end of a specific period, rather than as an average across the full quarter.

AFS (Available-for-Sale) Securities: Debt or equity instruments held by a bank intended to be sold in response to liquidity needs or changes in market conditions; marked to market on the balance sheet.

Allowance for Loan Losses: The financial reserve a bank sets aside to cover estimated losses from defaulted loans.

Betas (Deposit Betas): Measure of the rate at which a bank's deposit costs change in response to shifts in benchmark interest rates.

Tangible Book Value Per Share: The value of a bank's tangible assets divided by outstanding common shares, excluding intangible assets and goodwill.

Full Conference Call Transcript

Bob Rivers: Thank you, Joelle. Morning, everyone, and thank you for joining our call. With me today is Eastern's CEO, Denis Sheahan, and our CFO, David Rosato. Eastern recently celebrated its fifth anniversary as a public company. Before Denis and David walk through our results, I wanted to take a moment to acknowledge this important milestone and share why I'm excited about our future. As shown on slide two, today, Eastern is a $25.5 billion organization with the fourth largest deposit market share in Greater Boston, and we are the largest independent bank headquartered in Massachusetts.

Since our IPO, we have very intentionally expanded our footprint across attractive markets and built the scale we need to invest in the business while maintaining the understanding, accessibility, and engagement that makes us our region's hometown bank. This strategy, most importantly, our people, our culture, and our extensive community involvement, are what enable us to expand and deepen customer relationships, attract top talent, and capture growth opportunities. This has driven meaningful improvement in earnings, profitability, and shareholder returns. One of the keys to our success has been our ability to stay true to who we are while growing and positioning Eastern for the future.

That includes bringing in talented people to complement the many long-time Eastern employees who have contributed to our success. I'm so proud of what we've accomplished together. We are well-positioned to serve our customers and communities with excellence, which underpins our ability to drive continued shareholder value. Now I'll turn it to Denis.

Denis Sheahan: Thank you, Bob. As someone who's been in the Boston market for more than three decades, I can attest to how impressive the transformation Eastern has been over the last five years. I'm incredibly proud to be part of this team, and I share Bob's enthusiasm about the future and the opportunities ahead. Turning now to the quarter, we are very pleased to have received the required regulatory approvals for our merger with Harbor One, which is on track for a November 1 close. This partnership strengthens Eastern's leading presence in Greater Boston and expands our branch footprint into Rhode Island, providing even more opportunities for organic growth.

We're excited to bring together two banks that share a strong commitment to customers, community partners, and employees. I want to thank the teams from both organizations for their outstanding efforts, and we look forward to welcoming our new customers and colleagues to Eastern as we build on the strong legacies of both institutions. We're also pleased to announce today the resumption of our share buyback program, which underscores our confidence in the future. Third-quarter operating earnings of $74.1 million increased 44% from a year ago and generated solid returns.

Operating return on assets of 1.16% was up 34 basis points from the prior year quarter, and operating return on average tangible common equity increased 300 basis points to 11.7% over the same period. On a linked quarter basis, operating income was down from a very strong second quarter, which benefited from higher than expected net discount accretion due to early loan payoffs at fee income. Our ongoing strategic investments in hiring talent and commercial lending continue to deliver strong results. Over the past year, we have increased the number of relationship managers by 10%. Eastern has become an attractive destination for high-quality talent, particularly those with large bank experience.

We have the size to matter competitively, yet are small enough for them to apply their trade and provide a sense of ownership in building a business. Our loan growth continues to reflect the impact of this strategy. Total loans grew 1.3% linked quarter and 4.1% year to date, driven primarily by strong commercial lending results. The commercial portfolio has grown just under 6% since the beginning of the year, and the pipeline remains solid, ending the quarter at approximately $575 million. Wealth management is an important component of our long-term growth strategy, and the wealth demographic in our footprint provides significant opportunities.

Beyond strong investment solutions and results, we provide comprehensive wealth services, including financial, tax, and estate planning, as well as private banking. Assets under management reached a record high of $9 billion in the third quarter, driven by market appreciation and modest positive net flows. We've been pleased with the integration of the Eastern and Cambridge Trust wealth teams and the strong retention of clients and talent since the merger. We're also enhancing our internal distribution capabilities. Our retail branch network, through training and greater awareness, is becoming a meaningful driver of referrals. Notably, in the first half of this year, retail generated more funded wealth business than Eastern achieved in any prior full year.

