Eastern Bankshares Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2024

There are 6 speakers on the call.

Operator

Hello, and welcome to the Eastern Bancshares Inc. 1st Quarter 2024 Earnings Conference Call. Today's call will include forward looking statements, including statements about Eastern's future financial and operating results, outlook, business strategies and plans as well as other opportunities and potential risks that management foresees. Such forward looking statements reflect management's current estimates or beliefs and are subject to risks and uncertainties that can cause actual results or the timing of events to differ materially from the views expressed today. Before information more information about such risks and uncertainties is set forth under the caption Forward Looking Statements in the earnings press release as well as in the Risk Factors section and other disclosures in the company's periodic filings with the Securities and Exchange Commission.

Operator

Any forward looking statements made during this call represent management's views and estimates as of today and the company undertakes no obligation to update these statements as a result of new information or future events. During the call, the company will also discuss both GAAP and non GAAP financial measures. For a reconciliation of GAAP to the non GAAP financial measures, please refer to the company's earnings press release, which can be found at investor. Easternbank.com. Please note this event is being recorded.

Operator

After the speakers' remarks, there will be a question and answer session. Thank you. And I would like to turn the call over to Bob Rivers, Chair and CEO. Please go ahead, sir.

Speaker 1

Thank you, Sylvia. Morning, everyone, and thank you for joining our Q1 earnings call. With me today is Jim Fitzgerald, our Chief Financial and Chief Administrative Officer, who will go through our financial highlights in a few minutes. We expected a continued challenging environment as we enter 2024 and we've not been disappointed. Higher for longer interest rates, the inverted yield curve and normalizing credit costs were all present in the Q1 and we expect them to continue through the rest of the year.

Speaker 1

Our plan to meet these challenges has been twofold. The first is to maintain a fortress balance sheet, which we believe will continue to be a competitive advantage over time and allow us to capitalize on opportunities as they become available. Our Q1 balance sheet demonstrates this. Specifically, our capital ratios are robust with a CET1 ratio of 18.5% and a TCE ratio of 11.6%. Our liquidity position is very strong with balance sheet cash of 700,000,000 and essentially no wholesale funding.

Speaker 1

Our credit profile is a real strength with low levels of non performing loans, very manageable charge off levels and a healthy reserve that covers our non performing loans by more than 2.5 times. The second is our anticipated merger with Cambridge Trust, which demonstrates how we are capitalizing on opportunities. During the course of our integration planning, we have become even more confident that the Cambridge Trust franchise is among the most valuable in our market. Their wealth, deposit and lending businesses are all very additive to our own and will help us solidify our position as a leading independent bank

Speaker 2

in

Speaker 1

the Greater Boston area. In addition, we will create efficiencies and synergies that will benefit shareholders as we consolidate the 2 companies. Our capital strength allows us to absorb and mark the Cambridge Trust balance sheet to market, to reprice asset yields to market and create a higher net interest margin. The combination of expense savings and a better margin accelerates our financial performance metrics and will allow us to significantly grow earnings and EPS in an otherwise very challenging period. The company's capital position post merger will be very strong and we look forward to revisiting our capital management strategies, including share repurchases following the approval of the merger.

Speaker 1

We also continue to work with our regulators and expect to receive approvals later this quarter and close early in Q3. In the interim, we are very busy planning for the integration and working closely with Cambridge's CEO, Dennis Sheehan and his entire management team. I am pleased to say that those efforts are going very well with an increasing camaraderie built upon a shared set of values and very similar cultures, which gives us confidence that the merger will provide the scale we need to better serve our customers and the communities upon whose vibrancy we depend, while delivering strong financial returns for our shareholders. Our partnership with Cambridge Trust also advances our goal to be Greater Boston's premier local community bank, one characterized not only by expanded enhanced capabilities and delivering solutions to the financial needs of our customers, but with a deep understanding of and commitment to the region. Recently, I was honored to be named among the most influential Bostonians in Massachusetts by Boston Magazine for the 5th consecutive year.

Speaker 1

A list includes our President, Quincy Miller and several members of our Board of Directors and Advisory Boards. Such recognition and many others we receive every year are a reflection of our extensive community engagement and rising reputation in the market. Those that truly know us recognize that this is Eastern's special sauce and a key differentiator and driver of our business. While some of these awards are presented to us as individuals, they are always a reflection of the extremely talented and hardworking team we are privileged to work with at Eastern. For all of this and more, I am extremely grateful to all of our colleagues at Eastern and those soon joining us from Cambridge Trust as well as our customers and community partners for their tremendous support.

