Eastern Bankshares, Inc. Reports Third Quarter 2023 Financial Results

~ Company Announces a 10% Increase to Quarterly Dividend ~

Eastern Bankshares, Inc. (the "Company," or together with its subsidiaries, "Eastern") (NASDAQ Global Select Market: EBC), the stock holding company of Eastern Bank, today announced its 2023 third quarter financial results and the declaration of a quarterly cash dividend of $0.11 per share, representing a $0.01, or 10%, increase from the most recent quarterly dividend.

The release of the Company's quarterly financial results follows its September 19, 2023 announcement of the sale of the insurance operations of Eastern Insurance Group, LLC ("Eastern Insurance") ("the insurance transaction") and the pending merger with Cambridge Bancorp ("Cambridge") ("the merger"). Proceeds from the insurance transaction will allow Eastern to focus on the growth and strategic initiatives of its core banking business, including the merger with Cambridge. The merger will create a combined franchise with approximately $27 billion in total assets, create the largest bank-owned independent investment advisor in Massachusetts, and further solidify Eastern as the largest Boston-based mid-sized bank by deposits. On a combined basis, the transactions are financially compelling with expected earnings per share accretion in excess of 20% and an expected 10% improvement to the Company's efficiency ratio.

"The strategic transactions we announced just last month mark the next step in our journey, and will enhance our Boston franchise, allowing us to better meet the needs of our customers and communities," said Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank. "We are on track to complete the insurance transaction next week. It's been a remarkable effort by so many to get to the finish line, and I express my gratitude to Tim Lodge, President and Chief Executive Officer of Eastern Insurance, and his entire team. Regarding the merger with Cambridge, we have submitted all required regulatory merger applications and mobilized internal integration resources at both Eastern and Cambridge. I'm confident that the combined transactions will improve our focus, efficiency and profitability, as well as enhance our liquidity position as we continue to operate in a challenging environment."

FINANCIAL HIGHLIGHTS FOR THE THIRD QUARTER OF 2023

• Net income of $59.1 million, or $0.36 per diluted share, compared to net income of $48.7 million, or $0.30 per diluted share, for the prior quarter.
• Operating net income*, which excludes the revenues, expenses, and tax provision of discontinued operations, of $52.1 million, or $0.32 per diluted share, compared to $41.1 million, or $0.25 per diluted share, for the prior quarter.
• The insurance transaction triggered the elimination of a $14.6 million tax valuation allowance that was established as part of the sale of available-for-sale securities in the first quarter of 2023 (the "securities sale").
• The net interest margin on a fully tax equivalent basis held relatively steady at 2.77% as compared to 2.80% in the prior quarter.
• Continued focus on efficiency with total operating noninterest expense of $98.7 million, essentially flat from the prior quarter.
• Healthy balance sheet with 11.6% shareholders' equity to assets, 8.7% tangible shareholders' equity to tangible assets* and 16.0% common equity tier 1 capital ratio¹. Borrowings and brokered deposits totaled 5.2% of assets.
• Overall credit metrics remained strong with net charge-offs less than 1 basis point.
• Board declared a 10% increase in the quarterly cash dividend to $0.11 per share.

Regarding the Company's third quarter financial results, Mr. Rivers commented, "Our results continue to demonstrate our robust capital position and the strength of our franchise. We are confident in our earnings capacity and remain focused on long-term shareholder value, and the increase in our quarterly dividend is further evidence of that confidence and commitment."

In September 2023, following the approval of the insurance transaction by the Company's Board of Directors and in accordance with applicable accounting rules, the Company classified its insurance operations as both held-for-sale and discontinued operations. Accordingly, the Consolidated Balance Sheets and Statements of Income present discontinued operations for the current period and were adjusted for prior periods on a retrospective basis. Please refer to Appendix G for the results of discontinued operations.

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1</sup> Regulatory capital ratios are preliminary estimates.

BALANCE SHEET

Total assets were $21.1 billion at September 30, 2023, representing a decrease of $437.2 million, or 2%, from June 30, 2023.

• Total securities decreased $267.9 million, or 5%, from the prior quarter, to $4.7 billion, due to a decrease in the market value of available-for-sale securities as well as principal runoff.
• Total loans were $13.9 billion, representing a decrease of $42.6 million, or 0.3%, from the prior quarter. The decrease was driven primarily by the sale of approximately $192 million of Shared National Credit ("SNC") loans from the commercial and industrial loan portfolio. This was partially offset by loan originations to core customers.
• Deposits totaled $17.4 billion, representing a decrease of $756.8 million, or 4%, from the prior quarter caused primarily by a decrease in municipal deposits of approximately $375.0 million due in part to seasonality, as well as a decrease in brokered deposits of $305.9 million.
• Borrowed funds increased $364.2 million from the prior quarter to $715.4 million in the third quarter, as Federal Home Loan Bank ("FHLB") borrowings were used to replace certain maturing brokered CDs.
• Shareholders' equity was $2.4 billion, representing a decrease of $80.2 million from the prior quarter driven primarily by a decrease in accumulated other comprehensive income, partially offset by retained earnings. Please refer to Appendix D to this press release for a roll-forward of tangible shareholders' equity*.
• At September 30, 2023, book value per share was $13.87 and tangible book value per share* was $10.14.

