Sign in
EB

Eastern Bankshares, Inc. (EBC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered a clean beat versus internal Q3 guidance: net interest income landed at $179.2M (guided $175–$180M), NIM (FTE) reached 3.05% (top of 3.00–3.05% guide), and operating noninterest income exceeded guide at $36.9M ($33–$34M) while operating noninterest expense was modestly above plan at $133.7M ($130–$132M) .
  • GAAP diluted EPS was $0.30 and operating diluted EPS was $0.34, with margin expansion supported by lower deposit costs; cost of deposits fell to 1.69% (from 1.82% in Q3) .
  • Management announced a $1.2B investment portfolio repositioning to be completed mid-Q1 2025, expected to add ~$0.13 to 2025 operating EPS, 18 bps to margin and improve ROA/ROTCE; the after-tax loss ($200M) is already reflected in equity .
  • Credit costs were elevated: annualized net charge-offs rose to 0.71%, driven primarily by investor office PCD loans acquired from Cambridge; non-performing loans increased to 0.76% of loans .
  • FY2025 outlook: NII $815–$840M, full-year NIM (FTE) 3.45–3.55%, loan growth 2–4%, deposit growth 1–2%, provision $30–$40M, operating noninterest income $130–$140M, operating noninterest expense $535–$555M, tax rate 22–23% .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded 8 bps to 3.05%, aided by deposit repricing; cost of deposits fell 13 bps to 1.69% compared to Q3 .
  • Wealth management momentum: trust and advisory fees climbed to $18.0M (including $1.2M one-time), alongside a $9.3M non-operating gain on an equity investment (Numerated sale to Moody’s) .
  • Strategic capital actions: $1.2B securities repositioning to add ~$0.13 to 2025 operating EPS and ~18 bps to margin; repurchased 908K shares in Q4 at $17.41 and an additional 761K in January; dividend $0.12 declared .

What Went Wrong

  • Elevated credit costs in office CRE: net charge-offs increased to $31.7M (0.71% of average loans), mostly investor office PCD loans; NPLs rose to $135.8M (0.76% of loans) .
  • Tangible book value per share declined sequentially to $11.98 (from $12.17), reflecting AOCI movements and merger-related dynamics .
  • Operating noninterest expense rose linked-quarter to $133.7M (from $130.9M), as partial-quarter Cambridge impact in Q3 normalized and certain categories increased (e.g., data processing, amortization of intangibles) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total revenue ($USD Millions)$160.046 $153.997 $203.383 $216.542
GAAP Net income ($USD Millions)$31.509 $26.331 $(6.188) $60.771
Diluted EPS – Continuing Ops ($)$0.19 $0.16 $(0.03) $0.30
Operating EPS – diluted ($)$0.10 $0.22 $0.25 $0.34
Net interest margin (FTE, %)2.69% 2.64% 2.97% 3.05%
Cost of deposits (%)1.51% 1.78% 1.82% 1.69%

Segment/noninterest income breakdown ($USD Millions):

CategoryQ2 2024Q3 2024Q4 2024
Trust & investment advisory fees$6.711 $14.909 $17.962
Service charges on deposit accounts$7.930 $8.140 $8.426
Debit card processing fees$3.522 $3.806 $3.602
Interest rate swap income$0.418 $0.565 $1.169
Income from investments in rabbi trusts$1.761 $3.591 $0.005
Losses on sales of AFS securities$(7.557) $0.000 $(9.241)
Other$12.715 $2.902 $15.751

Key KPIs:

