BOSTON--(BUSINESS WIRE)--Eastern Bankshares, Inc. (NASDAQ Global Select Market: EBC), the stock holding company of Eastern Bank, today announced 2020 fourth quarter financial results and the initiation of a quarterly cash dividend.

Concurrent with its mutual-to-stock conversion and as described in the prospectus for its initial public offering (“IPO”), the Company made a one-time donation of 7.5 million shares of common stock to the Eastern Bank Charitable Foundation (“EBCF”) at a total market value of $91.3 million. This contribution resulted in a net loss of $44.1 million for the fourth quarter of 2020, or $0.26 per share, compared to net income of $28.5 million reported for the prior quarter. Operating net income* was $31.6 million for the quarter, or $0.18 per share, for the fourth quarter of 2020, compared to $32.3 million reported for the prior quarter.

“We are very pleased with our operating results for the fourth quarter as well as our dividend initiation, and thank our colleagues for their outstanding efforts,” said Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank. “We are thrilled to have completed our stock offering and to be trading publicly, which are major steps forward in building upon our more than 202-year history of providing competitive financial products and services and an outstanding customer experience. As I reflect on the year, I’m especially proud of the 8,800 Paycheck Protection Program (“PPP”) loans totaling $1.1 billion that we delivered to businesses in need, the third most among lenders in Massachusetts. This is all being accomplished during the COVID-19 pandemic which has had, and continues to have, an adverse effect on our customers, colleagues and the markets in which we operate. We continue to carefully monitor and adapt to it, while keeping the safety and well-being of our colleagues and customers a priority.”

“The transformative, one-time donation of $91.3 million of stock to the Eastern Bank Charitable Foundation, a condition of the stock offering, positions our Foundation to continue to support the communities we serve and address society’s most vexing challenges in a meaningful way,” added Rivers.

The Company also announced the initiation of a quarterly cash dividend of $0.06 per share as part of its capital management strategy.

Rivers continued, “Given our Company’s current strength and our history of generating strong cash flows, we believe that we can both invest in the business and return capital to shareholders. Our initiation of a quarterly dividend demonstrates our confidence in our ability to drive growth and effectively deploy capital while delivering value to our shareholders.”

SELECTED FINANCIAL HIGHLIGHTS

• Net loss was $44.1 million, or $0.26 per share, for the fourth quarter due to the stock contribution to the EBCF.
• Operating net income* was $31.6 million, or $0.18 per share, for the fourth quarter.
• Book value and tangible book value per share* were $18.36 and $16.34, respectively, at December 31, 2020.
• At December 31, 2020, $332.7 million in loan balances remained under modified payment terms due to the COVID-19 pandemic, down from $701.2 million at September 30, 2020. Provision for credit losses was $900 thousand in the fourth quarter compared to $700 thousand in the prior quarter.

BALANCE SHEET

Total assets were $16.0 billion at December 31, 2020, representing an increase of $503.6 million or 3% from September 30, 2020.

• Available-for-sale securities increased $976.2 million, or 44% on a consecutive quarter basis, to $3.2 billion, as excess liquidity was deployed into U.S. Agency securities. Cash and equivalents declined to $2.1 billion from $2.3 billion, a $274.0 million quarter over quarter decline.
• Total loans were $9.7 billion, representing a decrease of $213.7 million or 2% from the prior quarter as paydowns outpaced new originations. The main contributing factor was the forgiveness or paydown of PPP loans which totaled $97.4 million for the fourth quarter, reducing total PPP loans to $1.0 billion.
• Deposits totaled $12.2 billion representing a decrease of $1.2 billion, or 9%, from September 30, 2020. The decline in deposits resulted primarily from the use of funds on deposit by certain deposit holders to satisfy their stock subscription orders during the Company’s IPO in the fourth quarter.
• Shareholders’ equity was $3.4 billion, representing an increase of $1.7 billion or 100% from the prior quarter. The increase was attributable to the capital raised during the Company’s mutual-to-stock conversion and IPO completed on October 14, 2020.
• As previously disclosed, the Company converted its defined benefit plan to a cash balance defined benefit plan during the period which resulted in a $54.9 million after-tax increase to other comprehensive income and shareholders’ equity.
• At December 31, 2020, book value per share was $18.36 and tangible book value per share* was $16.34. Please refer to Appendix H for a quarter over quarter comparison of equity accounts.

NET INTEREST INCOME

Net interest income was $103.6 million for the fourth quarter, compared to $98.7 million in the prior quarter, representing an increase of $4.9 million. Included in net interest income in the fourth quarter was a favorable $3.8 million nonrecurring item. Also included in net interest income was $4.1 million and $6.1 million of SBA PPP fee accretion net of deferred cost amortization in the third and fourth quarters, respectively. The increase in PPP fee recognition on a consecutive quarter basis was attributable to an increase in PPP loan forgiveness rates in the fourth quarter. Between September 30 and December 31, 2020, $97.4 million in PPP loans were forgiven through the SBA or otherwise paid down.

The net interest margin on a fully tax equivalent (FTE) basis* was 2.84% for the fourth quarter, representing a 20 basis points decrease from the prior quarter primarily due to the Company’s excess liquidity.