Speaker 1

Before I turn it over to Jim for a detailed discussion of our financial results, I'd like to thank him personally for his over 12 years of significant contributions to our company. In yesterday's earnings release, we announced Jim's upcoming retirement, a truly bittersweet and momentous change for our company. When Jim joined us as our Chief Financial Officer in 2012, after serving much larger banks as their CFO, Eastern was a mutual bank with $8,000,000,000 in assets. Because of that prior experience, he brought us a vision and understanding of how Eastern could best evolve into a major player in the Greater Boston market. Due to his leadership in executing our initial public offering 3.5 years ago, 3 and soon 4 bank mergers along with innumerable insurance agency acquisitions and ultimately the divestiture of that business last year, Eastern will have grown by almost 3 times during his tenure.

Speaker 1

Serving in the dual role is both our CFO and our Administrative Officer. Jim has also had a significant positive impact in guiding the increasing sophistication and efficiency of our technology and operating platforms. As importantly, he has served as a key mentor, coach and friend to our management team, starting with myself, for whom he has been a strategic partner in Confidant. Thankfully, Jim will continue to serve in his current role until a worthy successor has been identified and beyond as a special advisor to Dennis, Quincy and I as well as our Board as we complete our integration of Cambridge Trust and prepare for the next steps in our journey. And with all of that said and so much more that could be, I turn it over to Jim.

Speaker 2

Well, thank you, Bob. Thank you for that and good morning, everyone. As Bob said and you all know, it's been a very challenging environment in the Q1 and we expect that to continue for the next few quarters as well. Given that backdrop, we're very pleased with our Q1 results as our expense levels provided a foundation for solid earnings. GAAP net income was $38,600,000 or $0.24 per share and operating net income was $38,100,000 or $0.23 per share.

Speaker 2

I'll go through the details shortly. As Bob said, we continue to be and have high expectations for the Cambridge merger. There seems to be a little confusion, so we wanted to be very clear on the timing and regulatory approval. Consistent with what we communicated in our 8 ks in February, we're working with our regulators to receive their approvals. We expect those approvals later this quarter and we expect to close the merger in early July.

Speaker 2

This timeline would be a delay of 1 quarter from our original expectations. I'll provide some specific updates to Cambridge in the second half of the year later in my remarks. I'll start with some highlights for the Q1. As I just mentioned, net income was $38,600,000 or $0.24 per diluted share and operating net income was $38,100,000 or $0.23 per diluted share. Overall, we saw modest growth in the balance sheet with core deposits up $121,000,000 or 2.8 percent annualized and loans up by $115,000,000 or 3.3 percent annualized driven by commercial lending.

Speaker 2

Net interest margin was stable in the quarter at 2.68% and very similar to the prior quarter margin of 2.69%. Expenses were $101,200,000 $97,600,000 on an operating basis. I'll go through expenses later in my remarks in more detail and we'll discuss again during my comments on the outlook. Asset quality was stable in the quarter and similar to the prior two quarters. NPLs were up slightly from $53,000,000 to 57,000,000 dollars or from 38 basis points of loans to 41 basis points of loans during the quarter.

Speaker 2

Net charge offs were 7,300,000 or 21 basis points of loans on an annualized basis, down from $11,032 basis points in the prior quarter. I'll also go through more credit details later in my comments. Our Board approved a dividend of $0.11 per share payable on June 14. I'll move to some comments on the balance sheet. We continue to maintain a very high quality balance sheet and we're very pleased with the overall position at the end of Q1.

Speaker 2

Cash was approximately $700,000,000 at the end of Q1 consistent with levels at year end. The securities portfolio was $4,700,000,000 down slightly from the prior quarter due to pay downs in the portfolio and a modestly lower market value. Loans were $14,100,000,000 and commercial loans ended the quarter at 10,100,000,000 dollars Commercial loan growth was $129,000,000 or 5.2 percent annualized. Consumer loans had growth of $8,000,000 or 2.2 percent annualized and residential loans decreased by $21,000,000 Core deposit growth was 121,000,000 dollars or 2.8 percent annualized in the quarter. We continue to experience some migration from lower cost accounts to higher cost accounts.

