Eastern Bankshares Earnings Call Highlights Growth and Scale

Eastern Bankshares, Inc. ((EBC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Eastern Bankshares Paints Upbeat Picture as Earnings, Wealth Business and Scale All Advance

Eastern Bankshares, Inc. struck an upbeat tone on its latest earnings call, underscoring strong underlying performance and momentum despite some merger-related noise. Management leaned into record wealth assets, a sizable jump in operating earnings and improved profitability metrics, while highlighting the strategic benefits of the HarborOne acquisition and a robust capital return program. At the same time, executives acknowledged near‑term headwinds from higher expenses, acquisition‑driven increases in criticized loans and elevated deposit costs, but framed these as manageable and largely transitional.

Surge in Operating Earnings Signals Strong Core Momentum

Management emphasized that full-year operating earnings surged an impressive 62% in 2025, a company-highlighted figure that set the tone for the call. Fourth-quarter operating earnings reached $94.7 million, up 28% from the prior quarter, with operating EPS climbing 19% to $0.44. This acceleration in profitability, even amid integration work and a choppy rate environment, signals that the underlying franchise is generating stronger earnings power and benefiting from both organic growth and accretive M&A.

Record Wealth Assets Under Management Strengthen Fee Franchise

Eastern’s wealth management business delivered standout results, with wealth assets reaching a record $10.1 billion at year-end, including $9.6 billion of assets under management. The increase was driven by both market appreciation and positive net flows, including roughly $200 million of net inflows in the fourth quarter alone. Wealth fees totaled $18.6 million in Q4 and accounted for about 40% of operating noninterest income, underscoring the growing importance of fee-based, capital-light revenues to the bank’s earnings mix and providing a valuable counterbalance to rate-sensitive net interest income.

Profitability Metrics Move Higher

Key profitability measures showed clear improvement, highlighting better earnings efficiency and capital productivity. Operating return on assets reached 1.30% in the fourth quarter, up 24 basis points year over year, while operating return on average tangible common equity improved to 13.8% from 11.3%. These gains reflect both higher revenues and disciplined cost management, and they position Eastern more competitively versus regional peers in terms of returns, a critical driver for investor sentiment.

Efficiency Ratio and Net Interest Margin Trend in the Right Direction

The bank made notable strides on efficiency and margin. The operating efficiency ratio improved to 50.1%, a meaningful advance from over 57% in the same quarter a year earlier, indicating Eastern is doing more with each dollar of expense. Net interest income rose to $237.4 million ($243.4 million on a tax-equivalent basis), an increase of $37.2 million from the third quarter. The reported net interest margin expanded to 3.61%, up 14 basis points from 3.47%, reflecting both the impact of HarborOne’s balances and better asset yields, even as funding costs remained a pressure point.

Healthy Organic Loan Growth and Solid Commercial Origination

Excluding the HarborOne acquisition, Eastern delivered solid organic loan expansion, with total loans up $1.0 billion for the year, or 5.6%. The legacy Eastern commercial portfolio grew about 6% year over year, supported by $2.5 billion of commercial originations in 2025 split roughly evenly between commercial & industrial (C&I) and commercial real estate (CRE). This balanced origination mix suggests management is prioritizing relationship-based lending and diversification, and indicates that demand in Eastern’s core New England markets remains resilient.

HarborOne Integration Adds Scale and Earnings Accretion

The November closing of the HarborOne merger was a central theme, with management highlighting the added heft and earnings tailwinds. HarborOne contributed approximately $4.5 billion of loans and $4.3 billion of deposits in the quarter, materially expanding Eastern’s balance sheet and customer base. Importantly for earnings, loan discount accretion from HarborOne is expected to contribute about $12–$13 million of additional net interest income per quarter over the next year, on top of roughly $9–$10 million per quarter from prior deals. This accretion provides a meaningful, though time‑limited, boost to net interest income as the combined bank realizes merger benefits.

Capital Return and Dividend Increase Affirm Shareholder Focus

Eastern is deploying excess capital aggressively. In the fourth quarter, the company repurchased 3.1 million shares for $55.4 million, representing 26% of its current authorization, at an average price of $17.79. Early in 2026, it bought back another 635,000 shares for $12.3 million. The board also approved a first‑quarter dividend of $0.13 per share. Management reiterated that share repurchases remain a key tool for managing capital, with an explicit plan to continue buybacks while steering its common equity tier 1 (CET1) ratio toward a target around 12%, more in line with the regional bank peer group.

Strong Capital and Liquidity Offer Strategic Flexibility

At year-end, Eastern’s regulatory and tangible capital remained comfortably above typical peer levels, providing a cushion as integration progresses. The CET1 ratio stood at 13.2%, while the tangible common equity ratio was 10.4%. Management projected that if the remaining repurchase authorization is executed, CET1 could edge down to about 12.7% by mid‑year, with a longer‑term goal of aligning around the KBW Regional Bank Index median of roughly 12%. This ample capital position affords Eastern flexibility for continued capital return, organic growth and further balance sheet optimization.

