Eastern Bankshares, Inc. 2026 Q2 Earnings Call

Welcome to the Eastern Bank Shares, Inc. 2nd Quarter 2026 Earnings Conference Call. Currently, all participant lines are in a listen-only mode. Following the prepared remarks, there will be a question and answer session. Please note, this event is being recorded for replay purposes. In connection with today's call, the company posted a presentation on its investor relations website, investor.easternbank.com. 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 21 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 Dennis Sheehan, Eastern Chief Executive Officer.

Thank you. Good morning and thank you for joining us. On the call with me today are executive chair and chair of the board of directors bob rivers president and chief operating officer quincy miller and chief financial officer david risotto we are pleased with our strong second quarter performance which reflects the enhanced earning power of the franchise and further reinforces eastern's position as a premier bank in greater boston one of the nation's largest and most affluent banking markets. Record operating net income increased 20% in quarter and 30% from a year ago, driving an operating return on average tangible common equity of 15.3%. Our results are a reflection of the priorities we have consistently communicated to investors, organically growing both banking and fee-based businesses and returning capital to shareholders. During the quarter, we grew loan balances and built healthy pipelines, generated meaningful deposit growth, increased wealth management assets to another record level, and produced positive operating leverage. Combined with the return of a significant amount of capital to shareholders, these results demonstrate we are successfully executing on those priorities and delivering on our commitments. Turning to lending, the increase in period-end loan balances was primarily driven by broad-based growth in the CNI loan portfolio. Partially offsetting this growth were headwinds from commercial real estate payoffs, some of which were expected as we continue to work out acquired non-performing loans. Looking forward, we were encouraged by the resiliency of customers as the commercial loan pipeline finished June at a record quarter-end level and is well diversified across businesses. We continue to benefit from the investments we've made in talent in recent years. In addition, our ability to combine local decision making with the breadth of products and services typically associated with larger banks continues to differentiate Eastern and contribute to growth. The meaningful increase in deposits was due to seasonal municipal inflows and broad-based growth across business lines. As a result, the loan-to-deposit ratio improved to 91% at quarter-end compared to 93% at March 31st. While the deposit environment remains competitive and costs move modestly higher, we remain committed to balancing deposit growth with margin performance. Importantly, the strength of our core deposit base and limited reliance and wholesale funding provide us with the flexibility to stay disciplined. Wealth management is an important component of the Eastern franchise and our long-term growth strategy. Momentum continued as wealth assets increased to another record high at $11.5 billion. And fees had strong growth year over year. Our wealth business not only provides recurring fee revenue and earnings diversification but also strengthens customer relationships across the franchise the growing connectivity between our wealth and banking teams including private banking continues to create more client engagements and new business opportunities our comprehensive solutions oriented approach is resonating with clients reinforcing our value proposition Given the wealth demographics and strength of the Cambridge Trust brand in our footprint, we are encouraged by the long-term outlook of the business. Asset quality remains strong. Net charge-offs were stable, but non-performing loans improved for the second consecutive quarter following the Harbor One merger. We are very 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 office portfolio exceptionally well, and it continues to perform within our expectations. Importantly, every office loan over $5 million is re-underwritten annually, providing us with a current and comprehensive view of each property. Overall, we view our asset quality as a source of strength, reflecting conservative underwriting and proactive risk management. Finally, given our profitability, we continue to generate capital in excess of our growth needs. As we have guided, we are committed to right-sizing our capital position. That commitment was evident again this quarter by returning $106 million in capital to shareholders through share repurchases and quarterly dividend. Notably, even after returning a sizable amount of capital this quarter we increased tangible book value per share at a seven percent annualized rate in addition given the strength of our balance sheet and enhanced earnings power the board approved a new five percent share repurchase program underscoring confidence in the company's long-term intrinsic value in closing we are grateful for our customers colleagues and community partners whose trust and support position us for future growth in markets we serve. David, I'll hand it over to you to provide further details on second quarter financials.

