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DATE

Fri, Oct 23, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Denis Sheahan
• Executive Chair and Chair of the Board of Directors - Bob Rivers
• President and Chief Operating Officer - Quincy Miller
• Chief Financial Officer - David Rosato

TAKEAWAYS

• Operating Net Income -- $111 million or $0.51 per diluted share, representing a 4% increase from the prior quarter and a 50% increase from the prior year.
• Net Interest Income -- $257.9 million, growing 2% linked quarter due to continued balance sheet growth.
• Net Interest Margin -- 3.62% on a fully taxable-equivalent basis, a decline of 4 basis points linked quarter as higher funding costs offset improved asset yields.
• Operating Efficiency Ratio -- 47.5%, an improvement from 49% in the prior quarter.
• Operating Return on Average Tangible Common Equity -- 15.7%, representing a 37-basis point improvement from the previous quarter.
• Total Loans -- $23.97 billion at period-end, an increase of 1.1% linked quarter driven by commercial real estate and commercial and industrial lending results.
• Commercial Real Estate Loans -- $9.62 billion at period-end, supported by originations despite a headwind from payoffs.
• Commercial and Industrial Loans -- $4.78 billion at period-end, reflecting broad-based growth across the portfolio.
• Total Deposits -- $26.02 billion at period-end, an increase of $98 million despite seasonal municipal outflows.
• Average Deposits -- $26.13 billion, increasing $667 million or 2.6% from the second quarter.
• Cost of Total Deposits -- 156 basis points, representing a 9-basis point increase from the prior quarter due to competition in the New England market.
• Non-performing Loans -- $84.8 million or 0.36% of total loans, representing the third consecutive quarter of improvement.
• Net Charge-offs -- $5.2 million or 0.09% of average total loans, down from 17 basis points in the second quarter.
• Assets Under Management -- $10.8 billion, a linked-quarter increase of $156 million driven by $97 million in positive net flows.
• Total Revenue -- $306.6 million, representing 1% growth from the prior quarter.
• Operating Non-interest Expense -- $159.7 million, a decrease of $6.7 million linked quarter due to lower benefit and occupancy costs.
• Share Repurchases -- 2.6 million shares at a total cost of $56.7 million and an average price of $22.11 during the third quarter.
• Cash Dividends -- $32.4 million paid during the quarter at a rate of $0.15 per share.
• Tangible Book Value Per Share -- $12.96, a 1% decline linked quarter due to higher unrealized losses in the available-for-sale securities portfolio.
• Fiscal 2026 NIM Guidance -- 3.60% to 3.65% for the full year, with management expecting the margin to remain stable in the fourth quarter.

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RISKS

• CFO Rosato warned that "deposit pressure continues" and "is going to continue into Q4 and into next year" if the Federal Reserve continues to raise interest rates.
• CEO Sheahan stated, "the pace of closings has been somewhat slower than anticipated as some clients take a more measured approach to investment decisions amid interest rate uncertainty," noting a risk to the timing of loan growth.

SUMMARY

Eastern Bankshares, Inc. (EBC +1.63%) reported record operating results for the third quarter, driven by positive operating leverage and steady commercial loan growth. Management reported that commercial real estate originations and broad-based commercial and industrial demand contributed to a 1.1% increase in period-end loan balances. The company maintained a focus on capital management, returning over $89 million to shareholders through dividends and share repurchases. While deposit competition in the New England market remains elevated, management expressed confidence in the core deposit base and its ability to fund future loan growth while managing margin performance.

• CEO Sheahan stated that commercial pipelines end the quarter at approximately $1 billion, with a balanced mix between commercial real estate and commercial and industrial segments.
• Management reported no plans for a formal branch rationalization program, with CEO Sheahan noting that any potential branch changes are evaluated on a "onesie, twosie" basis.
• Regarding the strategy for mergers and acquisitions, CEO Sheahan stated, "We are not focused on M&A at all," emphasizing organic growth and capital returns.
• CFO Rosato reported that technology and AI spending is increasing, but the company expects to "absorb that in our full expense base in a manner that puts year-over-year expenses well under control."
• The company expects fixed-rate asset repricing of $1 billion in the fourth quarter to help mitigate rising funding costs even if additional interest rate hikes occur.
• Management reported that the investor office portfolio represents only 4% of total loans and continues to perform within the company's expectations.

