Eastern Q4 2025 Eastern Bankshares Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Eastern Bankshares Inc Earnings Call
Speaker #1: Welcome to the Eastern Bankshares, Inc. Q4 2025 earnings conference call. Currently, all participant lines are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session.
Operator: Welcome to the Eastern Bankshares, Inc. Q4 2025 Earnings Conference Call. Currently, all participant lines are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. Please note this event is being recorded for replay purposes. In connection with today's call, the company posted a presentation on its investor relations website, investor.easternbank.com, which will be referred to during the call. Today's call will include forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in the company's earnings press release, and most recent 10-K filed with the SEC.
Speaker #1: Please note, this event is being recorded for replay purposes. In connection with today's call, the company has posted a presentation on its investor relations website.
Speaker #1: Investor.easternbank.com, which will be referenced during the call. Today's call will include forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties, and is not a guarantee of future performance.
Speaker #1: Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in the company's earnings press release and most recent 10-K filed with the SEC.
Speaker #1: Any forward-looking statements made represent management's views and estimates as of today, and the company undertakes no obligation to update these statements because of new information or future events.
David Rao: Any forward-looking statements made represent management's views and estimates as of today, and the company undertakes no obligation to update these statements because of new information or future events. The company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliations, please refer to the company's earnings press release. I will now like to turn the call over to Bob Rivers, Executive Chair and Chair of the Board of Directors of Eastern Bankshares. Thank you, Julie. Good morning, everyone, and thank you for joining our call. We hope your 2026 is off to a great start. With me today is Eastern CEO Denis Sheahan and our CFO, David Rosato. As we close out the fourth quarter, I want to take a moment to reflect on another successful year and share my thoughts on the future.
Any forward-looking statements made represent management's views and estimates as of today, and the company undertakes no obligation to update these statements because of new information or future events. The company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliations, please refer to the company's earnings press release. I will now like to turn the call over to Bob Rivers, Executive Chair and Chair of the Board of Directors of Eastern Bankshares.
Speaker #1: The company will also discuss both GAAP and certain non-GAAP financial measures. For reconciliations, please refer to the company's earnings press release. I would now like to turn the call over to Bob Rivers.
Speaker #1: Eastern Executive Chair and Chair of the Board of Directors.
Bob Rivers: Thank you, Julie. Good morning, everyone, and thank you for joining our call. We hope your 2026 is off to a great start. With me today is Eastern CEO Denis Sheahan and our CFO, David Rosato. As we close out the fourth quarter, I want to take a moment to reflect on another successful year and share my thoughts on the future.
Speaker #2: Thank you, Julie. Good morning, everyone, and thank you for joining our call. We hope your 2026 is off to a great start. With me today is Eastern CEO Denis Sheahan and our CFO, David Rosato.
Speaker #2: As we close out the fourth quarter, I want to take a moment to reflect on another successful year and share my thoughts on the future.
Speaker #2: First, I want to welcome our new colleagues from HarborOne, and express my sincere gratitude to all of our employees for their tremendous work throughout the year.
David Rao: First, I want to welcome our new colleagues from HarborOne and express my sincere gratitude to all of our employees for their tremendous work throughout the year. It is their efforts that elevate Eastern's brand every day and make us distinctive as Eastern New England's hometown bank. 2025 was a terrific year for Eastern, highlighted by a 62% increase in operating earnings, strong organic loan growth, and a record level of wealth assets under management. We delivered strong financial metrics, continued to return capital to shareholders, and our share price outperformed the regional banking index. Our results underscore the strength of our company, of our relationship banking model, and enhanced earnings power of the company. The merger with HarborOne was another important milestone in 2025. It strengthens our presence in key markets south of Boston and provides an entrance into Rhode Island.
First, I want to welcome our new colleagues from HarborOne and express my sincere gratitude to all of our employees for their tremendous work throughout the year. It is their efforts that elevate Eastern's brand every day and make us distinctive as Eastern New England's hometown bank. 2025 was a terrific year for Eastern, highlighted by a 62% increase in operating earnings, strong organic loan growth, and a record level of wealth assets under management. We delivered strong financial metrics, continued to return capital to shareholders, and our share price outperformed the regional banking index. Our results underscore the strength of our company, of our relationship banking model, and enhanced earnings power of the company. The merger with HarborOne was another important milestone in 2025. It strengthens our presence in key markets south of Boston and provides an entrance into Rhode Island.
Speaker #2: It is their efforts that elevate Eastern's brand every day and make us distinctive as Eastern New England's hometown bank. 2025 was a terrific year for Eastern.
Speaker #2: Highlighted by a 62% increase in operating earnings, strong organic loan growth, and a record level of wealth assets under management. We delivered strong financial metrics, continue to return capital to shareholders, and our share price outperformed the regional banking index.
Speaker #2: Our results underscore the strength of our relationship banking model and the enhanced earnings power of the company. The merger with HarborOne was another important milestone in 2025.
Speaker #2: It strengthens our presence in key markets south of Boston and provides an entrance into Rhode Island. At $31 billion in assets and with a highly concentrated footprint, we are the largest independent bank headquartered in Massachusetts and have the fourth-largest deposit market share in Greater Boston.
David Rao: At $31 billion in assets and a highly concentrated footprint, we are the largest independent bank headquartered in Massachusetts and have the fourth-largest deposit market share in Greater Boston. Our scale allows us to invest in the franchise and better serve our customers while preserving a nimble, community-focused approach. Looking ahead, we believe Eastern is well-positioned for 2026 and beyond. Our foundation is firmly in place, and we have the size and scale to compete effectively. Now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns. As a result, we will not pursue any acquisitions as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future.
At $31 billion in assets and a highly concentrated footprint, we are the largest independent bank headquartered in Massachusetts and have the fourth-largest deposit market share in Greater Boston. Our scale allows us to invest in the franchise and better serve our customers while preserving a nimble, community-focused approach. Looking ahead, we believe Eastern is well-positioned for 2026 and beyond. Our foundation is firmly in place, and we have the size and scale to compete effectively. Now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns. As a result, we will not pursue any acquisitions as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future.
Speaker #2: Our scale allows us to invest in the franchise and better serve our customers, while preserving a nimble, community-focused approach. Looking ahead, we believe Eastern is well positioned for 2026 and beyond.
Speaker #2: Our foundation is firmly in place, and we have the size and scale to compete effectively. Now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns.
Speaker #2: As a result, we will not pursue any acquisitions, as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future.
Speaker #2: We are excited about the organic growth opportunities we see in the market in both our banking and fee-based businesses, and expect to continue returning excess capital through share repurchases and prudently growing the dividend.
David Rao: We are excited about the organic growth opportunities we see in the market in both our banking and fee-based businesses and expect to continue returning excess capital through share repurchases and prudently growing the dividend. We believe this approach will deliver meaningful value to our shareholders. Now I'll turn it over to Denis. Thank you, Bob. I share Bob's comments in thanking the team for a successful 2025. We are well-positioned entering 2026 to capture growth opportunities in our larger market, resulting in steady improvement in our profitability metrics. Our balance sheet is healthy, well-capitalized, highly liquid, and well-reserved. We are frequently asked about M&A, and I want to echo Bob's comments. Simply put, we are not focused on M&A. We have plenty of opportunities to organically grow the company's earnings and enhance profitability, and that is our focus.
We are excited about the organic growth opportunities we see in the market in both our banking and fee-based businesses and expect to continue returning excess capital through share repurchases and prudently growing the dividend. We believe this approach will deliver meaningful value to our shareholders. Now I'll turn it over to Dennis.
Speaker #2: We believe this approach will deliver meaningful value to our shareholders. Now, I'll turn it over to
Speaker #2: Denis. Thank you,
Denis Sheehan: Thank you, Bob. I share Bob's comments in thanking the team for a successful 2025. We are well-positioned entering 2026 to capture growth opportunities in our larger market, resulting in steady improvement in our profitability metrics. Our balance sheet is healthy, well-capitalized, highly liquid, and well-reserved. We are frequently asked about M&A, and I want to echo Bob's comments. Simply put, we are not focused on M&A. We have plenty of opportunities to organically grow the company's earnings and enhance profitability, and that is our focus.
Speaker #3: Bob, I share Bob's comments in thanking the team for a successful 2025. We are well positioned entering 2026 to capture growth opportunities in our larger market, resulting in steady improvement in our profitability metrics.
Speaker #3: Our balance sheet is healthy, well-capitalized, highly liquid, and well-reserved. We are frequently asked about M&A, and I want to echo Bob's comments. Simply put, we are not focused on M&A.
Speaker #3: We have plenty of opportunities to organically grow the company's earnings and enhance profitability, and that is our focus. We will allocate capital towards organic growth efforts and returning excess capital to shareholders, while still maintaining appropriate capital levels.
David Rao: We will allocate capital towards organic growth efforts and returning excess capital to shareholders while still maintaining appropriate capital levels. What excites me most is the organic growth opportunity ahead of us in both our legacy and newer markets. We see a significant runway to take share with our commercial banking and wealth management businesses and improve deposit growth. Strategic investments and hiring talent have been an important driver of growth. Eastern is a destination of choice for high-caliber talent, particularly those with large bank experience. We offer the size to compete effectively, yet are small enough for individuals to apply their expertise, make decisions, and feel a sense of ownership. As a result, our lending teams, both new hires and long-tenured relationship managers, remain energized. Our commercial lending platform is a key differentiator driven by the strength of our culture and capabilities.
We will allocate capital towards organic growth efforts and returning excess capital to shareholders while still maintaining appropriate capital levels. What excites me most is the organic growth opportunity ahead of us in both our legacy and newer markets. We see a significant runway to take share with our commercial banking and wealth management businesses and improve deposit growth. Strategic investments and hiring talent have been an important driver of growth. Eastern is a destination of choice for high-caliber talent, particularly those with large bank experience. We offer the size to compete effectively, yet are small enough for individuals to apply their expertise, make decisions, and feel a sense of ownership. As a result, our lending teams, both new hires and long-tenured relationship managers, remain energized. Our commercial lending platform is a key differentiator driven by the strength of our culture and capabilities.
Speaker #3: What excites me most is the organic growth opportunity ahead of us in both our legacy and newer markets. We see a significant runway to take share with our commercial banking and wealth management businesses and improve deposit growth.
Speaker #3: Strategic investments in hiring talent have been an important driver of growth. Eastern is a destination of choice for high-caliber talent, particularly those with large bank experience.
Speaker #3: We offer the size to compete effectively, yet are small enough for individuals to apply their expertise, make decisions, and feel a sense of ownership.
Speaker #3: As a result, our lending teams—both new hires and long-tenured relationship managers—remain energized. Our commercial lending platform is a key differentiator, driven by the strength of our culture and capabilities.
Speaker #3: We can deliver the products and services expected from much larger banks, while retaining the certainty of execution of local decision-making and a deep understanding of our customers and communities.
David Rao: We can deliver the products and services expected from much larger banks while retaining the certainty of execution of local decision-making and deep understanding of our customers and communities. Our banking model continues to resonate with clients, reinforcing trust, building long-term relationships, and attracting new business. The positive impact of our renewed growth focus and investments in talent was evident in 2025. Excluding the merger impact, total loans grew $1 billion, or 5.6%, for the full year on a standalone basis, driven primarily by strong commercial lending results. The legacy Eastern commercial portfolio increased 6% from the beginning of the year, and pipelines remain solid heading into 2026. We originated $2.5 billion of commercial loans in 2025, with approximately half in commercial and industrial lending and half in commercial real estate.
We can deliver the products and services expected from much larger banks while retaining the certainty of execution of local decision-making and deep understanding of our customers and communities. Our banking model continues to resonate with clients, reinforcing trust, building long-term relationships, and attracting new business. The positive impact of our renewed growth focus and investments in talent was evident in 2025. Excluding the merger impact, total loans grew $1 billion, or 5.6%, for the full year on a standalone basis, driven primarily by strong commercial lending results. The legacy Eastern commercial portfolio increased 6% from the beginning of the year, and pipelines remain solid heading into 2026. We originated $2.5 billion of commercial loans in 2025, with approximately half in commercial and industrial lending and half in commercial real estate.