NET INTEREST INCOME

Net interest income was $137.2 million for the third quarter of 2023, compared to $141.6 million in the prior quarter, representing a decrease of $4.4 million.

• Net interest margin on a fully tax equivalent ("FTE") basis* was 2.77% for the third quarter, representing a 3 basis point decrease from the second quarter, as higher funding costs more than offset increases in asset yields.
• Total interest-earning asset yields increased 10 basis points from the prior quarter to 4.05%, due to increased loan and short-term investment yields as a result of higher interest rates during the quarter.
• Total interest-bearing liabilities cost increased 20 basis points from the prior quarter to 1.99%, due primarily to higher deposit costs resulting from deposit pricing increases and deposit mix shifts.

NONINTEREST INCOME

Noninterest income, which excludes revenues from discontinued operations, was $19.2 million for the third quarter of 2023, compared to $26.2 million for the prior quarter, representing a decrease of $7.0 million. Noninterest income on an operating basis* was $20.7 million for the third quarter of 2023, compared to $23.2 million for the prior quarter, a decrease of $2.5 million.

• Service charges on deposit accounts increased $0.2 million on a consecutive quarter basis to $7.4 million.
• Trust and investment advisory fees increased $0.1 million on a consecutive quarter basis to $6.2 million.
• Debit card processing fees decreased $0.1 million from the prior quarter to $3.4 million.
• Loan-level interest rate swap income increased $0.9 million from the prior quarter to $1.7 million. The increase was driven by higher cash income due to higher customer swap transaction volume and an increase in the fair value adjustment of such transactions.
• Losses from investments held in rabbi trust accounts were $1.5 million in the third quarter compared to gains of $3.0 million in the prior quarter due to investment performance.
• In the third quarter, the Company incurred losses on sales of commercial and industrial loans totaling $2.7 million due to the sale of SNC loans. There were no sales in the prior quarter. The losses on sale were partially offset by the release of loan loss reserves totaling approximately $2.0 million associated with the sale of SNC loans.

NONINTEREST EXPENSE

Noninterest expense, which excludes expenses from discontinued operations, was $101.7 million for the third quarter of 2023, compared to $99.9 million in the prior quarter, representing an increase of $1.8 million. Noninterest expense on an operating basis* for the third quarter of 2023 was $98.7 million, compared to $98.6 million in the prior quarter, an increase of $0.1 million.

• Salaries and employee benefits expense was $60.9 million in the third quarter, representing a decrease of $1.3 million from the prior quarter.
• Office occupancy and equipment expense was $8.6 million in the third quarter, a decrease of $0.4 million from the prior quarter.
• Data processing expense was $13.4 million in the third quarter, an increase of $0.6 million from the prior quarter.
• Professional services expense was $7.1 million in the third quarter, an increase of $4.1 million from the prior quarter, due primarily to merger and acquisition expenses of $3.6 million related to the planned merger with Cambridge.
• Marketing expense was $1.8 million in the third quarter, a decrease of $0.3 million from the prior quarter.
• Loan expenses were unchanged at $1.1 million in the third quarter.
• Federal Deposit Insurance Corporation ("FDIC") insurance expense was $2.8 million in the third quarter, a decrease of $0.2 million from the prior quarter.
• Other noninterest expense was $5.5 million in the third quarter, a decrease of $0.6 million from the prior quarter.

DISCONTINUED OPERATIONS

Net loss from discontinued operations was $4.4 million in the third quarter, compared to net income of $4.2 million in the prior quarter, a decrease of $8.6 million.

• In the third quarter of 2023, there were approximately $10.7 million of expenses associated with the insurance transaction, including the buyout of certain insurance producer contracts, professional services expenses, and real estate lease impairment charges.
• Discontinued operations is excluded from operating net income.*

Please refer to Appendix G for additional information on discontinued operations.

INCOME TAXES

The income tax benefit for the third quarter was $16.2 million compared to income tax expense of $15.9 million in the prior quarter, a decrease of $32.1 million.

• The insurance transaction triggered the elimination of a $14.6 million tax valuation allowance that was established as part of the securities sale in the first quarter of 2023. The elimination was made following the determination that the capital gain from the insurance transaction and the capital gain carrybacks would be greater than the previously incurred capital loss associated with the securities sale.
• Excluding the impact of the tax valuation allowance elimination, the tax benefit for the third quarter is reflective of Eastern's year-to-date net pre-tax loss position without consideration for any pre-tax gains resulting from the insurance transaction in the fourth quarter.

ASSET QUALITY

The allowance for loan losses was $155.1 million at September 30, 2023, or 1.12% of total loans, compared to $148.0 million, or 1.06% of total loans, at June 30, 2023. The Company recorded a provision for loan losses totaling $7.3 million in the third quarter of 2023 driven primarily by an increase in specific reserves associated with three commercial real estate loans collateralized by investor office real estate located in Boston's financial district.