Thanks Dennis and good morning everyone. Our second quarter financial performance was strong with record operating net income and we continue to see positive trends in many areas of the business. Highlights from the quarter include further improvement in key financial metrics, notably return on average assets and return on average tangible common equity. Positive operating leverage driven by margin expansion accompanied by diversified fee revenue growth and lower expenses. Solid balance sheet growth supported by strong commercial lending activity and higher deposit balances. Significant capital returns to shareholders and and sustained excellent asset quality with positive credit trends. We reported net income of $105.2 million, or $0.48 per diluted share, excluding $1.6 million of non-operating expenses related to the last remaining Harbor One merger-related costs. Operating net income was $106.5 million, or $0.49 per diluted share, an increase of 20% linked quarter. Our focus on growing revenues while thoughtfully managing expenses produced another quarter of positive operating leverage. As a result, the operating efficiency ratio improved 49 percent, contributing to a 21 basis point increase in operating ROA to 138 basis points and a 250 basis point improvement in operating return on average tangible common equity to 15.3 percent. As displayed on slides five and six, revenue growth accelerated during the quarter as both net interest income and non-interest income contributed meaningfully. Net interest income grew three percent from Q1 as the margin expanded three basis points to 366. Higher asset yields more than offset increased funding costs. Total interest earning asset yields increased four basis points supported by favorable loan and securities repricing. while interest-bearing liability costs rose two basis points due to modestly higher deposit pricing. Net discount accretion remained stable at approximately $20 million and contributed 28 basis points to the margin, which was consistent with the first quarter. Growth in operating non-interest income was strong and diversified, increasing $12.8 million or 28% from the first quarter. The largest contributor to the variance was an $8.9 million increase in income on investments for employee retirement benefits, reflecting stronger equity market performance. This favorable impact on fee income was partially offset by a $3.4 million increase in related benefit costs reported in non-interest expense. Non-interest income also benefited from notable growth in investment advisory fees and interest rate swap income. The increase in investment advisory fees was driven by higher wealth management assets and seasonal tax preparation fees, reflecting both continued business momentum and the value of our comprehensive wealth management services we provide to clients. The higher swap income was due to increased commercial loan volume and greater customer adoption of interest rate risk management solutions. Turning to expenses on slide eight, improvement in both non-operating and operating costs drove a $30.7 million or 15% reduction in non-interest expense late quarter. Non-operating expense decreased $29.2 million, largely driven by lower merger-related costs. On an operating basis, non-interest expense was down $1.5 million. The current quarter benefited from cost synergies achieved following the Harbor One core system conversion in February, and were primarily reflected in lower salaries and benefits, as well as occupancy and equipment expenses. These improvements were partially offset by higher professional services costs, primarily related to shareholder advisory fees, as well as an increase in other operating expenses, primarily driven by growth and off-balance sheet commitments. Moving to the balance sheet, starting with deposits on slide nine, Balances increased $814 million or 3.2% link quarter due to seasonal municipal inflows and broad-based growth across our business lines. While we expect a portion of the municipal deposits to seasonally outflow in Q3, we are encouraged by overall growth in the quarter. As we guided on our Q1 call, we took targeted actions in Q2 to appropriately position offerings to defend and grow our market share. This resulted in upward pressure on deposit costs. Total deposit costs of 147 basis points increased one basis point for the quarter, and the spot deposit rate for June was 1.51%, which is a reflection of elevated competition for deposits in the New England market. We are focused on increasing deposits to support our growth strategy. However, as Dennis stated earlier, we remain committed to balancing growth with margin performance. Looking at loans on slide 10, period end balances increased $325 million or 1.4% length quarter. Growth was driven by strong C&I production, which increased more than $300 million, partially offset by continued commercial real estate payoffs. We finished