Speaker #3: Our banking model continues to resonate with clients, reinforcing trust, building long-term relationships, and attracting new business. The positive impact of our renewed growth focus and investments in talent was evident in 2025.
Speaker #3: Excluding the merger impact, total loans grew a billion dollars, or 5.6%, for the full year on a standalone basis, driven primarily by strong commercial lending results.
Speaker #3: The legacy Eastern commercial portfolio increased 6% from the beginning of the year, and pipelines remain solid heading into 2026. We originated $2.5 billion of commercial loans in 2025, with approximately half in commercial and industrial estate.
Speaker #3: Wealth management is an important component of our long-term growth strategy, and the wealth demographics of our footprint provide significant opportunities. We have been pleased with the integration of the Eastern and Cambridge wealth teams and the progress made strengthening alignment between our wealth and banking businesses.
David Rao: Wealth management is an important component of our long-term growth strategy, and the wealth demographics of our footprint provide significant opportunities. We have been pleased with the integration of the Eastern and Cambridge Wealth teams and the progress made strengthening alignment between our wealth and banking businesses. Wealth assets reached a record high of $10.1 billion at year-end, including $9.6 billion in assets under management, driven by market appreciation and positive net flows. Still a lot of work to do, but we are encouraged by the momentum in wealth and optimistic about the growth opportunities in the years ahead. Turning to capital, our ratios remain strong and well-positioned to support our organic growth initiatives. At the same time, we recognize that given our profitability, we expect to generate capital in excess of what can be efficiently deployed through organic growth alone.
Wealth management is an important component of our long-term growth strategy, and the wealth demographics of our footprint provide significant opportunities. We have been pleased with the integration of the Eastern and Cambridge Wealth teams and the progress made strengthening alignment between our wealth and banking businesses. Wealth assets reached a record high of $10.1 billion at year-end, including $9.6 billion in assets under management, driven by market appreciation and positive net flows. Still a lot of work to do, but we are encouraged by the momentum in wealth and optimistic about the growth opportunities in the years ahead. Turning to capital, our ratios remain strong and well-positioned to support our organic growth initiatives. At the same time, we recognize that given our profitability, we expect to generate capital in excess of what can be efficiently deployed through organic growth alone.
Speaker #3: Wealth assets reached a record high of $10.1 billion at year-end, including $9.6 billion in assets under management driven by market appreciation and positive net flows.
Speaker #3: Still a lot of work to do, but we are encouraged by the momentum in Wealth and optimistic about the growth opportunities in the years ahead.
Speaker #3: Turning to capital, our ratios remain strong and well positioned to support our organic growth initiatives. At the same time, we recognize that, given our profitability, we expect to generate capital in excess of what can be efficiently deployed through organic growth alone.
Speaker #3: This dynamic reinforces our commitment to aggressively return excess capital to shareholders, primarily through share repurchases. That commitment was evident in the fourth quarter, as we repurchased 3.1 million shares for $55.4 million, or 26% of the total authorization announced in October.
David Rao: This dynamic reinforces our commitment to aggressively return excess capital to shareholders, primarily through share repurchases. That commitment was evident in the fourth quarter as we repurchased 3.1 million shares for $55.4 million, or 26% of the total authorization announced in October. We are committed to right-sizing our capital through organic growth, share repurchases, and quarterly dividends. We ended 2025 with a CET1 ratio of 13.2%. Assuming we execute the remainder of our existing share repurchase authorization, we estimate the CET1 ratio will decline to approximately 12.7% by June 30, at which point we anticipate seeking an additional share repurchase authorization subject to regulatory approval. We expect to continue to generate excess capital but plan to manage our CET1 ratio towards the median of the KRX, which is currently 12%. We are pleased with our performance in 2025 and feel well-positioned for 2026 and beyond.
This dynamic reinforces our commitment to aggressively return excess capital to shareholders, primarily through share repurchases. That commitment was evident in the fourth quarter as we repurchased 3.1 million shares for $55.4 million, or 26% of the total authorization announced in October. We are committed to right-sizing our capital through organic growth, share repurchases, and quarterly dividends. We ended 2025 with a CET1 ratio of 13.2%. Assuming we execute the remainder of our existing share repurchase authorization, we estimate the CET1 ratio will decline to approximately 12.7% by June 30, at which point we anticipate seeking an additional share repurchase authorization subject to regulatory approval. We expect to continue to generate excess capital but plan to manage our CET1 ratio towards the median of the KRX, which is currently 12%. We are pleased with our performance in 2025 and feel well-positioned for 2026 and beyond.
Speaker #3: We are committed to right-sizing our capital through organic growth, share repurchases, and quarterly dividends. We ended 2025 with a CET1 ratio of 13.2%.
Speaker #3: Assuming we execute the remainder of our existing share repurchase authorization, we estimate the CET-1 ratio will decline to approximately 12.7% by June 30th. At which point, we anticipate seeking an additional share repurchase authorization, subject to regulatory approval.
Speaker #3: We expect to continue to generate excess capital, but plan to manage our CET-1 ratio towards the median of the KRX, which is currently 12%.
Speaker #3: We are pleased with our performance in 2025 and feel well positioned for 2026 and beyond. We believe that focusing on meaningful growth, the organic growth opportunities we have in front of us, and returning excess capital—not M&A—will deliver meaningful value to shareholders for the foreseeable future.
David Rao: We believe that focusing on meaningful organic growth opportunities, we have in front of us and returning excess capital, not M&A, will deliver meaningful value to shareholders for the foreseeable future. David, I'll hand it over to you to provide a review of our fourth quarter financials. Thanks, Denis, and good morning, everyone. I'll begin on slides 2 and 3 of the presentation. Q4 marked a strong finish to the year as we reported net income of $99.5 million or $0.46 per diluted share. Included in net income is a GAAP tax benefit related to losses from the investment portfolio repositioning completed in Q1 that accrued over the course of 2025 and non-operating merger-related costs in the fourth quarter. Operating earnings of $94.7 million increased 28% quarter. On a per diluted share basis, operating earnings increased 19% to $0.44.
We believe that focusing on meaningful organic growth opportunities, we have in front of us and returning excess capital, not M&A, will deliver meaningful value to shareholders for the foreseeable future. David, I'll hand it over to you to provide a review of our fourth quarter financials.
Speaker #3: David, I'll hand it over to you to provide a review of our fourth quarter.
Speaker #3: financials. Thanks,
David Rosato: Thanks, Denis, and good morning, everyone. I'll begin on slides 2 and 3 of the presentation. Q4 marked a strong finish to the year as we reported net income of $99.5 million or $0.46 per diluted share. Included in net income is a GAAP tax benefit related to losses from the investment portfolio repositioning completed in Q1 that accrued over the course of 2025 and non-operating merger-related costs in the fourth quarter. Operating earnings of $94.7 million increased 28% quarter. On a per diluted share basis, operating earnings increased 19% to $0.44.
Speaker #4: Denis: And good morning, everyone. I'll begin on slides two and three of the presentation. Q4 marked a strong finish to the year as we reported net income of $99.5 million, or $0.46 per diluted share.
Speaker #4: Included in net income is a GAAP tax benefit related to losses from the investment portfolio repositioning completed in Q1 that accrued over the course of 2025.
Speaker #4: And non-operating merger-related costs in the fourth quarter. Operating earnings of $94.7 million increased 28% late quarter. On a per-diluted share basis, operating earnings increased 19% to $0.44.
Speaker #4: Results benefited from the partial quarter impact of the merger, which closed on November 1, and reflected continued organic loan growth and return of capital to shareholders.
David Rao: Results benefited from the partial quarter impact of the merger, which closed on 1 November, and reflected continued organic loan growth and return of capital to shareholders. Looking at slide 4, we are pleased by the strength of quarterly trends across several key financial metrics, including operating ROA and operating return on average tangible common equity, reflecting stronger earnings performance and thoughtful balance sheet management. Operating ROA of 130 basis points for Q4 is up 24 basis points from a year ago, while return on average tangible common equity of 13.8% increased from 11.3% over the same period. We continue to generate positive operating leverage, as evidenced by an operating efficiency ratio of 50.1%, which improved from over 57% in the prior year quarter.
Results benefited from the partial quarter impact of the merger, which closed on 1 November, and reflected continued organic loan growth and return of capital to shareholders. Looking at slide 4, we are pleased by the strength of quarterly trends across several key financial metrics, including operating ROA and operating return on average tangible common equity, reflecting stronger earnings performance and thoughtful balance sheet management. Operating ROA of 130 basis points for Q4 is up 24 basis points from a year ago, while return on average tangible common equity of 13.8% increased from 11.3% over the same period. We continue to generate positive operating leverage, as evidenced by an operating efficiency ratio of 50.1%, which improved from over 57% in the prior year quarter.
Speaker #4: Looking at slide four, we are pleased by the strength of quarterly trends across several key financial metrics, including operating, ROA, and operating return on average tangible common equity.
Speaker #4: Reflecting stronger earnings performance and thoughtful balance sheet management, operating ROA of 1.30% for the fourth quarter is up 24 basis points from a year ago.
Speaker #4: While return on average tangible common equity of 13.8% increased from 11.3% over the same period, we continue to generate positive operating leverage, as evidenced by an operating efficiency ratio of 50.1%, which improved from over 57% in the prior year quarter.
Speaker #4: Moving to the margin on slide five, net interest income of $237.4 million, or $243.4 million on an FTE basis, increased $37.2 million from Q3.
David Rao: Moving to the margin on slide five, net interest income of $237.4 million or $243.4 million on an FTE basis increased $37.2 million from Q3. The growth was driven by margin improvement due to higher interest-earning asset yields. Included in net interest income was net discount accretion of $22.6 million compared to $10 million in the third quarter, reflecting the HarborOne merger impact. The margin of $361 was up 14 basis points from $347. The yield on interest-earning assets increased 21 basis points, while interest-bearing liability costs were up 4 basis points. Net discount accretion contributed 34 basis points to the margin compared to 17 basis points in the prior quarter. Turning to slide six, non-interest income of $46.1 million increased $4.8 million from the third quarter.
Moving to the margin on slide five, net interest income of $237.4 million or $243.4 million on an FTE basis increased $37.2 million from Q3. The growth was driven by margin improvement due to higher interest-earning asset yields. Included in net interest income was net discount accretion of $22.6 million compared to $10 million in the third quarter, reflecting the HarborOne merger impact. The margin of $361 was up 14 basis points from $347. The yield on interest-earning assets increased 21 basis points, while interest-bearing liability costs were up 4 basis points. Net discount accretion contributed 34 basis points to the margin compared to 17 basis points in the prior quarter. Turning to slide six, non-interest income of $46.1 million increased $4.8 million from the third quarter.
Speaker #4: The growth was driven by margin improvement due to higher interest-earning asset yields. Included in net interest income was net discount accretion of $22.6 million, compared to $10 million in the third quarter.
Speaker #4: Reflecting the HarborOne merger impact, the margin of 3.61% was up 14 basis points from 3.47%. The yield on interest-earning assets increased 21 basis points, while interest-bearing liability costs were up 4 basis points.
Speaker #4: Net discount accretion contributed 34 basis points to the margin compared to 17 basis points in the prior quarter. Turning to slide six, non-interest income of $46.1 million increased $4.8 million from the third quarter.
Speaker #4: Q4 results were highlighted by mortgage banking income, which increased $2.9 million to $3 million as we benefited from the addition of HarborOne's mortgage banking operations.
David Rao: Q4 results were highlighted by mortgage banking income, which increased $2.9 million to $3 million as we benefited from the addition of HarborOne's mortgage banking operations. Investment advisory fees increased $1.1 million to $18.6 million due to higher asset values as wealth assets reached a record high, and interest rate swap income, which increased $500,000 to $1.4 million, the highest level since the third quarter of 2023, which benefited from our hiring last year of an experienced leader to head up foreign exchange and derivative sales. Turning to slide seven, we highlight wealth management, our primary fee business. Wealth assets reached a record high of $10.1 billion, including AUM of $9.6 billion, driven by market appreciation and positive net flows. Wealth fees in Q4 accounted for 40% of total operating non-interest income, which was lower than recent quarters.