On the commercial side, the strengthening alignment between our wealth management and banking businesses is in the early stages but beginning to produce results. There is still a lot more work ahead, but we are encouraged by the momentum of our wealth business, which was recently named the largest bank-owned independent adviser in Massachusetts for the second consecutive year. Finally, our capital position remains robust, and we continue to generate excess capital. Tangible book value per share at quarter end was $13.14, an increase of 5% from June 30 and up 10% from the beginning of the year.

In addition to using capital for organic growth, we are committed to returning capital to shareholders through opportunistic share repurchases and consistent and sustainable dividend growth. As such, we are very pleased the Board authorized a new 5% share repurchase program of up to 11.9 million shares. David, I'll hand it over to you to review our third-quarter financials.

David Rosato: Thanks, Denis. And good morning, everyone. I'll begin on slides four and five. We reported net income of $106.1 million or $0.53 per diluted share for the third quarter. Included in net income is a GAAP tax benefit related to losses from the investment portfolio repositioning, completed in Q1 that accrues over the course of 2025. On an operating basis, earnings of $74.1 million or $0.37 per diluted share decreased from a very strong second quarter, which benefited from higher than expected debt discount accretion and fee income.

Compared to the prior year quarter, operating net income increased 44%, reflecting margin expansion of 50 basis points and significant improvement in the efficiency ratio from 59.7% to 52.8%, driven by higher revenues and thoughtful expense management. We are pleased with the continued strength of our profitability metrics. While operating ROA of 116 basis points and return on average tangible common equity of 11.7% were down from second-quarter metrics, both meaningfully improved from a year ago. Operating ROA was 82 basis points, and operating return on average tangible common equity was 8.7%. We remain focused on driving sustainable growth and profitability and delivering top quartile financial performance. Moving to the margin on slide six.

Net interest income and margin declined from the second quarter primarily due to higher deposit costs and lower net discount accretion. Net interest income of $200.2 million or $205.4 million on an FTE basis decreased 1%. Included in net interest income net discount accretion of $10 million compared to $16.5 million in the second quarter, which was higher than expected due to early loan payoffs. Excluding net discount accretion, net interest income would have increased approximately 3%. The margin of 3.47% was down 12 basis points from 3.59%. The yield on interest-earning assets decreased six basis points, while interest-bearing liability costs were up seven basis points.

Net discount accretion contributed 17 basis points to the margin, compared to 29 basis points in the prior quarter. Excluding net discount accretion, the margin would have been flat quarter over quarter. Turning to slide seven. Noninterest income of $41.3 million declined $1.6 million from the second quarter. On an operating basis, non-interest income of $39.7 million was down $2.5 million. The decrease was driven primarily by $1.9 million in lower income from investments held for employee retirement benefits compared to a very strong Q2. This decline was partially offset by $1 million in lower benefit costs reported in non-interest expense.

In addition, miscellaneous income and fees were down $1.2 million due primarily to a loss on sale of commercial loans from our managed asset group and lower commercial loan and line fees. These headwinds in fee income were partially offset by deposit service charges and investment advisory fees, which both increased $300,000 in the quarter. Turning to slide eight. We highlight wealth management, our primary fee business. Assets under management reached a record $9.2 billion driven by market appreciation and modest positive net flows. Wealth management fees, accounting for nearly half of total noninterest income, were up $300,000 or 2% from Q2, primarily due to higher asset values.

In addition, the prior quarter benefited from approximately $700,000 in seasonally higher tax preparation fees. Moving to slide nine, non-interest expense was $140.4 million, an increase of $3.5 million from the second quarter due to higher operating expenses and merger-related costs. Merger costs of $3.2 million were up $600,000 from the prior quarter. Operating non-interest expense was $137.2 million, up $2.8 million. The increase was primarily driven by $3.3 million in higher salaries and benefits, primarily due to higher performance-based incentives, one additional pay period in Q3, and seasonal staff. In addition, technology and data processing costs increased $1.4 million, and occupancy and equipment expenses were up $500,000.

These increases were partially offset by a $2.3 million reduction in other operating expenses. Moving to the balance sheet. Starting with deposits on slide 10. Period-end deposits totaled $21.1 billion, a decrease of $104 million or less than 1% from Q2. A decline in checking balances was partially offset by higher balances in money market accounts and CDs. On an average basis, deposits were up 1.4%. We continue to benefit from a favorable deposit mix with nearly half of deposits in checking accounts, providing a stable and low-cost funding base. Importantly, we remain fully deposit funded with essentially no wholesale funding, which further enhances our balance sheet strength.

