Eastern Bankshares Q2 Earnings Call Highlights

Eastern Bankshares (NASDAQ:EBC) reported record operating net income for the second quarter, supported by loan and deposit growth, margin expansion, higher fee revenue and expense reductions tied to the HarborOne integration.

Chief Executive Officer Denis Sheahan said operating net income increased 20% from the prior quarter and 30% from a year earlier, producing an operating return on average tangible common equity of 15.3%. The company also returned $106 million to shareholders through dividends and share repurchases during the quarter.

“Our results are a reflection of the priorities we have consistently communicated to investors, organically growing both banking and fee-based businesses and returning capital to shareholders,” Sheahan said.

Second-Quarter Results and Margin Trends

Eastern reported GAAP net income of $105.2 million, or $0.48 per diluted share. Operating net income, which excluded $1.6 million of remaining HarborOne merger-related costs, was $106.5 million, or $0.49 per diluted share.

Chief Financial Officer David Rosato said operating revenue growth and expense management generated positive operating leverage. The operating efficiency ratio improved to 49%, while operating return on average assets increased 21 basis points to 1.38%.

Net interest income increased 3% from the first quarter as the net interest margin expanded 3 basis points to 3.66%. Higher yields on loans and securities more than offset increased funding costs, Rosato said. Total interest-earning asset yields rose 4 basis points, while interest-bearing liability costs increased 2 basis points.

Discount accretion remained about $20 million during the quarter and contributed 28 basis points to the margin. Rosato later said the company expects accretion income to remain around its recent quarterly run rate of roughly $19.5 million, with a potential slight decline over time.

Operating non-interest income rose $12.8 million, or 28%, from the first quarter. The largest contributor was an $8.9 million increase in investment income related to employee retirement benefits, reflecting stronger equity markets. That gain was partly offset by a $3.4 million increase in related employee benefit costs.

The company also cited higher investment advisory fees, seasonal tax preparation fees and increased interest-rate swap income. Rosato said swap income benefited from higher commercial loan volume and greater customer use of interest-rate risk-management products.

Loan, Deposit and Wealth Management Growth

Period-end loan balances increased $325 million, or 1.4%, from the preceding quarter. More than $300 million of commercial and industrial loan growth drove the increase, partially offset by commercial real estate payoffs.

Sheahan said the commercial lending pipeline finished June at a record level and was diversified across businesses. Rosato put the commercial pipeline at nearly $1 billion. Management said it expects commercial real estate payoffs, which were elevated in the second quarter, to moderate during the second half of the year.

Home equity balances rose $59 million, while residential mortgage balances declined slightly. Rosato said Eastern expects its residential mortgage portfolio to remain relatively flat in 2026 as it emphasizes home equity and commercial lending growth.

Deposits increased $814 million, or 3.2%, from the prior quarter, driven by seasonal municipal inflows and broad-based growth across business lines. The loan-to-deposit ratio improved to 91% at quarter-end from 93% at March 31.

Management expects a portion of municipal deposits to leave seasonally in the third quarter. Total deposit costs increased 1 basis point to 1.47%, while the June spot deposit rate was 1.51%, reflecting competition in the New England deposit market.

Rosato said competition remains relatively constant and does not expect it to ease in the near term. The company expects money market balances to grow faster than certificates of deposit, citing customer preference for money market products.

Wealth management assets reached a record $11.5 billion. Sheahan said the business provides recurring fee income, diversifies earnings and deepens customer relationships, particularly through coordination among wealth management, private banking and commercial banking teams.

Credit Quality, Costs and Capital Return

Asset quality remained strong, according to management. Net charge-offs were stable at 17 basis points of average total loans. Nonperforming loans declined $29 million from the first quarter to $109 million, or 47 basis points of total loans.

Sheahan said Eastern has limited exposure to life-science lending and continues to monitor its office portfolio closely. He said every office loan above $5 million is re-underwritten annually.

Non-interest expense declined $30.7 million, or 15%, from the first quarter. Most of the reduction reflected lower merger-related costs, while operating non-interest expense declined $1.5 million. Rosato said HarborOne cost savings are “basically done,” with savings primarily reflected in salaries and benefits as well as occupancy and equipment costs.

Eastern paid $33.1 million in dividends and repurchased 3.6 million shares for $72.7 million during the quarter, at an average price of $20.03 per share. Its CET1 ratio was 13% and its tangible common equity ratio was 10.1% at June 30.

The board authorized a new repurchase program for up to 11.3 million shares, equivalent to 5% of common shares outstanding, through Dec. 31, 2027. The board also approved a $0.15 per-share dividend payable in September.

Updated 2026 Outlook

Eastern narrowed its full-year loan growth outlook to 3% to 4%, from a previous range of 3% to 5%, reflecting a slower start to the year. It raised its deposit growth outlook to 2% to 3%, from 1% to 2%.

The company also lowered its outlook for net interest income and margin, citing softer first-quarter loan growth, lower-than-expected accretion income and deposit competition. Management expects full-year fully taxable equivalent net interest margin of 3.60% to 3.65%.

Eastern reduced its expected provision for credit losses to $25 million to $30 million, from $30 million to $40 million, citing favorable credit performance. It narrowed its operating fee income outlook to $195 million to $200 million and tightened its operating non-interest expense range to $655 million to $665 million.

About Eastern Bankshares (NASDAQ:EBC)

Eastern Bankshares, Inc is the bank holding company for Eastern Bank, one of the oldest and largest mutual banks in the United States. Founded in 1818 as Salem Savings Bank and later rebranded as Eastern Bank in 1989, the company preserved its mutual ownership structure for more than two centuries. In March 2020, it completed an initial public offering and began trading on the Nasdaq under the ticker EBC, while continuing to emphasize its community-focused heritage.

Through its primary subsidiary, Eastern Bank, the company delivers a broad range of commercial and consumer banking products.

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