INDUSTRY GLOSSARY

• C&I: Commercial and Industrial loans.
• CRE: Commercial Real Estate.
• CET1: Common Equity Tier 1 capital ratio, a measure of a bank's core equity capital compared to its total risk-weighted assets.
• FTE: Fully Taxable Equivalent, an adjustment that makes the interest on tax-exempt assets comparable to interest on taxable assets.
• AUM: Assets Under Management.
• NPL: Non-performing Loan, a loan on which the borrower is not making interest or principal payments.
• AOCI: Accumulated Other Comprehensive Income, which includes unrealized gains and losses on certain investments.

Full Conference Call Transcript

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

Denis Sheahan: Thank you. Good morning, everyone, and thank you for joining us. On the call today with me are Executive Chair and Chair of the Board of Directors, Bob Rivers, President Chief Operating Officer, Quincy Miller, and our Chief Financial Officer, David Rosato. We're pleased with our third quarter performance, which reflects disciplined execution of our priorities. We delivered record operating earnings, generated attractive returns, maintained excellent asset quality, and returned meaningful capital to shareholders, all while continuing to drive organic growth across both our banking and fee-based businesses. These results further reinforce Eastern's standing as a premier bank in Greater Boston, one of the nation's largest and most affluent banking markets.

The increase in period-end loan balances was primarily driven by strong commercial real estate originations and broad-based C&I growth. As expected, payoffs moderated from the second quarter, leading to solid growth overall in commercial real estate. Commercial loan pipelines remained strong, although the pace of closings has been somewhat slower than anticipated as some clients take a more measured approach to investment decisions amid interest rate uncertainty. Overall, customers remain resilient as business activity continues to generate demand for financing. We believe there are a lot of opportunities in the commercial banking segment, and we are well positioned to gain share.

Customers value our ability to deliver a broad set of commercial capabilities typically associated with larger institutions, while also providing the certainty of execution that comes from local decision-making and knowledge. The Eastern brand is highly regarded across our market, and the franchise is deeply rooted. We live and work here, and our extensive involvement in the communities we serve resonates with customers. On the funding side, period-end deposits grew modestly despite seasonal municipal outflows. While the deposit environment remains competitive and costs move higher, we remain committed to gathering core deposits to support our growth strategy and balancing these efforts with margin performance.

Importantly, the strength of our core deposit base and limited reliance on wholesale funding provide us with the flexibility to stay disciplined while also supporting customer relationships. Wealth management is an important component of our long-term growth strategy, and we achieved another successful quarter. Assets under management and administration increased from the end of the second quarter, driven by both positive net flows and market appreciation. Our comprehensive team-based approach continues to differentiate us across our target market of $2 million-$20 million in investable assets. We offer a level of service to this segment that larger firms typically cannot deliver. Importantly, we get compensated well for these services with an average fee ratio of approximately 70 basis points.

While we are in the early stages of capitalizing on the full potential of this business, the increasing alignment between our wealth and banking teams, combined with the attractive wealth demographics across our footprint, is generating meaningful momentum, and we are encouraged about its long-term outlook. Our asset quality remains a clear source of strength, reflecting conservative underwriting and proactive risk management. Net charge-offs declined linked quarter, and as anticipated, non-performing loans improved for the third consecutive quarter following the HarborOne merger. We are confident in our credit profile, including the sectors that have received greater attention in Boston, such as life science, which we have limited exposure.