Speaker 2

However, our total deposit cost remains very favorable at 1.66% in the quarter, a demonstration of the strength of our consumer of our customer base. As I mentioned earlier, we are essentially core deposit funded. We had no broker deposits at the end of the quarter and FHLB borrowings were less than $20,000,000 Shareholders' equity was down $22,000,000 in the quarter as net income of $38,000,000 was offset by a decline in other comprehensive income and the dividend paid in Q1. To follow-up on Bob's comments, the overall capital and liquidity of our balance sheet is competitive advantage that we think will create opportunities over time. Moving to earnings, net interest income was $129,900,000 compared to $133,300,000 in Q4.

Speaker 2

As I mentioned, the margin of 2.68 percent was down just 1 basis point from the prior quarter. Interest earning assets The provision for loan loss was $7,500,000 in line with the last 2 to 3 quarters. Non interest income was $27,700,000 $23,400,000 on an operating basis. As we provide on Page 8 of the presentation, the only significant change quarter to quarter was in interest rate swaps, which was due to a difference in the market valuation component. Other than swaps, all line items were pretty consistent with the prior quarter.

Speaker 2

As we outlined on Page 9 of the presentation, there were a number of moving pieces in non interest expenses relative to the prior quarter. As we mentioned at the time, Q4 expenses were very noisy and high with the largest contributor being the FDIC special assessment of $10,800,000 Q1 expenses were $101,200,000 and were $97,600,000 on an operating basis. These were lower than expected for a few reasons. There were 2 favorable items that we don't expect to be recurring. We paid out lower incentive compensation for 2023 than we had accrued and we experienced a reduction in our provision for off balance sheet commitments.

Speaker 2

Combined, these two items were $3,200,000 favorable. Last quarter, we guided to include some expenses relative to corporate headquarters move as well as a technology upgrade for our online mobile product. Most of these expenses will hit in Q2 and I'll provide a roadmap for expense expectations as I go through our outlook. The overall effective tax rate for the quarter was 21%. Asset quality was generally stable throughout the quarter, but I will walk through the various components.

Speaker 2

As I mentioned, non performing loans were $57,200,000 or 41 basis points of loans, up slightly from 52,600,000 and 38 basis points the prior quarter. Of note, in the quarter, we resolved one of the NPLs we discussed in Q3 of last year through a collateral sale. Sales price was slightly better than we expected. We also have 2 NPLs under contract for sale, both of which we expect to be resolved this quarter and both have sales prices that are in line with our expectations. We did move a suburban office property into non performing loan status and have started the workout process with the borrower.

Speaker 2

We expect the sale of that collateral over the next few quarters and have provisioned for that outcome in our Q1 results. Charge offs in the quarter were $7,300,000 or 21 basis points of loans annualized. As I just mentioned, that included the suburban office loan that was moved to NPL status in the Q1. We continue to add new pages of additional credit information. After the asset quality slide on Page 13, we provided some information on our overall commercial real estate portfolio on Page 14.

Speaker 2

The portfolio is generally diverse with the high performing multifamily segment being the largest concentration at 31%. As a percentage of risk based capital, our non owner occupied commercial real estate is 154%, which is well below the regulatory guidelines of 300%. As is outlined, 90% of the portfolio is located in our home markets of Massachusetts and New Hampshire, markets we know very, very well. We continue to add to our office disclosures on Page 15. The investor office portfolio declined by $21,000,000 in the quarter from $689,000,000 to $668,000,000 or 5% of the total loan portfolio.

Speaker 2

Of this total, criticized and classified loans totaled $103,000,000 up slightly from where it had been the prior two quarters. We added some specific information about maturities as well. As you can see on the upper right hand corner of that page, office maturities are light for the next two quarters and average approximately $20,000,000 over the next four quarters, a very manageable level. We're working very closely with the borrowers on all of these maturities and we'll provide updates as we move through the rest of the year. As a reminder, the Cambridge Trust portfolio will be mark to market for both interest rates and credit as part of the closing process.

Speaker 2

One additional comment I'd make here is that we are watching all of the loans in this portfolio very carefully. The 2 categories that get the most scrutiny are the criticized and classified loans and also those with upcoming maturities. We hope that this additional information helps investors track this portfolio over time. We updated our look at the multifamily portfolio on Page 16 that we provided last quarter. The shortage of housing continues to persist in our markets and multifamily is a very desirable asset class.

Speaker 2

We have no non performing loans in the portfolio and vacancy rates are extremely low. Turning to the outlook, we expect the Q2 to be similar to the Q1 in many ways. We expect the margin and net interest income to be similar to Q1 and expect overall loan and deposit growth to also be similar to the overall growth rates of the Q1. We expect NPLs and net charge offs to be similar to the last few quarters as well. We expect higher operating expenses in Q2 from a few sources.

