Eastern Bankshares, Inc.EBC
Eastern Bankshares, Inc. Income Taxes Disclosure
Income Taxes
The information presented within this Note excludes discontinued operations with respect to the year ended December 31, 2023. Refer to Note 24, “Discontinued Operations” for further discussion regarding discontinued operations.
The provision for income taxes is comprised of the following components:
| For the Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Current tax expense (benefit): | |||||||||||||||||
| Federal | $ | 25,022 | $ | 2,088 | $ | (39,710) | |||||||||||
| State | (185) | (1,942) | (5,332) | ||||||||||||||
| Total current tax expense (benefit) | 24,837 | 146 | (45,042) | ||||||||||||||
| Deferred tax expense (benefit): | |||||||||||||||||
| Federal | (17,709) | 19,204 | 1,219 | ||||||||||||||
| State | 4,159 | 16,855 | (19,486) | ||||||||||||||
| Total deferred tax (benefit) expense | (13,550) | 36,059 | (18,267) | ||||||||||||||
| Total income tax expense (benefit) | $ | 11,287 | $ | 36,205 | $ | (63,309) | |||||||||||
A reconciliation of the U.S. federal statutory rate to the Company’s effective income tax rate is detailed below:
| For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) at statutory rate | $ | 20,896 | 21.00 | % | $ | 32,711 | 21.00 | % | $ | (26,458) | 21.00 | % | |||||||||||||||||||||||
| Increase (decrease) resulting from: | |||||||||||||||||||||||||||||||||||
State income tax, net of federal tax benefit (1) | 4,703 | 4.73 | % | 13,783 | 8.85 | % | (17,313) | 13.74 | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (1,564) | (1.57) | % | (2,002) | (1.29) | % | (2,293) | 1.82 | % | ||||||||||||||||||||||||||
| Changes in valuation allowance | 2,088 | 2.10 | % | 2,781 | 1.79 | % | — | — | % | ||||||||||||||||||||||||||
| Tax credits | (4,373) | (4.39) | % | (3,459) | (2.22) | % | (1,617) | 1.28 | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Tax-exempt income | (16,260) | (16.34) | % | (14,911) | (9.57) | % | (14,161) | 11.24 | % | ||||||||||||||||||||||||||
| Other | 5,742 | 5.77 | % | 5,459 | 3.50 | % | 3,031 | (2.41) | % | ||||||||||||||||||||||||||
| Other, net | 55 | 0.06 | % | 1,843 | 1.18 | % | (4,498) | 3.57 | % | ||||||||||||||||||||||||||
| Actual income tax expense (benefit) | $ | 11,287 | 11.34 | % | $ | 36,205 | 23.24 | % | $ | (63,309) | 50.25 | % | |||||||||||||||||||||||
(1)The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category includes Massachusetts.
Significant components of the Company’s deferred tax assets and deferred tax liabilities are presented below:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Unrealized loss on available for sale securities | $ | 79,433 | $ | 194,324 | |||||||
| Allowance for loan losses | 96,165 | 69,531 | |||||||||
| Cash flow hedges | 1,359 | 10,347 | |||||||||
| Leases | 27,317 | 22,946 | |||||||||
| Charitable contribution limitation carryover | 5,213 | 5,214 | |||||||||
| Investment losses | 4,740 | 5,843 | |||||||||
| Accrued expenses | 13,799 | 9,952 | |||||||||
| Fixed assets | — | 659 | |||||||||
| Loan basis difference fair value adjustments | 126,832 | 75,301 | |||||||||
| Loss carryovers | 45,315 | 23,844 | |||||||||
| Tax credits | 34,372 | 276 | |||||||||
| Other | 1,968 | 1,195 | |||||||||
| Total deferred tax assets before valuation allowance | 436,513 | 419,432 | |||||||||
| Valuation allowance | (5,213) | (2,781) | |||||||||
| Total deferred tax assets net of valuation allowance | 431,300 | 416,651 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Amortization of intangibles | 58,008 | 44,736 | |||||||||
| Lease obligation | 20,739 | 19,199 | |||||||||
| Partnerships | 4,366 | 3,417 | |||||||||
| Trading securities | 6,997 | 5,203 | |||||||||
| Employee benefits | 16,029 | 11,102 | |||||||||
| Fixed assets | 1,700 | — | |||||||||
| Mortgage servicing rights | 11,240 | 575 | |||||||||
| Other | 2,258 | 291 | |||||||||
| Total deferred tax liabilities | 121,337 | 84,523 | |||||||||
| Net deferred income tax assets | $ | 309,963 | $ | 332,128 | |||||||
The Company assesses the realizability of deferred tax assets and whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The Company considers projections of future taxable income during the periods in which deferred tax assets and liabilities are scheduled to reverse. Additionally, in determining the availability of operating loss carrybacks and other tax attributes, both projected future taxable income and tax planning strategies are considered in making this assessment. As a result of a projected taxable loss for the year ended December 31, 2025, the Company believes that a portion of the associated charitable contribution carryforward will expire unutilized and therefore has recorded a valuation allowance for $5.2 million. As of December 31, 2025, management believes it is more likely than not that the Company will realize the remainder of its net deferred tax assets.