June with a record quarter-end commercial pipeline of nearly $1 billion, which gives us strong confidence in origination activity in the coming quarters. Turning to consumer lending, home equity balances increased by $59 million, given the strong underlying demand across our footprint for this product. We see home equity as an attractive area for growth. Residential mortgage balances were down slightly from Q1. Our expectation is the Resi portfolio will remain relatively flat in 2026 as we favor HELOC and commercial loan growth. As seen on slide 12, our capital position remains strong, as indicated by CET1 and TCE ratios of 13 percent and 10.1 percent, respectively. We are focused on right-sizing capital through organic growth, share repurchases, and quarterly dividends. We expect to continue to generate excess capital and are managing our CET1 towards the median of the KRX, which is currently 12%. We returned a significant amount of capital to shareholders during Q2. In addition to $33.1 million of cash dividends paid, we repurchased 3.6 million shares for $72.7 million at an average price of $20.03, which was 46 cents below the vwap for the quarter as a result our diluted common shares outstanding were 217.6 million as of june 30th at quarter end 1.3 million shares remain in the current share repurchase program the board authorized a new repurchase program of up to 11.3 million shares or five percent of common stock outstanding the program expires on december 31st 2027 in addition the board approved a 15 per a 15 cent dividend to be paid in september as displayed on slide 13 asset quality remains excellent net charge-offs the average total loans were stable at 17 basis points, and NPLs improved, as expected, falling by $29 million link quarter to $109 million, or 47 basis points of total loans. Notably, NPLs improved in both the legacy Eastern and acquired Harbor One portfolios, and we expect further credit resolutions in the quarters ahead. Criticized and classified loans decreased modestly from the first quarter. The improvement was driven by lower criticized balances in the legacy Eastern portfolio, largely offset by an increase in Harbor One loans. As we further deepen our knowledge of the acquired portfolio, we continue to refine risk ratings. The increase in Q2 was attributable to a small number of loans, all of which we believe present no risk of loss. Before turning to Q&A, I'd like to spend a few minutes on our full year 2026 outlook on slide 14. We're entering the second half of the year with healthy commercial loan pipelines, an exceptional deposit base, strong asset quality, improved efficiency, continued wealth management momentum and substantial capital flexibility, all of which position us well to deliver attractive returns for shareholders. With that said, we have revised our full year outlook to reflect our performance through the first six months of the year. On the balance sheet, we are narrowing our loan growth outlook to a range of three to four percent from our prior expectation of three to 5%. The change primarily reflects the slower than anticipated start to the year in the first quarter. That said, second quarter production was solid, and commercial pipelines ended June at a record quarter-end level, approaching a billion dollars, which gives us confidence and continued growth momentum through the balance of the year. Conversely, reflecting the meaningful growth in deposits during Q2, we are increasing our deposit growth outlook to 2% to 3%, up from our previous range of 1% to 2%. From an earnings perspective, softer loan growth in Q1, lower than anticipated accretion year to date, and a highly competitive deposit environment are impacting our expectations for net interest income and margin. Accordingly, we now anticipate net interest income in the range of $1.5 billion to $1.020 billion for the year with an FTE margin of $360 to $365. While these ranges are modestly lower than the previous outlook, we continue to expect solid profitability in the second half of the year. Credit performance remains strong and trends were posited over the first six months. As a result, we are lowering our provision outlook to a range of $25 to $30 million from our prior range of $30 to $40 million. As always, actual provision levels will depend on the evolving economic environment we are also narrowing the outlook range for operating fee income to 195 to 200 million compared to the original range of 190 to 200. in addition the successful harbor one integration and realization of cost synergies are supporting improved efficiency and expense discipline. Therefore, we are tightening the operating non-interest expense outlook to a range of $655 to $665 million from the previous range of $655 to $675. Finally, the outlook for operating tax rate and capital levels remain unchanged. changed. This concludes our remarks and will now open up the call for questions.

