Eastern Bankshares, Inc. Reports Fourth Quarter 2022 Financial Results

Company Declares Quarterly Cash Dividend

Eastern Bankshares, Inc. (the “Company,” or together with its affiliates and subsidiaries, “Eastern”) (NASDAQ Global Select Market: EBC), the stock holding company of Eastern Bank, today announced its 2022 fourth quarter financial results and the declaration of a quarterly cash dividend. Net income for the fourth quarter of 2022 was $42.3 million, or $0.26 per diluted share, compared to net income of $54.8 million, or $0.33 per diluted share, reported for the third quarter of 2022. Operating net income* for the fourth quarter of 2022 was $49.9 million, or $0.31 per diluted share, compared to $55.7 million, or $0.34 per diluted share, reported for the prior quarter.

“I’d like to thank my 2,100 colleagues at Eastern for all of their good work in making 2022 such a successful year for the Company” said Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank. “Together, we posted record net income for 2022 of $199.8 million, 29% higher than 2021. As always, this bottom line result is the product of a number of significant achievements, including the completion of the integration of Century Bank, record commercial loan and home equity originations, outstanding asset quality, the acquisition of two insurance agencies, the continued upgrade of our technology platforms, as well as many other notable accomplishments. All of this, along with the strength of the underlying franchise, is a testament to their hard work and tremendous commitment."

HIGHLIGHTS FOR THE FOURTH QUARTER OF 2022

• Net income of $42.3 million, or $0.26 per diluted share, and operating net income* of $49.9 million, or $0.31 per diluted share, for the fourth quarter of 2022.
• Net interest income of $150.0 million for the fourth quarter of 2022 was 1% lower than the prior quarter as the increase in interest income was more than offset by the increase in interest expense.
• The net interest margin on a fully tax equivalent (“FTE”) basis* of 2.81% for the fourth quarter was 6 basis points lower than the prior quarter.
• Core loan growth, excluding residential loans purchased from Embrace Home Loans, was 11.8% on an annualized basis. Commercial loan growth was 13.2% on an annualized basis.
• Asset quality remains strong, with annualized net charge-offs of just 0.01% of average total loans and non-performing loans of $38.6 million, or just 0.28% of total loans.

Please refer to Appendices A and B to this press release for reconciliations of operating net income* and fully-taxable equivalent net interest income*, respectively.

BALANCE SHEET

Total assets were $22.6 billion at December 31, 2022, representing an increase of $603.9 million, or 3%, from September 30, 2022.

• Total securities decreased $159.2 million, or 2%, from the prior quarter, to $7.2 billion, primarily due to principal runoff and security sales, partially offset by a reduction in the unrealized losses on the portfolio.
• Total loans were $13.6 billion, representing an increase of $671.6 million, or 5%, from the prior quarter. The increase was driven by strong loan growth in all major categories. Commercial loans grew $313.0 million, residential loans grew $342.0 million, and consumer loans grew $16.6 million, reflecting growth of 13%, 64%, and 5%, respectively, on an annualized basis. Residential loans at December 31, 2022 and September 30, 2022 included purchased loans from Embrace Home Loans totaling $366.7 million and $77.7 million excluding purchase premiums, respectively.
• Deposits totaled $19.0 billion, representing an increase of $241.0 million, or 1%, from the prior quarter. Deposit levels were supported by brokered certificates of deposit which totaled $928.6 million at year end. On a quarterly average basis, deposits decreased $418.3 million from the prior quarter.
• Borrowed funds increased $318.1 million from the prior quarter to $740.8 million to provide funding for strong loan growth in the fourth quarter.
• Shareholders’ equity was $2.5 billion, representing an increase of $55.6 million from the prior quarter driven primarily by increases in accumulated other comprehensive income and retained earnings, partially offset by share repurchases. Please refer to Appendix D to this press release for a roll forward of tangible shareholders’ equity*.
• At December 31, 2022, book value per share was $14.03 and tangible book value per share* was $10.28.

Please refer to Appendix C to this press release for a reconciliation of book value per share and tangible book value per share*.

