Eastern Bankshares, Inc. Q4 FY2024 earnings call

• The merger with Cambridge Trust solidified Eastern's position as the largest commercial bank in Greater Boston and a leading New England financial institution, enabling broader offerings and stronger community commitment.
• Strong retention of Cambridge clients and talent post-merger, reflecting thoughtful planning and seamless integration.
• The branch network in Boston and Southern New Hampshire holds the number one deposit market share among locally headquartered banks in the Boston MSA.
• Added talent in commercial and industrial lending, business development, and wealth management.
• Focus on organic growth but open to acquisitions if an appropriate opportunity develops, with confidence in the team to execute on acquisitions.
• Undertaking a $1.2 billion investment portfolio repositioning to improve financial performance, expected to be $0.13 accretive to operating EPS in 2025.

Net interest income was $607.6 million, a 10% increase from 2023, with a 12 basis point expansion in the net interest margin. Period-end loans were up 29% year-over-year due to the Cambridge Trust merger and organic growth. Deposits were up 21% year-over-year, with a loan-to-deposit ratio of 85%. Total non-interest income in the fourth quarter was $37.3 million, up $3.8 million linked quarter. The wealth business was a key driver, with fees of $18 million in Q4, up $3.1 million linked quarter (excluding a one-time item, wealth management fees were up $1.9 million or 13% linked quarter).

• 2025 loan growth anticipated to be 2% to 4%, deposit growth 1% to 2% with a favorable mix shift from CDs to money markets.
• Net interest income expected in the range of $815 million to $840 million with a full year FTE margin of 3.45% to 3.55%.
• Provision expense expected to be between $30 million and $40 million.
• Operating non-interest income expected between $130 million and $140 million.
• Operating non-interest expense expected in the range of $535 million to $555 million.
• Full year tax rate on an operating basis expected between 22% and 23%.

• Economic and rate environment could act as a headwind to loan and deposit growth.
• Credit cycle evolution in the office space may lead to quarterly fluctuations.
• Market disruption from recent mergers could impact the competitive landscape, though not explicitly factored into the 2025 guidance.

Q: Greg Zingone asked about the average rate of the securities sold and bought as part of the repositioning and details on the Eastern investor office loans.

A: Denis Sheahan said the average yield on securities sold was about 1.82%-1.84%, and when buying, the average yield was in the range of 4.75% to under 5%, with a mix of security asset classes. Regarding investor office loans, they had high specific reserves and were charged off.

Q: Damon DelMonte inquired about the margin impact from the portfolio restructuring and loan growth outlook.

A: David Rosato stated the margin benefit from the restructuring would be split in the first quarter, and the loan growth outlook of 2% to 4% with potential from market disruption not embedded in the guidance.

Q: Laurie Hunsicker asked about the margin in December, buybacks, office charge-offs, merger charges, and acquisition outlook.

A: David Rosato said the spot margin in December was 3.13% (normalized to 3.08%), details on buybacks, office charge-offs were mostly in the office, merger charges were wrapped up, and Eastern is open to acquisitions in a disciplined manner if an appropriate opportunity arises.