Total deposit cost of 155 basis points increased modestly from the second quarter as the cost of interest-bearing deposits increased eight basis points, primarily driven by money market accounts. We remain focused on growing deposits to support our funding strategy. As competition for deposits has become heightened in our region, we are disciplined in balancing the needs of our very strong deposit base with that of the margin. Looking ahead, as we thoughtfully integrate Harbor One deposits, we anticipate deposit costs to remain somewhat elevated. However, as the Fed eases, we will work deposit costs down and target deposit betas like our experience during the most recent tightening cycle, or about 45 to 50%, with lags relative to Fed actions.

Turning to slide 11. Period-end loans increased $239 million or 1.3% linked quarter, led by further strength in commercial. Continued momentum from Q2 in CRE drove balances higher by $133 million, while strong broad-based growth at C&I increased balances by $104 million. Consumer home equity lines continued a steady trajectory of quarterly growth, adding $45 million in outstandings. Commercial has delivered strong year-to-date performance with nearly $700 million of loan growth from year-end. This performance reflects the impact of our opportunistic hiring of growth-oriented talent, continued strength of Eastern's brand, and our long-tenured relationship managers.

Our combination of meaningful scale, which allows us to offer a broad suite of products and services, and deep local expertise and presence is what differentiates us. Slide 12 is an overview of our high-quality investment portfolio. The portfolio yield was up one basis point to 3.03 from Q2. In addition, the AFS unrealized loss position continued to decline as it ended the quarter at $280 million after tax compared to $313 million at June 30 and $584 million at year-end. Turning to Slide 13. Capital levels remain robust as indicated by CET1 and TCE ratios of 14.7% and 11.4% respectively.

Consistent with our commitment of returning capital to shareholders, the board authorized a new share repurchase program of up to 11.9 million shares or 5% of shares outstanding after completion of the Harbor One merger. The program expires on October 31, 2026. In addition, the Board approved a $0.13 dividend to be paid in December. As displayed on Slide 14, asset quality remains excellent. As evidenced by net charge-offs to average loans of 13 basis points and reflects the quality of our underwriting and proactive risk management approach. Addressing issues quickly and prudently.

While non-performing loans rose $14 million linked quarter, to $69 million, the increase was driven primarily by a single fixed-use office loan which has been in managed assets for some time. A portion of this loan was charged off during the quarter and had been previously reserved. Importantly, we continue to believe the worst of the office loan problems is mostly behind us. We remain cautiously optimistic in our outlook on credit as overall trends continue to be positive. Reserve levels remain strong as demonstrated by an allowance for loan losses of $233 million or 126 basis points of total loans. These metrics are consistent with $232 million or 127 basis points at the end of Q2.

Criticized and classified loans of $495 million, or 3.82% of total loans, increased modestly from $459 million or 3.6% at the end of Q2. Finally, we booked a provision of $7.1 million, down from $7.6 million in the prior quarter. On Slides fifteen and sixteen, we provide details on total CRE and CRE investments. Investor office exposures. Total commercial real estate loans are $7.4 billion. Our exposure is largely within local markets, we know well, and is diversified by sector. The largest concentration is the multifamily at $2.7 billion, which is a strong asset class in Greater Boston due to ongoing housing shortages.

We have no multifamily nonperforming loans, and we have had no charge-offs in this portfolio for well over the past decade. We remain focused on investor office loans. The portfolio of $813 million or 4% of our total loan book decreased $15 million linked quarter. Criticized and classified loans of $138 million, or about 17% of total investor office loans, compared to $118 million or 14% of total investor loans at the end of Q2. In addition, our reserve level of 5.1% remains conservative. As disclosed last quarter, the investor office loan portfolio includes our relatively limited exposure to the lab life science sector, consisting of four loans totaling $99 million, less than 1% of total loans.

None of these loans were originated as speculative construction transactions. All loans are accruing, and we continue to monitor these loans as part of our ongoing review of the office portfolio. Before turning it back to Denis, I wanted to give a brief update on the Harbor One merger, which is expected to close November 1. We are reiterating the key assumptions we announced earlier this year and are on track to deliver on our estimated cost savings, one-time charges, and gross credit market. We will disclose updated interest rate marks on our fourth-quarter call in January. As a reminder, the original announcement assumed 80% stock consideration. The midpoint of the range.

