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DATE

Thursday, April 30, 2026 at 1:30 p.m. ET

CALL PARTICIPANTS

  • Chairman & CEO — Paul Perrault
  • Chief Financial Officer — Carl Carlson
  • Chief Credit Officer — Mark Meiklejohn

TAKEAWAYS

  • GAAP Net Income -- $46.2 million, representing $0.55 per share for the quarter.
  • Operating Earnings -- $58.4 million, or $0.70 per share, excluding $13 million in pretax merger-related charges.
  • Net Interest Income -- $190.8 million, down $8.9 million, or 4%, sequentially from Q4 2025, due to lower earning assets and asset yields.
  • Net Interest Margin -- 3.78%, a 4 basis-point decline from the prior quarter.
  • Noninterest Income -- $23.9 million, down $2 million, or 8%, sequentially, driven by lower deposit fees and reduced gains on loan sales, partially offset by higher derivative and tax credit investment income, and stable wealth management fees.
  • Total Noninterest Expense -- Flat sequentially and nearly $1 million below budget, indicating expense discipline and realization of merger synergies.
  • Operating Efficiency Ratio -- 59.5% for the quarter, excluding merger charges.
  • Total Assets -- $22.2 billion at period end, a decline of $992 million driven by lower cash balances related to payroll deposits.
  • Total Loans -- Declined approximately 1% during the quarter, with runoff in commercial real estate and consumer portfolios, partially offset by growth in core commercial lending.
  • Loan Originations -- $734 million, with a weighted average coupon of 7.628%; 67% of originations were floating rate.
  • Deposits -- Decreased 6% from year-end, primarily from payroll and brokered deposit withdrawals; core customer deposits declined approximately 2% after excluding those categories.
  • Credit Metrics -- Nonperforming loans rose to 83 basis points of total loans, primarily from migration of Boston office exposure and multifamily properties under rent control in New York City; net charge-offs were $13.6 million, or 30 basis points annualized, driven by a few large credits.
  • Allowance for Loan Losses -- $244 million, or 1.36% of loans, with management maintaining current reserve coverage as appropriate.
  • Capital Ratios -- Common Equity Tier 1 (CET1) at 11%; tangible common equity at 9.1%; tangible book value increased $0.16 to $23.48 per share.
  • Dividend Declaration -- Quarterly dividend of $0.3225 per share approved by the board.
  • Stock Repurchase Authorization -- $50 million buyback program approved, subject to regulatory approval.
  • Merger Integration -- Core systems conversion completed in mid-February and final significant merger charges recognized; total merger costs matched the original $93 million estimate.
  • Loan Book Yields -- Commercial real estate loan originations in the quarter carried a weighted average coupon of 6.30%; C&I loans at 6.34%; consumer at 6.03%.
  • Bond Portfolio Activity -- $130 million in securities purchased, with new money yields of 4.29% and durations between 3.5 and 3.8 years.

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RISKS

  • CEO Perrault stated, "Loan growth and the margin fell far short of our expectations and reflect some near-term pressures, uncertainty in the economic environment, and the tail end of merger activity."
  • Nonperforming loans increased to 83 basis points of total loans, led by Boston office exposure and rent-controlled multifamily properties in New York City.
  • CFO Carlson confirmed, "First quarter operating results declined sequentially, driven primarily by balance sheet contraction, modest net interest margin pressure tied to the rate environment, and lower noninterest income."
  • Non-GAAP operating results were below prior quarter and internal expectations.

SUMMARY

Beacon Financial Corporation (BBT 8.97%) delivered Q1 results impacted by sequential declines in net interest income and noninterest income, attributed to continued margin pressure, economic uncertainty, and post-merger transition effects. Capital levels remain solid, with the company maintaining an 11% CET1 ratio and approving both a regular dividend and a $50 million stock repurchase subject to regulatory review. Management completed core systems integration, finalized significant merger charges, and expects loan growth to strengthen gradually through the remainder of 2026 alongside expected stabilization of margins around 3.80%.

