Eastern Bank Records 11^th Consecutive Year of
Record Earnings in 2002

Operating net income rises 11 percent; Deposits up 12 percent

BOSTON, Mass., Feb. 24 – Eastern Bank’s 2002 net income rose 24 percent from $36.1 million to $44.8 million, driven by growth in several key business lines and a change in the accounting for goodwill amortization, the bank announced today.

Excluding the accounting change and the impact of a $4.7 million contribution to the Eastern Bank Charitable Foundation, operating net income rose 10.4 percent from $43.1 million to $47.6 million.

In 2002, Eastern’s total revenue rose 11 percent to $203.7 million, thanks in part to strong performances by its capital market, residential mortgage and commercial real estate units. Eastern’s deposits rose 12 percent to $3.5 billion in 2002, as many consumers sought investments with safety and good yields, such as money market accounts. Meanwhile, the bank’s loan portfolio rose 9 percent to $3.1 billion, while total assets grew 8.9 percent to $4.4 billion.

“The sluggish economy and sagging stock market made it a challenging year for both our customers and the bank, but we capitalized on several opportunities created by low interest rates and had an overall solid performance,” said Stanley J. Lukowski, Eastern’s chairman and chief executive officer.

The Federal Reserve’s decision to further cut already low interest rates reduced the bank’s net interest margin to its lowest level in several years. However, the low rate environment also bolstered several business lines:

• Eastern Bank Capital Markets generated more than $4 million in revenue – an increase of 400 percent over 2001 – and finished the year among the nation’s ten largest underwriters of short-term municipal debt issues, according to Thomson Financial.
• Commercial Real Estate lenders generated more than $300 million in new commitments in 2002, pushing the portfolio past $700 million. Meanwhile, Eastern’s commercial real estate brokerage, Fantini & Gorga/iCap Realty Advisors, placed $280 million in loans with capital sources nationwide during its first full year of operation at Eastern.
• The Mortgage Division issued a record $680 million in mortgages in 2002, thanks to homeowners who refinanced their loans to take advantage of interest rates that were at 40-year lows. About 10 percent of the mortgages came to the bank through online applications, making Eastern the largest bank in the state for Internet originations, according to Thomson Financial.

In 2002, Eastern positioned itself for growth in 2003 and beyond. In December, Eastern completed its acquisition of Eastern Insurance, one of New England’s largest agencies, with 80,000 customers, $180 million in annual premiums and $27 million in revenue. The acquisition further diversifies Eastern’s mix of businesses and creates cross-marketing opportunities for both companies.

Eastern also moved its Corporate Headquarters at 53 State Street in Boston to a larger location three blocks away at 265 Franklin Street in Boston. The move was completed in June and was followed in September by the opening of a new branch at that same location.

Eastern’s 2002 performance will be presented tonight to its Directors, Trustees and Corporators, during the bank’s annual meeting, which is being held at the Museum of Fine Arts in Boston.

Founded in 1818, Eastern Bank is New England’s largest mutually-owned, independent commercial bank, with $4.4 billion in assets, $3 billion in commercial and consumer loans and 47 branches in Greater Boston. Eastern has a full line of consumer, commercial and investment banking products.