Eastern Bankshares Inc (EBC) 2025 Q4 法說會逐字稿

Welcome to the Eastern Bank Shares Inc for quarter 2025 earnings conference call. (Operator Instructions)

Please note this event is being recorded for relate purposes. In connection with today's call, the company posted a presentation on its investor relations website, investor.easternbank.com which will be referred 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.

Actual results may differ maturely 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.

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 of future events. The company will also discuss both GAAP and certain non-GAAP financial measures.

For reconciliation, please refer to the company's earnings press release. I would now like to turn the call over to Bob Rivers, Eastern Executive Chair and Chair of the Board of Directors.

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.

First, I want to welcome our new colleagues from Harbor One 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 Harbor One was another important milestone in 2025. It strengthens our presence in key markets south of Boston and provides an entrance into Rhode Island 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.

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 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 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 a billion dollars, or 5.6% for the full year on a stand-alone 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. 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 and 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.

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. We believe that focusing on meaningful growth, 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. 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.

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 the fourth quarter 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.

Moving to the margin on slide 5. Net interest income of $237.4 million $243.4 million dollars on an FTE basis, increased $37.2 million from Q3. The growth was driven by marginal improvement due to higher interest earning asset yields. Included in that interest income was net discount accretion of $22.6 million compared to $10 million in the third quarter, reflecting the Harbor One 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. That discount accretion contributed 34 basis points to the margin compared to 17 basis points in the prior quarter.

Turning the slide 6, non-interest income of $46.1 million, increased $4.8 million from the third quarter. Q4 results were highlighted by Mortgage banking income, which increased $2.9 million to $3 million as we benefited from the addition of Harbor One'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 7, 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. This was due to the addition of Harbor One, which did not have a wealth management business.

Moving to slide A, non-interest expense was $189.4 million an increase of $49 million link quarter due to higher operating expenses and merger-related costs. Non-operating expenses of $33.4 million increased $30.2 million link quarter due to a $26.7 million increase in merger-related costs and a $3.5 million dollar lease impairment.

On an operating basis, expenses of $156.1 million increased $18.9 million due primarily to the addition of Fiber One. 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 Harbor One deposits.

$163 million of Harbor One brokered deposits matured in the quarter, and we anticipate the remaining 85 million to run off in Q1. Excluding the merger impact, deposits increased $20 million. Importantly, while still early, we have not experienced any material drawdowns of Harbor One deposits.

Total deposit cost of 159 basis points increased modestly from the third quarter, primarily due to a mixed shift from the addition of the Harbor One 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 Harbor One deposit base, we anticipate deposit costs to remain slightly elevated. However, we will work deposit costs down and target deposit tatas like our experience during the most recent tightening cycle, or about 45% to 50%.

With lags relative to Fed actions. Turning the slide 10, period end loans increased $4.7 billion or 25% link quarter, 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.

On a full year basis, organic loan growth was a billion dollars 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 [304] 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 Harbor One totaling $298 million were sold following the completion of the merger and the proceeds used to reduce Harbor One's wholesale funding.

Turning the 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 for 26% of the authorization announced in October at an average price of [1,779], which was $0.44 below the [VWAp] for the quarter.

Our diluted common shares outstanding were 224.4 million as of the year end. Start 2026, we have repurchased an additional 635,000 shares from 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. 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 link quarter, mostly due to $94 million of loans acquired from Harbor One that were thoroughly assessed and adequately reserved. We have very strong reserve coverage of 35% on these loans.

The Harbor One NPLs are largely driven by a handful of [largerre] 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.

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 Harbor One loans.

Criticized and classified loans of 793 million or 5% of total loans increased from 495 or 3.8% of total loans at the end of Q3. The increase is entirely from Harbor One Loans as Eastern Legacy criticized and classified loans decrease $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. The largest concentration is the multi-family 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 multi-family 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 financial starting off slide 16.

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 Cecil Accounting Standard ASU 202,508, which marginally reduced accretion and marginally helped tangible book value due to the elimination of the day to 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 Harbor One 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. Most notable is the accretion of the discount on acquired loans. We expect this will create net interest income of approximately $12 million 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 million 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 non-interest expense. 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. As a reminder, the core system conversion is scheduled for February.

On slide 19, we provide our full year outlook for 2026. Low 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 $1.02 billion to $1.05 billion with a full year FTE margin of 3.65% to 3.75%.

While provision will be based on the evolution of credit trends in 2026, we currently expect $30 million to $40 million of provision expense. Operating non-interest income is expected to be between $190 million 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 million to $675 million.

As a reminder, Q1 expenses are impacted by seasonally higher payroll and benefit costs of approximately $2 million 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. This concludes our comments, and we will now open up the line for questions.

Thank you.

(Operator Instructions) Feddie Strickland, Hovde.

Hey, good morning. Just wanted to drill down on the margin. 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, Fetty, it's David. Yes, that is, that is accurate. Our margin forecast does ramp up. Each marginally each quarter accelerates a little bit in the back half of the year, just as a reminder, we 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, steeper yield curve and margin expansion.

