Eastern Bankshares NASDAQ: EBC executives said the company began fiscal 2026 with results that were “solid and in line with our expectations,” pointing to improved year-over-year profitability, record commercial loan pipelines, strong asset quality, and continued capital returns as key themes of the first-quarter earnings call.
Quarterly results and profitability
Chief Executive Officer Denis Sheahan said the quarter reflected “typical seasonal trends,” including modestly lower period-end loan and deposit balances compared with year-end levels. Still, Sheahan highlighted stronger operating performance versus the prior year, noting that operating income rose 31% and operating earnings per share increased 18% year-over-year, producing an operating return on average tangible common equity of 12.8%.
Chief Financial Officer David Rosato reported net income of $65.3 million, or $0.29 per diluted share, which included $30.8 million of non-operating costs “mostly related to the HarborOne merger.” On an operating basis, earnings were $88.6 million, or $0.40 per diluted share. Rosato said operating earnings were down 6% from the fourth quarter, but up 31% from a year earlier, reflecting what he called the company’s “enhanced earnings power.”
Rosato said operating return on assets was 117 basis points in the quarter and operating return on average tangible common equity was 12.8%. Both were down from the fourth quarter but improved from the year-ago period.
Net interest margin trends and outlook drivers
Net interest income totaled $244.7 million, or $250.8 million on a fully taxable equivalent basis, up 3% from the fourth quarter. Rosato attributed the increase to “margin improvement due to lower cost of funds,” partially offset by $3.1 million of lower net discount accretion. Net discount accretion was $19.5 million, down from $22.6 million in the prior quarter.
The company’s net interest margin expanded 2 basis points from the fourth quarter to 3.63%. Rosato said the improvement was driven by a 16-basis-point reduction in interest-bearing liability costs, which more than offset a 7-basis-point decline in the yield on interest-earning assets. Net discount accretion contributed 28 basis points to the margin versus 34 basis points in the fourth quarter; excluding accretion, Rosato said the margin expanded about 8 basis points linked-quarter.
Looking ahead, Rosato said the company expects accretion to average $21 million to $22 million per quarter, describing accretion income as “lumpy.” He also discussed a new disclosure on interest-earning asset repricing, noting that excluding cash flow hedges in runoff, $8.1 billion, or about 35% of total loans, is floating at current rates. Current loan origination yields were cited as 5.75% to 6% for commercial loans and 5.5% to 6% for residential loans, while HELOCs are indexed to prime.
Asked about the interest-rate backdrop, Rosato said Eastern remains “essentially interest rate risk neutral to NII,” though he reiterated that a steeper yield curve is modestly beneficial.
Fee income, wealth management momentum, and expense seasonality
Non-interest income was $43.6 million, down $2.5 million from the fourth quarter. On an operating basis, non-interest income was $45.1 million, down $1.6 million. Rosato said the largest driver was a $1.9 million loss on investments related to employee retirement benefits due to weaker equity market performance, compared with $1.7 million of income in the prior quarter. He added that this was partially offset by a $1.2 million improvement in related benefit costs recorded in non-interest expense.
Non-interest income also benefited from a $2.9 million increase in miscellaneous income and fees, including a $1.7 million gain on the sale of commercial loans tied to a HarborOne loan workout. Rosato said the sale was completed above the remaining fair value mark.
Management emphasized wealth management as a major fee driver. Sheahan said positive net flows in wealth management “approach[ed] $400 million” during the quarter. Rosato said wealth management accounts for more than 40% of non-interest income and that wealth assets rose to a record $10.3 billion, including $9.8 billion of assets under management, driven by positive net flows despite weaker equity market performance. Wealth management fees were modestly lower than in the fourth quarter but rose nearly 12% from a year earlier, he said.
On expenses, non-interest expense was $198.6 million, up $9.2 million from the fourth quarter, largely due to seasonal factors and a full quarter of HarborOne operating expenses. Operating non-interest expense was $167.9 million, up $11.8 million, primarily driven by salaries and benefits (up $10.6 million), along with higher occupancy and equipment costs and technology and data processing expenses. Rosato said the first quarter is typically “a seasonally high point” for expenses and management expects moderation over the rest of 2026.