NET INTEREST INCOME

Net interest income was $150.0 million for the fourth quarter of 2022, compared to $152.2 million in the prior quarter, representing a decrease of $2.2 million.

• The decrease in net interest income on a consecutive quarter basis was primarily due to a decrease in the net interest margin, as increases in earning asset yields were more than offset by increased funding costs. This was partially offset by an increase in average interest-earning asset balances of $170.3 million from the prior quarter, attributable primarily to loan growth.
• The net interest margin on a FTE basis* was 2.81% for the fourth quarter, representing a 6 basis point decrease from the prior quarter, as funding costs increased faster than asset yields.
• Total interest-earning asset yields increased 29 basis points from the prior quarter to 3.27%, due primarily to increased loan yields as a result of higher short-term interest rates during the quarter.
• Total interest-bearing funding costs increased 59 basis points from the prior quarter to 77 basis points, due to core deposit pricing increases and increases in brokered deposits and borrowings during the quarter.

Please refer to Appendix B to this press release for a reconciliation of operating revenues and expenses* and of fully-taxable equivalent net interest income*.

NONINTEREST INCOME

Noninterest income was $44.5 million for the fourth quarter of 2022, compared to $43.4 million for the prior quarter, representing an increase of $1.2 million. Noninterest income on an operating basis* was $42.0 million for the fourth quarter of 2022, compared to $45.3 million for the prior quarter, a decrease of $3.3 million.

• Insurance commissions decreased $1.7 million to $22.0 million in the fourth quarter, compared to $23.8 million in the prior quarter. Compared to the comparable prior year quarter, insurance commissions increased $1.1 million, or 5%.
• Service charges on deposit accounts increased $0.1 million on a consecutive quarter basis to $6.8 million.
• Trust and investment advisory fees decreased $0.2 million on a consecutive quarter basis to $5.6 million.
• Debit card processing fees were unchanged from the prior quarter at $3.2 million.
• Loan-level interest rate swap income decreased $1.6 million to a loss of $0.1 million in the fourth quarter, compared to income of $1.6 million in the prior quarter. The decrease was driven primarily by a decrease in the fair value of such interest rate swap transactions.
• Market performance drove gains on investments held in rabbi trust accounts totaling $3.2 million in the fourth quarter compared to losses of $2.2 million in the prior quarter.
• Realized losses on sales of available for sale securities were $0.7 million in the fourth quarter compared to $0.2 million in the prior quarter.
• Other noninterest income decreased $0.3 million in the fourth quarter to $4.3 million.

Please refer to Appendix B to this press release for a reconciliation of operating revenues and expenses*.

NONINTEREST EXPENSE

Noninterest expense was $132.8 million for the fourth quarter of 2022, compared to $116.8 million in the prior quarter, representing an increase of $15.9 million. Noninterest expense on an operating basis* for the fourth quarter of 2022 was $119.6 million, compared to $117.4 million in the prior quarter, an increase of $2.2 million.

• Salaries and employee benefits expense was $77.6 million in the fourth quarter, representing a decrease of $0.5 million from the prior quarter.
• Office occupancy and equipment expense was $9.6 million in the fourth quarter, a decrease of $0.1 million from the prior quarter.
• Data processing expenses were $14.3 million in the fourth quarter, an increase of $1.0 million from the prior quarter, due primarily to higher software services and support expense.
• Professional services expense was $4.6 million in the fourth quarter, a decrease of $0.2 million from the prior quarter.
• Marketing expense was $3.1 million in the fourth quarter, an increase of $0.9 million from the prior quarter, due primarily to higher advertising expense during the quarter.
• Loan expenses were $0.6 million in the fourth quarter, a decrease of $1.6 million from the prior quarter, due in part to a decrease in legal and appraisal expense.
• Other noninterest expense was $20.4 million in the fourth quarter, an increase of $16.4 million from the prior quarter, due primarily to a previously disclosed Defined Benefit Plan settlement accounting charge of $12.0 million, as well as an increase in the provision for credit losses on off-balance sheet credit exposure.