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 the pound key. We'll pause for just a moment to compile the Q&A roster. The first question comes from Steady Strickland of Hovde. Your line is now open.

Hey, good morning, everybody. Wanted to start on the positive competition. Costs held in better than I might have expected this quarter, just given some of the commentary. Last quarter on expectations on competition and really solid growth here. Has competition maybe been a little bit less of an issue than you expected, I know it's still strong, but maybe a little better than you anticipated, or do you just expect more of an acceleration than those costs in the back half of the year?

Hey, good morning, Fetty. I would label it as relatively constant, and our expectation is the same for the back half of the year. Maybe it was a little, it accelerated a bit during the second quarter modestly, but I don't really see any reason with current market expectations of higher rates that competition will lessen in the near term.

Got it. Fair enough. And then just on the other side of the balance sheet, is it fair to assume there's still more to go here on yield expansion, just given I'd assume loans in the pipeline are probably above portfolio rates and you still got a dip of repricing loans listed on page 18 of the deck?

Yeah, I would characterize your comments as consistent with our thinking. There's a multi-year asset repricing story, which we detail in the deck. And just one small item to point out, if you just look at the loan portfolio, because of the C&I, the strong C&I growth in the quarter, the floating rate component of that portfolio ticked up quite a few percentage points, which is a positive if you think about a Fed tightening cycle possibly beginning. The wild card, which is kind of what we talked about last quarter, is just with that long-term asset repricing, what's the state of deposit costs going to be as the back half of the year evolves?

Understood. And just real quick one last one. Do you have the weighted average rate on what's in the pipeline today?

No, I don't have it. But directionally, I would say consistent with the second quarter, there's some modest commercial real estate spread tightening that's occurring. And I think, you know, we've talked about that a little bit. Other banks have talked about it. But away from that, we're seeing relatively steady spreads across all of our businesses.

Great. Thanks, David. I'll step back.

The next question comes from Justin Crowley from Piper Sandler. Your line is now open.

Hey, good morning. On the NII guide, and I know the bias has already been toward the lower end previously, but following up a little on what was just said, thinking about the margin outlook from here, which kind of implies flat down through the balance of the year, it's a thought now that just what you've got on the asset repricing side just isn't going to be enough to outrun whatever you see as far as the funding cost pressure that you were talking about. Is that kind of the right way to think about it?

Yeah, I would just go back to, you know, kind of the same response as we gave to Feddy, which is there's a clear back book repricing that's going to go on on our fixed rate loan book and our securities portfolio. And you saw, especially in the securities portfolio, a nice uptick in the quarter. That's clear. And that's really regardless of what happens to interest rates as well. The deposit pressure, frankly, is hard to know exactly how that will evolve, especially if you think that we're going to have a more aggressive effect. So the two counteracting forces and deposits will, as we said last quarter, would probably take up two to three basis points a quarter. That's probably another basis point or two higher is how we'd answer that question. And if we're right, it's generally those two should offset each other with a little bit with the deposit cost eating into the positive asset repricing, costing us a few basis points of margin.

Okay, gotcha. That's helpful. And then just on, you know, deposit balances and the growth for the quarter, which is strong, you know, and it looks like most of that came from money market accounts, and you kind of called out the seasonality and municipal. But just curious how you're thinking about, you know, growth from here, just from a mixed standpoint.

I think it's going to be generally consistent. The CDs will probably grow less than money markets. There is a clear preference, we believe, for money markets rather than term product. But we did see growth in both of them in the quarter.

Okay, got it. And then just one last one, just on the payoff activity on the Cree side. I know it can be tough to predict, but do you have much line of sight or just any thoughts on how that should trend through the remainder of the year? Would you expect that pace to slow at all, just given the move that we've had in rates?

Yeah, it was elevated definitely in Q2. We do think there's a moderation in the back half of the year. Hard to know exactly how much, but we do think Q2 was abnormally high for us. And just a little color, about half of those came out of the harbor one portfolio and about half of those payoffs came out of the legacy easter portfolio okay great i will leave it there thanks for taking the questions yep thank you the next question comes from jared shaw of barclays your line is now open Thanks.

Good morning, guys.

Morning, Jared.

Just to keep on the interest income side, was there anything on the loan yields? Did you have any interest recoveries from some of those NPL reductions in loan yields this quarter? No. Okay, so that's sort of a good, that loan yield is a good base to look at going forward. And then I guess just sort of separately, oh, sorry.

Jared, I was just going to point out, you know, accretion income was consistent quarter to quarter. So the impact on the margin was the exact same each quarter.

Okay. I guess just on that, any thoughts on expected accretion sort of through the rest to the year to sort of trending? Should we just assume sort of it steadily grinds lower from here?

