Eastern Bankshares, Inc.

Thank you for joining us. Please refer to the company's forward-looking statement on slide 19 of this presentation, as well as the risk factors described in the company's SEC filings. The company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliations, please refer to the company's earnings press release and SEC filings. I'd now like to turn the call over to Denis Sheahan, Eastern Chief Executive Officer.

Thank you. Good morning, everyone, and thank you for joining us. On the call today with me are Executive Chair and Chair of the Board of Directors Bob Rivers, President and Chief Operating Officer Quincy Miller, and our Chief Financial Officer David Rosato. We're pleased with our third quarter performance, which reflects disciplined execution of our priorities. We delivered record operating earnings, generated attractive returns, maintained Excellent asset quality and returned meaningful capital to shareholders, all while continuing to drive organic growth across both our banking and fee-based businesses. These results further reinforce Eastern Standing as a premier bank in Greater Boston, one of the nation's largest and most affluent banking markets. The increase in period and loan balances was primarily driven by strong commercial real estate originations, and broad-based CNI growth. As expected, Cree payoffs moderated from the second quarter, leading to solid growth overall in commercial real estate. Commercial loan pipelines remain strong, although the pace of closings has been somewhat slower than anticipated, as some clients take a more measured approach to investment decisions amid interest rate uncertainty. Overall, Customers remain resilient as business activity continues to generate demand for financing. We believe there are a lot of opportunities in the commercial banking segment, and we are well positioned to gain share. Customers value our ability to deliver a broad set of commercial capabilities typically associated with larger institutions, while also providing the certainty of execution that comes from local decision making and knowledge. The Eastern brand is highly regarded across our market, and the franchise is deeply rooted. We live and work here, and our extensive involvement in the communities we serve resonates with customers. On the funding side, hearing end deposits grew modestly despite seasonal municipal outflows. While the deposit environment remains competitive and costs move higher, We remain committed to gathering core deposits to support our growth strategy and balancing these efforts with margin performance. Importantly, the strength of our core deposit base and limited reliance on wholesale funding provide us with the flexibility to stay disciplined while also supporting customer relationships. Wealth management is an important component of our long-term growth strategy, and we achieved another successful quarter. Assets under management and administration increased from the end of the second quarter, driven by both positive net flows and market appreciation. Our comprehensive team-based approach continues to differentiate us across our target market of $2 million to $20 million in investable assets. We offer a level of service to this segment that larger firms typically cannot deliver. Importantly, We get compensated well for these services with an average fee ratio of approximately 70 basis points. While we're in the early stages of capitalizing on the full potential of this business, the increasing alignment between our wealth and banking teams, combined with the attractive wealth demographics across our footprint, is generating meaningful momentum and we are encouraged about its long-term outlook. Our asset quality remains a clear source of strength, reflecting conservative underwriting and proactive risk management. Net charge-offs declined link quarter and, as anticipated, non-performing loans improved for the third consecutive quarter following the HarborOne merger. We are confident in our credit profile, including the sectors that have received greater attention in Boston, such as life science, which we have limited exposure. We know our investor office portfolio exceptionally well, and it represents only 4% of total loans. The portfolio is well reserved and continues to perform within our expectations. While overall credit trends remain favorable, our experienced credit team continues to actively monitor the macro environment and local market for emerging risks that could impact our customers, positioning us to respond quickly and decisively when needed. Finally, given our profitability, we continue to generate capital in excess of our growth needs. As we have consistently communicated, we are committed to thoughtfully rightsizing our capital position over time. That commitment was evident again this quarter as we returned meaningful capital to shareholders through both share repurchases and quarterly dividend while continuing to support organic growth opportunities. As always, Our results reflect the efforts of an exceptional team and I want to thank our colleagues for their continued commitment and execution. I also want to express my gratitude to our customers for choosing Eastern as their financial partner and to shareholders for their ongoing trust and support. We never take these relationships for granted and every day we are focused on delivering strong, sustainable performance and value for all stakeholders. David, I'll hand it over to you to provide further details on third quarter financials.