Q4 results were highlighted by mortgage banking income, which increased $2.9 million to $3 million as we benefited from the addition of HarborOne's mortgage banking operations. Investment advisory fees increased $1.1 million to $18.6 million due to higher asset values as wealth assets reached a record high, and interest rate swap income, which increased $500,000 to $1.4 million, the highest level since the third quarter of 2023, which benefited from our hiring last year of an experienced leader to head up foreign exchange and derivative sales. Turning to slide seven, we highlight wealth management, our primary fee business. Wealth assets reached a record high of $10.1 billion, including AUM of $9.6 billion, driven by market appreciation and positive net flows. Wealth fees in Q4 accounted for 40% of total operating non-interest income, which was lower than recent quarters.
Speaker #4: Investment advisory fees increased $1.1 million to $18.6 million due to higher asset values as wealth assets reached a record high. Interest rate swap income, which increased $500,000 to $1.4 million—the highest level since the third quarter of 2023—benefited from our hiring last year of an experienced leader to head up foreign exchange and derivative sales.
Speaker #4: Turning to slide seven, we highlight wealth management, our primary fee business. Wealth assets reached a record high of $10.1 billion, including AUM of $9.6 billion, driven by market appreciation and positive net flows.
Speaker #4: Wealth fees in Q4 accounted for 40% of total operating non-interest income, which was lower than recent quarters. This was due to the addition of HarborOne, which did not have a wealth management business.
David Rao: This was due to the addition of HarborOne, which did not have a wealth management business. Moving to slide 8, non-interest expense was $189.4 million, an increase of $49 million linked quarter due to higher operating expenses and merger-related costs. Non-operating expenses of $33.4 million increased $30.2 million linked quarter due to a $26.7 million increase in merger-related costs and a $3.5 million lease impairment. On an operating basis, expenses of $156.1 million increased $18.9 million due primarily to the addition of HarborOne. Moving to the balance sheet, starting with deposits on slide 9. Period-end deposits totaled $25.5 billion, an increase of $4.4 billion, or 21% from Q3, mostly due to the addition of $4.3 billion of HarborOne deposits. $163 million of HarborOne brokered deposits matured in the quarter, and we anticipate the remaining $85 million to run off in Q1.
This was due to the addition of HarborOne, which did not have a wealth management business. Moving to slide 8, non-interest expense was $189.4 million, an increase of $49 million linked quarter due to higher operating expenses and merger-related costs. Non-operating expenses of $33.4 million increased $30.2 million linked quarter due to a $26.7 million increase in merger-related costs and a $3.5 million lease impairment. On an operating basis, expenses of $156.1 million increased $18.9 million due primarily to the addition of HarborOne. Moving to the balance sheet, starting with deposits on slide 9. Period-end deposits totaled $25.5 billion, an increase of $4.4 billion, or 21% from Q3, mostly due to the addition of $4.3 billion of HarborOne deposits. $163 million of HarborOne brokered deposits matured in the quarter, and we anticipate the remaining $85 million to run off in Q1.
Speaker #4: Moving to slide eight, non-interest expense was $189.4 million and increased to $49 million late quarter, due to higher operating expenses and merger-related costs. Non-operating expenses of $33.4 million increased $30.2 million late quarter due to a $26.7 million increase in merger-related costs and a $3.5 million lease impairment.
Speaker #4: On an operating basis, expenses of $156.1 million increased $18.9 million due primarily to the addition of HarborOne. Moving to the balance sheet, starting with deposits on slide nine.
Speaker #4: Period-end deposits totaled $25.5 billion and increased $4.4 billion, or 21%, from Q3. Mostly due to the addition of $4.3 billion of HarborOne deposits. $163 million of HarborOne brokered deposits matured in the quarter, and we anticipate the remaining $85 million to run off in Q1.
Speaker #4: Excluding the merger impact, deposits increased $20 million. Importantly, while still early, we have not experienced any material drawdowns of HarborOne deposits. Total deposit cost of 159 basis points increased modestly from the third quarter, primarily due to a mix shift from the addition of the HarborOne deposit base.
David Rao: Excluding the merger impact, deposits increased $20 million. Importantly, while still early, we have not experienced any material drawdowns of HarborOne deposits. Total deposit cost of 159 basis points increased modestly from Q3, primarily due to a mix shift from the addition of the HarborOne deposit base, partially offset by pricing actions undertaken in the quarter. We are focused on growing deposits to support our funding strategy and remain disciplined in balancing the needs of our very strong deposit base with that of the margin. Looking ahead, as we thoughtfully integrate the HarborOne deposit base, we anticipate deposit costs to remain slightly elevated. However, 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.
Excluding the merger impact, deposits increased $20 million. Importantly, while still early, we have not experienced any material drawdowns of HarborOne deposits. Total deposit cost of 159 basis points increased modestly from Q3, primarily due to a mix shift from the addition of the HarborOne deposit base, partially offset by pricing actions undertaken in the quarter. We are focused on growing deposits to support our funding strategy and remain disciplined in balancing the needs of our very strong deposit base with that of the margin. Looking ahead, as we thoughtfully integrate the HarborOne deposit base, we anticipate deposit costs to remain slightly elevated. However, 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.
Speaker #4: Partially offset by pricing actions undertaken in the quarter. We are focused on growing deposits to support our funding strategy and remain disciplined in balancing the needs of our very strong deposit base with that of the margin.
Speaker #4: Looking ahead, as we thoughtfully integrate the HarborOne deposit base, we anticipate deposit costs to remain slightly elevated. However, we will work deposit costs down and target deposit betas like our experience during the most recent tightening cycle, which were about 45 to 50%.
Speaker #4: With lags relative to Fed actions. Turning to slide 10, period-end loans increased $4.7 billion, or 25%, late in the quarter. This was primarily due to the addition of $4.5 billion of Harbor One loans. Excluding the merger impact, loans increased $255 million, or 1.4%, primarily due to continued strong commercial lending.
David Rao: Turning to slide 10, period-end loans increased $4.7 billion, or 25% linked quarter, primarily due to the addition of $4.5 billion of HarborOne loans. Excluding the merger impact, loans increased $255 million, or 1.4%, primarily due to continued strong commercial lending. On a full-year basis, organic loan growth was $1 billion, or 5.6%, driven by commercial and steady growth in consumer home equity lines. Heading into 2026, commercial pipelines remain solid. Slide 11 is an overview of our high-quality investment portfolio. The portfolio yield was up one basis point to 3.04% from Q3. In addition, the AFS unrealized loss position ended the quarter at $259 million after tax, compared to $280 million at September 30. In addition, securities acquired from HarborOne, totaling $298 million, were sold following the completion of the merger and the proceeds used to reduce HarborOne's wholesale funding.
Turning to slide 10, period-end loans increased $4.7 billion, or 25% linked quarter, primarily due to the addition of $4.5 billion of HarborOne loans. Excluding the merger impact, loans increased $255 million, or 1.4%, primarily due to continued strong commercial lending. On a full-year basis, organic loan growth was $1 billion, or 5.6%, driven by commercial and steady growth in consumer home equity lines. Heading into 2026, commercial pipelines remain solid. Slide 11 is an overview of our high-quality investment portfolio. The portfolio yield was up one basis point to 3.04% from Q3. In addition, the AFS unrealized loss position ended the quarter at $259 million after tax, compared to $280 million at September 30. In addition, securities acquired from HarborOne, totaling $298 million, were sold following the completion of the merger and the proceeds used to reduce HarborOne's wholesale funding.
Speaker #4: On a full-year basis, organic loan growth was $1 billion, or 5.6%, driven by commercial and steady growth in consumer home equity lines.
Speaker #4: Heading into 2026, commercial pipelines remain solid. Slide 11 is an overview of our high-quality investment portfolio. The portfolio yield was up one basis point to 3.04% from Q3.
Speaker #4: In addition, the AFS unrealized loss position ended the quarter at $259 million after tax, compared to $280 million at September 30. In addition, securities acquired from HarborOne totaling $298 million were sold following the completion of the merger, and the proceeds were used to reduce HarborOne's wholesale funding.
Speaker #4: Turning to slide 12, our capital position remains strong, as indicated by CET1 and TCE ratios of 13.2% and 10.4%, respectively. As Denis stated earlier, we are committed to right-sizing capital through organic growth, share repurchases, and quarterly dividends.
David Rao: Turning to slide 12, our capital position remains strong, as indicated by CET1 and TCE ratios of 13.2% and 10.4%, respectively. As Denis stated earlier, we are committed to right-sizing capital through organic growth, share repurchases, and quarterly dividends. This commitment was evident in Q4 with the repurchase of 3.1 million shares for $55.4 million, or 26% of the authorization announced in October, at an average price of $17.79, which was $0.44 below the VWAP for the quarter. Our diluted common shares outstanding were 224.4 million as of year-end. To start 2026, we have repurchased an additional 635,000 shares through yesterday for a total cost of $12.3 million and now have 8.1 million shares remaining in our authorization that runs through the end of October. However, we currently anticipate completing the authorization around mid-year. Additionally, our board approved a $0.13 dividend for the first quarter.
Turning to slide 12, our capital position remains strong, as indicated by CET1 and TCE ratios of 13.2% and 10.4%, respectively. As Denis stated earlier, we are committed to right-sizing capital through organic growth, share repurchases, and quarterly dividends. This commitment was evident in Q4 with the repurchase of 3.1 million shares for $55.4 million, or 26% of the authorization announced in October, at an average price of $17.79, which was $0.44 below the VWAP for the quarter. Our diluted common shares outstanding were 224.4 million as of year-end. To start 2026, we have repurchased an additional 635,000 shares through yesterday for a total cost of $12.3 million and now have 8.1 million shares remaining in our authorization that runs through the end of October. However, we currently anticipate completing the authorization around mid-year. Additionally, our board approved a $0.13 dividend for the first quarter.
Speaker #4: This commitment was evident in Q4 with the repurchase of 3.1 million shares for $55.4 million, or 26% of the authorization announced in October.
Speaker #4: At an average price of $17.79, which was $0.44 below the VWAP for the quarter. Our diluted common shares outstanding were 224.4 million as of year end.
Speaker #4: Starting in 2026, we have repurchased an additional 635,000 shares through yesterday for a total cost of $12.3 million, and now have 8.1 million shares remaining in our authorization that runs through the end of October.
Speaker #4: However, we currently anticipate completing the authorization around mid-year. Additionally, our board approved a $0.13 dividend for the first quarter. As displayed on slide 13, asset quality remains excellent, as evidenced by net charge-offs to average total loans of 18 basis points, and reflects the quality of our underwriting and proactive risk management approach, addressing issues prudently and quickly.
David Rao: As displayed on slide 13, asset quality remains excellent, as evidenced by net charge-offs to average total loans of 18 basis points, and reflects the quality of our underwriting and proactive risk management approach addressing issues prudently and quickly. Non-performing loans increased, as expected, by $103 million linked quarter, mostly due to $94 million of loans acquired from HarborOne that were thoroughly assessed and adequately reserved. We have very strong reserve coverage of 35% on these loans. The HarborOne NPLs are largely driven by a handful of larger CRE loans across a mix of property types and one C&I loan. We expect to see resolution of several credits in the first half of 2026. Others may take longer, but we have action plans for each loan, and our managed asset group has strong experience in working through acquired non-accruing loans.
As displayed on slide 13, asset quality remains excellent, as evidenced by net charge-offs to average total loans of 18 basis points, and reflects the quality of our underwriting and proactive risk management approach addressing issues prudently and quickly. Non-performing loans increased, as expected, by $103 million linked quarter, mostly due to $94 million of loans acquired from HarborOne that were thoroughly assessed and adequately reserved. We have very strong reserve coverage of 35% on these loans. The HarborOne NPLs are largely driven by a handful of larger CRE loans across a mix of property types and one C&I loan. We expect to see resolution of several credits in the first half of 2026. Others may take longer, but we have action plans for each loan, and our managed asset group has strong experience in working through acquired non-accruing loans.