Speaker 2

We do not expect a recurrence of the 2 favorable expense items totaling $3,200,000 that occurred in Q1 and that I described earlier. We expect some normal increases in salaries based on the timing of our annual merit program as well as an increase in marketing expenses. The combination of these items of all of these items is expected to bring our run rate of expenses to between $104,000,000 $106,000,000 We expect some higher than run rate expenses for the cost associated with our headquarters move earlier this month and an increase in the technology costs for the transition to our new online mobile product rollout. These are expected to be out of the run rate by the end of Q2 and are approximately $3,000,000 We are waiting for the FDIC special assessment amount and we expect to record that in Q2. We expect the tax rate to be 22% on an operating basis.

Speaker 2

Turning to the second half of the year and after the Cambridge closing, we expect to see the benefits of the Cambridge transaction start in Q3 and be very evident by Q4 of this year. We've updated the loan valuation for the Cambridge portfolio at the end of Q1. Although rates have increased in April, we're still comfortable that the fair value discount on loans will be less than what we presented in the original projections at the time of the acquisition announcement. We expect the post merger net interest margin in Q4 to be 3%, up from the current up from our current levels 2.68%. As we mentioned last quarter, we expect to liquidate the Cambridge investment portfolio and pay off their wholesale funding at closing.

Speaker 2

We expect the EPS accretion to exceed the original projections of plus 20%. We expect the cash efficiency ratio to be in the mid-fifty percent by Q4 and as we move into 2025. This excludes the amortization of intangibles created in the transaction that we estimate to be $4,000,000 to $5,000,000 per quarter. On a run rate basis, we expect the combined wealth business to have over $60,000,000 of revenues and operated efficiency ratio in the low percent range. We expect the post merger capital ratios to be strong and support our capital management strategies.

Speaker 2

As hopefully you can see from these comments, we continue to be very excited about the opportunity with Cambridge and look forward to providing updates as we move forward. That concludes my remarks. Thank you, Sylvia. We can open it for questions.

Operator

Thank you. And your first question will be from Mark Fitzgibbon of Piper Sandler. Please go ahead.

Speaker 3

Hey, guys. Happy Friday.

Speaker 2

Good morning, Mark. Good morning, Mark.

Speaker 3

Jim, let me start off by echoing Bob's congratulations on your well deserved retirement.

Speaker 1

Thank you.

Speaker 2

Thank you very much.

Speaker 3

Before I let you off the hook, I am

Speaker 2

going to ask a question I

Speaker 3

have asked before and that is what gives you all such confidence that you will get approval to close the transaction in the Q3 given how long it's taken some other banks to get approval to close their transactions?

Speaker 2

Yes. No, sure. Mark, I jokingly would say I anticipated that to be your first question. And in many ways appreciate it because we understand the environment as you do. I think just by things we've communicated in the past, we have a very good communication channel with the regulators, very good relations.

Speaker 2

We wish the process was faster, but we certainly respect that they are doing what they have to do. In much of our communication and there's a lot of back and forth here, the regulatory applications are voluminous, as you know, and then there are incremental requests along the way. So we've supplied an incredible amount of detail that they are going through. But they've been very clear that they want to support us, I think, and they know our timelines for this and have communicated that they believe they will put us in a position to meet them. As I said, we respect their process and understand that it is their process, but appreciate the communication we have with them and that's what gives us the confidence.

Speaker 3

Okay. And then somewhat related, where did the higher cost saves come from and the EPS accretion versus your original estimates post deal? What's kind of driving that?

Speaker 2

Yes. So I think things are generally as we expected. I think on the cost savings side, we're expecting to be slightly higher than what we articulated last September. And I think so that's one component of it. And I think in this environment, gaining efficiencies is obviously critically important to us and to all banks.

Speaker 2

So we're very much excited about that. And as I said, we spent a lot of time in due diligence analyzing those costs and we're comfortable then and continue to be. I think the mark to market of their balance sheet at closing, which is something we believe we're capable of doing and it's that balance sheet strength, the capital strength in particular that we alluded to that allows us to afford that, if you will. And it's really just repricing those loans to market that enhances the Cambridge market margin in such a way that when you combine it with Eastern, you get the 32 basis point uplift that I articulated. It's really those are the 2 drivers.

