EBC Q1 Deep Dive: Merger With HarborOne Highlights Shift Toward Scale and Profitability

Regional banking company Eastern Bankshares (NASDAQ: EBC) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 130% year on year to -$47.22 million. Its non-GAAP profit of $0.34 per share was 3.8% above analysts’ consensus estimates.

Is now the time to buy EBC? Find out in our full research report (it’s free).

StockStory’s Take

Eastern Bank’s first quarter reflected the impact of a significant investment securities repositioning, which management said was completed to enhance flexibility and long-term earnings power. Operating performance showed improved profitability, with net interest margin expanding and efficiency ratios benefiting from both higher asset yields and effective cost controls. CEO Denis Sheahan noted, “Operating earnings benefited from a 33 basis point expansion in net interest margin.” While lending growth was slightly ahead of internal expectations due to growth in commercial and industrial balances, management remains cautious on the broader lending environment, citing economic uncertainty and trade policy shifts as persistent headwinds.

Looking forward, Eastern Bank’s trajectory will be shaped by its proposed merger with HarborOne Bancorp and continued progress in wealth management and franchise lending. Management expects the merger to drive meaningful cost synergies and enhance profitability, targeting an improvement to top quartile returns among peers. CFO David Rosato emphasized that while no changes are being made to full-year guidance, the outlook remains “mindful of the fluid and evolving nature of the current economic environment.” The company is focused on integrating new talent, expanding its presence in Rhode Island, and leveraging its scale to deepen market share and product offerings.

Key Insights from Management’s Remarks

Management highlighted the completion of a large-scale securities repositioning and announced a merger with HarborOne, both of which will influence future performance and strategic positioning.

• Securities portfolio repositioning: The sale of $1.3 billion in low-yielding available-for-sale securities and reinvestment at higher market rates was executed to improve portfolio yields and future earnings, despite generating a one-time non-operating loss in the quarter.
• HarborOne merger announcement: Eastern Bank entered into a definitive agreement to acquire HarborOne Bancorp, adding $5.7 billion in assets, expanding into Rhode Island, and reinforcing its position as the largest bank headquartered in Massachusetts.
• Loan growth and talent acquisition: Annualized loan growth of 3% was primarily driven by commercial and industrial balances, supported by the hiring of two experienced leaders in the franchise lending group, signaling an intent to build out this segment further.
• Wealth management momentum: Assets under management rose to $8.4 billion, aided by net client inflows and continued alignment between banking and wealth management teams; management views this as a more stable earnings source amid interest rate volatility.
• Improved credit trends: Nonperforming loans and net charge-offs declined, reflecting disciplined underwriting and proactive risk management, particularly in commercial real estate and office loan portfolios.

Drivers of Future Performance

Eastern Bank’s forward outlook centers on successful merger integration, disciplined cost management, and continued investment in lending and wealth management diversification.

• Merger-related cost synergies: Management expects approximately $55 million in annualized cost savings from the HarborOne merger, with 75% realized in the first half of 2026. CFO David Rosato described the merger as “financially compelling” and projected it would deliver a 16% increase in earnings per share and improvement in operating efficiency.
• Deposit and funding strategy: The bank’s focus remains on disciplined deposit growth and maintaining a favorable low-cost funding mix, which management believes will support net interest margin even as the Federal Reserve’s rate policy evolves. Management highlighted a 50% checking deposit mix as an advantage.
• Macro and credit risk vigilance: Ongoing uncertainty around trade policies, interest rates, and economic trends continues to inform a cautious approach to lending and credit provisioning. Management indicated that credit teams are actively monitoring commercial loan books and remain hesitant to provide specific charge-off guidance due to macro unpredictability.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) progress on integrating HarborOne, including realization of cost synergies and expansion in Rhode Island, (2) sustained growth in franchise lending and wealth management, and (3) the impact of ongoing deposit management strategies on net interest margin and funding costs. Updates on credit quality and commercial real estate exposures will also be important signposts.

Eastern Bank currently trades at $14.56, down from $15.58 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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