We know our investor office portfolio exceptionally well, and it represents only 4% of total loans. The portfolio is well reserved and continues to perform within our expectations. While overall credit trends remain favorable, our experienced credit team continues to actively monitor the macro environment and local market for emerging risks that could impact our customers, positioning us to respond quickly and decisively when needed. Finally, given our profitability, we continue to generate capital in excess of our growth needs. As we have consistently communicated, we are committed to thoughtfully rightsizing our capital position over time.

That commitment was evident again this quarter as we returned meaningful capital to shareholders through both share repurchases and quarterly dividend while continuing to support organic growth opportunities. As always, our results reflect the efforts of an exceptional team, and I want to thank our colleagues for their continued commitment and execution. I also want to express my gratitude to our customers for choosing Eastern as their financial partner and to shareholders for their ongoing trust and support. We never take these relationships for granted, and every day we are focused on delivering strong, sustainable performance and value for all stakeholders. David, I will hand it over to you to provide further details on third-quarter financials.

David Rosato: Thanks, Denis, and good morning, everyone. Our third quarter financial performance was strong and highlighted by record operating net income. Further improvement in key profitability metrics, including return on average assets and return on average tangible common equity. Positive operating leverage, driven by an increase in net interest income and lower expenses. Solid balance sheet growth, supported by strong commercial lending activity, sustained excellent asset quality and meaningful capital returns to shareholders. The third quarter also benefited from a modestly lower effective tax rate, primarily reflecting a higher level of tax-preferenced items. Going forward, we expect the effective tax rate to return to about 22%.

We reported record operating net income of $111 million, or $0.51 per diluted share, an increase of 4% linked quarter and 50% from a year ago, reflecting the enhanced earnings power of the company. Net interest income growth, combined with well-controlled expenses, produced another quarter of positive operating leverage. As a result, the operating efficiency ratio improved to 47.5%, contributing to a 3-basis point increase in operating ROAA to 141 basis points and a 37-basis point improvement in operating return on average tangible common equity to 15.7% compared to the second quarter. Total revenue of $306.6 million increased 1% linked quarter as growth in net interest income was offset by lower fee income.

Starting with slide five of the presentation, net interest income grew 2% linked quarter, reflecting the benefit of continued balance sheet growth. Net interest margin declined 4 basis points to 3.62%, which was in line with our expectations as higher funding costs more than offset improvement in asset yields. Asset yields increased 2 basis points, driven by favorable loan and securities repricing, while interest-bearing liability costs rose 8 basis points due to higher deposit costs. Net discount accretion contributed 26 basis points to the margin, compared to 28 basis points in the prior quarter. Excluding accretion, the margin declined 2 basis points linked quarter.

Importantly, our year-to-date net interest margin of 3.64% remains well within our full-year guidance range of 3.60%-3.65%. While the benefits of a steeper yield curve and higher rates are supporting asset repricing, those tailwinds continue to be offset by competitive deposit pricing. As a result, we currently expect net interest margin to remain relatively stable in the fourth quarter and to modestly improve into next year. We show the repricing characteristics of our interest-earning assets on slide six. We have approximately $8.8 billion of floating rate assets repricing constantly with short-term rates. Beyond that, we expect approximately $1 billion of fixed rate variable assets repricing in the fourth quarter and roughly $800 million per quarter in 2027.

As detailed on slide seven, operating non-interest income decreased by $5.2 million, or 16%, compared to a particularly strong second quarter result. The largest contributor to the variance was a $6.3 million decrease in income from investments for employee retirement benefits, reflecting weaker equity market performance. This unfavorable impact on fee income was partially offset by a $2.5 million reduction in related benefit costs reported in non-interest expense. Miscellaneous income and fees also decreased $3.1 million, largely as the result of gains on the sale of commercial loans recognized in Q2 that did not reoccur in Q3. Turning to wealth management on slide eight. Assets under administration increased to $11.6 billion, including $10.8 billion in assets under management.