Speaker 2

Cambridge is a wonderful franchise, right? They've got a very strong wealth deposit and lending platform. As Bob said in his remarks and we've experienced that our last 6 months, it's very additive to ours and we think the market opportunity, especially when the environment gets a little bit easier or better, is going to be very significant. Okay.

Speaker 3

And then lastly, I think you mentioned you had 2 NPLs that you were selling. I guess I'm curious where you're selling those where the sales prices are relative to par?

Speaker 2

Yes. No, I think I'd say this, Mark, we've had if you count them up, right, we've had a total of 5 properties that were in the process of either taking going through our charge off process slash provision process and or we've sold. And it's a small sample size. Some of those are at discounts of 30% to 40 percent of the original values. One is a little bit worse than that and some are slightly better.

Speaker 2

But I think the discounts that we expect of each asset is a little bit different. So it's hard to give you one number there. But the discounts are significant, as you know, and as I said, vary by facts and circumstances.

Speaker 3

Thank you.

Operator

Thank you. Next question will be coming from the line of Damon DelMonte at KBW. Please go ahead. Your line is open.

Speaker 4

Hey, good morning, guys. Thanks for taking my questions. And Jim, congrats on the retirement. It's been enjoyable working with you.

Speaker 2

Thank you.

Speaker 4

So just first question on the expenses, just trying to clarify. And so the headquarter move impact and the mobile banking impact, combined that's $3,000,000 or it's $3,000,000 for each that we'll be hitting in the 2nd quarter?

Speaker 2

Combined. And just as a side question, we have moved into our new headquarters just to make it real and everybody is welcome anytime they're in Boston to come over and see we're quite proud of the new space.

Speaker 4

Excellent. Cool. So if it so then it's going to come off the expense base in the Q3. Is that correct?

Speaker 2

Correct.

Speaker 4

Okay. Great. Thanks for clarifying that. And then with the cash position that you had at the end of the quarter around $700,000,000 or so, is the intent just to kind of leave that very liquid and not look to redeploy that into securities in the near term?

Speaker 2

Correct. Yes. Our goal over time, Damon, as we've probably articulated is to bring the size of the securities portfolio down relative to total assets. So, and if you look at where the yield curve is and the inversion there, our expectation certainly over the next couple of quarters, if we have that amount of cash would be to keep it in cash and earn overnight rates on it.

Speaker 4

Got it. Okay. And then just lastly, appreciate the commentary around credit and kind of the outlook there. So is it fair to assume that you're still kind of targeting maybe mid-twenty net charge off level and kind of a provision that supports the reserve at around this current level?

Speaker 2

Yes. Obviously, a volatile line item, Damon, and quarter to quarter, I'd expect some it's hard to be that precise on a quarter to quarter basis. But over the next couple of quarters, yes, on both the charge off level and the provision.

Speaker 4

Okay, great. That's all I have for now. Thanks.

Speaker 5

Thanks, Damon. Thanks.

Operator

Thank you. Next question will be coming from the line of Laurie Hunsicker at Seaport Research. Please go ahead. Your line is open.

Speaker 5

Yes. Hi. Thanks. Good morning. And Jim, I too want to say congrats.

Speaker 5

It's been really great working with you.

Speaker 2

Thank you.

Speaker 5

If we could just start with margin. So your 3% margin guide, how much accretion income is in that number? And do you have an accretion income figure that you can give us for the back half of 'twenty four and into 'twenty five, especially as accretion income winds down? How should we be thinking about that?

Speaker 2

Sure. Laurie, I'm laughing because I anticipated that question. You're sort of like Mark asked the timing question and you asked the accretion question. I said that very fondly by the way. That's please take it the way it's intended.

Speaker 2

So I think yes, accretion is clearly part of that. We are working through sort of how we would one of the problems we've got right now is rates are moving around. It's a little bit volatile. We're still a quarter away from closing. So, it feels a little premature to put too much information about what the exact state of play is now because it's going to be different.

Speaker 2

But we are sort of studying how we present that to you, And we'll follow-up. I don't want to give you an answer off the top of my head because I think that that's inappropriate. But we understand the question, we understand the importance of the question and it's something we spend a lot of time internally. So if you give us a little bit of time, we'll try and figure out how give yourself and everybody sort of a better road map there.

Speaker 5

Okay. Okay. And then sort of in line with that, pro form a intangibles, do you have a number for us on that yet?

