Eastern Bankshares, Inc. (EBC)·Q1 2025 Earnings Summary

Executive Summary

• Operating results were solid: Operating EPS of $0.34 modestly beat S&P Global consensus of $0.33–$0.33 per share, while operating revenue of $227.7M was in line with a $227.0M consensus; GAAP EPS of ($1.08) and GAAP revenue of ($47.2)M reflected a non-operating $269.6M pre-tax loss on securities repositioning that management expects to add ~$35M pre-tax to 2025 earnings and $0.13 to 2025 operating EPS . EPS est. and revenue est. from S&P Global*
• Net interest margin (FTE) expanded 33 bps q/q to 3.38% on higher asset yields and lower funding costs; operating efficiency ratio improved to 53.7% (third consecutive quarter of improvement) .
• Asset quality improved: NPLs fell to 0.51% of loans (from 0.76%) and net charge-offs declined to 0.26% of average loans, driven by investor office resolutions; allowance coverage remained solid at 1.25% .
• Capital return and strategic actions: Dividend raised 8% to $0.13; $48.7M of buybacks in Q1 (2.9M shares); buybacks paused pending the announced HarborOne merger (target close mid-Q4 2025 or slip to Q1 2026); CET1 remains robust at 14.15% .

What Went Well and What Went Wrong

• What Went Well

  • Margin and efficiency: “Operating earnings of $67.5 million benefited from a 33 basis point expansion… and continued improvement in the operating efficiency ratio to 53.7%,” producing an 11.7% operating ROTCE and 1.09% operating ROA .
  • Credit improvement: NPLs declined to $91.6M (0.51% of loans) from $135.8M (0.76%); net charge-offs fell to 0.26% from 0.71% in Q4, with concentration in investor office; allowance at 1.25% of loans .
  • Strategic repositioning and talent: Completed $1.3B securities repositioning (sold ~1.43% yielding AFS, bought ~5% yielding), expected ~$35M pre-tax 2025 accretion; expanded franchise lending with senior hires to drive C&I growth momentum .

• What Went Wrong

  • GAAP loss optics: GAAP net loss of $217.7M (–$1.08 diluted EPS) and GAAP “total revenue” of –$47.2M due to the $269.6M pre-tax loss on AFS sales; non-GAAP operating revenue was $227.7M and operating EPS $0.34 .
  • Deposit balances and funding: Deposits declined 2.4% q/q to $20.8B from seasonal outflows and runoff of high-cost CDs; average deposits also lower q/q; though cost of deposits improved to 1.48% .
  • Wealth fees normalization: Investment advisory fees declined q/q ($16.4M vs. $18.0M) due to a favorable one-time item in Q4 and market performance; operating noninterest income dipped $2.7M .

Financial Results

Key P&L and margin metrics (oldest → newest):

Q1 2025 actual vs S&P Global consensus:

Note: Large GAAP miss on “revenue” and EPS is entirely from the non-operating $269.6M pre-tax AFS loss; on an operating basis, results matched or slightly beat consensus .

KPIs and balance sheet (end of period unless noted):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Operating earnings of $67.5 million benefited from a 33 basis point expansion in the net interest margin to 3.38%, and further improvement in the operating efficiency ratio to 53.7%... loan portfolio increased nearly 3% annualized primarily due to higher C&I balances.” — CEO Denis Sheahan .
• “The [securities] transaction improved the total portfolio yield and is expected to provide pre-tax earnings accretion of approximately $35 million for 2025.” — CFO David Rosato .
• “We reported a GAAP net loss… driven by the strategic repositioning of $1.3 billion of securities… expected to be $0.13 accretive to 2025 operating EPS.” — CFO David Rosato .
• “We will target deposit betas similar to… the tightening cycle or about 45% to 50%, with modest lags relative to Fed actions.” — CFO David Rosato .
• “We are very excited about the partnership with HarborOne… delivering sizable earnings accretion of approximately 16% and tangible book value earn-back of 2.8 years.” — CEO Denis Sheahan .

Q&A Highlights

• Buybacks paused: “We will be out of the market since we'll be using an equity component [for the merger] at least until after [HarborOne] shareholder approval.” — CFO .
• Tax rate: Expect negative tax expense in subsequent quarters with a full-year 2025 effective tax rate ~11% (normalizing to ~21–23% in 2026) — CFO .
• Franchise lending: Hired two seasoned leaders; pipeline building across QSR categories; contributing to C&I growth — CEO .
• Accretion income: Cambridge accretion ~$12–13M per quarter early in 2025, stepping to $10–11M in H2; ~$45M full-year — CFO .
• Mortgage synergy: HarborOne Mortgage originated just under $700M in 2024 vs. EBC ~ $300M, with greater gain-on-sale; fee opportunity post-merger — CFO .

Estimates Context

• EPS: Operating EPS of $0.34 modestly beat S&P Global consensus of ~$0.33*, while GAAP EPS of ($1.08) missed due to the non-operating $269.6M pre-tax AFS loss .
• Revenue: Operating (non-GAAP) revenue of $227.7M aligned with a $227.0M consensus*, but GAAP revenue printed at ($47.2)M because the AFS loss is included in GAAP noninterest income .
• Forward context: Management did not change 2025 guidance; key model adjustments include ~$35M pre-tax accretion from the repositioning, 33 bps q/q NIM expansion, an ~11% 2025 tax rate, modest expense uptick near term, and buybacks paused pending merger .
  Values retrieved from S&P Global*

Key Takeaways for Investors

• Core run-rate improving: NIM expansion and a better efficiency ratio drove stable operating EPS despite fee normalization; operating results were in line to slightly better vs. consensus .
• GAAP vs. operating optics matter: The GAAP loss stems from a deliberate portfolio repositioning expected to lift 2025 earnings ($35M pre-tax; +$0.13 operating EPS) .
• Credit risks appear contained: NPLs and NCOs improved; investor office remains the focus but is tightly managed with conservative reserves (4.9% referenced on the call) .
• Funding constructive: Deposit costs fell to 1.48%; management targets 45–50% deposit betas if the Fed eases, supporting further margin resilience .
• Capital return shifts: Dividend up 8% to $0.13; buybacks paused during merger process; CET1 remains strong at 14.15% .
• Merger upside: HarborOne deal implies ~16% EPS accretion and faster path to top-quartile profitability; timeline mid-Q4 2025 (or Q1 2026) .
• Near-term trading lens: Expect focus on NIM trajectory, deposit trends, investor office updates, and merger milestones (regulatory progress, cost-save cadence) as stock catalysts .

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References:

• Q1 2025 press release and financials .
• Q1 2025 earnings call transcript .
• Prior quarters for trend: Q3 2024 press release ; Q4 2024 press release .
• Q1 2025 additional press release (franchise lending expansion) .

* Values retrieved from S&P Global (consensus estimates).