Company Declares Quarterly Cash Dividend

Eastern Bankshares, Inc. (the “Company,” or together with its affiliates and subsidiaries, “Eastern”) (NASDAQ Global Select Market: EBC), the stock holding company of Eastern Bank, today announced its 2022 second quarter financial results and the declaration of a quarterly cash dividend. Net income for the second quarter of 2022 was $51.2 million, or $0.31 per diluted share, compared to net income of $51.5 million, or $0.30 per diluted share, reported for the first quarter of 2022. Operating net income* for the second quarter of 2022 was $52.5 million, or $0.32 per diluted share, compared to $55.1 million, or $0.32 per diluted share, reported for the prior quarter.

“Our financial results for the second quarter were strong, with net interest income benefiting from the combination of the rising rate environment and our asset-sensitive balance sheet,” said Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank. “Our net interest margin expanded by twenty-one basis points from the prior quarter, driving an eight percent increase in net interest income and record quarterly revenue. Loan growth was also strong, as we achieved double-digit annualized growth in each of our major lending categories while maintaining excellent credit quality and underwriting standards. We remain focused on achieving our strategic priorities and are optimistic about the strength and resiliency of our local economy."

HIGHLIGHTS FOR THE SECOND QUARTER OF 2022

• Operating net income* of $52.5 million, or $0.32 per diluted share, for the second quarter of 2022 was 42% higher than the comparable prior year quarter.
• Net interest income of $137.8 million for the second quarter of 2022 was 8% higher than the prior quarter and 32% higher than the comparable prior year quarter.
• The net interest margin on a fully tax equivalent (“FTE”) basis* of 2.63% for the second quarter was 21 basis points higher than the prior quarter.
• The cost of deposits was 6 basis points in the second quarter, a decrease of one basis point from the prior quarter.
• Loan growth excluding Paycheck Protection Program (“PPP”) loans was 10.5% on an annualized basis, and included double-digit annualized growth in commercial (excluding PPP loans), residential, and consumer lending.
• The Company repurchased 4,216,469 shares of its common stock during the second quarter of 2022 at a weighted average price of $19.24 excluding commissions, for an aggregate purchase price of $81.1 million.

The results for the comparable prior year quarter do not reflect the Company’s acquisition of Century Bancorp, Inc. (“Century”), which was completed on November 12, 2021.

BALANCE SHEET

Total assets were $22.4 billion at June 30, 2022, representing a decrease of $485.2 million, or 2%, from March 31, 2022.

• Total securities decreased $287.2 million, or 3%, from the prior quarter, to $8.0 billion, primarily due to a decline in the market value of available for sale securities driven by higher interest rates. Cash and equivalents declined $461.6 million from the prior quarter to $368.9 million.
• Total loans were $12.4 billion, representing an increase of $216.5 million, or 2%, from the prior quarter. The increase was driven by strong loan growth in all categories, partially offset by PPP loan paydowns of $98.7 million. Excluding PPP loans, commercial loans grew $218.6 million, residential loans grew $53.4 million and consumer loans grew $43.1 million, reflecting growth of 10.0%, 11.1%, and 13.3%, respectively, on an annualized basis.
• Deposits totaled $19.2 billion, representing a decrease of $229.0 million, or 1%, from the prior quarter. Deposits declined by approximately $300 million on April 1, 2022 in connection with the previously announced transfer to Needham Bank of the Company’s cannabis and money services business originally acquired through the Century transaction.
• Shareholders’ equity was $2.7 billion, representing a decrease of $290.0 million from the prior quarter driven primarily by decreases in accumulated other comprehensive income of $248.5 million and additional paid-in capital of $77.2 million and partially offset by an increase in retained earnings of $34.5 million. Please refer to Appendix D to this press release for a roll forward of tangible shareholders’ equity*.
• At June 30, 2022, book value per share was $15.17 and tangible book value per share* was $11.52.

NET INTEREST INCOME

Net interest income was $137.8 million for the second quarter of 2022, compared to $128.1 million in the prior quarter, representing an increase of $9.6 million from the prior quarter.