  • CFO Carlson explained that, "We expect the margin to stabilize around 3.80% and gradually improve." as funding costs continue to decline and loan growth resumes later in the year.
  • Management outlined a path toward full realization of announced merger expense synergies, with operating costs performing better than budget despite one-time integration charges.
  • Chief Credit Officer Meiklejohn disclosed specific reserving actions on problem loans, including 40% reserves on a $17 million downtown Boston office loan and similar coverage for two related New York City multifamily loans totaling $9 million, all recently migrated to nonaccrual status.
  • The new stock buyback program will be executed opportunistically, with approval expected within a month, reflecting "confidence in the franchise, our capital strength, and the long-term value creation opportunity" as stated by management.

INDUSTRY GLOSSARY

  • CRE (Commercial Real Estate): Real estate loans secured by income-producing properties such as office buildings, multifamily, and retail spaces.
  • C&I (Commercial and Industrial): Loans made to businesses for working capital, equipment, or general corporate purposes not secured by real estate.
  • Nonaccrual: Loans on which the bank stops accruing interest income due to deterioration in borrower's ability to pay.
  • Allowance for Loan Losses: Reserve set aside to cover estimated credit losses inherent in the loan portfolio.

Full Conference Call Transcript

Paul Perrault: Thanks, Dario, and good afternoon, everyone, and thank you for joining us for our first quarter earnings call. I am pleased to share that we achieved a major milestone in our integration process in the quarter with the successful completion of a core systems conversion in mid-February. I would like to recognize the hard work and dedication of our teams in executing on this very critical step and, just as importantly, their efforts to achieve strong client retention throughout that process. That outcome reflects months of preparation, disciplined execution, and a continued focus on serving clients during a period of significant change. From a financial perspective, I am very disappointed with our first quarter results.

Loan growth and the margin fell far short of our expectations and reflect some near-term pressures, uncertainty in the economic environment, and the tail end of merger activity. GAAP earnings for the first quarter were $0.55 per share and operating earnings were $0.70 per share, excluding merger-related charges. While operating results were below both our prior quarter and our expectations, the core returns remained good with operating ROA just over 1% and operating return on tangible common equity of 11.25%. As we discussed coming out of the fourth quarter, the operating environment during the first quarter remained quite challenging. Balance sheet contraction, margin pressure from declining rates, and lower fee income all weighed on our results.

Importantly, several of these headwinds are not structural in nature. They were influenced by seasonal dynamics, timing, and the uncertainty created in the economy from persistent inflation, extremely thin pricing, global events, and the prospect of rent control legislation in our major markets. Collectively, these headwinds impacted loan volumes. While the pipelines remain strong, clients are cautious yet optimistic as the economic environment remains quite fluid. Excuse me. On the positive side, we continue to make progress on the strategic priorities we laid out at the time of the merger. Expense discipline remains strong. Core funding costs improved sequentially. Capital levels are robust with CET1 at 11% and tangible common equity at just over 9%.

And while credit metrics moved modestly higher during the quarter, they remain manageable and well reserved, reflecting proactive credit management in a still uncertain environment. Now that the systems conversion is behind us and merger charges are largely complete, our focus shifts squarely to execution, stabilizing the balance sheet, restoring growth momentum, and fully capturing the revenue and efficiency we outlined when we announced the merger. We believe the pieces are now in place to close the gap between current performance and our planned runway as we move through the remainder of the year.

Before I turn it over to Carl, I will note that our board approved a quarterly dividend of $0.3225 per share, consistent with our commitment to returning capital to stockholders. In addition, the board authorized a $50 million stock repurchase program, subject to regulatory approval, reflecting our confidence in the franchise, our capital strength, and the long-term value creation opportunity that we see ahead. I will now turn it over to Carl to walk us through the financial results in some more detail. Carl? Thank you, Paul.

Carl Carlson: I will begin with the high-level summary of the quarter and then walk through the income statement, balance sheet, and credit trends in more detail. First quarter operating results declined sequentially, driven primarily by balance sheet contraction, modest net interest margin pressure tied to the rate environment, and lower noninterest income. GAAP earnings totaled $46.2 million, or $0.55 per share. Operating earnings were $58.4 million, or $0.70 per share, which excludes $13 million of one-time pretax merger-related charges. Operating return metrics remained healthy: operating ROA was 1.01%, operating return on tangible common equity was 11.24%, reflecting continued expense discipline and solid core profitability even with lower revenues. Turning to the income statement in more detail.