Speaker 2

We'll do that in the same way. I think our expectation and timing again is it makes this a little bit hard, right? If you go back to the original merger presentation, which was September 19, the pro form a tangible book value that we presented at that presentation, pretty confident it was $10.16 That's sort of at the end of the day, the tangible book value per share that was in the presentation. We're very comfortable it's going to be higher than that. Rates are moving around both on the Eastern portfolio and obviously the Cambridge portfolio as well.

Speaker 2

So we're trying to figure out ways that how best to present that. So at this point, I can say that we'll be higher than that, and let us come back to you with some more thoughtful answers.

Speaker 5

Okay. Okay. And then on office, and I really appreciate all the details you guys have added. What of your $668,000,000 office book, how much is the non performers there? And any refresh on those loans that you can provide?

Speaker 2

Yes. So I think, yes, we can go through the history because it's a small size. There's been and I may miss like a small business loan somewhere, but I don't believe I am. We've had 4 non performing office loans, 3 we reported 1st in the Q3 of 2023. 2 of those were sold, 1 in the 4th quarter, 1 in this quarter and the third one is this quarter meaning the Q1 of 2024.

Speaker 2

So let me again, the 3 NPLs from the Q3 of 2020 3, one was sold in the Q4 of 2023, one was sold in the Q1 of 20 24 and the third one will be sold in the Q2 of 20 24. In addition to that, we had a retail commercial real estate loan that went non performing in the Q4 of 2024 and that's slated to be sold in the Q2 I'm sorry, the Q4 of 2023 will be sold in the Q2 of 'twenty four. And this new non performer, we're just getting started. It went nonperforming just recently.

Operator

Got you.

Speaker 2

And it's an office. Okay. And so for MPL

Speaker 5

So the suburban office that went into nonperforming that's been worked out that you're hopefully getting rid of this quarter. How much was that? And then how much did you actually provision for it in this Q1?

Speaker 2

So we don't like to give out specifics customer information, but I would say this, it's a suburban office. It was the heaviest discounts to both our loan value and also the original purchase price of the building of all 4. And it was in the provision and the charge offs for this quarter of $7,000,000 most of that was concentrated in that asset.

Speaker 5

I got you. Okay. And then just last year, CATC, their office exposure, do you have anything refreshed that you could share with us on that, what their balance is currently, how their book is looking, anything that you can share there?

Speaker 2

Sure. A little bit, right. Again, it's their information, but I think you can see from their public information. It's approximately $250,000,000 in many ways Cambridge Trust and Eastern were competitors in the commercial real estate arena. So we know many of those properties well.

Speaker 2

And I think our clear view is it's very similar to Eastern's. Most of the loans that they originated had good underwriting characteristics and very similar to ours. The locations, there are some in Boston itself and some in the suburban areas. So the $250,000,000 generally looks very similar to things that we would have expected quite frankly look similar to our portfolio in many ways. And as I said, I've said a couple of times, it will go through the as part of the mark to market process, it will be for both interest rates and credit.

Speaker 2

And we feel like we're developing a very good understanding of those assets. Great.

Speaker 5

Perfect. Thanks for taking my questions.

Speaker 1

Thanks, Laurie.

Operator

Thank you. There are no further questions at this time. I will now turn the call over to Bob Rivers for closing remarks.

Speaker 1

Well, thank you for your interest and your questions this morning, and we look forward to sharing more with you during our next earnings call at the end of July.

Operator

Thank you, sir. Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines.

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Key Takeaways

  • Eastern’s Q1 results highlighted a fortress balance sheet with a CET1 ratio of 18.5%, TCE of 11.6%, $700 M cash and virtually no wholesale funding, positioning the bank to navigate higher rates and an inverted yield curve.
  • The announced merger with Cambridge Trust is expected to drive over 20% EPS accretion, lift net interest margin to ~3% by Q4 and generate significant cost synergies through portfolio mark-to-market and repricing.
  • Net interest margin held at 2.68% in Q1, supported by 2.8% annualized core deposit growth, 3.3% annualized loan growth and a favorable 1.66% deposit cost, with no reliance on brokered funding.
  • Credit metrics remained stable, with nonperforming loans at 0.41% of total loans and net charge-offs at 0.21% annualized, while the $7.5 M provision supports ongoing NPL workouts and dispositions in the suburban office portfolio.
  • Q1 operating expenses totaled $97.6 M (GAAP $101.2 M); Q2 expenses are forecast at $104–106 M, including ~$3 M of one-time HQ relocation and technology upgrade costs that will normalize after the quarter.
A.I. generated. May contain errors.
Earnings Conference Call
Eastern Bankshares Q1 2024
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