Operator: Currently, all participant lines are in a listen-only mode. Following the prepared remarks, 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 would now like to turn the call over to Denis K. Sheahan, Eastern chief executive officer.
Denis K. Sheahan: 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 L. Miller, and chief financial officer, R. David Rosato. 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. 1 of the nation's largest and most affluent banking markets. Record operating net income increased 20% linked 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 asset 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 C&I 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 nonperforming loans. Looking forward, we are 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 have 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 31. 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 on 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 but also strengthens customer relationships across the franchise. 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 and our footprint, we are encouraged by the long term outlook of the business. Asset quality remains strong. Net charge offs were stable, but nonperforming loans improved for the second consecutive quarter following the HarborOne merger. We are very confident in our credit profile. Including the sectors that have received greater attention in Boston, such as life science, to 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 reunderwritten 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 rightsizing our capital position. That commitment was evident again this quarter by returning $106 million in capital to shareholders, through share repurchases and a quarterly dividend. Notably, even after returning a sizable amount of capital this quarter, we increased tangible book value per share at a 7% annualized rate. In addition, given the strength of our balance sheet and enhanced earnings power, the board approved a new 5% 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 the markets we serve. David, I will hand it over to you to provide further details on second quarter financials.
R. David Rosato: Thanks, Denis, 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 diverse fee revenue growth and lower expenses. Solid balance sheet growth, supported by strong commercial lending activity, and higher deposit balances. A significant capital returns to shareholders, 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 nonoperating expenses, related to the last remaining Harbor 1 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 to 49%. 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%. As displayed on Slides 5 and 6, revenue growth accelerated during the quarter as both net interest income and noninterest income contributed meaningfully. Net interest income grew 3% from Q1 as the margin expanded 3 basis points to 3.66. Higher asset yields more than offset increased funding costs. Total interest earning asset yields increased 4 basis points supported by favorable loan and securities repricing. While interest bearing liability costs rose 2 basis points due to modestly higher deposit pricing. Net discount accretion remains stable at approximately $20 million and contributed 28 basis points to the margin. Which was consistent with the first quarter. Growth in operating noninterest 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 noninterest expense. Noninterest 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 8. Improvement in both nonoperating and operating costs drove a $30.7 million or 15% reduction in noninterest expense linked quarter. Nonoperating expense decreased $29.2 million largely driven by lower merger related costs. On an operating basis, noninterest expense was down $1.5 million. The current quarter benefited from cost synergies achieved following the HarborOne 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 service 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 9. Balances increased $814 million or 3.2% linked 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 1 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 Denis 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% linked 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 13.10% and 10.1%, respectively. We are focused on rightsizing capital through organic growth share repurchases, and quarterly dividends. We expect to continue to generate excess capital and are managing our CET 1 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 30. 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 5% of common stock outstanding. The program expires on 12/31/2027, In addition, the board approved a 15-cent dividend to be paid in September. As displayed on Slide 13, asset quality remains excellent. Net charge-offs to average total loans were stable at 17 basis points, and NPLs improved as expected falling by $29 million linked quarter, to $109 million or 47 basis points of total loans. Notably, NPLs improved in both the legacy Eastern and acquired HarborOne 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 HarborOne 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 would like to spend a few minutes on our full year 2026 outlook on Slide 14. We are entering the second half of the year with healthy commercial loan pipelines, and 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 through to reflect our performance through the first 6 months of the year. On the balance sheet, we are narrowing our loan growth outlook to a range of 3% to 4% from our prior expectation of 3% 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 $1 billion. Which gives us confidence in 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 $1.005 billion to $1.020 billion for the year with an FTE margin of 3.60% to 3.65%. 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 positive over the first 6 months. As a result, we are lowering our provision outlook to a range of $25 million to $30 million from our prior range of $30 million 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 million to $200 million. Compared to the original range of $190 million to $200 million. In addition, the successful HarborOne integration and realization of cost synergies are supporting an improved efficiency and expense discipline. Therefore, we are tightening the operating non interest expense outlook to a range of $655 million to $665 million from the previous range of $655 million to $675 million. Finally, the outlook for operating tax rate and capital levels remain unchanged. This concludes our remarks, and we will now open up the call for questions.
Operator: At this time, if you would like to ask a question, simply press * followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. We will pause for just a moment to compile the Q and A roster. The first question comes from Stedi Strickland of Hovde. Your line is now open.
Stedi Strickland: Hey. Good morning, everybody. Wanted to start on deposit 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 is still strong, but maybe a little better than you anticipated, or do you just expect more of an acceleration in those costs in the back half of the year?
R. David Rosato: it is 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 do not really see any reason with current market expectations of higher rates that competition will lessen in the near term.