Net interest income was $190.8 million, down $8.9 million, or 4%, from the fourth quarter. This decline was driven by lower average earning assets and a modest reduction in asset yields as rates moved lower in late 2025. The net interest margin declined by 4 basis points to 3.78%. Importantly, funding costs improved sequentially. Interest-bearing deposit costs declined 17 basis points and we expect continued improvement as pricing actions taken continue to flow through. As balance sheet growth resumes, we believe this positions the margin more favorably ahead. Noninterest income totaled $23.9 million, down $2 million, or 8%, from the prior quarter.

The decline was primarily driven by lower deposit fees and reduced gains on loan sales as SBA activity moderated from a very strong fourth quarter. These declines were partially offset by higher mark-to-market income on derivatives, tax credit investment income, and relatively stable wealth management fees. On the expense side, operating costs remain well controlled. Total noninterest expense was essentially flat compared to the fourth quarter, and came in nearly $1 million below budget. This performance reflects disciplined cost management and continued execution against merger synergies, offset modestly by seasonal increases in occupancy costs and a true-up in FDIC insurance. Excluding merger charges, the operating efficiency ratio for the quarter was 59.5%, underscoring the underlying expense discipline in the business.

Now turning to the balance sheet. Total assets declined $992 million to $22.2 billion, driven primarily by lower cash balances associated with point-in-time payroll fulfillment deposits. Loans declined approximately 1%, reflecting continued runoff in the commercial real estate and consumer portfolios, partially offset by growth in core commercial lending. Loan originations and draws totaled $734 million, with a weighted average coupon of 7.628%. Sixty-seven percent of originations were floating rate. Deposits declined 6%, driven largely by payroll deposits and brokered balances. Excluding payroll and brokered deposits, core customer deposits declined approximately 2%, reflecting typical seasonal outflows related to tax payments and commercial activity. Turning to credit. Credit metrics deteriorated modestly during the quarter.

Nonperforming loans increased to 83 basis points of total loans, driven primarily by migration of Boston office exposure and several rent-controlled multifamily properties in New York City. Net charge-offs totaled $13.6 million, or 30 basis points annualized, reflecting resolutions of a small number of larger credits. The allowance for loan losses closed the quarter at $244 million, representing 1.36% of loans. Given portfolio composition and current risk trends, we believe reserve coverage remains appropriate. Provision expense declined modestly from the prior quarter, and we continue to expect provisioning to be less than net charge-offs as we work through existing criticized credits. Capital generation remains a clear strength.

CET1 ended the quarter at 11%, tangible common equity at 9.1%, and tangible book value increased $0.16 to $23.48 per share. Importantly, with the core systems conversion completed in early February, we have now recognized the final significant merger charges. Total merger costs were in line with expectations, and management is confident the announced cost synergies of the merger have been realized. Looking ahead, we anticipate improving earnings momentum now that merger costs and system conversions are completed and announced expense synergies have been realized. We expect loan growth to remain soft in the second quarter, then strengthen throughout the remainder of the year. We expect the margin to stabilize around 3.80% and gradually improve.

While near-term macro and rate uncertainties remain, we believe the franchise is well positioned to improve performance and close the gap to our targeted run rate over the coming quarters. That concludes my prepared remarks. Back to you, Paul.

Paul Perrault: Thank you, Carl. We will now be joined by Mark Meiklejohn and Michael McFerrity, and we will open it up for questions.

Operator: As a reminder, to ask a question, press star 1 on your telephone keypad. Our first question comes from the line of Justin Crowley with Sandler. Please go ahead.

Justin Crowley: Hey, good afternoon, everyone. Just wanted to start out on the margin. In the outlook there, can you, Carl, maybe provide a little more detail on the reset on accretion expectations, what changed from the original assumptions that went into that, and what got you from $15 million down to that $12 million number just on a go-forward basis?

Carl Carlson: Sure. Thanks for the question. When we first estimated the purchase accounting, we tried to take out the impact of prepayments and things of that nature, and we were estimating it around $15 million. A lot of the schedules suggested that. We have these all set up in our systems to track as loans pay down, and it is coming in a little bit lower. We are not seeing any kind of prepayment activity at this point that is meaningful to the amounts. For this quarter, it came in at $12.1 million. I believe it was over $13 million last quarter.