Thanks, Dennis, and good morning, everyone. Our third quarter financial performance was strong and highlighted by record operating net income, further improvement in key profitability metrics, including return on average assets and return on average tangible common equity, positive operating leverage driven by an increase in net interest income and lower expenses, Solid balance sheet growth supported by strong commercial lending activity, sustained excellent asset quality, and meaningful capital returns to shareholders. The third quarter also benefited from a modestly lower effective tax rate, primarily reflecting a higher level of tax-preferenced items. Going forward, we expect the effective tax rate to return to about 22%. We reported record operating net income of $111 million, or 51 cents per diluted share, an increase of 4% link quarter and 50% from a year ago, reflecting the enhanced earnings power of the company. Net interest income growth, combined with well-controlled expenses, produced another quarter of positive operating leverage. As a result, the operating efficiency ratio improved to 47.5%, contributing to a three basis point increase in operating ROAA to 141 basis points and a 37 basis point improvement in operating return on average tangible common equity to 15.7% compared to the second quarter. Total revenue of $306.6 million increased 1% link quarter as growth in net interest income was offset by lower fee income. Starting with slide five of the presentation, net interest income grew 2% link quarter, reflecting the benefit of continued balance sheet growth. Net interest margin declined four basis points to 362, which was in line with our expectations as higher funding costs more than offset improvement in asset yields. Asset yields increased two basis points driven by favorable loan and securities repricing while interest bearing liability costs rose eight basis points due to higher deposit costs. Net discount accretion contributed 26 basis points to the margin compared to 28 basis points in the prior quarter. Excluding accretion, the margin declined two basis points, link quarter. Importantly, our year-to-date net interest margin of 364 remains well within our full-year guidance range of 360 to 365. While the benefits of a steeper yield curve and higher rates are supporting asset repricing, Those tailwinds continue to be offset by competitive deposit pricing. As a result, we currently expect net interest margin to remain relatively stable in the fourth quarter and to modestly improve into next year. We show the repricing characteristics of our interest earning assets on slide six. We have approximately $8.8 billion of floating rate assets repricing constantly with short-term rates. Beyond that, we expect approximately $1 billion of fixed rate variable assets repricing in the fourth quarter and roughly $800 million per quarter in 2027. As detailed on slide 7, operating non-interest income decreased $5.2 million, or 16%, compared to a particularly strong second quarter results. The largest contributor to the variance was a $6.3 million decrease in income from investments per employee retirement benefits, reflecting weaker equity market performance. This unfavorable impact on fee income was partially offset by a $2.5 million reduction in related benefit costs reported in non-interest expense. Miscellaneous income and fees also decreased $3.1 million largely as the result of gains on the sale of commercial loans recognized in Q2 that did not reoccur in Q3. Turning to wealth management on slide eight, assets under administration increased to $11.6 billion, including $10.8 billion in assets under management. AUM increased $156 million link quarter primarily driven by $97 million in positive net flows, highlighting the continued momentum in the business. Wealth management fees declined modestly from the prior quarter as growth in AUM revenues was more than offset by lower tax preparation fees, which are seasonally higher in the second quarter. Compared to Q3 25, fees increased 10% reflecting strong organic and market-driven asset growth over the last year. As detailed on slide nine, the third quarter demonstrated our ongoing focus on prudent expense management and operating efficiency as non-interest expense decreased $8.3 million or 5% linked quarter. Notably, we did not incur any non-operating costs in the current quarter compared to $1.6 million in Q2. On an operating basis, non-interest expense was down $6.7 million. The current quarter benefited from the following, $2.2 million decrease in salaries and employee benefits, primarily due to lower costs related to employee retirement benefits that I referenced earlier. A $1.9 million decrease in occupancy and equipment expenses reflecting lower depreciation and maintenance costs. A $1.8 million decrease in professional services