Stedi Strickland: Got it. Fair enough. And then just on the other side of the balance sheet, is it fair to assume there is still more to go here on yield expansion just given I would assume loans in the pipeline are probably above portfolio rates and you still got a good bit of repricing loans, what is on Page 18 of the deck?
R. David Rosato: Yeah. I would characterize your comments as consistent with our thinking. there is a multiyear asset repricing story, which we detail in the deck. And it just 1 small item to point out if you just look at the loan portfolio, because of the C and I the strong C&I growth in the quarter, the floating rate component of that portfolio ticked up. Quite a few a few percentage points, which is a positive. If you think about a Feddie tightening cycle possibly beginning. The wildcard, which is kind of what we talked about last quarter, is just with that with that long term asset repricing, what is the state of deposit cost going to be? As the back half of the year evolves?
Stedi Strickland: Understood. And just real quick 1 last 1. Do you have the weighted average rate on what is in the pipeline today?
R. David Rosato: No. I do not have it. But directionally, I would say consistent with the second quarter. there is there is some modest commercial real estate spread tightening that is occurring, I think, you know, we have talked about that a little bit. Other banks have talked about it. But away from that, we are seeing relatively steady spreads across all of our businesses.
Stedi Strickland: Great. Thanks, David. I will step back.
Operator: The next question comes from Justin Crowley from Piper Sandler. Your line is now open.
Justin Crowley: Hey. Good morning. Just 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, you know, thinking about the margin outlook from here, which kind of implies flat to down through the balance of the year. So it is a thought now that just what, you know, what you have got on the asset repricing side, going to be enough to outrun whatever you see as far as funding cost pressure that you were talking about. Is that kind of the right way to think about it?
R. David Rosato: Yeah. I would just go back to the same response as we gave to Fadi, which is there is a clear back book repricing that is going to go 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 is clear. And that and that is 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 are going to have a more aggressive fed. So the 2 counteracting forces and deposits will as we said last quarter, would probably tick up 2 to 3 basis points a quarter. that is probably another basis point or 2 higher. Is that how we have answered that question? And if we are right, it is a generally those 2 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.
Justin Crowley: Okay. Got you. that is helpful. Then just on, you know, deposit balances and the growth for the quarter, which is strong, you know, and it looked like most of that came from money market and you kind of called out the seasonality in municipal. But just curious how you are thinking you know, growth from here just from a mix standpoint.
R. David Rosato: I think it is gonna be generally consistent. The CDs will probably grow less than money markets. There is a 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.
Justin Crowley: Okay. Got it. And then just 1 last 1. Just on the payoff activity on the CRE side, 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? You know, would you expect that pace slow down at all just given the move that we have had in rates?
R. David Rosato: Yeah. It was elevated definitely in Q2. We do think there is 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 HarborOne portfolio, and about half of those payoffs came out of the legacy Eastern portfolio.
Justin Crowley: Okay. Great. I will leave it there. Thanks for taking the questions. Yep. Thank you.
Operator: The next question comes from Jared David Shaw of Barclays. Your line is now open.
Jared David Shaw: 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? Loan yields this quarter?
R. David Rosato: No. Okay, so that is sort of a good that loan yield is a good base to look at going forward.
Jared David Shaw: And then I guess just sort of separately--oh, sorry.
R. David Rosato: Jared, I was just gonna point out you know, accretion income was consistent quarter to quarter. So the impact on the margin was the exact same each quarter.
Jared David Shaw: Okay. I guess just on that, any thoughts on expected accretion sort of through the rest of the year to sort of trending? Should we just assume sort of steadily grinds lower from here?
R. David Rosato: Yeah. If anything, maybe just a slight tick down. So last quarter, if you remember, we talked about a range of $21 million to $22 million. In the last 2 quarters, we have come in at 19.5. We think that 19.5 is about that run rate. Commercial is actually higher is coming in higher than our original expect expectations. However, the resi portfolio is coming in a little slower because prepay speeds have slowed down.
Jared David Shaw: Okay. Thanks. And then, I guess, shifting over to the wall management side, good trends there. what is the competitive landscape looking like up there? We are 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?
Denis K. Sheahan: Jared, it is it is 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 1 of the unique things about our franchise is that there is a there is 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 is they are thinking now about wealth, whereas in the past, they might have been thinking about insurance. So we believe there is a lot of upside both within our customer base and in the market And, you know, we have we are finding a way. it is it is we are in the early innings, we believe, of the growth that is possible in this business, and we are pretty excited about it. Thanks.
Operator: Your next question comes from Damon Paul DelMonte with KBW. Your line is now open.
Damon Paul DelMonte: Hey. Good morning, guys. Hope you are, you are 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 looking for a little color on what industries and what types of loans that you guys are getting good looks at.
