- GAAP Net Income: $26.3 million, $0.16 per diluted share.
- Operating Earnings: $36.5 million, $0.22 per diluted share.
- Net Interest Margin: Compressed 4 basis points from 2.68% to 2.64%.
- Net Interest Income: Down $1.3 million in the quarter.
- Loan Growth: $57 million in the quarter, 1.6% annualized basis.
- Consumer Loan Growth: 14% annualized basis, primarily home equity lines.
- Deposits: Reduction of $129 million, including $100 million from early withdrawal of legacy Century Bank deposit.
- Non-Performing Loans (NPLs): Reduced from $57 million to $40 million.
- Common Equity Tier 1 Ratio: 18.6%.
- Tangible Common Equity (TCE) Ratio: 11.7%.
- Cash: $750 million, essentially no borrowings.
- Dividend: $0.11 per share for shareholders of record on September 3, payable on September 16, 2024.
- Assets: $21 billion at June 30, down by $100 million from Q1.
- Securities Portfolio: $4.5 billion, down $197 million from Q1.
- Provision for Loan Losses: $6.1 million, down $1.4 million from Q1.
- Noninterest Income: Included $7.8 million early withdrawal penalty and $7.6 million securities loss.
- Noninterest Expense: $109.9 million, $105.3 million on an operating basis.
- Core Noninterest Expenses: $102 million in Q2.
- Operating Tax Rate: 25% for the quarter, expected 21% for the full year.
- Share Repurchase Authorization: Up to 5% of shares or $200 million.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eastern Bankshares Inc (EBC, Financial) successfully closed its merger with Cambridge Trust, enhancing its strategic position in core markets.
- The company announced a share repurchase authorization of up to 5% of its shares or $200 million, indicating confidence in its financial stability.
- Eastern Bankshares Inc (EBC) reported strong asset quality with a reduction in non-performing loans from $57 million to $40 million.
- The company maintains a robust balance sheet with a common equity Tier 1 ratio of 18.6% and a TCE ratio of 11.7%.
- Eastern Bankshares Inc (EBC) has a strong liquidity position with $750 million in cash and essentially no borrowings.
Negative Points
- The operating environment remains challenging with higher rates compressing net interest margin and continued credit challenges, particularly in the office market.
- GAAP net income for the quarter was $26.3 million, which is lower than desired for long-term performance.
- Net interest margin compressed by 4 basis points in the quarter, from 2.68% to 2.64%, and net interest income was down $1.3 million.
- Deposits decreased by $129 million in the quarter, partly due to the early withdrawal of a legacy Century Bank deposit.
- The company experienced a continuation of the deposit mix shift, with demand deposits declining by approximately $150 million on an average basis.
Q & A Highlights
Q: Since you marked the Cambridge loan book in conjunction with the deal, are there any plans to sell down office or CRE loans?
A: We are going through that process now. Our plans have been to retain the loans, and with the purchase accounting and higher yields, we find them attractive. For credit-impaired loans, we anticipate moving through them similarly to our own office loans and other credit impairments. (James Fitzgerald, CFO)
Q: On the new office loan that moved to nonperforming status, where is it, what are the vacancies like, and what are the prospects for resolution?
A: It's in a suburb of Boston with vacancies in the 30s and occupancy in the 70s. We hope to market it for sale and resolve it within the next couple of quarters. (James Fitzgerald, CFO)
Q: What are you targeting longer term for capital ratios, whether it's TCE or CET1?
A: We will need to wait for our new CFO, David Rosato, and CEO, Denis Sheahan, to provide a more clear answer over time. Post-Cambridge, we still feel we have a very healthy amount of capital, and we are excited about share repurchases. (James Fitzgerald, CFO)
Q: When do you think you could handle another bank deal, and are asset management acquisitions likely?
A: Right now, we are focused on the Cambridge Trust integration. For the balance of this year, our plate is full. We will evaluate future merger opportunities depending on the environment. Asset management acquisitions are not a priority but are not ruled out entirely. (Robert Rivers, CEO; Denis Sheahan, CEO)
Q: Could you provide an outlook on core expenses and fee income for the combined operations?
A: We will provide guidance in the third quarter once we have everything put together. For now, the environment remains challenging, and we expect slow growth. (James Fitzgerald, CFO)
Q: What is the outlook for loan growth, particularly on the commercial side?
A: We expect slow growth, specifically low single-digit growth on the commercial side, for the combined entity. (James Fitzgerald, CFO)
Q: Can you provide more details on the pro forma margin of 3% and the impact of accretion income?
A: The 3% margin includes the Cambridge balance sheet post-securities transaction and the accretion from loans. We will provide more details at the end of the third quarter. (James Fitzgerald, CFO)
Q: What was the timing of the securities sales this quarter?
A: The sale of the $85 million in securities occurred in mid-May. (James Fitzgerald, CFO)
Q: How should we be thinking about the tax rate for 2025?
A: Historically, we have been at 21% to 22%, and we expect to be in that range. (James Fitzgerald, CFO)
Q: How much of the $6 million loan loss provision was related to office?
A: All of it was related to office. (James Fitzgerald, CFO)
Q: What deal size would be too small for you, and are you committed to the Boston marketplace?
A: We prefer deals that are contiguous in nature and easier to integrate. We are committed to the Greater Boston market and building a concentrated franchise. (Denis Sheahan, CEO; Robert Rivers, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