Based on the performance of our stock, our current estimate assumes 85% stock consideration. Furthermore, we continue to plan for the sale of Harbor One Securities portfolio, the deleveraging of Harbor One's securities portfolio, with proceeds intended to pay down FHLB borrowings. Harbor One's period-end loans and deposits at September 30 were $4.763 billion and $4.433 billion respectively. In addition, if approved, we intend to early adopt the changes to the CECL accounting standard, designed to remove the current double counting of expected credit losses. I'd now like to turn it back over to Denis.

Denis Sheahan: Thanks, David. We are pleased with this quarter's results and are excited about closing the Harbor One merger. With a leading local bank in Massachusetts, and this merger strengthens our presence south of Boston and into new markets in Rhode Island, providing opportunities for organic growth for many years to come. The continued improvement in our profitability will allow us to return meaningful amounts of capital and enhance shareholder value. This concludes the presentation. I will now open the call for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Moment please for your first question. Your first question comes from Damon DelMonte with KBW. Your line is now open.

Damon DelMonte: Hey, good morning, hope you're all doing well, and thanks for taking my questions. First question, just with regards to, you know, I know it's a tricky quarter because you have Harbor One closing next week and we're in the middle of the fourth quarter here. But, you know, David, as we kinda think about the margin, obviously, a bunch of noise on the fair value accretion side of things. But if you look at the core margin, as you noted about, you know, it's flat quarter over quarter. You think that kind of, you know, can hold steady here in the fourth quarter and then kinda grind higher into '26?

Or do you think that the competitive pressures on deposits will probably weigh on that a little bit?

David Rosato: Let's talk about both sides of that, Damon, and good morning. So the core Eastern margin, there's two key drivers. Right? There's accretion income, which unfortunately in Q3 was down $6.5 million. That's the wild card here. The average run rate is, call it, 11 to twelve. So last quarter, we were above trend. This quarter, we are a little below trend. And you saw that ripple through. Asset yields. That's the wild card. On the other side, on the deposit side, the competition has heated up here. We've talked, I think we talked about this last quarter as well. Ret in retail and government banking, I think that pressure remains in Q4.

So that leads me to roughly flat deposit cost with a little bit of wildcard on the asset side. From a and then just as a reminder, we'll have two months of Harbor One in our Q4 numbers. Our thinking is that the original margin expansion and numbers that we put out back in April for the combined institution are still good numbers.

Damon DelMonte: Okay. That's helpful. Okay. Great. And then how about as far as just, like, on the expense side, you know, was higher this quarter. You had some elevated, you know, comp and benefit type costs and stuff. Again, kinda looking at the core Eastern expenses, do you think that kinda stays at a similar level here going into the fourth quarter or could it tick even higher just given year-end accrual true-ups and things of that nature?

David Rosato: I think we were a little inflated on the comp line this quarter. I think that will tend to settle down in Q4. There's been a little uptick in tech expense that will probably be consistent. So, I'm not overly concerned about our expense base at this point. And with Telegraph roughly flat in Q4 overall. To down a touch.

Damon DelMonte: Okay. Great. And then, you know, with the deal closing here next week, kinda just, you know, curious on your updated thoughts on appetite for additional deals, you know, over the coming months or in 2026. Is that, you know, something you guys are considering or, you know, I think messaging has also been more about a focus towards organic growth. So just kinda wondering how you balance those two avenues. Thanks.

Denis Sheahan: Damon, it's Denis here. And I'm not that rim sort of remains consistent. Look, our focus right now is clearly on continuing to build on the good organic growth that we've had in recent quarters. On the important integration of the Harbor One merger. You know, we feel good about that opportunity. And are looking forward, as I said in my comments earlier, to working with our new customers, our new colleagues at Harbor One. But as you can well imagine, there's a lot of work to do there on that integration. We have no plans, you know, in terms of additional mergers in the near term.

But that said, we think if a merger opportunity were to arise, it's in our shareholders' best interest for us to evaluate the opportunity. Doesn't mean we would execute, but certainly it's lower on our list of priorities when we think about capital allocation. But as Bob indicated with his opening statements, you look at the progress at Eastern Bank since we had our IPO. The performance improvement is very material. And significant, and the opportunity of the new markets that those mergers provided are a meaningful contributor to our operating performance. So we think it's in our best shareholders' best interest to consider it, but it's not our focus today.

David Rosato: I would just add to that, you know, it's clear when you think about deployment of capital from our perspective. Nothing has changed. It's organic growth. It's now we're excited that with the board's approval of the share repurchase. So we can be back in the market. It's supported the dividend. And then by far, number four is anything around M&A.