Management performed an evaluation of the Company’s uncertain tax positions as of December 31, 2025 and determined that no liability was needed for unrecognized tax benefits. Management performed a similar evaluation as of December 31, 2024 and determined that liabilities for unrecognized tax benefits of $1.8 million was needed related to certain state tax positions. The decrease was primarily due to a reversal of $1.8 million recognized during the year ended December 31, 2025.
The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits for the periods indicated:
| For the Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Beginning | $ | 1,564 | $ | 3,503 | $ | 5,782 | ||||||||||||||
| Additions based on tax positions related to the current year | — | — | — | |||||||||||||||||
| Additions for tax positions of prior years | — | — | — | |||||||||||||||||
| Reductions related to settlements with taxing authorities | — | — | — | |||||||||||||||||
| Reductions as a result of a lapse of the applicable statute of limitations | (1,564) | (1,939) | (2,279) | |||||||||||||||||
| Ending | $ | — | $ | 1,564 | $ | 3,503 | ||||||||||||||
The Company recognizes penalties and accrued interest related to unrecognized tax benefits in tax expense. No penalties or interest were accrued as of December 31, 2025. Accrued penalties and interest amounted to $0.5 million at December 31, 2024. During the year ended December 31, 2025, $1.8 million of unrecognized state tax benefits and $0.2 million of interest and penalties reversed upon expiration of the statute of limitations for the tax year to which the reserve was related.
The Company had net operating loss carryforwards for federal or state income tax purposes represented by a deferred tax asset of $40.8 million and $23.8 million at December 31, 2025 and 2024, respectively.
At December 31, 2025, the Bank’s federal pre-1988 reserve, for which no federal income tax provision has been made, was approximately $20.8 million. Under current federal law, these reserves are subject to recapture into taxable income, should the Company make non-dividend distributions, make distributions in excess of earnings and profits retained, as defined, or cease to maintain a banking type charter. A deferred tax liability is not recognized for the base year amount unless it becomes apparent that those temporary differences will reverse into taxable income in the foreseeable future. No deferred tax liability has been established as these two events are not expected to occur in the foreseeable future.
The Company’s primary banking activities are in the states of Massachusetts, New Hampshire and Rhode Island; however, the Company also files additional state corporate income and/or franchise tax returns in states in which the Company has a filing requirement. The methods of filing, and the methods for calculating taxable and apportionable income, vary depending upon the laws of the taxing jurisdiction.
The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The Company is no longer subject to federal and state income tax examinations by tax authorities for years before 2022.
The Company invests in low-income affordable housing and renewable energy projects which provide the Company with tax benefits, including tax credits, generally over a period of approximately 5-15 years. When permissible, the Company accounts for its investments in Low Income Housing Tax Credit (“LIHTC”) projects using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes that amortization as a component of income tax expense. The net investment performance in the housing projects is included in other assets in the Consolidated Balance Sheets. The Company will continue to use the proportional amortization method on any new qualifying LIHTC investments. During the years ended December 31, 2025 and 2024, the Company generated federal tax credits primarily from LIHTC investments of $23.3 million and $16.5 million, respectively. The Company treats the investment tax credits received as a reduction of federal income taxes for the year in which the credit arises using the flow-through method (i.e., the credit flows directly through the statement of income in the year of purchase). For additional information on these investments, refer to Note 13, “Low Income Housing Tax Credits and Other Tax Credit Investments.”
The amounts of cash income taxes (refunded) paid by the Company during the year ended December 31, 2025 were as follows:
| For the Year Ended December 31, 2025 | |||||
| (In thousands) | |||||
| Federal | $ | (2,415) | |||
| State: | |||||
| Massachusetts | 125 | ||||
| New Hampshire | (1,080) | ||||
| Rhode Island | 600 | ||||
| Other | 256 | ||||
| Total | $ | (2,514) | |||
The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $18.8 million and $65.9 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 29, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.