Great, thanks, David. And just one more if you could talk about pipeline mix today and what percentage of maybe C&I versus owner occupied [Siri], not owner occupied Siri, when heOs we might see, in terms of loan growth over the next couple of quarters.

Yeah, Fetty, it's Denis here. We, 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. It's.

About A little bit more than 50% between CRE and community development lending and the other say 45% is C&I. We had a lot of closings here to end the year, so we would, it's good, we'll expect it to continue to grow, certainly in first and second quarter.

All right, great, thanks. I'll step back in the queue.

Thank you. Damon DelMonte, KBW.

Hey, good morning guys. Hope everybody's doing well today. So just curious on the outlook for the provision of $30 million to $40 million. Just wondering if 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?

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 leave 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, 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 but there's nothing underneath it that has us concerned.

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 also considering that you paid off some, brokered CDs and wholesale stuff, from the Harbor One side.

Sure, Damon, I, the That there was very modest deleveraging, as in the securities portfolio it was $298 million. So I would take the period and balance sheet and the 1,231 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 going to, we're targeting about 15% of total assets and securities, so a little growth there.

Got it. Okay, great, that's all I have 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 key locks consistent with 2025.

Got it. Thank you.

Gregory Zingone, Piper Sandler.

Good morning, guys. Sorry that Mark couldn't be on the call this morning. I first question, nice 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, 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, it they First of all, they're not located in downtown Boston. The NPLs were completely driven by Harbor One. And what I would point you to, it, it's they're mostly Creed, 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 plans, resolution plans for each one of those. Some will actually be resolved, this quarter. And I point you to the originally telegraphed credit mark and the final credit mark, which is exactly the same. So there was no surprise whatsoever. In that book.

And at what point in your workout phase would you guys entertain a larger size loan sale for any of these portfolios whether they're nonperforming or criticized?

We don't see, we don't see that as necessary here. We 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, we have these well identified through the merger process, the merger evaluation. So these loans are being closely monitored by Harbor One. 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, 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.

(Operator Instructions) Laurie Hunsicker, Seaport Research.

Yeah, hi, good morning, Denis and 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 H1?

Right out of the shoot, 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 the facts, yeah, I, 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.

Got you. 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 4, first quarter, so it looks like that's going to be about 20 basis points or so. Kind of that's the run rate 19 basis points to 20 basis points of a Christian 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 third quarter, second quarter, and third quarter of last year, we had a $6.5 million dollar swing, late quarter. So this is our best estimate, based on, a lot of analytical work and what happened.

So 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.

And to be clear Laurie, this is what you see in the 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, that being mostly Cambridge but also Century.

Yeah, thank you, Denis and large, 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, got you. 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, $96 million, $94 million came from H1y, and that's 35% reserved.

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?

It's, that's difficult to answer. I know it's a handful of loans. I know there will be some resolutions in the 1 and second quarter. Yeah, I can't be more specific than that. We were, 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. It took a couple 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. And then NDFI exposure, do you have an update there?

Yeah, I mean, it's, Laurie, it's still, it's in the same ballpark, a little over $500 million. 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 dollars. There's another $250 million is 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 a multi-family 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, 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 and non-interest income or is that sort of separate sale of other assets category where you, where is that line?

Runs through the non-operating expense line. So it was Yeah, it was a building.

But on the income statement, it's through the non-operating expense, yes.

Okay. Okay, it's in that 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 broken out at the end, the sale of other assets, the loss of 700,000, what's that relative to it was 1.5 last quarter? Yeah.

That was just the associated leasehold improvements in that building that had the operated that had the lease. So, there's two components.

Okay. And how should we think about that running?

One time event.

Okay, so that line should run zero-ish.

Yeah, 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 Holco. I realized you're not probably going to come, 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?

Well, we, 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, as I said in my comments, we think we'll manage our CET. Ratio down over time towards 12%, which is 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 just, we're not pursuing acquisitions.

Great, thanks for the details.

Sure.

Janet Lee, TD Cowen.

Good morning.

Morning. Morning, Shannon.

For, 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 of, 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 be that could potentially surprise to the upside versus where you have on your guide.

Sure, Janet. So I caught out in my comments that the guy 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 wanted to make sure we're clear about that. The, I think.

Over time, the income from Harbor One's mortgage business will probably be 8% to 10% of. Total fee income, we will. You're right, 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, we're that we're not, we're 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, in, into Legacy Eastern.

They, 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. That's not, as I said, our ex to Damon, 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. I really appreciate the comment around how you're staying focused on organic and probably there's more opportunities for buyback. You talked about 12 getting that CT1 down to 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 tier level beyond that June, guidance that you gave?

Well, Janet, it's Denis, I think, assuming there's a lot of assumptions in there, the first one being that we're, we finish and we believe we will, let's see 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. We will 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 stock price, etc. We want to be disciplined and responsible as we execute the buyback, but nonetheless, that is our intent. Thank you.

Freddie Strickland, Hovde.

Hey, just had a quick follow-up on loan growth. Is there any seasonality or a particular slower, or faster quarter, in terms of loan growth just as we think about the guide within the course of the year?

Yeah, it's a little bit like a frozen tundra here in the first quarter, so it would build more through, throughout the year, Feddie, 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, thanks, 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. So 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.