Yeah, if anything, maybe just a slight tick down. So last quarter, if you remember, we talked about a range of $21 to $22 million. In the last two quarters, we've come in at $19.5. half. We think that 19 and a half is about that run rate. Commercial is actually coming in higher than our original expectations. However, the Resi portfolio is coming in a little slower because prepay speeds have slowed down.

Okay. Thanks. And then, I guess, shifting over to the wealth management side, good trends there. What's the competitive landscape looking like up there? We're hearing other banks really making a big push and have hired people. Are you seeing that? Is it more difficult to attract that incremental new customer here? And I guess, how are you trying to differentiate your product from others in the market?

Jared, it's consistently competitive. I mean, yes, there are others who are entering the market and looking to grow in this space. But we have had very robust pipelines and our outlook for that is to continue certainly into the back half of this year and beyond. And one of the unique things about our franchise is that there's a lot of upside within the Eastern customer base. If you go back just a few years, the primary fee business at Eastern was insurance. Now the primary fee business is wealth management. So when you think of the opportunity that our colleagues in the retail branch division and in commercial lending have to refer, it's they're thinking now about wealth, whereas in the past they might have been thinking about insurance. So we believe there's a lot of upside, both within our customer base and in the market. And, you know, we're finding a way. We're in the early innings, we believe, of the growth that's possible in this business, and we're pretty excited about it.

Thanks. Your next question comes from Damon Del Monte with KBW. Your line is now open.

Hey, good morning, guys. Hope you're doing well, and thanks for taking my questions here. So just curious if you could provide a little color on the commercial pipeline. A lot of positive commentary about it being at record levels. Just kind of, you know, looking for a little color on what industries and what types of loans that you guys are getting good looks at.

So, Damon, good morning, and thanks for the question. It's broad-based. If we look at our growth that we had just here in the second quarter, it really was well diversified across many industries. And it's really a testament to the team in commercial, their focus, the talent that we brought in that is now beginning to hit its stride. So it really and truly is. It's not concentrated in any one particular industry. And our pipeline in commercial real estate and in community development lending is also very strong. We certainly, we didn't experience growth in Cree in the last quarter, but as David has referenced, you know, we're working through a lot of acquired loans and beyond that, just payoffs in the marketplace. But we would expect the payoffs to decrease in the back half, and we should see growth in Cree as well. But good, good activity. You know, our customers are feeling reasonably optimistic, and that's being reflected in our loan pipelines.

Got it. Okay, great. That's helpful. And then maybe just one on the expenses. You know, could you just maybe talk a little bit about your approach with continuing to have a tight, you know, restrictor on expense growth, but then also, you know, balancing that with investing in technology and other areas of footprint, you know, making strategic hires and things of that nature?

Sure. Damon, you know, expense management, you know, just it's a day-to-day activity. Fortunately, this is a company that is relatively just thrifty in its mindset and has a good history of thoughtful expenses management. We are always looking for opportunities to save money to redirect into technology. We're not unique in that, obviously, but we work extra hard on that tradeoff, trying to push the use of AI and other technology to support our customers and increase productivity. You can tell by our guide, we lowered the top end on expenses, and I feel really good about expenses in the back half of the year. And I'll just add to that.

We're always looking for talent. We have opportunities to bring in talent to help grow revenue and future where we're absolutely open for business.

Got it. Okay, great. All right. That's all that I had. Thank you very much. Thanks, David.

Your next call comes from Janet Lee of TD Cohen. Your line is now open.

Hey, good morning, everyone. This is Brad D'Alsandro. On for Janet. um one question about non-interest bearing deposits um one of the key themes of this earnings season has been non-interest bearing closets and you've had a couple strong quarters of growth um here on an average basis but and the period is down slightly did you expect non-interest bearing as a percent of a total to flatten out here in the back half of the year you brad you were breaking up a little bit was the question our thoughts around non-interest bearing dda balances Yeah, that's correct. Sorry, I don't know if that's any better now. That's correct.