AUM increased $156 million linked quarter, primarily driven by $97 million in positive net flows, highlighting the continued momentum in the business. Wealth management fees declined modestly from the prior quarter as growth in AUM revenues was more than offset by lower tax preparation fees, which are seasonally higher in the second quarter. Compared to Q3 2025, fees increased 10%, reflecting strong organic and market-driven asset growth over the last year. As detailed on slide nine, the third quarter demonstrated our ongoing focus on prudent expense management and operating efficiency as non-interest expense decreased $8.3 million, or 5% linked quarter. Notably, we did not incur any non-operating costs in the current quarter compared to $1.6 million in Q2.

On an operating basis, non-interest expense was down $6.7 million. The current quarter benefited from the following: a $2.2 million decrease in salaries and employee benefits, primarily due to lower costs related to employee retirement benefits that I referenced earlier. A $1.9 million decrease in occupancy and equipment expenses, reflecting lower depreciation and maintenance costs. A $1.8 million decrease in professional services, primarily due to shareholder advisory fees in Q2 that did not reoccur in the third quarter, and a $1.9 million decrease in other operating expenses, largely driven by a of unfunded commitment reserves. These declines in non-interest expense were partially offset by a $1 million increase in FDIC insurance costs.

Moving to the balance sheet, starting with deposits on Slide 10. Period-end balances increased $98 million linked quarter despite seasonal municipal outflows. On an average basis, deposits increased $667 million, or 2.6% from the second quarter. Consistent with recent trends, money market balances continued to grow as customers maintained a preference for liquidity. Total deposit costs of 156 basis points increased nine basis points linked quarter with a September spot rate of 159 basis points, reflecting elevated competition for deposits in the New England market. In response to higher short-term rates, we took targeted actions to appropriately position offerings to defend and grow market share. Looking ahead, we remain focused on gathering core deposits while balancing growth with margin performance.

Looking at loans on Slide 11. Period-end balances increased $261 million, or 1.1% linked quarter. CRE balances grew $229 million, supported by strong originations, although payoffs remained a headwind despite moderating from Q2 levels. C&I balances increased $93 million, reflecting broad-based growth across the portfolio and continued client activity. Commercial pipelines remained strong and ended September at approximately $1 billion with a balanced mix between CRE and C&I. Turning to consumer lending. Home equity balances increased $44 million. Given the strong underlying demand across our footprint for this product, we continue to see home equity as an attractive area of growth. Residential mortgage balances were up modestly from Q2.

However, our expectation is the residential portfolio will remain relatively flat in 2026 as we favor HELOC and commercial loan growth. Moving to Slide 13. Our capital position remains strong, as indicated by CET1 and TCE ratios of 13% and 9.6%, respectively. We are focused on right-sizing capital through organic growth, share repurchases and quarterly dividends. We expect to continue to generate excess capital but are managing our CET1 towards the median of the KRX. Tangible book value per share of $12.96 declined 1% linked quarter, primarily driven by higher unrealized losses in the available-for-sale securities portfolio reflected in AOCI.

Excluding this mark-to-market impact, tangible book value per share would have increased approximately 2% from Q2, despite returning $89.1 million of capital to shareholders during the quarter. In addition to $32.4 million of cash dividends paid, we repurchased 2.6 million shares for $56.7 million at an average price of $22.11, which was $0.30 below the VWAP for the quarter. As a result, our diluted common shares outstanding were 215.5 million as of September 30th. Fourth quarter to date, we have also repurchased an additional 1.6 million shares through yesterday for a total cost of $33.8 million and now have 8.5 million shares remaining in our authorization that runs through the end of 2027.

We continue to view our buyback through two lenses, core and opportunistic. The core component reflects our need to consistently repurchase shares to steadily reduce capital levels. The opportunistic component is more price sensitive as we remain disciplined and focused on creating value for shareholders. As a result, the pace of repurchases may vary from quarter to quarter based on market conditions and the stock's valuation. While we control capital generation and the pace of buybacks, we do not control valuation. As displayed on slide 14, asset quality remains excellent.