Please refer to Appendix B to this press release for a reconciliation of operating revenues and expenses*.

ASSET QUALITY

The allowance for loan losses was $142.2 million at December 31, 2022, or 1.05% of total loans, compared to $131.7 million or 1.02% of total loans at September 30, 2022. The Company recorded a provision for loan losses totaling $10.9 million in the fourth quarter of 2022, of which $7.2 million was due to loan growth.

Non-performing loans totaled $38.6 million at December 31, 2022 compared to $34.0 million at the end of the prior quarter. During the fourth quarter of 2022, the Company recorded total net charge-offs of $0.3 million, or 0.01% of average total loans on an annualized basis, compared to $0.3 million or 0.01% of average total loans in the prior quarter, respectively.

DIVIDENDS AND SHARE REPURCHASES

The Company’s Board of Directors has declared a quarterly cash dividend of $0.10 per common share. The dividend will be payable on March 15, 2023 to shareholders of record as of the close of business on March 3, 2023.

The Company repurchased 1,547,934 shares of its common stock during the fourth quarter of 2022 at a weighted average price of $19.91 excluding commissions, for an aggregate purchase price of $30.8 million.

As announced in September of 2022, the Company received regulatory non-objection for its second share repurchase program of up to 8,900,000 shares, representing approximately 5% of its shares of common stock then outstanding. The repurchase program, which is limited to $200 million through August 31, 2023, may be modified or terminated by the Board of Directors of the Company at any time. At December 31, 2022, there were 6,989,750 shares available for repurchase and $161.8 million in total market value remaining under the repurchase authorization.

CONFERENCE CALL AND PRESENTATION INFORMATION

A conference call and webcast covering Eastern’s fourth quarter 2022 earnings will be held on Friday, January 27, 2023 at 9:00 a.m. Eastern Time. To join by telephone, participants can call the toll-free dial-in number (888) 396-8049 from within the U.S. and reference conference ID 15857557. The conference call will be simultaneously webcast. Participants may join the webcast on the Company’s Investor Relations website at investor.easternbank.com. A presentation providing additional information for the quarter is also available at investor.easternbank.com. A replay of the webcast will be made available on demand on this site.

ABOUT EASTERN BANKSHARES, INC.

Eastern Bankshares, Inc. is the stock holding company for Eastern Bank. Founded in 1818, Boston-based Eastern Bank has more than 120 locations serving communities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island. As of December 31, 2022, Eastern Bank had approximately $23 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 LLC subsidiary. Eastern takes pride in its outspoken advocacy and community support that includes $240 million in charitable giving since 1994. An inclusive company, Eastern employs approximately 2,100 deeply committed professionals who value relationships with their customers, colleagues, and communities. For investor information, visit investor.easternbank.com.

NON-GAAP FINANCIAL MEASURES

*Denotes a non-GAAP financial measure used in this press release.

A non-GAAP financial measure is defined as a numerical measure of the Company’s historical or future financial performance, financial position or cash flows that excludes (or includes) amounts, or is subject to adjustments that have the effect of excluding (or including) amounts that are included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”) in the Company’s statement of income, balance sheet or statement of cash flows (or equivalent statements).

The Company presents non-GAAP financial measures, which management uses to evaluate the Company’s performance, and which exclude the effects of certain transactions that management believes are unrelated to its core business and are therefore not necessarily indicative of its current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into the Company’s core business as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