Please refer to Appendix E for a four-quarter trend analysis of the adjusted core margin*.

NONINTEREST INCOME

Noninterest income was $49.6 million for the fourth quarter, compared to $47.7 million for the prior quarter, representing an increase of $1.9 million.

• Insurance commissions increased $0.6 million to $22.4 million in the fourth quarter, compared to $21.9 million in the prior quarter and included a $1.2 million nonrecurring item.
• Service charges on deposit accounts increased $1.0 million on a consecutive quarter basis to $6.0 million, primarily driven by higher account analysis service charges.
• Loan-level interest rate swap revenue was $2.5 million in the fourth quarter, compared to $1.3 million in the prior quarter, representing an increase of $1.2 million primarily driven by an increase in the fair value of these interest rate swap transactions.
• Income on securities held in rabbi trust accounts was $5.5 million in the fourth quarter compared to $3.8 million in the prior quarter, an increase of $1.7 million as strong equity market gains continued in the fourth quarter.
• Mortgage origination activity was strong in the fourth quarter with the gain on sale of loans totaling $3.3 million, up $1.1 million from the prior quarter. This was mostly offset by a $3.1 million reduction in the gain/loss on commitments to sell mortgage loans which is recorded in other income.

Please refer to Appendix B for a reconciliation of operating revenues and expenses.

NONINTEREST EXPENSE

Noninterest expense was $199.2 million for the fourth quarter representing an increase of $89.4 million, or 81%, from the prior quarter noninterest expense of $109.8 million. Fourth quarter noninterest expense included costs associated with the Company’s mutual-to-stock conversion. Excluding expenses related to the mutual-to-stock conversion and certain other non-operating items, noninterest expense on an operating basis* for the third and fourth quarters was $100.8 million and $101.8 million, respectively.

• Charitable contributions expense in the fourth quarter included $91.3 million in expense from the donation of shares of the Company to the EBCF in connection with the Company’s mutual-to-stock conversion and IPO. The Company established a $12.0 million deferred tax valuation allowance in connection with the contribution.
• Salaries and benefits were $70.3 million in the fourth quarter, representing an increase of $3.7 million from the prior quarter primarily due to employee stock ownership plan (“ESOP”) contribution expense of $2.4 million and higher defined contribution supplemental employee retirement plan expense associated with the mark-to-market increase in rabbi trust accounts of $1.4 million noted above.
• Other noninterest expense declined from $12.6 million in the prior quarter to $6.2 million in the fourth quarter, a decline of $6.4 million. The Company recorded impairment charges on tax credit investments of $7.6 million and $3.2 million in the third and fourth quarter, respectively. Included in other noninterest expense are components of the Company’s pension expense which were $1.3 million lower in the fourth quarter compared to the prior quarter. However, this was offset by an increase in pension service cost which is included in salary and benefit expense.

Please refer to Appendix B for a reconciliation of operating revenues and expenses.

ASSET QUALITY

The allowance for credit losses was $113.0 million at December 31, 2020, or 1.16% of total loans, compared to $115.4 million or 1.16% of total loans at September 30, 2020. The Company recorded a fourth quarter provision for credit losses of $0.9 million, compared to $0.7 million in the prior quarter. The Company followed the incurred loss allowance GAAP accounting model at December 31, 2020 and all preceding periods.

Non-performing loans totaled $43.3 million at December 31, 2020 compared to $44.8 million at the end of the prior quarter. The consecutive quarter decline was driven by reduction in nonperforming residential mortgage loans of $0.7 million, a reduction in nonperforming consumer loans of $0.6 million, and a reduction in nonperforming commercial loans of $0.3 million. During the fourth quarter of 2020, the Company recorded total net charge-offs of $3.3 million, or 0.13% of average total loans on an annualized basis compared to $1.9 million and 0.08% in the prior quarter, respectively.

Through June 30, 2020, approximately $946.0 million of loans had been modified due to COVID-19. Loans were modified on full or partial payment deferral pursuant to the criteria established in federal requirements for COVID-19-related loan relief. Most modifications were for a term of six months. At December 31, 2020, approximately $332.7 million in COVID-19 modified loans remained under modified payment terms, down from $701.2 million at September 30, 2020.

Please refer to Appendix F and Appendix G for detail on the Company’s lending exposure to industries which management believes are most likely to experience adverse effects of the COVID-19 pandemic, as well as a detailed breakout on COVID-19 related loan modifications.

ABOUT EASTERN BANKSHARES, INC.

Eastern Bankshares, Inc. (NASDAQ Global Select Market: EBC) is the stock holding company for Eastern Bank. Founded in 1818, Boston-based Eastern Bank has more than 110 locations serving communities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island, and as of December 31, 2020, Eastern Bank had approximately $16.0 billion in total assets. Eastern provides banking, investment and insurance products and services for consumers and businesses of all sizes, including through its Eastern Wealth Management division and its Eastern Insurance Group subsidiary. Eastern takes pride in its outspoken advocacy and community support that has exceeded $140 million in charitable giving since 1999. An inclusive company, Eastern employs 1,800+ deeply committed professionals who value relationships with their customers, colleagues, and communities. For investor information, visit investor.easternbank.com.