Damon DelMonte: Got it. Okay. Great. And then just lastly, David, real quick. You know, you had mentioned before, like, last quarter about the possibility of another restructuring. But it would kinda depend on market conditions and kind of how you felt the best use of capital once Harbor One is closed. Any updated thoughts on that? And you're considering that still, or is it the focus more on organic growth and buybacks only?

David Rosato: It's really, we're really not focused at all on any type of further portfolio restructuring of Eastern Bank. It is organic growth, which we've had a very good track record of success year to date. As Denis referenced, the pipeline is robust. And our brand is resonating in the market. So it's that. It's being back in the market for buybacks. And it's not no contemplation at all right now of any type of further portfolio restructuring.

Damon DelMonte: Okay. Great. Well, thank you very much for taking all my questions.

Denis Sheahan: Yes. Thanks, Damon.

Operator: Next question comes from Mark Fitzgibbon with Piper Sandler. Your line is now open.

Mark Fitzgibbon: Hey, guys. Good morning.

David Rosato: Morning, Mark.

Mark Fitzgibbon: You had mentioned in your comments earlier on the wealth management business, I think it was $550 million increase in AUM this quarter. A lot of that was market driven. Could you break out for us how much was the $550 million was market driven versus flows?

David Rosato: Yeah. It was predominantly market driven, you know, good equity and fixed income markets. The net flows in the quarter were a little over $50 million. Positive.

Mark Fitzgibbon: Okay. Great. And then secondly, are there plans within the wealth management business to hire more people or to acquire other, you know, RIAs or wealth businesses?

Denis Sheahan: Mark, this is Denis. So, yes, we are looking for talent. And we have brought on some existing talent in the wealth area. You know, we're active and engaged in opportunities to bring in talent whether it be in business development or portfolio relationship management. So hopefully, you'll hear more from us about that in the coming quarters. And in terms of M&A in the RIA space, no. We're not interested in that to any great degree. It's challenging for those opportunities to work from a variety of perspectives. One being culture and integration, another being financially, it's challenging to make them work. So we're not interested at this point in any kind of M&A there.

Mark Fitzgibbon: Okay. And then, Denis, I guess I'm curious, and I know it's a little awkward, but any comments on the slide presentation that Holdco put out earlier this week? I guess I'm curious, you know, do you agree with it? Do you plan to implement any of the things that they've proposed, and do you plan to meet with them?

Denis Sheahan: Well, Mark, as you know, we're very open to engaging with our shareholders. We do a lot of investor conferences and investor roadshows, etcetera, and we're happy to engage with any of our investors and we have what we believe is a shared goal. We and our investors of driving the performance of the company even higher than we've already done and to build long-term value creation for our shareholders. So we welcome that dialogue from whomever. But I would say most importantly, I really want to turn our focus to the future and think about, you know, we're excited about the future of the company.

We feel very well positioned, you know, here today and even more so with the combination with Harbor One, to execute the strategy that we've built to really drive that top quartile financial performance. That's the mantra at the company. That's what we're aiming for. That's our aspiration. And that's what we're really, really focused on. And we think that's going to deliver very, very attractive shareholder returns. So that's our focus. You know, I'm not going to comment on anything in any particular disclosure that someone has made. But, you know, rest assured, that this team is focused on driving performance, and that's what gets us up every day. That's what gets us excited.

And as I said, we're going to continue to focus on that.

Mark Fitzgibbon: That's great. Thank you.

Operator: Your next question comes from Laurie Hunsicker with Seaport Research. Your line is now open.

Laurie Hunsicker: Hi. Thanks. Bob, Denis, David, and Andrew, good morning. Just wanted to go over to slide 16, your office exposure here. And I just want to make sure I'm reading this right. It looks like your office nonperformers jumped linked quarter. But I guess what's also new is you've got $19 million now in non-accruals maturing in the first quarter there of '26. And so I'm just wondering how we should think about that with respect to provision just since that's new, can you help us understand that a little bit?

David Rosato: Sure, Laurie. So it's one loan that just looked a little background. That loan was originated in 2016. It's been so pre-COVID, we've been watching it since COVID, so for quite a few years here. This is consistent with what we've said all along. There will be a couple loans in the portfolio that we'll have to deal with. In the grand scheme of things, small numbers. This loan we started building reserves, it'll mature next year. That's why it hit the schedule. We will have it with probably full resolution, probably not in Q4, but into Q1. It's on our books at what we believe will be the final resolution economics.

So there's really, it is one loan, but there's really no story there or anything different worth mentioning about that loan or about the rest of the portfolio.