Net charge-offs to average total loans of 9 basis points declined from 17 basis points in Q2, and NPLs improved by $24.6 million to $84.8 million, or 36 basis points of total loans. Notably, NPLs continue to improve in both the legacy Eastern and acquired HarborOne portfolios. Commercial criticized and classified loans increased modestly from the second quarter, reflecting higher balances in both the legacy Eastern and HarborOne portfolios. The increase was primarily driven by a small number of relationships. To conclude, our third quarter results underscore the strength of the franchise.

We generated record operating net income, produced positive operating leverage, and maintained excellent asset quality, all while executing against our priorities of growing organically and returning capital to shareholders. As we look ahead, we remain encouraged by the underlying momentum across the franchise. At the same time, we continue to operate in a dynamic environment characterized by elevated deposit competition, evolving interest rate expectations, inflationary pressures, and broader macroeconomic uncertainty. While these factors may influence the pace of loan and earnings growth in 2027, we believe our relationship-based banking model, disciplined expense management, and strong balance sheet position us well to continue delivering attractive returns to shareholders.

This concludes our remarks, and we will now open up the call for questions.

Operator: At this time, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Damon DelMonte with Keefe, Bruyette & Woods. Damon, your line is open. Please go ahead.

Damon DelMonte: Hey, good morning, guys. Hope everybody's doing well today and thanks for taking my questions. Just want to start off on loan growth, kind of around the commentary with the C&I outlook with kind of a bit of a pause from customers. Just wondering if that impacts your outlook for the full year at all, or if you think you're still on track for your updated guide that you provided last quarter.

Denis Sheahan: Damon, good morning. Thanks for joining us. Pipeline still remained very robust. Actually, the C&I segment is the largest component of our pipeline overall, so we feel really good about that. But certainly the increase in interest rates, as you might expect, has an impact. We've more conversations with clients about the fact that rates have gone up, and so it does slow things down somewhat, but we're still optimistic overall and certainly regarding the targets we provided for this year.

As we look ahead into next year, we'll have to reassess, and we'll provide new guidance at the beginning of the year in terms of once we've had more time to digest the higher rate environment, what our outlook for 2027 would be.

Damon DelMonte: Okay, great. On the CRE side, are you seeing similar trends with payoffs kind of moderating so far here in the fourth quarter?

Denis Sheahan: Well, certainly, I'll speak to the third quarter. Payoffs did moderate. We did expect them to. If we go back to the beginning of the year, we did expect elevated payoffs, in part because of the environment, but also because of the HarborOne merger. As we anticipated in Q3, they did moderate somewhat, although at an elevated level overall. But in a higher rate environment, yes, we would expect payoffs to slow to some degree.

Damon DelMonte: Okay, great. Just one for David on securities. The average securities this quarter were up linked quarter. Could you just remind us, was that a kind of a full quarter impact from activity in the second quarter or were those purchases here in the third quarter?

David Rosato: It was both, Damon. We cash flow about $40 million a month, which we have been reinvesting this year. Plus, we have added to that both last quarter and this quarter.

Damon DelMonte: Okay. Can we expect there to be a little bit more growth in the securities portfolio?

David Rosato: Yeah.

Damon DelMonte: Yeah.

David Rosato: Yeah, sorry. I think that trend of reinvestment and net modest growth will continue into Q4.

Damon DelMonte: Okay, great. Okay, that's all that I had for now. I'll step back. Thank you.

David Rosato: Thanks.

Denis Sheahan: All right. Thanks, Damon.

Operator: Your next question comes from the line of Justin Crowley with Piper Sandler. Justin, your line is open. Please go ahead.

Justin Crowley: Hey, good morning, everyone.

Denis Sheahan: Good morning.

Justin Crowley: I was wondering if you could frame up for us the state of play on the deposit side a bit more. I think you kind of alluded to this, David, but it sounds like it's your sense that competition, and I suppose yourselves included, moved on rate just in advance of the September hike. Could that be less of the case and we could see a longer lag here, especially if we think about a couple more hikes that may be on the way? How are you thinking about that going forward?