Speaker #4: Non-performing loans increased, as expected, by $103 million late quarter, mostly due to $94 million of loans acquired from HarborOne that were thoroughly assessed and adequately reserved.
Speaker #4: We have very strong reserve coverage of 35% on these loans. The HarborOne MPLs are largely driven by a handful of larger CRE loans across a mix of property types and one C&I loan.
Speaker #4: We expect to see resolution of several credits in the first half of 2026. Others may take longer, but we have action plans for each loan, and our managed asset group has strong experience in working through acquired non-accruing loans.
Speaker #4: Reserve levels remain strong, as demonstrated by an allowance for loan losses of $332 million, or 144 basis points of total loans. These metrics are up from $233 million, or 126 basis points, at the end of Q3, due to the initial allowance established for acquired HarborOne loans.
David Rao: Reserve levels remain strong, as demonstrated by an allowance for loan losses of $332 million, or 144 basis points of total loans. These metrics are up from $233 million, or 126 basis points, at the end of Q3 due to the initial allowance established for acquired HarborOne loans. Criticized and classified loans of $793 million, or 5% of total loans, increased from $495 million, or 3.8% of total loans at the end of Q3. The increase is entirely from HarborOne loans, as Eastern Legacy criticized and classified loans decreased $23 million. Finally, we booked a provision of $4.9 million, down from $7.1 million in the prior quarter. On slides 14 and 15, we provide details on total CRE and CRE investor office exposures. Total commercial real estate loans are $9.5 billion. Our exposure is largely within local markets that we know well and is diversified by sector.
Reserve levels remain strong, as demonstrated by an allowance for loan losses of $332 million, or 144 basis points of total loans. These metrics are up from $233 million, or 126 basis points, at the end of Q3 due to the initial allowance established for acquired HarborOne loans. Criticized and classified loans of $793 million, or 5% of total loans, increased from $495 million, or 3.8% of total loans at the end of Q3. The increase is entirely from HarborOne loans, as Eastern Legacy criticized and classified loans decreased $23 million. Finally, we booked a provision of $4.9 million, down from $7.1 million in the prior quarter. On slides 14 and 15, we provide details on total CRE and CRE investor office exposures. Total commercial real estate loans are $9.5 billion. Our exposure is largely within local markets that we know well and is diversified by sector.
Speaker #4: Criticized and classified loans of $793 million, or 5% of total loans, increased from $495 million, or 3.8% of total loans, at the end of Q3.
Speaker #4: The increase is entirely from HarborOne loans, as Eastern's legacy criticized and classified loans decreased $23 million. Finally, we booked a provision of $4.9 million, down from $7.1 million in the prior quarter.
Speaker #4: On slides 14 and 15, we provide details on total CRE and CRE investor office exposures. Total commercial real estate loans are $9.5 billion. Our exposure is largely within local markets that we know well and is diversified by sector.
Speaker #4: The largest concentration is the multifamily at $3.1 billion, which is a strong asset class in Greater Boston due to ongoing housing shortages. Within our Eastern Legacy portfolio, we have had no multifamily non-performing loans and have had no charge-offs in this portfolio for well over the past decade.
David Rao: The largest concentration is the multifamily at $3.1 billion, which is a strong asset class in Greater Boston due to ongoing housing shortages. Within our Eastern Legacy portfolio, we have had no multifamily non-performing loans and have had no charge-offs in this portfolio for well over the past decade. We remain focused on investor office loans. The portfolio is now $1.1 billion, or 5% of our total loan book with the addition of Harbor One. Criticized and classified loans of $178 million, or about 16% of total investor office loans, compared to $138 million, or 17% of total investor loans at the end of Q3. In addition, our reserve level of 5% remains conservative. Before discussing our 2026 outlook, I want to briefly review the Harbor One merger financials starting on slide 16.
The largest concentration is the multifamily at $3.1 billion, which is a strong asset class in Greater Boston due to ongoing housing shortages. Within our Eastern Legacy portfolio, we have had no multifamily non-performing loans and have had no charge-offs in this portfolio for well over the past decade. We remain focused on investor office loans. The portfolio is now $1.1 billion, or 5% of our total loan book with the addition of Harbor One. Criticized and classified loans of $178 million, or about 16% of total investor office loans, compared to $138 million, or 17% of total investor loans at the end of Q3. In addition, our reserve level of 5% remains conservative. Before discussing our 2026 outlook, I want to briefly review the Harbor One merger financials starting on slide 16.
Speaker #4: We remain focused on investor office loans. The portfolio is now $1.1 billion, or 5% of our total loan book, with the addition of HarborOne.
Speaker #4: Criticized and classified loans of $178 million, or about 16% of total investor office loans, compared to $138 million, or 17% of total investor loans, at the end of Q3.
Speaker #4: In addition, our reserve level of 5% remains conservative. Before discussing our 2026 outlook, I want to briefly review the HarborOne merger financials, starting on slide 16.
Speaker #4: We are on track to achieve the merger-related financial targets set forth at the time of our announcement last year. Notably, as indicated on our third quarter call, we early adopted the CECL accounting standard, ASU 2025-08.
David Rao: We are on track to achieve the merger-related financial targets set forth at the time of our announcement last year. Notably, as indicated on our third quarter call, we early adopted the ASU 2025-08 accounting standard, which marginally reduced accretion and marginally helped tangible book value due to the elimination of the day-two credit reserve. Slide 17 outlines the final purchase accounting adjustments relative to estimates at time of announcement. These came in as expected. The interest rate fair value mark on loans of $246 million was modestly higher than estimated at announcement. The credit mark of $104 million at closing was spot on, consistent with expectations and the result of a very thorough review of the Harbor One loan portfolio. On slide 18, we provide an estimated schedule of accretion and amortization for the fair value marks that will impact earnings going forward from the Harbor One merger.
We are on track to achieve the merger-related financial targets set forth at the time of our announcement last year. Notably, as indicated on our third quarter call, we early adopted the ASU 2025-08 accounting standard, which marginally reduced accretion and marginally helped tangible book value due to the elimination of the day-two credit reserve. Slide 17 outlines the final purchase accounting adjustments relative to estimates at time of announcement. These came in as expected. The interest rate fair value mark on loans of $246 million was modestly higher than estimated at announcement. The credit mark of $104 million at closing was spot on, consistent with expectations and the result of a very thorough review of the Harbor One loan portfolio. On slide 18, we provide an estimated schedule of accretion and amortization for the fair value marks that will impact earnings going forward from the Harbor One merger.
Speaker #4: This marginally reduced accretion and marginally helped tangible book value due to the elimination of the day two credit reserve. Slide 17 outlines the final purchase accounting adjustments relative to estimates at the time of announcement.
Speaker #4: These came in as expected. The interest rate fair value mark on loans of $246 million was modestly higher than estimated at announcement. The credit mark of $104 million at closing was spot on.
Speaker #4: Consistent with expectations, and the result of a very thorough review of HarborOne, of the HarborOne loan portfolio. On slide 18, we provide an estimated schedule of accretion and amortization for the fair value marks that will impact earnings going forward from the HarborOne merger.
Speaker #4: Most notable is the accretion of the discount on acquired loans. We expect this will create net interest income of approximately $12 to $13 million each quarter for the next year.
David Rao: Most notable is the accretion of the discount on acquired loans. We expect this will create net interest income of approximately $12 to $13 million each quarter for the next year. For acquisitions prior to Harbor One, we anticipate accretion will provide net interest income of approximately $9 to $10 million per quarter in 2026. We have modeled the loan accretion schedule based on the best information we have available, but actual accretion recognized is subject to loan prepayments over time. We provided a similar schedule following the close of the Cambridge transaction, and the actual results have been generally consistent with our projections, which reinforces our confidence in these estimates. Also provided on slide 18 is the expected amortization of the core deposit intangible for Harbor One, which will be reported in noninterest expense.
Most notable is the accretion of the discount on acquired loans. We expect this will create net interest income of approximately $12 to $13 million each quarter for the next year. For acquisitions prior to Harbor One, we anticipate accretion will provide net interest income of approximately $9 to $10 million per quarter in 2026. We have modeled the loan accretion schedule based on the best information we have available, but actual accretion recognized is subject to loan prepayments over time. We provided a similar schedule following the close of the Cambridge transaction, and the actual results have been generally consistent with our projections, which reinforces our confidence in these estimates. Also provided on slide 18 is the expected amortization of the core deposit intangible for Harbor One, which will be reported in noninterest expense.
Speaker #4: For acquisitions prior to HarborOne, we anticipate accretion will provide net interest income of approximately $9 to $10 million per quarter in 2026. We have modeled the loan accretion schedule based on the best information we have available.
Speaker #4: But actual accretion recognized is subject to loan prepayments over time. We provided a similar schedule following the close of the Cambridge transaction, and the actual results have been generally consistent with our projections.
Speaker #4: This reinforces our confidence in these estimates. Also provided on slide 18 is the expected amortization of the core deposit intangible for HarborOne, which will be reported in non-interest expense.
Speaker #4: We anticipate this non-cash expense to be approximately $8 million to $9 million per quarter over the next year. We are focused on merger integration and ensuring a smooth transition for customers and employees, while capturing the projected cost savings and other long-term benefits of the transaction.
David Rao: We anticipate this non-cash expense to be approximately $8 to $9 million per quarter over the next year. We are focused on merger integration and ensuring a smooth transition for customers and employees while capturing the projected cost savings and other long-term benefits of the transaction. As a reminder, the core system conversion is scheduled for February. On slide 19, we provide our full-year outlook for 2026. Loan growth for 2026 is anticipated to be 3% to 5% and deposit growth of 1% to 2%. Based on market forwards as of year-end, we anticipate net interest income to be in the range of $1.2 billion to $1.5 billion, with a full-year FTE margin of $365 to $375. While provision will be based on the evolution of credit trends in 2026, we currently expect $30 to $40 million of provision expense.
We anticipate this non-cash expense to be approximately $8 to $9 million per quarter over the next year. We are focused on merger integration and ensuring a smooth transition for customers and employees while capturing the projected cost savings and other long-term benefits of the transaction. As a reminder, the core system conversion is scheduled for February. On slide 19, we provide our full-year outlook for 2026. Loan growth for 2026 is anticipated to be 3% to 5% and deposit growth of 1% to 2%. Based on market forwards as of year-end, we anticipate net interest income to be in the range of $1.2 billion to $1.5 billion, with a full-year FTE margin of $365 to $375. While provision will be based on the evolution of credit trends in 2026, we currently expect $30 to $40 million of provision expense.
Speaker #4: As a reminder, the core system conversion is scheduled for February. On slide 19, we provide our full-year outlook for 2026. Loan growth for 2026 is anticipated to be 3% to 5%, and deposit growth of 1% to 2%.
Speaker #4: Based on market forwards as of year-end, we anticipate net interest income to be in the range of $1,020 to $1,050, with a full-year FTE margin of 365 to 375.
Speaker #4: While provision will be based on the evolution of credit trends in 2026, we currently expect $30 to $40 million of provision expense. Operating non-interest income is expected to be between $190 and $200 million; this assumes no market appreciation impacting our wealth management business.
David Rao: Operating non-interest income is expected to be between $190 and $200 million. This assumes no market appreciation impacting our wealth management business. Also, fee income is seasonally weaker in the first quarter and grows in subsequent quarters. Operating non-interest expense should be in the range of $655 to $675 million. As a reminder, Q1 expenses are impacted by seasonally higher payroll and benefit costs of approximately $2 to $3 million. We expect the full-year tax rate on an operating basis of approximately 23%. We will maintain a strong capital position as we manage our CET1 ratio towards 12%. Continuing our 2026 outlook on slide 20, we have significant capital return opportunities. We believe focusing on organic growth within our existing footprint, returning capital through share repurchases, and prudently growing the dividend, and not pursuing acquisitions will deliver meaningful value to shareholders for the foreseeable future.