Non-performing loans totaled $47.5 million at September 30, 2023 compared to $30.6 million at the end of the prior quarter. The increase was driven by the non-accrual designation of the three aforementioned commercial real estate loans. During the third quarter of 2023, the Company recorded total net charge-offs of $0.1 million, or less than 0.01% of average total loans on an annualized basis, compared to $0.5 million or less than 0.01% of average total loans in the prior quarter, respectively.

Please refer to the investor presentation for a review of the Company's office-related commercial real estate exposure.

DIVIDENDS AND SHARE REPURCHASES

The Company's Board of Directors has declared a quarterly cash dividend of $0.11 per common share, representing a $0.01, or 10%, increase from the prior quarter. The dividend will be payable on December 15, 2023 to shareholders of record as of the close of business on December 1, 2023.

The Company's share repurchase authorization expired in August of 2023. The Company did not repurchase any shares of its common stock during the third quarter of 2023.

CONFERENCE CALL AND PRESENTATION INFORMATION

A conference call and webcast covering Eastern's third quarter 2023 earnings will be held on Friday, October 27, 2023 at 9:00 a.m. Eastern Time. To join by telephone, participants can call the toll-free dial-in number (888) 259-6580 from within the U.S. and reference conference ID 50539618. The conference call will be simultaneously webcast. Participants may join the webcast on the Company's Investor Relations website at investor.easternbank.com. A presentation providing additional information for the quarter is also available 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 September 30, 2023, Eastern Bank had approximately $21 billion in total assets. Eastern provides a full range of banking and wealth management solutions for consumers and businesses of all sizes, and 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 business as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures. Except as otherwise indicated, these non-GAAP financial measures presented in this press release exclude discontinued operations. Please refer to Appendix G to this press release for further information regarding discontinued operations.

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), and the operating efficiency ratio. 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, (viii) the non-cash pension settlement charge recognized related to the Defined Benefit Plan, (ix) certain discrete tax items, and (x) net income from discontinued operations. 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 including the impact of mark-to-market adjustments on held-to-maturity securities, 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-E 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; 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 interest rates and resulting changes in competitor or customer behavior, mix or costs of sources of funding, and deposit amounts and composition; risks associated with the Company's completion and/or implementation of the merger with Cambridge, including risks that required regulatory, shareholder or other approvals for the merger are not obtained or other closing conditions are not satisfied in a timely manner or at all and that the merger fails to occur in the timeframe expected or at all; prior to the completion of the merger or thereafter, Cambridge or the Company may not perform as expected due to transaction-related uncertainty or other factors; and revenue or expense synergies may not fully materialize for the Company in the timeframe expected or at all, or may be more costly to achieve; risks associated with the disposition of Eastern Insurance, including risks that the disposition fails to occur in the timeframe expected or at all, does not provide the full expected economic or strategic benefits, or may be more costly to achieve; adverse national or regional economic conditions or conditions within the securities markets or banking sector; 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 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 or a failure to raise the national debt ceiling; market and monetary fluctuations, including inflationary or recessionary pressures, interest rate sensitivity, liquidity constraints, increased borrowing and funding costs, and fluctuations due to actual or anticipated changes to federal tax laws; the realizability of deferred tax assets; the Company's ability to successfully implement its risk mitigation strategies; asset and credit quality deterioration, including adverse developments in local or regional real estate markets that decrease collateral values associated with existing loans; and operational risks such as cybersecurity incidents, natural disasters, and pandemics, including COVID-19. 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.

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.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the proposed merger transaction, the Company intends to file with the SEC a Registration Statement on Form S-4 that will include a Joint Proxy Statement of the Company and Cambridge and a Prospectus of the Company (the "joint proxy statement/prospectus"), as well as other relevant documents concerning the proposed transaction. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND SHAREHOLDERS OF THE COMPANY AND CAMBRIDGE ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION WHEN IT BECOMES AVAILABLE AND EACH OTHER RELEVANT DOCUMENT FILED WITH THE SEC, AS WELL AS ANY AMENDMENT OR SUPPLEMENT TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. A copy of the definitive joint proxy statement/prospectus, as well as other filings containing information about the Company and Cambridge, can be obtained without charge, at the SEC's website (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to the Company's Investor Relations team via email at [email protected] or by telephone at (781) 598-7920, or to Cambridge Investor Relations via email at [email protected] or by telephone at (617) 520-5520.

PARTICIPANTS IN THE SOLICITATION

The Company, Cambridge, and their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and/or Cambridge in connection with the proposed transaction under the rules of the SEC. Information regarding the Company's directors and executive officers is available in its definitive proxy statement relating to its 2023 Annual Meeting of Shareholders, which was filed with the SEC on April 3, 2023, and its Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Commission on February 24, 2023, and other documents filed by the Company with the SEC. Information regarding Cambridge's directors and executive officers is available in its definitive proxy statement relating to its 2023 Annual Meeting of Shareholders, which was filed with the SEC on March 16, 2023 and other documents filed by Cambridge with the SEC. Other information regarding the participants in the proxy solicitation and a description of their interests will be included in the joint proxy statement/prospectus and other relevant materials filed with the SEC, which may be obtained free of charge as described in the preceding paragraph.

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."