Okay, okay, good. I want to make sure we answered the right question. Feel generally positive about it. It's, you know, it's not going to grow at the pace that money markets are going, for example, obviously, but it's the bread and butter of new customer acquisitions and holding on and growing the relationships that you have so i expect modest growth there uh only great um and then one quick one on um really on buybacks right so with ct1 around 13 and continuing to trend towards that stated 12 target um with the new 5 repurchase authorization on place um is there any cadence we should think about five bucks over the next few quarters um the yeah i i mean what i would say is on the current bike back that we're we're getting close to completing you know the our stock has moved up appreciably you know We've outperformed the KRX and then obviously the industry's moved up. So we're trying to work through and prudently manage the buyback and the pace of the buyback, recognizing that we're trading at a higher valuation, whether it's priced earnings or price to book. So we think of executing the buyback in basically two components, a core amount, because we're generating excess capital this quarter, we essentially bought either return capital in the totality of what we earned in the quarter. And the other component is the opportunistic piece that is more scale to trading valuations. So little reluctant to get overly definitive on the pace of getting from currently 13% to 12%. It is clearly our target, and we will achieve it. But the market trading multiples will be a determinant in the final pace.

Great.

Your next question comes from Lori Hunsicker with Seaport Research. Your line is now open.

Just wanted to go back to the slide 14. your NII growth, or NII, I should say, guys, I'm not growth, guys. Of the billion dollars, how much do you have modeled for accretion income in that figure?

That accretion income in the, so you're asking for the full year or the back half of the year?

It doesn't matter however you want to get it, right? So you wouldn't.

Yeah, so for the full year, yeah, so either way, and it's about $80 million full year, it's about $40 million in the backup, half of that. In the backup? Yeah, it was 19, it's been 19, 19-5, Q1, 19-7, Q2, running slightly below our original expectations.

Great. Okay. Thanks for that. Okay. And then on expenses, I mean, obviously no more merger charges, which was great, but you still have, I think, a little bit more cost saves that you're picking up. Can you help us think about what the Harbor One cost saves are going to look like and when they're fully realized? Is it a three-quarter event or four-quarter event? How much are you still picking up there? Yeah.

Those cost saves are basically done, the 40% that we advertised or telegraphed.

Okay. So that $55 million fully baked now into the run rate. Okay. And then I guess the professional services line had a big jump. It had been running $2 million, $3 million. It was up last quarter, but now it's doubled here at almost $6 million. Where does that line go? And maybe just help us think about what is that? Is that a one-off or is that going down?

Well, no, we detailed it in the slides. It's a one-time, it was a $2 million expense related to advisory services, shareholder advisory services.

Okay. Okay. So, I mean, where, so where's the run right been on that? It's about $4 million going forward?

That $2 million will fall, that $2 million falls out of the run rate going forward.

Okay. Okay, great. And then just last question, I know we spent a lot of time in the cost of deposits, but borrowing, can you just talk a little bit about that? You, you know, obviously you increased on a weighted basis for the quarter, but it looks like right at period end, you sort of cut it in half there, and that was costing $370.

How are we thinking about borrowing for the back half of the year how are you thinking about that well i mean simply the borrowings is the the um wild card uh balancing loan growth and deposit growth so we had really strong uh we had both um strong growth in the quarter of loans and deposits and deposits outpace loans, you know, low over $800 million versus $300 million and change for loan growth. Therefore, once you net out securities as growth as well, we're able to reduce our borrowings. And those borrowings are essentially federal home loan advances.

Right. I mean, so what would you expect in the back half of the year?

Are your borrowings going to track you know close to where you ended i.e 350 million or is that is that going to go back up when the municipal deposits fall off like how should we think about that because that's your obviously most expensive cost yeah i i mean it's hard to answer i mean we we're telegraphing good loan growth so the wild card is going to be what we wind up doing in securities portfolio And then how deposit competition and our success evolves over the quarter. That number, you know, can move one or $200 million in a quarter, and that's, from my perspective, no big deal.

Okay. I'll leave it there. Thanks so much.