Laurie Hunsicker: Okay. And then just with respect to that loan, I mean, can you share with us occupancy or anything around that? Or, you know, if you expect to extend or just sort of think about?

David Rosato: I will share one fact. It's 85% occupied.

Laurie Hunsicker: That's great. That's helpful. Okay. Thanks. And then spot margin, do you have an update on that for September?

David Rosato: Hear that? I'm sorry. Did you say spot margin?

Laurie Hunsicker: Yeah. Do you have a September spot margin?

David Rosato: Yeah. So it's 3.48. So one basis point higher than the quarter.

Laurie Hunsicker: Okay. Great. All my other questions have been answered. I'll leave it there. Thank you.

David Rosato: Thanks, Laurie.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please. Your next question comes from Janet Lee with TD Cowen. Your line is now open.

Janet Lee: Hi, good morning.

David Rosato: Morning, Janet.

Janet Lee: Hi. Apologies if I missed it in the prepared remarks earlier, but if I were to interpret your comment around NIM, so basically, as we look into 2026, although maybe deposit costs were a little bit more elevated this quarter because of competition. But as rates come down, you're able to still sustain your NIM. Is that the right way to think about this?

David Rosato: Yes. Generally true statement. What I was trying to elaborate on a little bit from Damon's question is two drivers. Right? There's the accretion income, which bounces around. Last quarter is a little above trend. This quarter is a little below trend. Hard to predict as we all know. On the deposit side, in Q3, there was one Fed move so far. We were slow in our repricing down. So less than our historical long-term beta of 45 to 50%. Competition in our market remains intense or heavy. We're five days away from what's seems to be a foregone conclusion. The Fed's gonna move again, followed by another move in December.

So we will be pricing down as we get cover from the Fed. Our message is in the near term, a little slow. A little slower to maintain and eventually grow market share. But longer term through this full cycle, you should expect us to achieve our full betas.

Janet Lee: Got it. That's helpful. And on a higher bigger picture, so, Denis, it's been a little over a year since you joined Eastern from Cambridge. So I believe you have assessed, you know, Eastern franchise or the business overall. So given its historical roots as a mutual conversion and given a lot of the M&As that you guys have done, I mean, growth has been slow or slower. Versus, I guess, standalone Cambridge or Eastern. As you look at Eastern's franchise, like, what parts of the business are perhaps underutilized, or where do you see the most upside to growth or increase in profitability?

I get that you guys are seeing acceleration in C&I opportunities, but are there other parts of the business where you think could be improved?

Denis Sheahan: Janet, yeah, thanks for your question. So I would reflect on it this way. We have seen very significant increase in the company's profitability that's really riding on the back of the strategy that the team before, David and I had very significant, and it positions us well. In terms of continuing to grow profitability, I think of it about the areas that you hear us emphasizing in our comments. The commercial lending team, it was frankly one of the things that attracted me when I was thinking about merging Cambridge into Eastern. Is the journey that Eastern has gone on for several years including as a mutual and what it converted to build out that commercial banking division.

The talent on the team is terrific. They can execute. They're excited about the growth that we have and that we're continuing to embark on. So I think the commercial banking division is certainly one. Second, and this isn't necessarily an order of priority. All our businesses are important, but wealth management. You know, the market in Massachusetts and New England broadly, you know, from a demographic perspective, we don't have significant population growth, but what we do have is a very good wealth and household income demographic. So our ability to lean into that business further over the years, it takes time. I've seen this in my past and how you build out a wealth management business successfully.

I think will significantly improve our performance. That's low capital intensive. Very beneficial to ROA. And we have a good, a really strong capability in that area. I think about our retail and deposit franchise. You know, we've new leadership in that area, terrific team, and I feel very good about our prospects in that area of the company as well. So that's a lot, Janet. But we're fortunate to have a lot. And it comes down to the talent on the team and our ability to execute in the market. Including our newer markets. You know, when I think about our markets, you have to really, the inter merger integrations well done, take years.

If you go back to the Century merger in my view, it's not fully integrated. Have we maximized the potential of our opportunity in this old century markets, in the old Cambridge markets, and the soon to be Harbor One markets, absolutely not. So I think there's a lot of opportunity ahead. The management team is excited. We're pumped. So that's how I would answer your question, Janet.

Janet Lee: Thank you so much.

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

Bob Rivers: Well, thanks again, everyone, for joining us this morning. Best wishes for very happy and healthy holidays, and we look forward to talking with you again in the New Year.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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