I am feeling more confident that the $12 million range is something, now that the system conversions have taken place—we had two general ledger conversions and old systems conversions onto a new system. I feel more confident that this will be the number going forward.

Justin Crowley: Okay. Understood. And just, I guess, some of the moving pieces there. If I look at the average balance sheet and just loan yields, that 5.96% was down over 30 basis points. You pointed it out, but without a huge swing in accretion income—and I know we had lower rates filtering through—it seemed like a big move. So I was just curious if there is anything else underneath the surface there that drove that yield down for the quarter?

Carl Carlson: As you mentioned, the purchase accounting did come down in the quarter from $13.8 million to $12.2 million, so that was $1.6 million of the impact, which was about 7 basis points. On the other side, the movements in the fourth quarter in rates—75 basis points moved by the Fed—we saw that throughout the quarter really impact Q1 as you see the full impact in the quarter. You still have some loans that reprice every three months and things of that nature coming in and repricing down as well. I would say we are not particularly surprised by where the yields came in when you exclude the purchase accounting impact.

What did not help us here is we expected a little bit more loan growth and at more current yields. We are originating loans in the 6.20% range right now, so you are not getting that lift from new originations as much.

Justin Crowley: Okay. Then just one other one sticking with the margin. Can you flesh out a little more your thoughts on deposit costs from here? We have heard from a lot of your competitors that we are at a point where there could now perhaps be some upward pressure on funding with rate cuts off the table for the time being. It sounds like you instead see some more room to go lower there. What factored into that and what repricing may be left on the book?

Carl Carlson: Sure. We were going into a systems conversion, and we probably lagged our deposit costs on moving down our nonmaturity deposit costs a bit. I think we will see the benefits of that more so in the second quarter into the third quarter. We probably could have done a little bit more, but going into a systems conversion, it did not make a lot of sense to be moving rates at that point. On the nonmaturity deposits, we see opportunity there. The CD book is roughly $1.4 billion to $1.5 billion that will be repricing. I do not see tremendous opportunity there.

I think things that are rolling off—at the rates that they are rolling off—there will be some opportunity, 10, 20, maybe even 30 basis points there, but the competition is pretty tough, so we have to be competitive in the market. On the rest of the funding book, Federal Home Loan Bank advances and brokered deposits, we are basically at market at this point. Not a lot of benefit on that side. Things are kind of rolling into current at rates that are current rates now.

Paul Perrault: The margin gain is going to be with better loan production. In that environment, that is the better lever that I can see as I look a few months down the road.

Justin Crowley: Okay. Great. We will leave it there. I appreciate it.

Operator: Yep. Okay. Your next question comes from the line of David Bishop with Hub Group. Please go ahead.

Paul Perrault: Yeah. Good afternoon.

David Bishop: Hi. Hey. Quick question, Paul, Carl. In terms of the investor CRE—I appreciate the slide at the back there—looks like a slug of that is coming up for maturing or repricing. Just curious, in terms of the risk you point out there, is that more of debt service coverage risk or refinance risk, or both?

Paul Perrault: I did not catch the preface, David. I could not clearly hear what the preface was. What is it that you are asking about?

David Bishop: On the investor CRE portfolio that is coming up for maturity here in the next couple of quarters, I think in the slide deck, you mentioned some risk factors there. Just curious if that is more pertinent in terms of debt service coverage risk, refinance risk, or a combination of both—where you see the risk in that book? Thanks.

Paul Perrault: Mark will answer that.

Mark Meiklejohn: Yes, I will take that. We have the maturity and refinance—there is a fair amount coming up over the next four quarters. As we look forward through it, I was taking a look at it the other day, and there is one substandard loan in that portfolio. It is a property that is being redeveloped. We expect that to work itself out, and there are two smaller criticized loans. The rest of that is a pass book. So I think we feel pretty good both with maturity and repricing as we move through those maturities, whether they are hard maturities or pricing maturities.

David Bishop: Got it. And then I noticed just the linked-quarter trends—the loan 90-day past due seemed to decline the same amount nonaccruals went up. Is it the right way to read into it that they just migrated to nonaccrual from past due?

Mark Meiklejohn: Yeah. I think that is fair to say.