Operating non-interest income is expected to be between $190 and $200 million. This assumes no market appreciation impacting our wealth management business. Also, fee income is seasonally weaker in the first quarter and grows in subsequent quarters. Operating non-interest expense should be in the range of $655 to $675 million. As a reminder, Q1 expenses are impacted by seasonally higher payroll and benefit costs of approximately $2 to $3 million. We expect the full-year tax rate on an operating basis of approximately 23%. We will maintain a strong capital position as we manage our CET1 ratio towards 12%. Continuing our 2026 outlook on slide 20, we have significant capital return opportunities. We believe focusing on organic growth within our existing footprint, returning capital through share repurchases, and prudently growing the dividend, and not pursuing acquisitions will deliver meaningful value to shareholders for the foreseeable future.
Speaker #4: Also, fee income is seasonally weaker in the first quarter and grows in subsequent quarters. Operating non-interest expense should be in the range of $655 million to $675 million.
Speaker #4: As a reminder, Q1 expenses are impacted by seasonally higher payroll and benefit costs of approximately $2 to $3 million. We expect the full-year tax rate on an operating basis to be approximately 23%.
Speaker #4: We will maintain a strong capital position as we manage our CET1 ratio towards 12%. Continuing our 2026 outlook on slide 20, we have significant capital return opportunities.
Speaker #4: We believe focusing on organic growth within our existing footprint, returning capital through share repurchases, and prudently growing the dividend—not pursuing acquisitions—will deliver meaningful value to shareholders for the foreseeable future.
Speaker #4: This concludes our comments, and we will now open up the line for questions.
David Rao: This concludes our comments, and we will now open up the line for questions. Thank you. At this time, if you'd like to ask a question, simply press Star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press Star 2. We'll pause for a moment to compile the Q&A roster. And your first question comes from Feddie Strickland from Hovde. Please go ahead. Hey, good morning. Just wanted to drill down on the margin. I appreciate the guide, but is the idea that we maybe see the core margin relatively flat near term as you focus on growing deposits and holding on to the Harbor One deposits, and then maybe we see more expansion later in the year? Hey, Feddie, it's David. Yes, that is accurate.
This concludes our comments, and we will now open up the line for questions.
Operator: Thank you. At this time, if you'd like to ask a question, simply press Star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press Star 2. We'll pause for a moment to compile the Q&A roster. And your first question comes from Feddie Strickland from Hovde. Please go ahead.
Speaker #1: Thank you. At this time, if you'd like to ask a question, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press star, two.
Speaker #1: We'll pause for a moment to compile the Q&A roster. And your first question comes from Freddie Strickland. Please go ahead.
Feddie Strickland: Hey, good morning. Just wanted to drill down on the margin. I appreciate the guide, but is the idea that we maybe see the core margin relatively flat near term as you focus on growing deposits and holding on to the Harbor One deposits, and then maybe we see more expansion later in the year?
Speaker #2: Hey, good morning. Just wanted to drill down on the margin—I appreciate the guide, but is the idea that we maybe see the core margin relatively flat in the near term as you focus on growing deposits and holding on to the HarborOne deposits?
Speaker #2: And then maybe we see more expansion later in the year.
Speaker #2: year. Hey,
Speaker #3: Freddie, it's David. Yes, that is accurate. Our margin forecast does ramp up marginally each quarter and accelerates a little bit in the back half of the year.
David Rosato: Hey, Feddie, it's David. Yes, that is accurate.
David Rao: Our margin forecast does ramp up marginally each quarter, accelerates a little bit in the back half of the year. Just as a reminder, that forecast is based on market forwards of two rate cuts in June and September. So the impact, as if those two cuts come to be, is a steeper yield curve and margin expansion. Great. Thanks, David. Just one more. If you could talk about pipeline mix today and what percentage of maybe C&I versus owner-occupied CRE, non-owner-occupied CRE, and HELOCs we might see in terms of loan growth over the next couple of quarters. Yeah. Feddie, it's Denis here. The pipeline remains strong across our different commercial businesses, whether it's commercial real estate, community development lending, and C&I. It's down somewhat from our peak, which was during the fourth quarter, but we have a good mix.
Our margin forecast does ramp up marginally each quarter, accelerates a little bit in the back half of the year. Just as a reminder, that forecast is based on market forwards of two rate cuts in June and September. So the impact, as if those two cuts come to be, is a steeper yield curve and margin expansion.
Speaker #3: Just as a reminder, that forecast is based on market forwards of two rate cuts—in June and in September. So the impact, as if those two cuts come to be: steeper yield curve and margin expansion.
Feddie Strickland: Great. Thanks, David. Just one more. If you could talk about pipeline mix today and what percentage of maybe C&I versus owner-occupied CRE, non-owner-occupied CRE, and HELOCs we might see in terms of loan growth over the next couple of quarters.
Speaker #2: Great, thanks, David. Just one more—if you could talk about the pipeline mix today and what percentage of maybe C&I versus owner-occupied CRE, non-owner-occupied CRE, and HELOCs we might see in terms of loan growth over the next couple of quarters.
Denis Sheehan: Yeah. Feddie, it's Dennis here. The pipeline remains strong across our different commercial businesses, whether it's commercial real estate, community development lending, and C&I. It's down somewhat from our peak, which was during the fourth quarter, but we have a good mix.
Speaker #3: Yeah, Freddie, it's Denis here. The pipeline remains strong across our different commercial businesses, whether it's commercial real estate, community development lending, and C&I. It's down somewhat from our peak, which was during the fourth quarter.
Speaker #3: But we have a good mix; it's about a little bit more than 50% CRE between CRE and community development lending, and the other, say, 45% is C&I.
David Rao: It's about a little bit more than 50% CRE between CRE and community development lending, and the other, say, 45% is C&I. But we had a lot of closings here to end the year, so it's good. We expect it to continue to grow, certainly in Q1 and Q2. All right. Great. Thanks. I'll step back in the queue. Thank you. Your next question comes from Damon Delmonte from KBW. Please go ahead. Hey, good morning, guys. Hope everybody's doing well today. So just curious on the outlook for the provision of $30 to $40 million. Just wondering, that's higher than we saw this year for realized provision. Just kind of curious on your thoughts of the credit landscape, and are you sensing there's some softness which is leading you to kind of step that up on a year-over-year basis?
It's about a little bit more than 50% CRE between CRE and community development lending, and the other, say, 45% is C&I. But we had a lot of closings here to end the year, so it's good. We expect it to continue to grow, certainly in Q1 and Q2.
Speaker #3: But we had a lot of closings here to end the year, so it's good. We'll expect it to continue to grow, certainly first and second.
Speaker #3: quarter. All right, great.
Feddie Strickland: All right. Great. Thanks. I'll step back in the queue.
Speaker #2: Thanks. I'll step back in the queue.
Speaker #3: Thank you.
Your next question comes from Damon Delmonte from KBW. Please go ahead.
Speaker #1: Your next question comes from Damon Delmonte from KBW. Please go ahead.
Damon DelMonte: Hey, good morning, guys. Hope everybody's doing well today. So just curious on the outlook for the provision of $30 to $40 million. Just wondering, that's higher than we saw this year for realized provision. Just kind of curious on your thoughts of the credit landscape, and are you sensing there's some softness which is leading you to kind of step that up on a year-over-year basis?
Speaker #4: Hey, good morning, guys. Hope everybody's doing well today. So just curious on the outlook for the provision of $30 to $40 million. Just wondering, that's higher than we saw this year for realized provision.
Speaker #4: Just kind of curious on your thoughts of the credit landscape, and are you sensing there's some softness, which is leading you to kind of step that up on a year-over-year basis?
Speaker #3: The guidance is similar to what we gave last year, and then in '25, we outperformed the guidance. Our thoughts are generally the same—we tend to lean a little conservative.
David Rao: The guidance is similar to what we gave last year, and then in 2025, we outperformed the guidance. Our thoughts are generally the same. We tend to lean a little conservative and hope to outperform what we have there. But I wouldn't read too much into concerns that we have on the credit front. Yeah. We're not seeing. Damon, it's Denis here. We're not seeing any material shift in our credit metrics, credit trends in the marketplace. I think, as David said, he outlined sort of the rationale for the provision, but there's nothing underneath it that has us concerned. Okay. Great.
David Rosato: The guidance is similar to what we gave last year, and then in 2025, we outperformed the guidance. Our thoughts are generally the same. We tend to lean a little conservative and hope to outperform what we have there. But I wouldn't read too much into concerns that we have on the credit front.
Speaker #3: And hope to outperform what we have there. But I wouldn't read too much into concerns that we have on the credit front.
Denis Sheehan: Yeah. We're not seeing. Damon, it's Dennis here. We're not seeing any material shift in our credit metrics, credit trends in the marketplace. I think, as David said, he outlined sort of the rationale for the provision, but there's nothing underneath it that has us concerned.
Speaker #4: Yeah, we're not seeing Damon and Dennis here. We're not seeing any material shift in our credit metrics, credit trends in the marketplace. I think, as David said, he outlined sort of the rationale for the provision, but there's nothing underneath it that has us concerned.
Damon DelMonte: Okay. Great. Then just given the timing of the deal closing during the quarter, David, can you give us a little guidance on what a pro forma average earning asset base would be in Q1, also considering that you paid off some brokered CDs and wholesale stuff from the HarborOne side?
Speaker #2: Okay, great. And then just given the timing of the deal closing during the quarter, David, can you give us a little guidance on what a pro forma average earning asset base would be in the first quarter?
David Rao: Then just given the timing of the deal closing during the quarter, David, can you give us a little guidance on what a pro forma average earning asset base would be in Q1, also considering that you paid off some brokered CDs and wholesale stuff from the HarborOne side? Sure, Damon. There was very modest deleveraging, as you know, in the securities portfolio. It was $298 million. So I would take the period end balance sheet and the 12/31 and then the growth numbers that we've laid out for loans and deposits. The only thing I'd add to that would be a slight uptick, maybe 1% of total assets in the securities portfolio, but that'll be throughout the year. We haven't been reinvesting in bonds for a while, so we're targeting about 15% of total assets and securities. So a little growth there. Got it. Okay.
Speaker #2: Also, considering that you paid off some brokered CDs and wholesale stuff from the HarborOne side.
David Rosato: Sure, Damon. There was very modest deleveraging, as you know, in the securities portfolio. It was $298 million. So I would take the period end balance sheet and the 12/31 and then the growth numbers that we've laid out for loans and deposits. The only thing I'd add to that would be a slight uptick, maybe 1% of total assets in the securities portfolio, but that'll be throughout the year. We haven't been reinvesting in bonds for a while, so we're targeting about 15% of total assets and securities. So a little growth there.
Speaker #3: Sure, Damon. There was very modest deleveraging, as you know, in the securities portfolio. It was $298 million. So I would take the period-end balance sheet and the 12/31, and then the growth numbers that we've laid out for loans and deposits.
Speaker #3: The only thing I'd add to that would be a slight uptick, maybe 1% of total assets in the securities portfolio. But that'll be throughout the year.
Speaker #3: We haven't been reinvesting in bonds for a while, so we're going to—we're targeting about 15% of total assets in securities. So, a little growth.
Speaker #3: there. Got it.
Damon DelMonte: Got it. Okay. Great. That's all I had for now. Thank you.
Speaker #2: Okay, great. That's all I had for now. Thank you.
David Rao: Great. That's all I had for now. Thank you. And Damon, just one other thought is, similar to this year, residential mortgage balances will be basically flat. So the growth will come, as Denis said, in commercial and then HELOCs consistent with 2025. Got it. Thank you. Your next question comes from Gregory Zingone from Piper Sandler. Please go ahead. Good morning, guys. Sorry that Mark couldn't be on the call this morning. Thanks for the words. First question. Next quarter on the AUM growth. Would you be able to break out the growth between market appreciation and the net flows? Yeah. We had about $200 million of net flows in the fourth quarter. Really strong. Good momentum building in terms of the integration of the business here at Eastern.