• The increase in net interest income on a consecutive quarter basis was primarily due to an increase in the net interest margin, which benefited primarily from higher short-term interest rates. This was partially offset by a decline in average interest-earning asset balances of $410.7 million from the prior quarter, attributable to a lower average cash balance for the period, which was driven by lower average deposits.
• The net interest margin on a FTE basis* was 2.63% for the second quarter, representing a 21 basis point increase from the prior quarter, as asset yields benefited from higher interest rates in the period, partially offset by lower net PPP fee accretion compared to the prior quarter.
• Included in net interest income in the second quarter and prior quarter, respectively, was $2.5 million and $5.8 million of PPP fee accretion net of deferred cost amortization. During the second quarter, $98.7 million in PPP loans were forgiven by the U.S. Small Business Administration or otherwise paid down, compared to $190.2 million in the prior quarter.

NONINTEREST INCOME

Noninterest income was $41.9 million for the second quarter of 2022, compared to $46.4 million for the prior quarter, representing a decrease of $4.5 million. Noninterest income on an operating basis* was $48.0 million for the second quarter of 2022, compared to $53.3 million for the prior quarter, a decrease of $5.2 million.

• Insurance commissions decreased $4.0 million to $24.7 million in the second quarter, compared to $28.7 million in the prior quarter, driven by lower annual incentive payments received. Compared to the comparable prior year quarter, insurance commissions increased $1.0 million, or 4%.
• Service charges on deposit accounts decreased $0.2 million on a consecutive quarter basis to $8.3 million.
• Trust and investment advisory fees decreased $0.1 million on a consecutive quarter basis to $6.0 million.
• Debit card processing fees increased $0.3 million on a consecutive quarter basis to $3.2 million.
• Loan-level interest rate swap income was $1.6 million in the second quarter, compared to $2.9 million in the prior quarter, representing a decrease of $1.3 million. The decrease was driven by a $0.8 million decrease in the fair value adjustment of such interest rate swap transactions and a $0.5 million decrease in cash income due to lower swap transaction volume.
• Losses from investments held in rabbi trust accounts were $7.3 million in the second quarter compared to losses of $4.4 million in the prior quarter due to weaker investment performance in the period as compared to the prior quarter.
• Realized losses on available for sale securities were $0.1 million in the second quarter compared to $2.2 million in the prior quarter.
• Other noninterest income increased $1.9 million in the second quarter to $5.4 million, due primarily to increases in income on bank owned life insurance policies, gains on the sale of fixed assets, and other miscellaneous fee income.

Please refer to Appendix B to this press release for a reconciliation of operating revenues and expenses*.

NONINTEREST EXPENSE

Noninterest expense was $111.1 million for the second quarter of 2022, compared to $108.9 million in the prior quarter, representing an increase of $2.3 million. Noninterest expense on an operating basis* for the second quarter of 2022 was $114.4 million, compared to $110.9 million in the prior quarter, an increase of $3.5 million.

• Salaries and employee benefits expense was $73.0 million in the second quarter, representing an increase of $3.5 million from the prior quarter, primarily due to an increase in equity award and incentive compensation expense which was partially offset by a decrease in benefits expense primarily attributable to the lower market value of investments held in rabbi trust accounts associated with the Company’s defined contribution supplemental executive retirement plan.
• Office occupancy and equipment expense was $9.9 million in the second quarter, a decrease of $1.7 million from the prior quarter, in part due to lower costs related to Century compared to the prior quarter.
• Data processing expenses were $14.3 million in the second quarter, a decrease of $1.0 million from the prior quarter, primarily due to lower core data processing expenses.
• Professional services expense was $4.0 million in the second quarter, a decrease of $0.7 million from the prior quarter due primarily to lower legal fees and other professional fees.
• Marketing expense was $2.7 million in the second quarter, an increase of $1.1 million from the prior quarter, primarily due to higher advertising expenses in the period.

Please refer to Appendix B to this press release for a reconciliation of operating revenues and expenses*.

ASSET QUALITY

The allowance for loan losses was $125.5 million at June 30, 2022, or 1.01% of total loans, compared to $124.2 million or 1.02% of total loans at March 31, 2022. The Company recorded a provision for the allowance for loan losses totaling $1.1 million in the second quarter of 2022.