Asset Quality Stable Overall Despite Acquisition-Driven Uptick

Credit metrics remained manageable, though the HarborOne acquisition contributed to higher reported problem loan balances. Net charge‑offs were modest at 18 basis points of average total loans, and the allowance for loan losses rose to $332 million, or 1.44% of total loans, reflecting both acquired reserves and a conservative approach. Nonperforming loans increased by $103 million quarter over quarter, largely due to $94 million of HarborOne nonperformers concentrated in a handful of larger CRE relationships and one C&I credit. Criticized and classified loans moved up to $793 million (5% of loans) from $495 million (3.8%), but management stressed that the increase was entirely acquisition-related and is being actively managed through workout strategies.

Merger and Integration Costs Drive Higher Expenses

Expenses spiked in the quarter as Eastern absorbed HarborOne and booked one-time charges. Total noninterest expense reached $189.4 million, up $49.0 million from the prior quarter. Nonoperating costs climbed to $33.4 million, an increase of $30.2 million that included $26.7 million of merger-related expenses and a $3.5 million lease impairment. Operating expenses also rose, reaching $156.1 million, up $18.9 million primarily due to the added HarborOne cost base. Management framed these as expected integration and scaling effects, with an eye on future efficiencies as systems and operations are fully combined.

Securities Repositioning and AFS Losses Remain Contained

The securities portfolio continues to carry mark‑to‑market losses, but trends improved slightly and repositioning is underway. Eastern reported an after‑tax unrealized loss of $259 million on its available‑for‑sale (AFS) securities at quarter-end, better than the $280 million figure at the end of September. Following the HarborOne closing, the bank sold $298 million of acquired securities, using the proceeds to reduce wholesale funding. This indicates management is actively reshaping the securities book to optimize funding and risk, while gradually working through the AFS loss position as rates evolve.

Deposit Costs Rise on Mix Shift, With Plans to Ease Over Time

Funding costs remain a headwind, particularly with the addition of HarborOne’s deposit base. Total deposit costs rose to 1.59% in the quarter, up modestly from the prior period, primarily due to a shift in deposit mix. Management acknowledged that deposit costs are likely to stay somewhat elevated in the near term as the combined deposit base is integrated and repriced, but the strategy is to work these rates down over time as competitive pressures normalize and as relationship-based deposits deepen.

Core Deposit Intangible Amortization Adds Noncash Expense

The HarborOne deal brought along a core deposit intangible that will show up in higher reported noninterest expense, though it is noncash in nature. Management expects amortization of this intangible to be about $8–$9 million per quarter over the next year. While this will elevate the expense line, it does not affect cash earnings, and investors may look through these charges when assessing the underlying expense trajectory and profitability of the combined franchise.

Accretion and Amortization Introduce Earnings Volatility

Eastern cautioned that its estimates for loan discount accretion and core deposit amortization remain inherently variable. Factors such as loan prepayments and timing differences can cause quarter‑to‑quarter swings, creating some volatility in reported net interest income and noninterest expense relative to guidance. While the overall directional impact from merger accretion is positive, earnings modeling will require investors to account for these moving parts, especially in the first full year post‑integration.

Office CRE Exposure a Key Watch Area

Within its commercial real estate book, investor-owned office loans stand out as a risk segment to monitor. Eastern reported $1.1 billion of investor office exposure, representing about 5% of total loans, with criticized and classified balances of $178 million, or roughly 16% of that segment. Management described its 5% reserve coverage on this portfolio as conservative, yet acknowledged that concentration and elevated criticized levels warrant close oversight. In an environment where office fundamentals remain under pressure, investors are likely to track this segment closely for any signs of deterioration.

Management’s 2026 Outlook Calls for Steady Growth and Strong Margins

Looking ahead, Eastern laid out detailed 2026 guidance that points to steady growth and solid profitability for the combined company. The bank expects loans to grow 3–5% and deposits 1–2%, with net interest income projected in the $1.20–$1.50 billion range and a full‑year tax‑equivalent net interest margin of 3.65–3.75%, broadly consistent with a December spot margin of about 3.64%. Using market rate assumptions that include two cuts in mid‑to‑late 2026, management is planning for provision expense of $30–$40 million, operating noninterest income of $190–$200 million (without assuming further market appreciation), and operating noninterest expense of $655–$675 million. The operating tax rate is expected to hover around 23%. Capital-wise, Eastern intends to manage CET1 down from 13.2% toward roughly 12%, projecting around 12.7% by June 30 if current repurchase plans are completed, while continuing substantial capital returns through both buybacks and dividends. Merger accretion is expected to remain a meaningful tailwind, with about $12–$13 million per quarter from HarborOne loans plus $9–$10 million per quarter from prior deals, partly offset by $8–$9 million per quarter of core deposit amortization, as the bank targets deposit betas of 45–50% and a securities portfolio near 15% of assets.

In sum, Eastern Bankshares’ earnings call presented a story of strengthening core performance, expanding scale and shareholder-friendly capital deployment, tempered by the inevitable noise of integration and elevated funding costs. Record wealth management balances, robust operating earnings growth and improved returns point to a healthier, more profitable franchise, while detailed guidance and a disciplined capital strategy offer investors a clearer roadmap for 2026. The key risks to watch remain the integration of HarborOne, the evolution of deposit pricing and office CRE credit quality, but management’s tone and numbers suggest confidence that the combined bank is well-positioned to navigate these challenges and deliver attractive returns.