Hey, Laurie, I just, one further thought there is, from an earnings perspective, That's becomes the issue, you know, that's that's 3 and 3 quarter ish, maybe a little higher money relative to deposit costs. You know, average deposit costs of, you know, 147 basis points in the quarter.

Right. Perfect. Thank you.

The next question comes from Matthew breeze of Stevens bank. Your line is now open.

Hey, good morning. A couple of quick modeling and then a couple of big picture. The first one, Dave, I don't know if I missed it. I'm sorry if I did. Within the NII guide, any sort of forecasted changes to rates?

You spoke a couple of times about potential rate hikes, I agree.

And then how does NII or the NIM respond at this point to each 25 basis point hike?

Sure. Yeah. Matt, so part of the NII change is volume related. We're slow on loan growth in Q1, but it's also interest rate related. And it's roughly our original guidance had two cuts. So 50 basis points total of cuts. We're now thinking there's one tightening in the back half of the year. So a 75 basis point differential on the short end of the curve and a flatter yield curve. So that's the interest rate question and the thought around, one of the reasons around the lower net interest income outlook. Look, from an interest rate risk perspective, we are still relatively neutral to interest rates and have been for a long while. With that said, 25 basis points of steepening or flattening is about one to two basis points to margin. And again, that's been consistent for quite a period of time for us. I know I've talked about it on previous calls.

Great. Okay. Very helpful. The other one is within fees, the income or losses from investments for employee retirement benefits. I'm going to be honest, I have a tough time modeling this one. Can you help me out what's baked into the forward guide? For the last couple of years, it's been about 10 million bucks a year. Is that a reasonable place to be?

You know, it's hard for you and it's hard for me. Those investments have an equity market component. When we think about it, we try to think with no market impact, so no effect in fee income. And don't forget, there's an offsetting employee benefit expense as well. But we've had strong equity markets, especially in Q2, and that produced that income. It's basically from a modeling perspective, you're making a judgment on what equity markets will do in each quarter. And I try to just be neutral about that, to be honest with you. But the reality is it's been a positive this year and it was a it was a positive last year as well.

Bigger picture. You know, considering the background of some of the executives now at Eastern and continued disruption in Connecticut, now with Webster being sold. Is there opportunity there for you all on either side of the balance sheet? Firing opportunities. Have you considered that?

Yes, we're open to, you know, to talent opportunities in any of the markets that we operate in. So, Matt, you may or may not recall, we do have a wealth management office in Connecticut. So, you know, perhaps thinking about other areas of the income statement or balance sheet, we'd welcome those opportunities. And, you know, we are always looking for talent, as I said earlier.

And then the other one I had, you know, there's been, to Jared's point, a bunch of larger banks, even going back the last handful of years to enter or try to enter or make a big push in Boston. It's hard to miss some of, you know, I won't name names, but who's advertising for the local Red Sox games. Curious, as we've seen increased competition, How much is coming from new versus existing entrants? And for the new entrants, how are they doing in terms of deposit markets here? Historically, Boston's been a parochial market, pretty loyal to existing banks in the area. And I'm curious if anything has changed on that front.

Look, Matt, it's a story that just continues to evolve. We've had new entrants to this market before, and that will continue. It's a very attractive market. It's why we feel so good about being here. This is our home base. We're the local bank. And so the competition, whether it's in the wealth management business or in the banking business, it just continues to increase. but we're comfortable that we can find our way and continue to put up good numbers for our shareholders quarter after quarter, year after year. It's intense, but it's been intense before. And our president, Quincy Miller, is here right next to me. Quincy, how would you describe it?

Yeah, I would echo that. What I'd say is they've all been here on the commercial side. That's not new. They've been here for well over a decade. The increased pressure is really more on the consumer front. and but we carve out our own niche here uh as you know a 30 billion local community bank we offer a great value proposition for clients who are looking for that and so you know we continue to compete and we'll continue to compete into the future i think very well i'll leave it there thank you guys thanks thanks matt there are no further questions at this time i will now turn the call over to dennis sheehan for closing remarks uh thank you everybody thanks for your interest your questions i would look forward to speaking

with you at the end of our next quarter this concludes today's conference call you may now disconnect