David Rosato: Yeah, it's the million-dollar question, Justin. The deposit pressure continues. I would say it's broadened out from smaller banks to larger regionals as well. We think it's going to continue into Q4 and into next year if we do in fact see another 75 basis points of tightening from the Fed. The good news from our perspective is, and we called it out in our comments, the $1 billion of fixed-rate asset repricing in Q4 and the $800 million or so a quarter next year. We believe that the fixed-rate asset repricing will outpace deposit cost increases, leading to a slightly better margin. But we underestimated deposit pricing in Q3, frankly, as you can see in our results.

Our core margin, if you adjust for a little slowdown in accretion in the residential mortgage portfolio, was down 2 basis points.

Justin Crowley: Okay. Got it. That's helpful. Just flipping to the lending side. You talked about higher rates and what it's doing as far as customers, some of the uncertainty. But curious for you folks, not that you go that far out on the risk spectrum, but just if you guys at all are tightening up the credit box in a meaningful way, and if there are just some deals that don't work with the move in interest rates.

Denis Sheahan: Well, we can give you a couple of examples. I was just talking to a senior lender about this, of loans that sort of had to be reworked because of the change in interest rates. It is a combination of, as you would imagine with higher rates, the debt service coverage ratio changes. So that requires that the borrower has to put in more equity to satisfy our requirements. That happened in that situation. Perhaps in some other situations, it may not.

The other thing that has an effect here is with higher rates, sometimes the sale price of a property would need to be renegotiated modestly to accommodate for the buyer's need to pay a higher rate on the loan. So those things have an effect, and they can have an effect on the speed to close those loans. It can also have an effect on demand. But we have been through this before, different rate cycles, and I am confident in the team's ability to sort of weather through this period.

David Rosato: Justin, I would just add to that because our credit box is fairly tight and conservative, our customer base has the ability to put up more equity in the example that Denis cited, rather than a more highly levered client base who does not have that ability. So on a relative basis, I think we have a better ability to manage through this.

Justin Crowley: Okay, great. That makes sense. Just one last one. You guys have, of course, done a lot of work on just improving asset quality, you called that out, and maybe selectively moving some credits out of the bank if we think about the acquired portfolio. So I guess I am curious where you think you are there, and is the legwork basically complete at this point, or is there still a little room left to go?

Denis Sheahan: I think we feel like we're on track. As we mentioned at the beginning of the year, we knew we'd have sort of an increase in the non-performing assets, non-accrual loans, and we'd work our way through it. So if you look at our level of non-performers at the end of the quarter, 36 basis points, that's a pretty normalized level. So we think we're through most of the issues we needed to work through on the acquired portfolio.

David Rosato: Yeah. As Denis says, we're right on track. There's probably another quarter into Q1 at most of working through that portfolio. As you can see, that 36 basis points that Denis referenced, it is essentially half HarborOne and half Legacy, split right down the middle.

Justin Crowley: Got it. Great. I will leave it there. Thank you guys so much.

David Rosato: Thank you, Justin.

Operator: Your next question comes from the line of Feddie Strickland with Hovde Group. Feddie, your line is open. Please go ahead.

Feddie Strickland: Hey, good morning. Wanted to clarify on the directional NIM guide. Thanks, David, for that. Does that include any rate hikes, and does the fixed-rate repricing story still outpace funding costs in a scenario where we get, let's call it, two more hikes over the next couple quarters?

David Rosato: Yes. Good question, Feddie. Yes, it does include additional rate hikes, and the conclusion still holds.

Feddie Strickland: Okay. Just one more piece to that. Just again, appreciate the detail on the fixed rate asset repricing. Can you give us a sense for the rate that you're able to get on the new securities purchases, as well as where these loans are repricing up to?