David Bishop: Got it. Then just one follow-up in terms of the board approval for the buyback there. Any color or indication when you might be getting regulatory approval? I do not know if there is any sort of a time frame you would feel comfortable sharing.

Paul Perrault: Well, there is a little time frame. I never try to predict exactly what the Federal Reserve is going to do, but we expect it to happen reasonably quickly, within the month.

David Bishop: Got it. Thank you.

Carl Carlson: Okay. Who is next in line? Maybe it is only a few days.

Paul Perrault: Who is up next?

Operator: I am sorry. Your next question comes from the line of Karl Shepard with RBC Capital Markets. Please go ahead.

Karl Shepard: Hey. Good afternoon, guys.

Paul Perrault: Echo.

Karl Shepard: Just maybe to get ahead of ourselves a little bit on the regulatory approval of the buyback—but maybe just high-level thoughts—how do you want us to think about what could go into your decision-making process if you want to go ahead and use it? I know you have the CRE issue or concentration, but you also have lots of capital. So maybe can you frame up a little bit?

Paul Perrault: We are actually pretty far ahead on the real estate piece of it for the leverage concentration. We have created an opportunity to do these kinds of things with that. Go ahead, Carl. Any other factors?

Carl Carlson: No. We still remain committed to that 300%. The board is certainly behind that and wants us to hit that and stay on target. But as capital continues to grow, and the size of the balance sheet, I think we are in good shape to be able to continue to move forward with at least this initial authorization.

Karl Shepard: Okay. So let me just try it one more time, I guess. If you feel like you are on pace to get under the 300% by the 2027 year, you are comfortable using a little bit of buyback. Is that a fair way to think about it?

Paul Perrault: Yeah. Particularly when you couple it with the current shrinking of the balance sheet with originations being way off from what we are used to, and payoffs still coming in. So when you look at the current environment, the idea of a buyback seems to fit in very nicely.

Karl Shepard: Great. I appreciate that. I know it is a topic for investors. And then I guess on a follow-up question here for you guys, both of you used the term “close the gap,” and I was wondering if you can help us understand what gives you the confidence that the macro or environmental headwinds you saw this quarter are starting to fade and then, once you get one quarter past the conversion, what kind of tailwinds do you see at the core from not having to spend the time and energy and focus on getting that right?

Paul Perrault: I expect people to move from making sure we have customer retention and problem solving—you always have those things associated with a massive conversion like this. We are at the point now where I think of it as like you built a new home. When you move in, there is a punch list of things that need to get done, and that is where we are. I am expecting that our bankers and support personnel will now continue to shift toward loan production and fee income production, which will get us on the right track to where we had hoped we would be. Carl, do you want to add anything?

Carl Carlson: No. I think just the uncertainty in the market—so we feel good about our loan pipelines. We feel good about what is going on out there, but we know they could be better. There is a lot of uncertainty in the market. In late February, and then we have the geopolitical things that are going on. We have seen interest rates increase, particularly the yield curve steepening, which sets people back even if it is momentarily. We also have the multifamily proposals for rent control in the Boston market, which has a lot of folks in wait-and-see mode, and in Rhode Island. In Rhode Island, it was passed in Providence.

So there are a number of things that we think will get resolved sooner rather than later—or hope to get resolved sooner rather than later—that take some of that uncertainty off the table and move things forward.

Karl Shepard: Thank you both.

Paul Perrault: Okay, Carl.

Operator: Your next question comes from the line of Stephen Moss with Raymond James. Please go ahead.

Carl Carlson: Hey.

Stephen Moss: Carl, maybe starting for you—I will just circle back to the margin here. In terms of just thinking about the day count here, you do have, it looks like, a certain five to six basis points drag or increase potential in the upcoming quarter on the margin. Just curious if you could be a little bit over the 3.80% number for the second quarter here?

Carl Carlson: Anything is possible. Day counts always come into play. As far as I am concerned, I am less focused on the margin number and more on the actual net interest income that we earn. Just to give you a little sense around that, payroll deposits are something that drags us on the margin. We have average payroll deposits that are substantial. In the first quarter, they were about $1.2 billion in average balances. They are highly volatile during the week, and depending on what day of the week we close for the quarter, that is the ending balance of those balances.