Non-performing loans totaled $59.9 million at June 30, 2022 compared to $33.8 million at the end of the prior quarter. The increase from the prior quarter was primarily attributable to the migration to nonaccrual status of one syndicated credit facility which is in an active workout process. During the second quarter of 2022, the Company recorded total net recoveries of $0.3 million, or 0.01% of average total loans on an annualized basis, compared to net charge-offs of $0.2 million or 0.01% of average total loans in the prior quarter, respectively.

At June 30, 2022, approximately $19.9 million in COVID-19 modified loans remained under modified payment terms, down from $49.0 million at March 31, 2022. The commercial real estate portfolio contained $12.8 million of the remaining COVID-19 modifications at period end, all of which were in the hotel segment.

DIVIDENDS AND SHARE REPURCHASES

The Company’s Board of Directors has declared a quarterly cash dividend of $0.10 per common share. The dividend will be payable on September 15, 2022 to shareholders of record as of the close of business on September 2, 2022.

The Company repurchased 4,216,469 shares of its common stock during the second quarter of 2022 at a weighted average price of $19.24 excluding commissions, for an aggregate purchase price of $81.1 million. Beginning in the fourth quarter of 2021 and through June 30, 2022, the Company had repurchased 8,218,968 shares of its common stock in total under the Company’s current repurchase authorization at a weighted average price of $20.06 excluding commissions, for an aggregate purchase price of $164.9 million. At June 30, 2022, there were 1,118,932 shares available for repurchase and $60.1 million in total market value remaining under the Company’s current repurchase authorization, which expires on November 30, 2022 and is limited to $225.0 million in total market value.

CONFERENCE CALL INFORMATION

A conference call and webcast covering Eastern’s second quarter 2022 earnings will be held on Friday, July 29, 2022 at 9:00 a.m. Eastern Time. To join by telephone, participants can call the toll-free dial-in number (888) 396-8049 from within the U.S. and reference conference ID 97071632. The conference call will be simultaneously webcast. Participants may join the webcast on the Company’s Investor Relations website at investor.easternbank.com. A replay of the webcast will be made available on demand on this site.

ABOUT EASTERN BANKSHARES, INC.

Eastern Bankshares, Inc. is the stock holding company for Eastern Bank. Founded in 1818, Boston-based Eastern Bank has more than 120 locations serving communities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island. As of June 30, 2022, Eastern Bank had approximately $22 billion in total assets. Eastern provides banking, investment and insurance products and services for consumers and businesses of all sizes, including through its Eastern Wealth Management division and its Eastern Insurance Group LLC subsidiary. Eastern takes pride in its outspoken advocacy and community support that includes $240 million in charitable giving since 1994. An inclusive company, Eastern employs approximately 2,100 deeply committed professionals who value relationships with their customers, colleagues, and communities. For investor information, visit investor.easternbank.com.

NON-GAAP FINANCIAL MEASURES

*Denotes a non-GAAP financial measure used in this press release.

A non-GAAP financial measure is defined as a numerical measure of the Company’s historical or future financial performance, financial position or cash flows that excludes (or includes) amounts, or is subject to adjustments that have the effect of excluding (or including) amounts that are included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”) in the Company’s statement of income, balance sheet or statement of cash flows (or equivalent statements).

The Company presents non-GAAP financial measures, which management uses to evaluate the Company’s performance, and which exclude the effects of certain transactions that management believes are unrelated to its core business and are therefore not necessarily indicative of its current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into the Company’s core businesses as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

There are items in the Company’s financial statements that impact its financial results, but which management believes are unrelated to the Company’s core business. Accordingly, the Company presents noninterest income on an operating basis, total operating revenue, noninterest expense on an operating basis, operating net income, operating earnings per share, operating return on average assets, operating return on average shareholders’ equity, operating return on average tangible shareholders’ equity (discussed further below), the operating efficiency ratio, and the ratio of noninterest income to total revenue on an operating basis. Each of these figures excludes the impact of such applicable items because management believes such exclusion can provide greater visibility into the Company’s core business and underlying trends. Such items that management does not consider to be core to the Company’s business include (i) income and expenses from investments held in rabbi trusts, (ii) gains and losses on sales of securities available for sale, net, (iii) gains and losses on the sale of other assets, (iv) rabbi trust employee benefits, (v) impairment charges on tax credit investments and associated tax credit benefits, (vi) other real estate owned (“OREO”) gains, (vii) merger and acquisition expenses, and (viii) settlement of putative consumer class action litigation matters related to overdraft and non-sufficient funds fees, and associated settlement expenses. The Company does not provide an outlook for its total noninterest income and total noninterest expense because each contains income or expense components, as applicable, such as income associated with rabbi trust accounts and rabbi trust employee benefit expense, which are market-driven, and over which the Company cannot exercise control. Accordingly, reconciliations of the Company’s outlook for its noninterest income on an operating basis and its noninterest expense on an operating basis to an outlook for total noninterest income and total noninterest expense, respectively, cannot be made available without unreasonable effort.

