Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eastern Bankshares Inc (EBC, Financial) reported a solid first quarter performance with operating earnings of $67.5 million, benefiting from a 33 basis point expansion in net interest margin.
- The company announced a definitive merger agreement with HarborOne Bancorp, which will create a $30 billion-plus bank, enhancing its presence in Greater Boston and expanding into Rhode Island.
- Eastern Bankshares Inc (EBC) increased its quarterly dividend by 8%, continuing its trend of returning capital to shareholders.
- The company successfully repositioned its investment portfolio, which is expected to be $0.13 accretive to 2025 operating EPS.
- Credit trends improved with a decrease in nonperforming loans and net charge-offs, reflecting strong underwriting and risk management practices.
Negative Points
- Eastern Bankshares Inc (EBC) reported a GAAP net loss of $1.08 per diluted share due to the strategic repositioning of $1.3 billion of securities.
- Noninterest income was a loss of $236.9 million on a GAAP basis, primarily due to pretax nonoperating losses on the sale of AFS securities.
- The lending environment remains tempered due to economic uncertainty and changes in trade policies, impacting customer sentiment and loan demand.
- Operating noninterest income decreased by $2.7 million, driven by lower wealth management fees and reduced income from investments held in Rabbi Trust.
- Period-end deposits decreased by $522 million, primarily due to seasonal outflows and runoff of high-cost CDs.
Q & A Highlights
Q: With regards to the outlook, will Eastern Bankshares be active in share buybacks during the merger process with HarborOne?
A: David Rosato, CFO, stated that Eastern Bankshares will be out of the market for share buybacks until after HarborOne's shareholder approval due to the equity component in the merger consideration.
Q: Could you clarify the expected closing timeline for the merger with HarborOne?
A: David Rosato, CFO, explained that the merger is expected to close before October 31, provided regulatory approvals and waiting periods are completed. If the process extends late into Q4, the closing might be deferred to Q1 2026 to avoid year-end closing challenges.
Q: Can you provide more details about the franchise lending group and its growth potential?
A: Denis Sheahan, CEO, mentioned that Eastern Bankshares hired two seasoned lenders to enhance their franchise lending capabilities, focusing on sectors like fast food. The pipeline is building effectively, and they anticipate continued growth in this segment.
Q: What is the effective tax rate expected for the remainder of 2025?
A: David Rosato, CFO, indicated that despite a large GAAP loss in Q1, the full-year effective tax rate is expected to be about 11%, with negative tax expenses in subsequent quarters.
Q: How does Eastern Bankshares plan to integrate HarborOne's mortgage business, and is there a strategy to expand in this area?
A: David Rosato, CFO, noted that HarborOne's mortgage business is larger than Eastern's, with significant fee opportunities. The plan is to optimize the combined mortgage operations for Eastern, considering HarborOne's gain on sale model and Eastern's focus on jumbo mortgages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