Usually the first quarter is the highest quarter for average balances—that is because of tax and other things that go through that—and it was about $200 million more than the fourth quarter. We expect that the average balance in Q2 will be lower, and it will be lower still in Q3, then bounce back in Q4. But those balances we have very little spread on. That is mostly a fee-income business, and the margins around that may be around 35 to 40 basis points. As those balances move, it could move the margin overall.

Paul Perrault: As Carl is learning about the payroll business, it is not because he is not doing his job. It was a legacy Berkshire business that they have been in for some time. It is quite volatile. I look at it daily and it goes, I think the lowest I have seen is about $600 million in deposits to a little over $2 billion in deposits. We do not employ it as we do our other sources of funding.

Carl Carlson: On the loan side, on the commercial side, the CRE loans and the C&I loans are actual day-basis loans, and the others are 30/360. We will get a pickup—there is an extra day next quarter. I will let you guys figure out how you want to calculate the margin; I see it get calculated in lots of different ways.

Stephen Moss: 100% on that. Okay, that is fair enough. And then, the second thing here for me, in terms of credit and the provision and charge-off guidance—so provision to exceed charge-offs—how are you thinking about the level of charge-offs for the remainder of the year?

Mark Meiklejohn: I think we provided some guidance on the provision. I think those are good numbers, probably trending a little bit towards the high end of that guidance. Charge-offs, I expect to exceed the provision, and that is as a result of the aggressive reserving that we have in place, and the credit marks that we have in place. As an example, we have about $80 million on our substandard portfolio, and net of substandard, we are at about 91 basis points coverage. Those charge-offs will effectively be funded out of that reserve. So I expect provision will run lower than charge-offs.

Stephen Moss: Okay. So pretty substantial charge-offs then as the year goes on?

Mark Meiklejohn: That is hard to say. It depends on how we resolve some of these loans. They will be in excess of provision.

Stephen Moss: Okay. Fair enough. And then, sticking with credit for the moment, in terms of the office loan that went to nonaccrual here and the multifamily, maybe just color around the LTVs and debt service coverage ratios for those properties and timing on resolution?

Mark Meiklejohn: I will start with the larger loan, which is the office property. That is a downtown Boston property. It is a larger loan. We have a participant in that deal. Our share of that deal is around $17 million and change. There is about 50% occupancy, about a 0.7x debt service coverage. On that particular loan, we are working with the sponsor on a potential sale of that property. Between specific reserves and then customer reserves that we hold against the loan, we have about 40% coverage on that loan.

Even though it is a somewhat new nonaccrual, we feel like we are in a pretty good place from a reserving perspective and we will be able to work with the borrower through that. As far as the rent control, I want to make a comment on New York rent control. We only have seven rent-control properties in New York. It is a total of $18 million, so that represents the entire portfolio. This was two particular loans. They are related to each other. They total $9 million.

I do not have the statistics on those loans—loan-to-value, debt service coverage—but, again, we are about 40% coverage on a reserve basis, and we are potentially looking at selling either the notes or the loans near term.

Stephen Moss: Appreciate that color there. Maybe just on the loan growth outlook for the second quarter and the pipeline here—just kind of wrestling a little bit with the flattish comment for the upcoming quarter. Is it just more CRE runoff at the end of the day than you expected that drives that, versus the pipeline, or are they both typically driving it?

Paul Perrault: It might be equal, but it is the distraction and the internal focus that everybody has had now for a number of months, coupled with more prepayments than we expected, coupled with customers and prospects not moving as quickly as we thought on purchases or activity that would cause loan drawdowns. To get that cranking again, it is going to take a little while. But we are on it. I think it will happen. How quickly and how deeply, I would be speculating, but we all know what we need to do to get there.

Stephen Moss: Okay. Great. That is everything for me at the moment. Appreciate all the color.

Operator: Our next question comes from the line of Laura Havener Hunsicker with Seaport Research. Please go ahead.

Laura Havener Hunsicker: Yes. Hi. Good afternoon.

Carl Carlson: Hi, Laurie.

Laura Havener Hunsicker: Just wanted to stay with credit here. I really appreciate the details on slide 5.06. The $192 million criticized office—how much of that is coming due this year and next year? Are there any lumps, any colors you can give us? Obviously, you referenced some maturing. I just did not know the amount.