Management also presents tangible assets, tangible shareholders’ equity, average tangible shareholders’ equity, tangible book value per share, the ratio of tangible shareholders’ equity to tangible assets, return on average tangible shareholders’ equity, and operating return on average shareholders’ equity (discussed further above), each of which excludes the impact of goodwill and other intangible assets, as management believes these financial measures provide investors with the ability to further assess the Company’s performance, identify trends in its core business and provide a comparison of its capital adequacy to other companies. The Company included the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.

These non-GAAP financial measures presented in this press release should not be considered an alternative or substitute for financial results or measures determined in accordance with GAAP or as an indication of the Company’s cash flows from operating activities, a measure of its liquidity position or an indication of funds available for its cash needs. An item which management considers to be non-core and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular period. In addition, management’s methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other banking companies to calculate the same or similar performance measures, and accordingly, the Company’s reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other banking companies. Please refer to Appendices A-D for reconciliations of the Company's GAAP financial measures to the non-GAAP financial measures in this press release.

FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. Forward-looking statements, by their nature, are subject to risks and uncertainties. There are many factors that could cause actual results to differ materially from expected results described in the forward-looking statements.

Certain factors that could cause actual results to differ materially from expected results include developments in the Company’s market relating to the COVID-19 pandemic, including the severity and duration of the associated economic slowdown; adverse developments in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses; increased competitive pressures; changes in the interest rate environment; risks that revenue or expense synergies or the other expected benefits of the Company’s merger with Century (“Transaction”) may not fully materialize for the Company in the timeframe expected or at all, or may be more costly to achieve; risks that the Company is unable to successfully implement integration strategies for the Transaction; reputational risks and the reaction of customers to the Transaction; and diversion of management time on Transaction-related issues; as well as general economic conditions or conditions within the securities markets; and legislative and regulatory changes and related compliance costs that could adversely affect the business in which the Company and its subsidiary Eastern Bank are engaged, including inflation, interest rates, interest rate sensitivity and liquidity, including the effect of, and changes in, monetary and fiscal policies and laws, such as the interest rate policies of the Board of Governors of the Federal Reserve System; market and monetary fluctuations, including fluctuations due to actual or anticipated changes to federal tax laws; credit quality, including adverse developments in local or regional real estate markets that decrease collateral values associated with existing loans; and the failure of the Company to execute all of its planned share repurchases. For further discussion of such factors, please see the Company’s most recent Annual Report on Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission (the “SEC”), which are available on the SEC’s website at www.sec.gov.

Further, given the ongoing and dynamic nature of the COVID-19 pandemic, it is difficult to predict what continued effects the COVID-19 pandemic will have on the Company's business and results of operations. The COVID-19 pandemic and the related local and national economic disruption may result in a continued decline in demand for the Company's products and services; increased levels of loan delinquencies, problem assets and foreclosures; an increase in the Company's allowance for loan losses; a decline in the value of loan collateral, including real estate; reduced demand for office space in the Company’s markets due to remote and/or hybrid work arrangements; a greater decline in the yield on the Company's interest-earning assets than the decline in the cost of the Company's interest-bearing liabilities; and increased cybersecurity risks, as employees continue to work remotely.

You should not place undue reliance on forward-looking statements, which reflect the Company's expectations only as of the date of this press release. The Company does not undertake any obligation to update forward-looking statements.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

Certain information in this press release is presented as reviewed by the Company’s management and includes information derived from the Company’s Consolidated Statements of Income, non-GAAP financial measures, and operational and performance metrics. For information on non-GAAP financial measures, please see the section titled "Non-GAAP Financial Measures."