primarily due to shareholder advisory fees in Q2 that did not reoccur in the third quarter. And a $1.9 million decrease in other operating expenses largely driven by of unfunded commitment reserves. These declines in non-interest expense were partially offset by a $1 million increase in FDIC insurance costs. Moving to the balance sheet, starting with deposits on slide 10. Period end balances increased $98 million linked quarter despite seasonal municipal outflows. On an average basis, deposits increased $667 million, or 2.6% from the second quarter. Consistent with recent trends, money market balances continued to grow as customers maintained a preference for liquidity. Total deposit costs of 156 basis points increased nine basis points linked quarter with a September spot rate of 159 basis points, reflecting elevated competition for deposits in the New England market. In response to higher short-term rates, we took targeted actions to appropriately position offerings to defend and grow market share. Looking ahead, we remain focused on gathering core deposits while balancing growth with margin performance. Looking at loans on slide 11, period end balances increased $261 million for 1.1% link quarter. Cree balances grew $229 million, supported by strong originations, although payoffs remained a headwind, despite moderating from Q2 levels. CNI balances increased $93 million, reflecting broad-based growth across the portfolio and continued client activity. Commercial pipelines remained strong and ended September at approximately $1 billion, with a balance mix between Cree and CNI. Earning to consumer lending. Home equity balances increased $44 million, Given the strong underlying demand across our footprint for this product, we continue to see home equity as an attractive area of growth. Residential mortgage balances were up modestly from Q2. However, our expectation is the residential portfolio will remain relatively flat in 2026 as we favor HELOC and commercial loan growth. Moving to slide 13, our capital position remains strong. is indicated by CET1 and TCE ratios of 13% and 9.6%, respectively. We are focused on right-sizing capital through organic growth, share repurchases, and quarterly dividends. We expect to continue to generate excess capital but are managing our CET1 towards the median of the KRS. Tangible book value per share of $12.96 declined 1% link quarter, primarily driven by higher unrealized losses in the available per sale securities portfolio reflected in AOCI. Excluding this mark-to-market impact, Tangible book value per share would have increased approximately 2% from Q2 despite returning $89.1 million of capital to shareholders during the quarter. In addition to $32.4 million of cash dividends paid, we repurchased 2.6 million shares for $56.7 million at an average price of $22.11 which was 30 cents below the BWAP for the quarter. As a result, our diluted common shares outstanding were $215.5 million as of September 30th. Worth quarter to date, we have also repurchased an additional 1.6 million shares through yesterday for a total cost of $33.8 million. and now have 8.5 million shares remaining in our authorization that runs through the end of 2027. We continue to view our buyback through two lenses, core and opportunistic. The core component reflects our need to consistently repurchase shares to steadily reduce capital levels. The opportunistic component is more price sensitive. as we remain disciplined and focused on creating value for shareholders. As a result, the pace of repurchases may vary from quarter to quarter based on market conditions and the stock's valuation. While we control capital generation and the pace of buybacks, we do not control valuation. As displayed on slide 14, asset quality remains excellent. Net charge-offs to average total loans of nine basis points declined from 17 basis points in Q2, and NPLs improved by $24.6 million to $84.8 million, or 36 basis points of total loans. Notably, NPLs continued to improve in both the Legacy Eastern and Acquired Harbor One portfolios. Commercial criticized and classified loans increased modestly from the second quarter, reflecting higher balances in both the Legacy Eastern and HarborOne portfolios. The increase was primarily driven by a small number of relationships. To conclude, our third quarter results underscore the strength of the franchise. We generated record operating net income, produced positive operating leverage, and maintained excellent asset quality, all while executing against our priorities of growing organically and returning capital to shareholders. As we look ahead, we remain encouraged by the underlying momentum across the franchise. At the same time, we continue to operate in a dynamic environment characterized by elevated deposit competition, evolving interest rate expectations, Thank you. Thank you.