KPIQ2 2024Q3 2024Q4 2024
Loans (period-end, $USD Millions)$14,145.520 $18,064.126 $18,079.084
Deposits (period-end, $USD Millions)$17,537.809 $21,216.854 $21,291.619
Allowance for loan losses ($USD Millions)$156.146 $253.821 $228.952
Total NPLs / total loans (%)0.28% 0.70% 0.76%
Net charge-offs / avg loans (%)(0.02)% 0.12% 0.71%
CET1 capital ratio (%)—15.52% 15.73%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income ($USD)Q4 2024$175–$180M —Achieved near high end
NIM (FTE, %)Q4 20243.00–3.05% —Achieved top end at 3.05%
Operating noninterest income ($USD)Q4 2024$33–$34M —Beat at $36.9M
Operating noninterest expense ($USD)Q4 2024$130–$132M —Slightly above at $133.7M
Net Interest Income ($USD)FY 2025—$815–$840M New FY guide
NIM (FTE, %)FY 2025—3.45–3.55% New FY guide
Loan growth (%)FY 2025—2–4% New FY guide
Deposit growth (%)FY 2025—1–2% New FY guide
Provision expense ($USD)FY 2025—$30–$40M New FY guide
Operating noninterest income ($USD)FY 2025—$130–$140M New FY guide
Operating noninterest expense ($USD)FY 2025—$535–$555M New FY guide
Tax rate (operating)FY 202522–23% (forward-looking) 22–23% Maintained
Dividend per shareQuarterly$0.12 (raised in Q3) $0.12 declared Maintained
Portfolio repositioningFY 2025—~$0.13 EPS accretion; ~18 bps margin benefit; after-tax loss ~$200M New initiative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Margin trajectoryNIM 2.64%; pressure from higher funding costs NIM improved to 2.97%; accretion from Cambridge marks NIM 3.05%; deposit costs down; repositioning to add ~18 bps Improving
Office CRE credit managementNPLs fell to 0.28% of loans; net recoveries (0.02%) Allowance up to 1.43%; investor office reserves ~8% of book Net charge-offs 0.71%; NPLs 0.76%; majority office PCD Active de-risking; watch cycle
Deposit costs & fundingCost of deposits 1.78%; stable average deposits Cost of deposits 1.82%; ~50% checking mix Cost of deposits 1.69%; ongoing CD repricing; betas 45–50% on easing Falling funding costs
Capital actions (buybacks/dividends)Repurchase authorization; dividend $0.11 Repurchased 836K shares; dividend raised to $0.12 Repurchased 908K shares; +761K in Jan; dividend $0.12 Continued return of capital
Wealth managementFees $6.7M; AUM growth Fees $14.9M; Cambridge AUM uplift Fees $18.0M (incl. $1.2M one-time); Numerated gain $9.3M Growing
M&A environmentFocus on organic; merger closing planned Cambridge integration; organic growth priority Open to disciplined M&A amid local consolidation Opportunistic

Management Commentary

  • “Our margin expanded by 8 basis points, supported by a reduction in deposit costs.” – CFO David Rosato .
  • “We are executing on a $1.2 billion repositioning... expected to be $0.13 accretive to operating EPS in 2025.” – CFO David Rosato .
  • “Our most significant milestone was the merger with Cambridge Trust... solidifies our position as a leading financial institution in our region.” – Executive Chair Bob Rivers .
  • “We posted full year operating net income of $192.6 million, 18% higher than 2023.” – CEO Denis Sheahan .

Q&A Highlights

  • Portfolio repositioning earn-back: ~$200M loss for ~$35M annual NII benefit equates to ~5.7-year earn-back; driven by low-yield, longer-duration bonds sold; expected reinvestment yields ~4.75–5% .
  • Margin timing: mid-Q1 execution implies partial benefit in Q1, full run-rate in Q2; December spot margin was 3.13%, normalized ~3.08% due to extra accretion .
  • Office CRE specifics: ~81% of Q4 charge-offs tied to previously reserved credits; Q4 CRE charge-offs were essentially all office; criticized/classified investor office ended ~$184M; upcoming maturities largely accruing and expected to resolve without issues .
  • Capital returns: 908K shares repurchased in Q4; 761K in January; ~8.3M shares remain under authorization through July .
  • Loan growth outlook and market disruption: guidance (2–4% loan growth) excludes potential uplift from local mergers disrupting competitors; upside possible but not embedded in plan .

Estimates Context

  • Wall Street consensus estimates from S&P Global were unavailable due to data access limits at time of retrieval; as a result, a direct comparison to consensus EPS and revenue could not be provided.
  • Relative to internal Q3 guidance, Q4 results were strong: NII at $179.2M (near high end), NIM 3.05% (top end), operating noninterest income beat ($36.9M vs $33–$34M), and operating noninterest expense modestly above ($133.7M vs $130–$132M) .

Key Takeaways for Investors

  • Margin tailwinds: Lower deposit costs (1.69% in Q4) and $1.2B portfolio repositioning should support NIM expansion through 2025; full-year NIM (FTE) guided to 3.45–3.55% .
  • Credit watch but contained: Office CRE is the primary headwind; most Q4 charge-offs were previously reserved PCD loans; allowance coverage remains robust at 1.29% of loans and CET1 15.73% .
  • Wealth growth and fee resilience: Wealth fees reached $18.0M with one-time uplift; fee reinstatement on Cambridge accounts adds incremental noninterest income .
  • Capital deployment: Ongoing buybacks and maintained dividend ($0.12) signal confidence in capital strength and earnings trajectory .
  • FY2025 setup: NII $815–$840M and NIM 3.45–3.55% imply material ROA/ROTCE improvement, even as provision normalizes ($30–$40M) .
  • Tactical trading: Near-term catalysts include completion of repositioning, visible margin uplift, and clarity on office CRE resolutions; risks center on credit migration and rate path variability .
  • Medium-term thesis: Enhanced earnings power post-merger, improving margin structure, diversified fee base (wealth), and conservative credit posture support compounding returns as rates ease and deposit betas normalize .