Speaker #2: you.
David Rosato: And Damon, just one other thought is, similar to this year, residential mortgage balances will be basically flat. So the growth will come, as Denis said, in commercial and then HELOCs consistent with 2025.
Speaker #3: And Damon, just one other
Speaker #3: Thought is, similar to this year, residential mortgage balances will be basically flat.
Speaker #1: growth will the come . As Dennis in in said commercial . And then he locks consistent with 2025 .
Damon DelMonte: Got it. Thank you.
Speaker #2: Got it. Thank you.
Operator: Your next question comes from Gregory Zingone from Piper Sandler. Please go ahead.
Speaker #1: Consistent with 2025 .
Speaker #2: Got it. Thank you.
Gregory Zingone: Good morning, guys. Sorry that Mark couldn't be on the call this morning. Thanks for the words. First question. Next quarter on the AUM growth. Would you be able to break out the growth between market appreciation and the net flows?
Speaker #3: Your next question comes from Gregory from Piper Sandler. Please go ahead.
Speaker #3: Zingone
Speaker #4: Good morning, everyone. Sorry that Mark Morning couldn't be on the call this morning.
Speaker #1: Worries. No, hi, Greg.
Denis Sheehan: Yeah. We had about $200 million of net flows in the fourth quarter. Really strong. Good momentum building in terms of the integration of the business here at Eastern.
Speaker #4: Question. Nice quarter on, first, the AUM growth. Would you be able to break out the growth between market appreciation and the net flows?
Speaker #1: we had Yeah , about flows 200 million of in the fourth quarter . Really strong you know good momentum building in terms of the integration of of the business here at Eastern referrals from our across the colleagues bank , whether be from the it commercial banking division or the retail division into wealth management or building nicely .
David Rao: Referrals from our colleagues across the bank, whether it be from the commercial banking division or the retail division into wealth management, or building nicely. So we're very pleased with the progress there, and hopefully that will continue into 2026. Awesome. And then pivoting back to credit for a second, would you be able to give us a little more color on those non-performing credits, maybe including whether or not these loans were located in downtown Boston? Sure. First of all, they are not located in downtown Boston. The NPLs were completely driven by HarborOne. And what I would point you to, they're mostly CRE. There's one C&I loan in there. There's no surprises in there whatsoever to us. We followed these loans from the beginning of due diligence all the way through to today. We have resolution plans for each one of those.
Referrals from our colleagues across the bank, whether it be from the commercial banking division or the retail division into wealth management, or building nicely. So we're very pleased with the progress there, and hopefully that will continue into 2026.
Gregory Zingone: Awesome. And then pivoting back to credit for a second, would you be able to give us a little more color on those non-performing credits, maybe including whether or not these loans were located in downtown Boston?
Speaker #1: So we're very pleased with the progress there . And , and you know , hopefully that will continue into 2026 .
Speaker #4: Awesome. And then pivoting back to credit for a second, would you be able to give us more color on those, a little nonperforming credits?
David Rosato: Sure. First of all, they are not located in downtown Boston. The NPLs were completely driven by HarborOne. And what I would point you to, they're mostly CRE. There's one C&I loan in there. There's no surprises in there whatsoever to us. We followed these loans from the beginning of due diligence all the way through to today. We have resolution plans for each one of those.
Speaker #4: whether or not these loans were located in downtown Boston?
Speaker #1: Sure . They .
Speaker #5: they are located First of all , in downtown not Boston . The the NPLs were completely driven were by one . And Harbor point what I would you to , it's they're mostly cre .
Speaker #5: There's one CNI loan in there no . There's there surprises in whatsoever to us . We followed these loans from the beginning of due diligence all the way through to , to , to , to , to , to today we have plans , resolution plans for for each one of those .
David Rao: Some will actually be resolved this quarter. I'd point you to the originally telegraphed credit mark and the final credit mark, which is exactly the same. There was no surprise whatsoever in that book. At what point in your workout phase would you guys entertain a larger-sized loan sale for any of these portfolios, whether they're non-performing or criticized? We don't see that as necessary here. Certainly, in terms of resolving the loans, you might look at individual loan sales, but we don't think that this is significant enough to entertain sort of a blanket portfolio sale. Again, as David said, these were well-identified through the merger process, the merger evaluation. These loans were being closely monitored by Harbor One.
Some will actually be resolved this quarter. I'd point you to the originally telegraphed credit mark and the final credit mark, which is exactly the same. There was no surprise whatsoever in that book. At what point in your workout phase would you guys entertain a larger-sized loan sale for any of these portfolios, whether they're non-performing or criticized?
Speaker #5: Some will actually be resolved this quarter. And I'd point you to the originally telegraphed credit mark and the final credit mark, which is exactly the same.
Speaker #5: So there was no surprise whatsoever in that book.
Speaker #4: Okay. And at what point in your workout phase would you guys entertain a size loan sale for any of these larger portfolios, whether they're non-performing or criticized?
Denis Sheehan: We don't see that as necessary here. Certainly, in terms of resolving the loans, you might look at individual loan sales, but we don't think that this is significant enough to entertain sort of a blanket portfolio sale. Again, as David said, these were well-identified through the merger process, the merger evaluation. These loans were being closely monitored by Harbor One.
Speaker #1: We don't see we don't see that as as necessary here . And we certainly , you know , in terms of resolving the loans , you might you might look at individual loan sales , but think that this is significant enough to entertain sort of a blanket portfolio sale as David .
Speaker #1: said , we have these Again , wel identified through the merger merger process . The evaluation . These loans are being closely monitored by Harbor One .
David Rao: They may not have been non-accruing, but there's some deterioration that we expected, and that's why we had a significant credit mark in those, and that was part of our overall evaluation of the firm and of the merger. So we're confident in our ability to resolve these here relatively quickly, and we don't think we need to do any kind of a bulk portfolio sale. Awesome. That's all for me. Thanks, guys. Thanks, Greg. Thanks, Greg. As a reminder, if you'd like to ask a question, press Star 1 on your telephone keypad. Your next question comes from Laurie Hunsicker from Seaport Research Partners. Please go ahead. Yeah. Hi. Good morning, Denis, David, and Bob. So David, if I could just come back to you on margin, just a couple of things here. When in the quarter did you guys do the whole investment portfolio repositioning on HarborOne?
They may not have been non-accruing, but there's some deterioration that we expected, and that's why we had a significant credit mark in those, and that was part of our overall evaluation of the firm and of the merger. So we're confident in our ability to resolve these here relatively quickly, and we don't think we need to do any kind of a bulk portfolio sale.
Speaker #1: They may not have been non-accruing, but there's some deterioration that we expected, and that's why we had a significant credit. And that was in those.
Speaker #1: our mark overall evaluation of of the firm and of the merger . So , so we we're confident in our ability to resolve these here relatively quickly .
Awesome. That's all for me. Thanks, guys.
Speaker #1: And we don't think we need to do any kind of bulk portfolio sale.
Denis Sheehan: Thanks, Greg.
David Rosato: Thanks, Greg.
Speaker #1: a
Operator: As a reminder, if you'd like to ask a question, press Star 1 on your telephone keypad. Your next question comes from Laurie Hunsicker from Seaport Research Partners. Please go ahead.
Speaker #4: Awesome. That's all for me, guys. Thanks.
Speaker #1: Thanks ,
Speaker #5: Greg Thanks ,
Speaker #5: . Greg .
Speaker #5: . Greg .
Speaker #3: reminder , if you'd like a to ask a As question , press Star one on your telephone keypad . Your next question comes from Laura Unsicker from Seaport Research .
Laurie Hunsicker: Yeah. Hi. Good morning, Denis, David, and Bob. So David, if I could just come back to you on margin, just a couple of things here. When in the quarter did you guys do the whole investment portfolio repositioning on HarborOne?
Speaker #3: Please go ahead
Speaker #6: Hi . Good Yeah .
Speaker #6: David and Dennis and . So , David , I could if I could just come back to you on margin . Just things a couple of here .
Speaker #6: When in the quarter did you guys do the whole investment portfolio repositioning on Honey?
David Rao: Right out of the chute. So the first couple of days of November. Perfect. Okay. Cool. And then do you have a spot margin for December? I do. Similar to, I think, two quarters ago. Let me give you an adjusted spot margin because there was a bunch of accretion that came through in December. I think the most representative number would be 364 for December. So in that, yeah. No. So what I was going to say is just the basis point below the lower end of our margin guidance. And together with the comments, I said that the margin will incrementally creep up over the course of the year. Gotcha. Gotcha. Okay. And then just looking at slide 18, love this slide. Really appreciate you including it. So your actual accretion impact, the $11.4, that's 17 basis points on margin, and I looked for first quarter.
David Rosato: Right out of the chute. So the first couple of days of November.
Laurie Hunsicker: Perfect. Okay. Cool. And then do you have a spot margin for December?
Speaker #5: Right, right, out of the chute. So, the days of the first couple of November...
Denis Sheehan: I do. Similar to, I think, two quarters ago. Let me give you an adjusted spot margin because there was a bunch of accretion that came through in December. I think the most representative number would be 364 for December. So in that, yeah. No. So what I was going to say is just the basis point below the lower end of our margin guidance. And together with the comments, I said that the margin will incrementally creep up over the course of the year.
Speaker #6: Okay, cool. Perfect.
Speaker #6: And then, do you have a spot margin for December?
Speaker #5: I do similar to, I think, two quarters ago. Let me give you an adjusted margin because I spot a bunch of accretion that came through in December.
Speaker #5: the most I think representative number would be 364 for December . in fact So , yeah , no . So what I was say is just going to the basis point below the lower end of our margin guidance and together with comments , I said the that the margin will incrementally creep up over the course of the year .
Laurie Hunsicker: Gotcha. Gotcha. Okay. And then just looking at slide 18, love this slide. Really appreciate you including it. So your actual accretion impact, the $11.4, that's 17 basis points on margin, and I looked for first quarter.
Speaker #6: Gotcha , gotcha . Okay . And then just looking at site 18 , love this slide . Really appreciate you including it . So your your actual accretion impact the 11.4 .
David Rao: So it looks like that's going to be about 20 basis points or so. Kind of that's the run rate, 19 to 20 basis points of accretion income on margin. Is that correct? So just thinking about your guide of 365 to 375, that's obviously inclusive of that. Just making double sure here. Yes. The guide includes the numbers you see on slide 18. Again, I just want to caution everyone. There's variability quarter to quarter. If you go back to Q2 and Q3 of last year, we had a $6.5 million swing link quarter. So this is our best estimate based on a lot of analytical work and what happened. Though there's variability quarter to quarter in Cambridge Trust, life of the deal we're basically spot on. That's the good news. But it will bounce around each quarter.
So it looks like that's going to be about 20 basis points or so. Kind of that's the run rate, 19 to 20 basis points of accretion income on margin. Is that correct? So just thinking about your guide of 365 to 375, that's obviously inclusive of that. Just making double sure here.
Speaker #6: That's 17 basis points on margin. And I looked at first quarter, so it looks like that's going to be about 20 basis points or so.
Speaker #6: That's kind of the run rate—19 to 20 basis points of accretion income on margin. Is that correct? So just thinking about your guide of 3.65 to 3.75.
David Rosato: Yes. The guide includes the numbers you see on slide 18. Again, I just want to caution everyone. There's variability quarter to quarter. If you go back to Q2 and Q3 of last year, we had a $6.5 million swing link quarter. So this is our best estimate based on a lot of analytical work and what happened. Though there's variability quarter to quarter in Cambridge Trust, life of the deal we're basically spot on. That's the good news. But it will bounce around each quarter.
Speaker #6: That's obviously inclusive of that. Just making here double sure.
Speaker #5: Yes, the guide includes the numbers. You see on slide 18. Again, I just want to caution everyone there's variability quarter to quarter.