David Rosato: Well, on the securities portfolio, if you look in the page that we have there, we've been able to drive up security purchases, on average, about 10 basis points a quarter through the last year. Some quarters a little higher, some quarters a little lower. We're putting in, depending what asset class you're talking about, whether it's mortgage backs, which we're primarily doing hybrid ARMs or municipal bonds. You're putting in yields at 6%-6.5% dependent on asset class. So quite additive to the portfolio. The second part of your question was on the loan side. With as much talk about competition on loan spreads, we're actually seeing loan spreads, for the most part, being held relatively stable.

So you're talking 175-200 basis points across our bread and butter CRE and C&I portfolios. Where we're really seeing spread competition is what I would call the larger, more marquee names in the markets that also would have strong fee income opportunities.

Feddie Strickland: Got it. That's helpful. Thank you. Just one more from me, just on expenses. Are there any items that could meaningfully add to the expense base in the fourth quarter? Directionally, as we think out to 2027, just given the step down in expenses in the third quarter, could we potentially see expenses either flat or maybe even slightly lower for the year? Just trying to get a sense for where they could go.

David Rosato: I would caution you a touch there. I would expect expenses to tick up a bit in Q4 relative to Q3. The investment advisory fees that we called out. Link quarter drove that down. That's not repeatable. Maintenance operating expense there was a little below trend. I would think more about the average of the second and third quarter, which puts that expense base call it 163, 164, in that neighborhood.

Feddie Strickland: Great. Perfect. Thank you so much. I'll step back.

David Rosato: Thanks, Feddie.

Operator: Our next question comes from the line of Tyler Cacciatori with Stephens. Tyler, your line is open. Please go ahead.

Tyler Cacciatori: Hey, good morning. This is Tyler. I'm from [@Bryce].

David Rosato: Morning. Hi, Tyler. Good morning.

Tyler Cacciatori: I was wondering if you could talk a little bit about the loan-to-deposit ratio. I know the seasonal muni outflows played a role this quarter, but is there any level you start to pull back on loan growth if deposit growth doesn't keep pace? Or is that not really a constraint you're focused on today?

David Rosato: If you look over many years, our loan-to-deposit ratio has ticked up. But if you look at our 930 balance sheet, we have $2 billion more deposits than we have loans today. We've made comments about our residential mortgage portfolio being a little larger than normal because of acquisition. So we're certainly focused on growing our deposit base to fund loan growth. But we're not at a point where we believe it would be a constraint on loan growth.

Tyler Cacciatori: Okay, great. Just one more quick one. Do you happen to have the spot cost of deposits, maybe at quarter end or in the month of September?

David Rosato: Yeah, we do. It was 156, as we said, for the quarter. We ended September at 159.

Tyler Cacciatori: Okay, great. That will be it for me. Thank you very much.

David Rosato: All right. Thank you.

Operator: Your next question comes from the line of Laurie Hunsicker with Seaport Research Partners. Laurie, your line is open. Please go ahead.

Laurie Hunsicker: Yeah, hi. Thanks. Good morning. Thanks for taking my questions. Just staying on margin. By the way, love slide six. That's super helpful. Spot margin, do you have that?

David Rosato: Sure. The spot margin for September was 3.62.

Laurie Hunsicker: Okay, great. Then just going back to expenses more broadly, and I realize you haven't yet given guidance for next year, but can you help us think about where you all sit in terms of a tech AI spend relative to where you were this year? Then branch rationalization, which is something that certainly some of your peers are looking at. How do you approach that?

David Rosato: Right. We're certainly focused. We have seen tech AI spend go up this year modestly. We're in the middle of a budget process where we are seeing increased ask for tech spend and people to support that tech spend. At the end of the day, we will be able to absorb that in our full expense base in a manner that puts year-over-year expenses well under control. They will increase, and they will increase modestly. But we don't think the tech AI spend is we're going to be sitting here in January delivering bad news on the expense line.

Denis Sheahan: As I will jump in, as far as your question about branch rationalization.

David Rosato: Thank you.

