Eastern Bankshares Q2 Earnings Call Highlights

Eastern Bankshares posted record Q2 operating net income, with operating net income up 20% from the prior quarter and 30% from a year ago. GAAP net income was $105.2 million, and the bank also returned $106 million to shareholders through dividends and buybacks. Core business trends improved as net interest income rose 3%, the net interest margin expanded to 3.66%, and deposits grew $814 million. Loan balances increased 1.4% quarter over quarter, led by commercial and industrial lending, while wealth management assets hit a record $11.5 billion. Credit quality stayed strong and capital returns remained active, with nonperforming loans falling to $109 million and net charge-offs steady at 17 basis points. The board also authorized a new repurchase plan for up to 11.3 million shares and approved a quarterly dividend of $0.15 per share.

Eastern Bankshares NASDAQ: EBC reported record operating net income for the second quarter, supported by loan and deposit growth, margin expansion, higher fee revenue and expense reductions tied to the HarborOne integration. Chief Executive Officer Denis Sheahan said operating net income increased 20% from the prior quarter and 30% from a year earlier, producing an operating return on average tangible common equity of 15.3%. The company also returned $106 million to shareholders through dividends and share repurchases during the quarter.

“Our results are a reflection of the priorities we have consistently communicated to investors, organically growing both banking and fee-based businesses and returning capital to shareholders,” Sheahan said.

Eastern reported GAAP net income of $105.2 million, or $0.48 per diluted share. Operating net income, which excluded $1.6 million of remaining HarborOne merger-related costs, was $106.5 million, or $0.49 per diluted share. Chief Financial Officer David Rosato said operating revenue growth and expense management generated positive operating leverage. The operating efficiency ratio improved to 49%, while operating return on average assets increased 21 basis points to 1.38%.

Net interest income increased 3% from the first quarter as the net interest margin expanded 3 basis points to 3.66%. Higher yields on loans and securities more than offset increased funding costs, Rosato said. Total interest-earning asset yields rose 4 basis points, while interest-bearing liability costs increased 2 basis points. Discount accretion remained about $20 million during the quarter and contributed 28 basis points to the margin. Rosato later said the company expects accretion income to remain around its recent quarterly run rate of roughly $19.5 million, with a potential slight decline over time.

Operating non-interest income rose $12.8 million, or 28%, from the first quarter. The largest contributor was an $8.9 million increase in investment income related to employee retirement benefits, reflecting stronger equity markets. That gain was partly offset by a $3.4 million increase in related employee benefit costs. The company also cited higher investment advisory fees, seasonal tax preparation fees and increased interest-rate swap income. Rosato said swap income benefited from higher commercial loan volume and greater customer use of interest-rate risk-management products.

Period-end loan balances increased $325 million, or 1.4%, from the preceding quarter. More than $300 million of commercial and industrial loan growth drove the increase, partially offset by commercial real estate payoffs. Sheahan said the commercial lending pipeline finished June at a record level and was diversified across businesses.