In response to analyst questions, Rosato said several expense categories should come down in the second quarter on a linked-quarter basis, while Sheahan noted marketing is seasonal and said home equity promotions tend to be heavier in the spring and early summer.
Balance sheet: deposits, loan pipelines, and credit quality
Deposits ended the quarter at $25.1 billion, down $366 million, or 1.4%, from year-end. Rosato attributed the decline to seasonal outflows and elevated competition for deposits, as well as the maturity of $81 million of HarborOne brokered deposits. Total deposit costs declined 13 basis points to 1.46%, supported by lower costs in time deposits and money market accounts. He said Eastern is taking “targeted actions” to defend and grow deposit share, while acknowledging these actions may put “some upward pressure on costs.”
Multiple executives addressed deposit competition in New England, with Rosato telling analysts he expects “a 2-3 basis points incremental cost to deposits as the year unfolds,” which he said could translate into 1-2 basis points of pressure on overall margin. He also noted the spot deposit rate at quarter-end was 142 basis points, compared with 146 basis points for the full quarter. Sheahan said retention of HarborOne deposits has been consistent with expectations and “going very well,” while emphasizing that the broader market is driving pricing pressure.
Loans declined $187 million from year-end, or less than 1%, with Rosato citing resolutions of non-performing loans and commercial real estate payoffs as contributors. Commercial and industrial lending grew $49 million, or 1.1%, from year-end. Rosato said Eastern ended the quarter with a record commercial pipeline of about $800 million.
Sheahan provided additional pipeline mix details during Q&A, stating the pipeline included commercial real estate at about 57%, C&I at just under 30%, and the remainder in community development lending, which he described as typically affordable housing lending. He said the company also felt “really good” about its consumer home equity pipeline.
On consumer lending, Rosato said home equity balances grew slightly, while residential mortgage balances declined about 1% from year-end. He said the company expects the residential portfolio to be relatively flat in 2026 as it favors HELOC and commercial loan growth, and noted Eastern is implementing a new home equity origination platform to improve “speed, scalability, and consistency.”
Asset quality was a recurring focus. Sheahan said net charge-offs were 17 basis points and non-performing loans improved from year-end. Rosato reported non-performing loans declined by nearly $35 million from the fourth quarter to $138 million, or 60 basis points of total loans, with improvement in both legacy Eastern and the acquired HarborOne portfolios. The allowance for loan losses was $327.9 million, or 143 basis points of total loans, and the company recorded a $5.8 million provision.
Rosato also discussed the investor office portfolio, which totals $1.0 billion, or 4% of total loans, saying the company believes “the worst of the office loan issues are behind us,” while remaining “realistic” about the outlook. He said criticized and classified investor office loans improved to $160 million from over $170 million at year-end, and noted the company re-underwrites all investor office loans of $5 million or more annually, completing that process in the first quarter with “no unexpected findings.”
Capital return and HarborOne integration progress
Management emphasized capital deployment and integration execution following the HarborOne merger. Sheahan said Eastern repurchased 3.9 million shares for $75.1 million in the first quarter and increased its dividend by 15%, marking the sixth consecutive year of dividend growth since becoming a public company. Rosato said the buyback was executed at an average price of $19.33 and that, as of March 31, diluted common shares outstanding were 220.8 million.
Rosato added that during the second quarter to date, the company repurchased an additional 740,000 shares for $14.4 million, completing 65% of the authorization, with 4.2 million shares remaining. Both Sheahan and Rosato said they expect to complete the current repurchase program around mid-year and anticipate pursuing a new authorization, subject to regulatory approval.
On the merger integration, Sheahan said Eastern completed the HarborOne merger core system conversion in February, calling it a significant milestone. He said the company remains on track to capture targeted cost savings, and that one-time charges are “largely complete,” with about $2 million expected in the second quarter, bringing total one-time charges to $67 million.
Rosato said the company is not changing full-year guidance, though he cautioned that based on first-quarter results, Eastern “may trend towards the lower end” of the net interest income guidance range due to a combination of softer loan growth and potential deposit-cost pressure. Management said it plans to revisit the outlook at mid-year as visibility improves given uncertainty around geopolitical developments, interest rates, inflation, and broader market volatility.
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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