Speaker #5: If you go back to the third quarter, second quarter and third quarter of last year, you know we had a $6.5 million swing linked quarter.
Speaker #5: So is this our this is our best estimate based on , you know analytical , a lot of . And what happened though there's variability quarter to quarter .
Speaker #5: In trust Cambridge, life of the deal. We're basically on. That's the good news. But it will bounce around each quarter.
David Rao: To be clear, Laurie, what you see in this schedule is the accretion for HarborOne. As David indicated in his comments, there's an additional $9 to $10 million of accretion from former mergers, that being mostly Cambridge, but also Century. Yeah. Thank you, Denis. And Laurie, just make sure you read the footnotes. Everyone read the footnotes because we've laid out the remaining accretion and amortization expense for each deal. Okay. Sorry. Where is that? It's just the footnotes, the bottom of page 18. Oh, right. Okay. Gotcha. Gotcha. Gotcha. Okay. And then just going back over to credit, I just want to make sure I got right. So looking at the increase in the commercial non-performers from $51 million to $147 million at $96 million, $94 million came from HarborOne, and that's 35% reserved? Yes. Yes. Okay.
Denis Sheehan: To be clear, Laurie, what you see in this schedule is the accretion for HarborOne. As David indicated in his comments, there's an additional $9 to $10 million of accretion from former mergers, that being mostly Cambridge, but also Century. Yeah. Thank you, Denis. And Laurie, just make sure you read the footnotes. Everyone read the footnotes because we've laid out the remaining accretion and amortization expense for each deal.
Speaker #1: And to be clear Lori this is what you see in this schedule is the accretion for Harbor one . As David indicated in his comments , there's an additional 9 to $10 million of accretion from former mergers .
Speaker #1: Being that mostly Cambridge, but also Century.
Speaker #5: you , Yeah . Thank And Laurie . Just make sure you read Dennis . the footnotes . Everyone read the footnotes because we've laid out the remaining accretion and amortization expense for each deal .
Laurie Hunsicker: Okay. Sorry. Where is that?
David Rosato: It's just the footnotes, the bottom of page 18.
Laurie Hunsicker: Oh, right. Okay. Gotcha. Gotcha. Gotcha. Okay. And then just going back over to credit, I just want to make sure I got right. So looking at the increase in the commercial non-performers from $51 million to $147 million at $96 million, $94 million came from HarborOne, and that's 35% reserved?
Speaker #6: Okay. Sorry. Where is that?
Speaker #5: Just—it's the footnotes, the bottom of page 18.
Speaker #6: right . Oh , Okay . Gotcha . Gotcha , gotcha . Okay . And then just going back over to credit , I just want to make sure I got this right .
Speaker #6: So, looking at the increase in commercial non-performers from $51 million to $147 million, that's a $96 million increase. Of that, $94 million came from Honey.
David Rosato: Yes.
Laurie Hunsicker: Yes. Okay. And then as we look throughout the year, you said you'd reduce it. Can you just help us think about when is that $94 million gone?
David Rao: And then as we look throughout the year, you said you'd reduce it. Can you just help us think about when is that $94 million gone? That's difficult to answer. I know it's a handful of loans. I know there will be some resolutions in Q1 and Q2. I can't be more specific than that. I would point you back to our experience with Cambridge Trust. We had an initial jump-up in NPLs, and we worked those down quite quickly. It took a couple of quarters, but a year after that deal, all that stuff had been worked through. And I would expect similar experience here, maybe even a little faster. Perfect. Perfect. And then NDFI exposure, do you have an update there? Yeah. I mean, Laurie, it's in the same ballpark, a little over $500 million.
Speaker #6: And that's 35% reserved .
Speaker #5: Yes . Yes .
Speaker #6: Okay . And then as we look throughout the year , you said you'd it . Can you reduce just help us think about , you know , when is that ?
David Rosato: That's difficult to answer. I know it's a handful of loans. I know there will be some resolutions in Q1 and Q2. I can't be more specific than that. I would point you back to our experience with Cambridge Trust. We had an initial jump-up in NPLs, and we worked those down quite quickly. It took a couple of quarters, but a year after that deal, all that stuff had been worked through. And I would expect similar experience here, maybe even a little faster.
Speaker #6: 94 million gone
Speaker #5: You it's know , that's difficult to answer . I know it's a handful of loans . I know there will be some resolutions in the first and second quarter .
Speaker #5: Yeah . I can't be more specific than that . We we I would point you back to our experience with Cambridge Trust . We had an initial jump up in NPLs and we worked those down quite quickly .
Speaker #5: It took a couple quarters, but you know, a year after that deal, all that stuff had been worked, and I through.
Laurie Hunsicker: Perfect. Perfect. And then NDFI exposure, do you have an update there?
Speaker #5: Would expect similar experience here, maybe even a little faster.
Denis Sheehan: Yeah. I mean, Laurie, it's in the same ballpark, a little over $500 million.
Speaker #6: Perfect , perfect . And then NFI exposure . Do you have an update there ?
David Rao: And again, for us, a big chunk of this is affordable housing. It's lending to organizations that provide affordable housing in the state. That's about $120 million of that half a billion. There's another $250 million to REITs that lend in our market. These are direct loans that we look at, and we underwrite right alongside the REIT. It's in the multifamily space largely. And then there's about $100 million of asset-based lending that are fully followed asset-based credits. So it's not a particularly large segment for us, and that constitutes the composition of the portfolio. Right. Okay. Okay. And then just shifting over here, the $3.5 million lease impairment, where is that showing up exactly? Is that a credit against your other non-interest income, or it's that sort of separate sale of other assets category? Where is that line? It runs through the non-operating expense line.
And again, for us, a big chunk of this is affordable housing. It's lending to organizations that provide affordable housing in the state. That's about $120 million of that half a billion. There's another $250 million to REITs that lend in our market. These are direct loans that we look at, and we underwrite right alongside the REIT. It's in the multifamily space largely. And then there's about $100 million of asset-based lending that are fully followed asset-based credits. So it's not a particularly large segment for us, and that constitutes the composition of the portfolio.
Speaker #1: mean it's Yeah . I it's Laurie , it's still it's in the same ballpark , a over little $500 million . for And again , us , a big a chunk of big this is affordable housing .
Speaker #1: You know, it's to lending organizations that provide affordable housing in the state. That's about $120 million of that, half a billion.
Speaker #1: There's another 250 million . Is to rights that that lend in our market . These are these are direct loans that we look at and we underwrite right alongside the REIT .
Speaker #1: It's in the multifamily space largely . And then there's about $100 million of asset based lending that are fully followed , asset based credits .
Speaker #1: So it's it's not a particularly large segment for us . And that constitutes the the the composition of of the portfolio .
Laurie Hunsicker: Right. Okay. Okay. And then just shifting over here, the $3.5 million lease impairment, where is that showing up exactly? Is that a credit against your other non-interest income, or it's that sort of separate sale of other assets category? Where is that line?
Speaker #6: Right ? Okay . Okay . And then just shifting over here , the $3.5 million lease impairment . Where is that showing up exactly .
Speaker #6: Is that a credit against your other, other in noninterest income, or is that sort of separate, sale of other assets category, or where—you know, that line—where is?
David Rosato: It runs through the non-operating expense line.
David Rao: So it was, yeah, it was a building. But on the income statement, it's through the non-operating expense. Non-operating expense, yes. Okay. Okay. It's in the other, okay. And then can you just talk a little about you had a drop in that sort of within the other broken out at the end, the sale of other assets, the loss of $700,000. What's that relative to? It was $1.5 million last quarter? Yeah. That was just the associated leasehold improvements in that building that had operated that had the lease. So there's two components. Okay. And how should we think about that running? I mean, that is a one-time event. One-time event. Okay. Okay. Okay. So that line should run zero-ish. Yeah. Okay. Okay. Okay. And then last question, Denis, to you. Can you just share a little bit about and this maybe kind of circles back to HarborOne.
David Rosato: So it was, yeah, it was a building.
Speaker #5: It runs through the non-operating expense line . So it was a . Yeah , it was a building .
Denis Sheehan: But on the income statement,
it's through the non-operating expense.
David Rosato: Non-operating expense, yes.
Laurie Hunsicker: Okay. Okay. It's in the other, okay. And then can you just talk a little about you had a drop in that sort of within the other broken out at the end, the sale of other assets, the loss of $700,000. What's that relative to? It was $1.5 million last quarter?
Speaker #1: Income, but on the statement, it's...
Speaker #5: the Through .
Speaker #1: Non-operating .
Speaker #5: Non-operating expense . Yes .
Speaker #6: Okay . Okay . It's in that other other . Okay . And then can you just talk a little about you had a , you had a drop in that sort of the within sort of other .
Speaker #6: It's broken out at the end . The sale of other assets . The loss 700,000 . What's of that relative to . It was a million and a half last quarter .
David Rosato: Yeah. That was just the associated leasehold improvements in that building that had operated that had the lease. So there's two components.
Speaker #6: Yeah .
Speaker #5: That was just the associated leasehold improvements in that building that had the operating—that had the lease. So there's two components.
Laurie Hunsicker: Okay. And how should we think about that running?
David Rosato: I mean, that is a one-time event. One-time event.
Laurie Hunsicker: Okay. Okay. Okay. So that line should run zero-ish.
Speaker #6: Okay. And how should we think about that running?
Speaker #5: Time event. One one-time event.
David Rosato: Yeah.
Laurie Hunsicker: Okay. Okay. Okay. And then last question, Denis, to you. Can you just share a little bit about and this maybe kind of circles back to HarborOne.
Speaker #6: Okay, okay, okay. So that line should run zero-ish.
Speaker #7: Yeah .
Speaker #6: Okay okay okay . And then last question Dennis to you , can you just share a little bit about , you may be know , kind of back to this realize you're not I circles probably going to comment , but you know again your outlook your .
David Rao: I realize you're not probably going to comment, but again, your outlook, page 20, last bullet, not pursuing acquisitions, all in bold. I mean, I think that's great. It's certainly more definitive than we were last quarter. So directionally, you've gotten stronger on that. Can you just share a little bit about your thinking around that and how you've come to be? And certainly, we love that you're leaning more into buybacks, but just can you share a little bit about how you came to this position? Thanks. Well, we've outlined, Laurie, just look, we're not pursuing acquisitions. We're entirely focused on the growth of this company, the organic growth. We're excited about the potential in each of our businesses. That's what we're leaning into. We recognize returning capital to our shareholders is the best use in terms of that excess capital. And so we're leaning heavily into buybacks.
I realize you're not probably going to comment, but again, your outlook, page 20, last bullet, not pursuing acquisitions, all in bold. I mean, I think that's great. It's certainly more definitive than we were last quarter. So directionally, you've gotten stronger on that. Can you just share a little bit about your thinking around that and how you've come to be? And certainly, we love that you're leaning more into buybacks, but just can you share a little bit about how you came to this position? Thanks.
Speaker #6: Last bullet, not pursuing acquisitions. All in bold. I think that's great. It's certainly more, I mean, definitive than we were last quarter.
Speaker #6: So, directionally, you've gotten stronger on that. You just—can you share a little bit about your thinking around that and how you've come to be?
Denis Sheehan: Well, we've outlined, Laurie, just look, we're not pursuing acquisitions. We're entirely focused on the growth of this company, the organic growth. We're excited about the potential in each of our businesses. That's what we're leaning into. We recognize returning capital to our shareholders is the best use in terms of that excess capital. And so we're leaning heavily into buybacks.
Speaker #6: And certainly, we love that you're leaning more into buybacks. But just, can you share a little bit about how you came to this position?
Speaker #6: Thanks .
Speaker #5: Well .
Speaker #1: We've I outlined Lori . Just look , you know , we're not we're not pursuing acquisitions . We're we're entirely focused on growth of this company .
Speaker #1: The organic the growth . excited We're about the potential each of our in businesses . That's what we're leaning into . We recognize , you know , returning capital to our shareholders is is the best use in terms of that excess capital .