Mark Meiklejohn: I will go over it again for you, Laurie. Over the next four quarters, in terms of criticized and classified, the total is about $55 million. Twenty million of that is substandard. Again, I mentioned earlier, that is a property that is being redeveloped for a major retail tenant. That is a relatively new event, so I think that is going to help us with a favorable resolution there. The other two loans are both special mention, and they have very strong sponsors. I do not expect any issues with those. One is $18 million maturing in the third quarter, and the other is $17 million maturing in 2027. That represents the total of criticized or classified loans in office.

Laura Havener Hunsicker: Okay. And I am sorry. Just to clarify, the $18 million and the $17 million, those are office?

Mark Meiklejohn: Correct.

Paul Perrault: Okay.

Carl Carlson: Okay.

Laura Havener Hunsicker: Great. And how much office charge-offs were there this quarter?

Mark Meiklejohn: It is in the deck, but there was a single charge-off for just under $7 million, and that represented the resolution of a downtown office property that we have had in nonaccrual for some time. We took the charge-off in the first quarter. That loan will resolve in the second quarter. The deal has been inked, and we are just waiting for it to close, but we went ahead and took the charge on that.

Laura Havener Hunsicker: Okay. And I am so sorry. What is the total balance of that loan?

Mark Meiklejohn: $23 million.

Laura Havener Hunsicker: $23 million. Okay. So great. So all of your CRE charge-offs this quarter were office.

Mark Meiklejohn: It was a single loan, Laurie, just to be clear. One single loan.

Laura Havener Hunsicker: One single loan. Right. Yeah. Okay. Great. And then your C&I charge-offs were $6.6 million. I am thinking most of that is the discontinued specialty vehicles or the Eastern Funding—can you help us think about what that is and what the nonperformers are on those two categories?

Mark Meiklejohn: That was split pretty evenly between SBA and Eastern Funding. In the case of Eastern Funding, it was a charge-down of a loan that has been a long-term workout. In the case of SBA, it was an SBA charge-off. In terms of the nonperforming balances, Vehicle was at $3.9 million. Macrolease is at $5.5 million—that is down pretty significantly from prior quarter. We did have a resolution of an $11 million loan. It was that Orangetheory franchise that we talked about last quarter, I believe. That resolved itself, and I expect it will be back accruing within the current quarter. I am sorry—it is accruing already. It will be upgraded within the current quarter.

And you did not ask, but Firestone is a little under $1 million.

Laura Havener Hunsicker: Oh, that is great. Okay. Great. And then just one last question for me. Carl, your final one-time charge is $13 million, a little bit higher than the $10 million you had expected. Can you help us think about what were the differences there? Thanks so much.

Carl Carlson: Sure. On the compensation side, those numbers came in a little bit higher. Accounting and tax came in a little bit higher. Some of the contract terminations came in a little higher than I expected for the quarter. But overall, we came in on top of what we originally announced—$93 million was our original estimate when we announced the transaction. We came in basically right on top of that number, but in different buckets than we thought. The IT folks did a great job of negotiating and executing on a lot of the contracts and the conversion costs, which helped pay for some of the things that went over.

At the end of the day, we came in right on top of the original $93 million, and merger charges are over now. They are done. If anything sneaks through, it is not going to be a merger charge. It will just go in the operating run rate.

Laura Havener Hunsicker: Perfect. Thanks so much.

Paul Perrault: Okay, Laurie.

Operator: Next question comes from the line of David Konrad with KBW. Please go ahead.

David Konrad: Yeah, hey. Good afternoon. I just want to circle back on the NIM a little bit because it is pretty important with what the stock is doing today. I just want to clarify the language of the 3.80% stabilized NIM. Are you thinking about that for the second quarter and then build from there, or is 3.80% kind of the full 2026 average NIM in your thoughts?

Carl Carlson: I really liked the 5.80% you threw out there. I just wish I was there. We feel pretty good about the 3.80% for Q2 and feel that we will be building on that. Again, a lot of this is dependent on loan growth—that really drives a lot of this. I think the second quarter will be more about the funding side as well as loan growth. I expect that we will get the funding rates down to where they are supposed to be on some of our deposit products. Of course, everything changes in the market, but we have a little bit of a steeper yield curve, so I feel good about how things look going forward.