There are items in the Company’s financial statements that impact its financial results, but which management believes are unrelated to the Company’s core business. Accordingly, the Company presents noninterest income on an operating basis, total operating revenue, noninterest expense on an operating basis, operating net income, operating earnings per share, operating return on average assets, operating return on average shareholders’ equity, operating return on average tangible shareholders’ equity (discussed further below), the operating efficiency ratio, and the ratio of noninterest income to total revenue on an operating basis. Each of these figures excludes the impact of such applicable items because management believes such exclusion can provide greater visibility into the Company’s core business and underlying trends. Such items that management does not consider to be core to the Company’s business include (i) income and expenses from investments held in rabbi trusts, (ii) gains and losses on sales of securities available for sale, net, (iii) gains and losses on the sale of other assets, (iv) rabbi trust employee benefits, (v) impairment charges on tax credit investments and associated tax credit benefits, (vi) other real estate owned (“OREO”) gains, (vii) merger and acquisition expenses, and (viii) the non-cash pension settlement charge recognized related to the Defined Benefit Plan. The Company does not provide an outlook for its total noninterest income and total noninterest expense because each contains income or expense components, as applicable, such as income associated with rabbi trust accounts and rabbi trust employee benefit expense, which are market-driven, and over which the Company cannot exercise control. Accordingly, reconciliations of the Company’s outlook for its noninterest income on an operating basis and its noninterest expense on an operating basis to an outlook for total noninterest income and total noninterest expense, respectively, cannot be made available without unreasonable effort.

Management also presents tangible assets, tangible shareholders’ equity, average tangible shareholders’ equity, tangible book value per share, the ratio of tangible shareholders’ equity to tangible assets, return on average tangible shareholders’ equity, and operating return on average shareholders’ equity (discussed further above), each of which excludes the impact of goodwill and other intangible assets, as management believes these financial measures provide investors with the ability to further assess the Company’s performance, identify trends in its core business and provide a comparison of its capital adequacy to other companies. The Company included the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.

These non-GAAP financial measures presented in this press release should not be considered an alternative or substitute for financial results or measures determined in accordance with GAAP or as an indication of the Company’s cash flows from operating activities, a measure of its liquidity position or an indication of funds available for its cash needs. An item which management considers to be non-core and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular period. In addition, management’s methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other banking companies to calculate the same or similar performance measures, and accordingly, the Company’s reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other banking companies. Please refer to Appendices A-D for reconciliations of the Company's GAAP financial measures to the non-GAAP financial measures in this press release.

FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. Forward-looking statements, by their nature, are subject to risks and uncertainties. There are many factors that could cause actual results to differ materially from expected results described in the forward-looking statements.

Certain factors that could cause actual results to differ materially from expected results include developments in the Company’s market relating to the COVID-19 pandemic, including the severity and duration of the associated economic slowdown; adverse developments in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses; increased competitive pressures; changes in interest rates and resulting changes in competitor or customer behavior and mix or costs of sources of funding; risks that revenue or expense synergies or the other expected benefits of the Company’s merger with Century Bank in November 2021 may not fully materialize for the Company in the timeframe expected or at all, or may be more costly to achieve; adverse national or regional economic conditions or conditions within the securities markets; legislative and regulatory changes and related compliance costs that could adversely affect the business in which the Company and its subsidiary Eastern Bank are engaged, including the effect of, and changes in, monetary and fiscal policies and laws, such as the interest rate policies of the Board of Governors of the Federal Reserve System; market and monetary fluctuations, including inflationary or recessionary pressures, interest rate sensitivity, liquidity constraints, increased borrowing and funding costs, and fluctuations due to actual or anticipated changes to federal tax laws; the Company’s ability to successfully implement its risk mitigation strategies; and asset and credit quality deterioration, including adverse developments in local or regional real estate markets that decrease collateral values associated with existing loans; and the failure of the Company to execute all of its planned share repurchases. For further discussion of such factors, please see the Company’s most recent Annual Report on Form 10-K and subsequent filings with the U.S. Securities and Exchange Commission (the “SEC”), which are available on the SEC’s website at www.sec.gov.

You should not place undue reliance on forward-looking statements, which reflect the Company's expectations only as of the date of this press release. The Company does not undertake any obligation to update forward-looking statements.

EASTERN BANKSHARES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS

Certain information in this press release is presented as reviewed by the Company’s management and includes information derived from the Company’s Consolidated Statements of Income, non-GAAP financial measures, and operational and performance metrics. For information on non-GAAP financial measures, please see the section titled "Non-GAAP Financial Measures."