Denis K. Sheahan: So Damon, good morning, and thanks for the question. it is broad based. You know, if we look at our growth that we had in the just here in the second quarter, it really was well diversified across many industries. And it is really a testament to the team in commercial, their focus, the talent that we brought in that are now beginning to hit its stride. So it really and truly is. it is not concentrated in any 1 particular industry. And our pipeline in commercial real estate and in community development lending is also very strong. We certainly we did not experience growth in CRE, in the last quarter. But as David has referenced, you know, we are working through a lot of acquired loans and beyond that, payoffs in the marketplace. But we would expect the payoffs to decrease in the back half, and we should see growth in CRE as well. But good activity. Our customers are feeling reasonably optimistic, and that is being reflected in our loan pipelines.
Damon Paul DelMonte: Got it. Okay. Great. that is helpful. And then maybe just 1 on the expenses. Could you just maybe talk a little bit about your approach with, continuing to have a tight restrictor on expense growth, but then also, you know, balancing that with investing in technology and other areas of footprint.
R. David Rosato: You strategic hires and things of that nature. Sure, Damon. You know, expense management is just 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 looking we are always looking for opportunities to save money to redirect into technology.
Denis K. Sheahan: that is--we are not unique in that, obviously, but we work extra hard on that trade off trying to push the use of AI and other technology to support our customers 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 will I will just add to that. We are always looking for talent. If we have opportunities to bring in talent to help you know, grow revenue in future, we are we are absolutely open for business.
Damon Paul DelMonte: Got it. Okay. Great. Alright. that is all that I had. Thank you very much. Thanks. Thanks, Damon.
Operator: Your next call comes from Janet Lee of TD Cowen. Your line is now open.
Analyst: Good morning, everyone. This is Brad Dalsandro on for Jared. Question on non interest bearing deposits. Of the key themes of this earning season has been non interest bearing deposits, and you have had a couple strong quarters of growth here on an average basis, but end of period is down slightly. Did you expect noninterest bearing as a percent of total to flatten out here in the back half of the year?
R. David Rosato: You Brad, you were breaking up a little bit. Was the question on thoughts around non interest bearing DDA balances? Yeah. that is correct. Sorry. I do not know if that is any better now. that is correct. Okay. Okay. Good. Make sure we answered the right question. Feel generally positive about it. it is not going to grow at the pace that money markets are going, for example, obviously. But it is it is the bread and butter of new customer acquisitions and holding on and growing the relationships that you have. So I expect modest growth there only. Great. And then 1 quick 1 on, really, on buybacks. Right? So the CET 1. Around 13% Mhmm. And continue to trend towards that stated 12 percent target. With the new 5% repurchase authorization on place. Is there any cadence we should think about for buybacks over the next few quarters? The yeah. I mean, what I would say is on the current buyback that we are getting close to completing, you know, the our stock has moved up appreciably. We have outperformed the KRX. And then, obviously, the industry's moved up. So we are trying to work through and prudently manage the buyback and the pace of the buyback, recognizing that we are trading at a higher valuation. Whether it is price earnings or price to book. So we think of executing the buyback in basically 2 components, a core amount because we are 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 scaled 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 determine the final pace Great. Thank you.
Operator: Next question comes from Laura Havener Hunsicker with Seaport Research Partners. Your line is now open.
Laura Havener Hunsicker: Yeah. Hi. Good morning. Just wanted to go back to slide 14. Your NII growth or NII I should say guide. I am not growth guide. Of the billion dollars, how much do you have modeled for accretion income? In that figure? That accretion income in the so you are asking for the full year or the back half of the year? It does not matter however you want to expect.
R. David Rosato: Right? So you would not Yeah. So for the full year, yeah. So in either way, and it is about $80 million full year. it is about $40 million in the back half of that.
Laura Havener Hunsicker: In the back half? Yeah.
R. David Rosato: It was 19.5 in Q1, 19.7 in Q2. Running slightly below our original expectations. Right.
Laura Havener Hunsicker: 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 are picking up Can you help us think about what the Harbor 1 cost saves are gonna look like and when they are fully realized? Is it a 3 quarter event or 4 quarter event? How much are you still picking up there?
R. David Rosato: They those cost saves are basically done. The 40% that we advertised. Or telegraphed.
Laura Havener Hunsicker: Okay. So that 55 million fully baked now into the run rate. Okay.
R. David Rosato: And then the I guess, the professional services line had a big jump. It had been running $2.3 million. It was up last quarter, but now, you know, it is doubled here at almost $6 million. Where does that line go?
Laura Havener Hunsicker: And maybe just help us think about what is that. Is that a 1 off? Or going down?
R. David Rosato: Well, we well, no. That we detail it in the slides. it is a onetime. It was a $2 million expense related to advisory services. Shareholder advisory services, Okay.
Laura Havener Hunsicker: Okay. So I mean, where so where is the run rate then on that?
R. David Rosato: it is about $4 million? Going forward? That $2 million will fall that $2 million falls out of the run rate going forward.