Denis Sheahan: We do not have a program you refer that some others may have of rationalizing branch no more than we would in any other period. Anything we think about there, whether it is expansion or potential branch closure is sort of onesie, twosie. We evaluate each of our markets and our presence there in terms of its growth potential or profitability, et cetera. So we do not have a significant plan in terms of branch rationalization.

Laurie Hunsicker: Okay, that is helpful. Then just very high level, Denis, maybe you can comment. I think we know the answer, but just would like to hear you say it. Whole bank M&A, where do you sit on that at the moment? Thanks.

Denis Sheahan: Yeah. Laurie, our position remains the same as it has been for quite some time. We are focused on. We are very pleased to deliver a nice clean quarter with sort of no non-operating items as David referenced. The profitability performance of the company is improving significantly. We are generating a lot of capital. We are returning a lot of capital, and that is exactly what we are focused on. We are not focused on M&A at all.

Laurie Hunsicker: Perfect. Thanks so much.

David Rosato: Thanks, Laurie.

Operator: As a reminder, if you would like to ask a question, simply press star followed by the number 1 on your telephone keypad. Your next question comes from the line of Jared Shaw with Barclays Capital. Jared, your line is open. Please go ahead.

Jared Shaw: Thanks. Hi, everybody. Should we assume with the removal of the guidance slide, are you removing guidance or how should we think about guidance from last quarter?

David Rosato: Yeah, Jared Shaw, I did chuckle to myself when I read your note last night. Our practice is guidance in January, mid-year update in July, not quarterly guidance. There really wasn't. We haven't removed anything. That's just what our practice is.

Jared Shaw: Okay. So what was left from July is still sort of we can call that still the current guidance.

David Rosato: 100%. And I slightly referenced that in the comments around the margin. Even though the margin was down, it's still within that guidance. But we have not changed any of our thoughts for full year 2026 relative to what we put out in July.

Denis Sheahan: Other than your earlier comments during Q&A, you referenced expenses in Q4, the tax rate.

David Rosato: Yeah

Denis Sheahan: For Jared, it is largely the same guidance.

Jared Shaw: Got it. Okay. Thanks for that. What are your thoughts on expected beta given the sort of the changed rate outlook and the competition that you referenced? How should we think about your thoughts of deposit beta through the cycle here?

David Rosato: Yeah. Again, a really important question. Our goal, our thought today is we will be able to achieve the historic 50% deposit betas that we did in the last up cycle. Every one of these cycles is different as we all know. What is different this cycle is the industry moved before the Fed moved, right? That is kind of what we are experiencing on deposit cost last quarter and slightly in Q2. It is the level of deposit competition, which is also driven by the level of loan demand ultimately is going to control that beta. There is nothing other than the fact that the industry moved sooner that should be different this cycle.

The deposit power of our franchise is only stronger now than it has been in the past as we are bigger and more important in our market. So we stand by the historical averages we've been able to achieve, which is essentially a 50% beta.

Jared Shaw: Okay. All right. Thanks. Then just finally for me, any update on the competitive environment on commercial with some of the consolidation that we've seen? Is that flowing through to the potential to see some movement among borrowers?

Denis Sheahan: Jared, yes. I mean, certainly there has been a change in the competitive environment with some of the consolidation that's happened. We've been able to attract talent to our company. We're very pleased with that. Very high caliber talent. And we've been able to keep our pipeline at an elevated level. And good growth in C&I, and now growth returning in CRE. So we are benefiting to a degree, yes, from the consolidation, and our outlook would, absent the higher rates. We'll give you some guidance in January as to what we think 2027 will look like. But the team is in place to be able to take more share in the market.

Jared Shaw: Great. Thank you.

David Rosato: Thanks, Jared.

Operator: There are no further questions at this time. I will now turn the call over to Denis Sheahan for closing remarks.

Denis Sheahan: Thank you for joining us. We look forward to speaking with you following our next quarterly earnings.

Operator: This concludes today's conference call. You may now disconnect.