Now, if rates drop 25 basis points—just to throw that out there, even though there is no expectation of this right now—if rates happen to drop 25 basis points, that would cost us about $6.8 million a year in net interest income, and that is a parallel move. I do not think anybody is expecting rates to go up—we will see what happens.

Paul Perrault: A lot of our loan originations are in the five-year neighborhood, and those originations should be helpful as we go forward into the second and third quarter.

David Konrad: And so commercial yields—the commercial loan book at around 6.20%—that is probably pretty good for now, so that will just benefit from the mix as it grows. The key is to grow the commercial real estate at 5.74% to get that up to the 6.20% range.

Paul Perrault: Yes, but I would add that we are still on track to target getting to the 300% leverage of commercial real estate to capital. We are probably ahead of the original schedule, and so we have turned the real estate lenders back on because we can easily absorb some decent production and still make the targets to get to the 300% in plenty of time. That is all good news.

Carl Carlson: Just to add a little bit of color on the loan origination side of things. The CRE loans we originated this quarter had a WAC of 6.30%. The C&I loans were at 6.34%, and the consumer loans were coming in at 6.03%. The spot weighted average coupon on those books at the end of the quarter: commercial real estate at 5.57%, C&I at 6.75%, and consumer loans at 5.01%. We are originating at higher coupons than what is on the book. Those coupons do not include purchase accounting; that is just the rate on the loan.

Paul Perrault: Right.

David Konrad: And then last one, just building off of that on the bond book. You actually had decent lift there. What is new money going in at on the bond portfolio?

Carl Carlson: That is going in at around 4.29%. I think we purchased about $130 million during the quarter. Durations are in about 3.5 to 3.8 on that book.

Paul Perrault: Got it.

David Konrad: Okay. Thank you. That is all I had.

Carl Carlson: Appreciate it. Okay.

Operator: And our final question comes from the line of Daniel Cardenas with Brain Capital Research. Please go ahead.

Daniel Cardenas: Good afternoon, guys. Just a couple follow-up questions on the office—the Boston office credit that went on NPAs this quarter. Was that Class A property or a Class B?

Paul Perrault: It is a B.

Daniel Cardenas: Okay. And the occupancy rate that you gave out, that 50%—is that kind of indicative of the overall marketplace?

Paul Perrault: No. I do not think so. There is certainly pressure, and occupancy is down. I think it is about 75% occupancy—about 25% vacancy would be the number. So that is low. How much of that is being unused but still under good lease—you can speculate on what that may or may not be. But I think we read about some green shoots in leasing that have been happening, not the least of which is JPMorgan moving into the big new building over the South Station area—quite a few floors. So they will introduce some competition maybe.

Daniel Cardenas: Got it. And how does the rest of your portfolio look? I am sure you have taken a deep dive. Are there any concerns in that Boston office portfolio?

Mark Meiklejohn: We have taken a deep dive. We have about $1.2 billion in office, and only about $200 million is in downtown Boston. We have talked about two problem loans on the call already—one that we took the charge-off on and then the new nonaccrual. Those are our two largest nonaccruals in our book. Beyond that, the portfolio is criticized, but we have good reserves. We look very closely at all those loans, and we reassess the reserves all the time.

Carl Carlson: Okay.

Daniel Cardenas: Perfect. And then last question for me is, as I think about operating expenses for you guys—

Carl Carlson: Daniel, I think we lost you, but you asked about operating expenses. I am getting this question all the time, so I am going to guess what you are asking. We are certainly on target, if not better, than what we originally anticipated and targeted for operating costs, and we laid that out in the deck. We feel good about where we are right now going forward.

Paul Perrault: Are you there, Daniel?

Carl Carlson: Is anybody there? We have lost Daniel.

Mark Meiklejohn: Yeah.

Operator: With no further questions in queue, I will hand the call back over to CEO, Paul Perrault, for closing remarks.

Paul Perrault: Thanks, Tina, and thank all of you for joining us today, and we look forward to talking with you next quarter. Have a good day.

Operator: Thank you again for joining us today. This does conclude today’s conference call. You may now disconnect.