Laura Havener Hunsicker: Okay. Okay. Great. And then just last question. I know we spent a lot of time in deposit, but borrowings, can you just talk a little bit about that? 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 3.70%. How are we thinking about borrowing for the back half of the year? How are you thinking about that?
R. David Rosato: Well, I mean, simply, the borrowings is the wildcard balancing loan growth and deposit growth. So we had really strong--we had both strong growth in the quarter of loans and deposits and deposits outpaced loans. Yeah. Low over $800 million versus $300 million and change for loan growth. Therefore, once you net out securities growth as well. We are able to reduce our borrowings. And those borrowings are essentially federal home loan advances.
Laura Havener Hunsicker: Right. I mean, so what would you expect in the back half of the year? Are your borrowings going to track close to where you ended? I e, $350 million, or is that going to go back up when the municipal deposits fall off? Like, how should we think about that? Is that your, obviously, most expensive cost?
R. David Rosato: Yeah. I mean, it is hard to answer. I mean, we are telegraphing good loan growth, So the wildcard 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 can move $100 million or $200 million in a quarter, and that is from my perspective, no big deal. Okay.
Laura Havener Hunsicker: I will leave it there. Thanks so much.
R. David Rosato: Hey, Laura. I just want for the thought there is from an earnings perspective, that becomes an issue. You know, that is that is 3.75%-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.
Operator: The next question comes from Matthew Breese of Stephens. Your line is now open.
Matthew Breese: Hey. Good morning. Good morning. Couple of quick modeling and then a couple of big picture. First 1, I do not know if I missed it. I am sorry if I did. Within the NII guide, any sort of forecasted changes to rates You spoke a couple times about potential rate hikes. I agree. And then, you know, how does how does NII or the NIM respond at this point to each 25 basis point hike?
R. David Rosato: Sure. Yeah. Matthew, the so part of the NII change, you know, is volume related. We are we are slow on loan growth in Q1. But it is also interest rate related, and it is roughly our original guidance had 2 cuts, so 50 basis points total of cuts. We are now thinking there is 1 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 is the interest rate question. And the thought around part of the reasons around the lower net interest income. Outlook. The 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 1 to 2 basis points to margin. And, again, that is been consistent for quite a period of time for us. I know I have talked about it on previous calls. Great.
Matthew Breese: Okay. Very helpful. The other 1 is within fees the income or losses from investments employee retirement benefits, I am gonna be honest. I have a tough time modeling this 1. Can you help me out what is baked into the forward guide For last couple of years, it is been about $10 million a year. Is that a reasonable place to be?
R. David Rosato: You know, it is hard for you, and it is hard for me. it is those investments have an equity market component. When we think about it, we try to think up with no market impact. So no effect in fee income, and do not forget there is an offsetting employee benefit expense as well. But we have had strong equity markets. Especially in Q2, and that produced that income. it is basically from a modeling perspective, you are making a judgment on what equity markets will do in each water. And I try to just be neutral about that. To be honest with you. But the reality is it is been a positive this year, and it was a positive last year as well.
Matthew Breese: Okay. Big 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 hiring opportunities? Have you considered that?
Denis K. Sheahan: Yes. We are open 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 of the income statement or balance sheet we would welcome those opportunities. And we are always looking for talent, as I said earlier. Okay.
Matthew Breese: And then other 1 I had, you know, there is been, to Jared's point, a bunch of larger banks even going back the last handful of years, to enter or try to or make a big push in Boston, it is hard to miss some of, you know, will not name names, like, who is advertising. For the local Red Sox games. Here, as we have 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 market share? Has Historically, Boston's been a parochial market. Loyal to existing banks in the area, and I am curious if anything had changed on that front.
Denis K. Sheahan: I mean, I mean, it is not bad. The it is it is a story that just continues to evolve. We have had new entrants to this market before, you know, and that will continue. it is a very attractive market. it is why we feel so good about being here. This is our home base. We are the local bank. And, so the competition whether it is in the wealth management business or in the banking business, It just, continues to increase, but we are comfortable that we can find our way and continue to put up good numbers for our shareholders quarter after quarter, year after year. it is it is intense, and but it is been intense before. I do not and president Quincy L. Miller is here right next to me. Quincy, how would you describe it?
Quincy L. Miller: Yeah. I would, I would echo that. You know, what I would say is they have all been here on the commercial side. that is not new. They have 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 as, you know, $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 will continue to compete into the future, I think, very well.
Matthew Breese: I will leave it there. Thank you, guys. Thanks. Thanks, Matthew.
Operator: There are no further questions at this time. I will now turn the call over to Dennis Sheehan for closing remarks.
Denis K. Sheahan: Thank you, everybody. Thanks for your interest, your questions. I would look forward to speaking with you at the end of our next quarter.
Operator: This concludes today's conference call. You may now disconnect.