David Rao: As I said in my comments, we think we'll manage our CET1 ratio down over time towards 12%, which is a pretty significant decline from where it is today. And we still think it leaves us with very comfortable and safe capital levels. So we're going to lean into buybacks. We're going to do all the blocking and tackling of growing this business one customer at a time. And that's what we're looking forward to. And we're not pursuing acquisitions. Great. Thanks for the details. Sure. Your next question comes from Janet Lee from TD Cowen. Please go ahead. Good morning. Good morning. Good morning, Janet. I don't know if this is talked about yet. For your fee income, could there be, where do you see better upside? As in, did you also talk about what you would do with Harbor One's mortgage banking business?
As I said in my comments, we think we'll manage our CET1 ratio down over time towards 12%, which is a pretty significant decline from where it is today. And we still think it leaves us with very comfortable and safe capital levels. So we're going to lean into buybacks. We're going to do all the blocking and tackling of growing this business one customer at a time. And that's what we're looking forward to. And we're not pursuing acquisitions.
Speaker #1: And so we're leaning heavily into buybacks , as I said in in my comments . You know , we'll manage our city ratio down over time 12% , which is towards significant decline from where it is today .
Speaker #1: And we still think it leaves us with very comfortable and safe capital levels. So we're going to lean into buybacks. We're going to do all the blocking and tackling of growing this one customer at a time.
Laurie Hunsicker: Great. Thanks for the details.
Denis Sheehan: Sure.
Speaker #1: And that's business. What we're looking forward to. And we're just—we're not, we're not—we're pursuing acquisitions.
Operator: Your next question comes from Janet Lee from TD Cowen. Please go ahead.
Speaker #6: Great. Thanks for the details.
Janet Lee: Good morning.
Speaker #7: Sure .
Denis Sheehan: Good morning.
Speaker #3: Your next question comes from Janet Lee, TD Cohen. Please go ahead.
David Rosato: Good morning, Janet.
Operator: I don't know if this is talked about yet. For your fee income, could there be, where do you see better upside? As in, did you also talk about what you would do with Harbor One's mortgage banking business? Would you be beneficiary if mortgage comes back more fully if the rates were to go down a little more? And what's sort of your outlook for other fee income line for the investment advisory business fees or others that could potentially surprise to the upside versus where you have on your guide?
Speaker #8: Good morning
Speaker #8: .
Speaker #5: Morning .
Speaker #7: Janet .
Speaker #8: For I don't know if this is talked about yet for for your fee income . Could there be where do you see better upside as in did you also talk about what you would do with harbor One's mortgage banking business ?
David Rao: Would you be beneficiary if mortgage comes back more fully if the rates were to go down a little more? And what's sort of your outlook for other fee income line for the investment advisory business fees or others that could potentially surprise to the upside versus where you have on your guide? Sure, Janet. So I called out in my comments that the guide was assuming no market appreciation in the wealth management business. So you can make a judgment of expected returns of the S&P 500. And if it's up, there's additional fee income that'll be derived there. So I want to make sure we're clear about that. I think over time, fee income from HarborOne's mortgage business will probably be 8% to 10% of total fee income. You're right.
Speaker #8: Would you be a beneficiary if mortgage comes back more fully, if the rates were to go down a little more? And what's sort of your outlook for other fee income lines, for the investment advisory business fees or others?
David Rosato: Sure, Janet. So I called out in my comments that the guide was assuming no market appreciation in the wealth management business. So you can make a judgment of expected returns of the S&P 500. And if it's up, there's additional fee income that'll be derived there. So I want to make sure we're clear about that. I think over time, fee income from HarborOne's mortgage business will probably be 8% to 10% of total fee income. You're right.
Speaker #8: That could be— that could potentially be upside versus where you have on your guide.
Speaker #5: Sure . Janet . So I called out in in my comments that the the guide was assuming no market appreciation in the wealth management business .
Speaker #5: So you can make a judgment of , you know , expected returns of the S&P 500 . And if it's up , there's additional fee income that will be derived .
Speaker #5: There . So I want to make sure we're clear about that . The I think over over time the income from Harbor One's mortgage business will probably be 8 to 10% of total fee income .
David Rao: We would be a large beneficiary if there's a drop in rates, there's an increase in refi activity, or even purchase activity. We're not counting on that. Time will tell if that's true. It's a highly efficient, well-oiled business that they run. We're still in the process of integrating that into Legacy Eastern. That business will be part of the system conversion next month. But it gives us an option on fee income, and it also gives us an option on the ability to feed our balance sheet with residential mortgage if we ever choose to do so. As I said, today, our expectation is we're going to keep our residential mortgage portfolio flat in 2026, just as we did in 2025, and favor HELOC and commercial loan growth. Got it. Thank you. And just one follow-up.
We would be a large beneficiary if there's a drop in rates, there's an increase in refi activity, or even purchase activity. We're not counting on that. Time will tell if that's true. It's a highly efficient, well-oiled business that they run. We're still in the process of integrating that into Legacy Eastern. That business will be part of the system conversion next month. But it gives us an option on fee income, and it also gives us an option on the ability to feed our balance sheet with residential mortgage if we ever choose to do so. As I said, today, our expectation is we're going to keep our residential mortgage portfolio flat in 2026, just as we did in 2025, and favor HELOC and commercial loan growth.
Speaker #5: We will, right? We would. You're going to be a large beneficiary if there's a drop in rates, there's an increase in refi activity, or even purchase activity.
Speaker #5: We're not counting on that . That we're not we're . Time will tell if that's true . It's a highly efficient , well oiled business that they run .
Speaker #5: We're still in the process of integrating that into legacy Eastern. They said that business will be part of the system conversion next month.
Speaker #5: But it is an option that gives on fee income. And it also gives us an option on the ability to feed the balance sheet with residential mortgage.
Speaker #5: If we ever choose to do so . That's not as I as I said , our to and our expectation to keep our is we're going residential mortgage portfolio flat in 2026 , just as we did in 2025 .
Janet Lee: Got it. Thank you. And just one follow-up.
Speaker #5: And favor HELOCs and commercial loan growth.
David Rao: Really appreciate the comment around how you're staying focused on organic, and probably there's more opportunities for buyback. You talked about getting that CET1 down to 12.7 by the June quarter. When you say managing towards that 12%, is there sort of a timeline around when you want to get down to that peer level beyond that June guidance that you gave? Well, Janet and Denis, I think, assuming there's a lot of assumptions in there. The first one being that we finish, and we believe we will. We'll complete the existing buyback authorization by about mid-year. And at that point, we would look to request approval for another buyback. And thinking about the profitability of the company, the amount of excess capital we believe we will generate, because organic growth will not absorb that excess capital. So it'll give us room to continue to execute and do buybacks.
Really appreciate the comment around how you're staying focused on organic, and probably there's more opportunities for buyback. You talked about getting that CET1 down to 12.7 by the June quarter. When you say managing towards that 12%, is there sort of a timeline around when you want to get down to that peer level beyond that June guidance that you gave?
Speaker #8: Got it. Thank you. And just one follow-up. Really appreciate the comment around how you're staying focused on organic, and probably there's more opportunity for buyback.
Speaker #8: For 12, you talked about getting that down to, I think, 12.7% by June. By the June quarter, when you say managing towards that 12%, is there sort of a timeline around when you want to get down to that peer level?
Denis Sheehan: Well, Janet, Denis, I think, assuming there's a lot of assumptions in there. The first one being that we finish, and we believe we will. We'll complete the existing buyback authorization by about mid-year. And at that point, we would look to request approval for another buyback. And thinking about the profitability of the company, the amount of excess capital we believe we will generate, because organic growth will not absorb that excess capital. So it'll give us room to continue to execute and do buybacks.
Speaker #8: Beyond that? June guidance that you gave?
Speaker #7: Well .
Speaker #1: Dennis , I Janet , it's think , you know , assuming there's a lot of assumptions in there . The first one being that we're we finish and we believe we will .
Speaker #1: Let's say that the existing buyback authorization will run through mid-year, and at that point, we would look to request approval for another buyback.
Speaker #1: And thinking about, you know, the profitability of the company, the amount of excess capital we believe we will generate, because organic growth will not absorb that excess capital.
David Rao: We would continue to manage down that pro forma, say, 12.7% to a lower level and towards 12% as we execute that additional buyback. So we don't have a precise point in time, but our intent is to continue to manage it. It's, of course, subject to where its stock price, etc. We want to be disciplined and responsible as we execute the buyback. But nonetheless, that is our intent. Thank you. And your next question comes from Feddie Strickland from Hovde. Please go ahead. Hey, just a quick follow-up on loan growth. Is there any seasonality or particular slower or faster quarter in terms of loan growth just as we think about the guide within the course of the year? Yeah. Yeah. It's a little bit like a frozen tundra here in the first quarter. So it would build more throughout the year, Feddie.
We would continue to manage down that pro forma, say, 12.7% to a lower level and towards 12% as we execute that additional buyback. So we don't have a precise point in time, but our intent is to continue to manage it. It's, of course, subject to where its stock price, etc. We want to be disciplined and responsible as we execute the buyback. But nonetheless, that is our intent.
Speaker #1: So, it’ll give us room to continue to execute and do buybacks. We would continue to manage down that pro forma, say, 12.7% to a lower level and towards 12% as we execute additional buybacks.
Speaker #1: So , you know , we don't have a precise point in time , but our intent is , is to continue to manage it .
Speaker #1: It's of course , subject to where the price , stock etc. we want to be disciplined and responsible as we execute the buyback , but nonetheless , that that is our intent .
Janet Lee: Thank you.
And your next question comes from Feddie Strickland from Hovde. Please go ahead.
Speaker #8: you Thank .
Feddie Strickland: Hey, just a quick follow-up on loan growth. Is there any seasonality or particular slower or faster quarter in terms of loan growth just as we think about the guide within the course of the year?
Speaker #3: And your next question comes from Freddy Strickland from Hardy. Please go ahead.
Speaker #9: Hey, just had a quick follow-up on growth. Is there any seasonality or a particular slower or faster quarter in loan terms of growth?
Denis Sheehan: Yeah. Yeah. It's a little bit like a frozen tundra here in the first quarter. So it would build more throughout the year, Feddie.
Speaker #9: Just as we think about the guide within the course of the year?
Speaker #7: Yeah .
Speaker #1: Yeah , it's it's a little bit like a frozen tundra here in the first quarter . it So would build more through throughout the year if Eddie pipelines , pipelines built into the first quarter .
David Rao: Pipelines build into the first quarter, but certainly as you get late Q1 into Q2 and Q3, that's typically when most of our production happens and round off the end of the year nicely as we did this year. But typically, Q1 is a little slower. Do you agree, David? Yes. 100%. All right. Great, then. That's all I have. And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks. Well, thanks again, folks, for joining our call this morning. We hope you fare well during the winter and look forward to talking with you again in the spring. This concludes today's conference call. You may now disconnect. Thank you.
Pipelines build into the first quarter, but certainly as you get late Q1 into Q2 and Q3, that's typically when most of our production happens and round off the end of the year nicely as we did this year. But typically, Q1 is a little slower. Do you agree, David?
Speaker #1: But certainly, as you get late Q1 into Q2 and Q3, that's typically when most of our production happens and rounds off the end of the year nicely, as we did this year.
David Rosato: Yes. 100%.
Feddie Strickland: All right. Great, then. That's all I have.
Speaker #1: But typically, Q1 is a little slower. Do you agree, David?
Operator: And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks.
Speaker #5: Yes , 100% .
Speaker #9: All right. Great. Thanks. That's all I have.
Bob Rivers: Well, thanks again, folks, for joining our call this morning. We hope you fare well during the winter and look forward to talking with you again in the spring.
Speaker #3: And there are no further questions at this time. I will turn the call back over to Bob Rivers for closing remarks.
Speaker #7: Well , thanks again .
Speaker #10: Thank you for joining our call this morning. We hope you fare well during the winter and look forward to talking with you again in the spring.
Operator: This concludes today's conference call. You may now disconnect. Thank you.
