10-Q: Eastern Bankshares Reports Strong Q3, Completes HarborOne Merger

Eastern Bankshares, Inc. reported a significant rebound in Q3 net income and improved asset quality, while completing its acquisition of HarborOne Bancorp.

Summary

• Net income for the three months ended September 30, 2025, was $106.1 million, a substantial increase from a net loss of $6.2 million in the same period last year.
• Basic and diluted earnings per share for Q3 2025 were $0.53, up from a loss of $0.03 per share in Q3 2024.
• Year-to-date (nine months ended September 30, 2025) net loss was $11.3 million, compared to net income of $58.8 million in the prior year, primarily due to a strategic investment portfolio repositioning that resulted in $269.6 million in losses on sales of available-for-sale securities.
• Operating net income (non-GAAP) for the nine months ended September 30, 2025, increased by 73.8% to $223.3 million, demonstrating strong underlying business performance.
• Net interest income increased by 17.9% to $200.2 million for the three months ended September 30, 2025, and by 38.0% to $591.2 million for the nine months ended September 30, 2025.
• The net interest margin (FTE) improved by 50 basis points to 3.47% for Q3 2025 and by 71 basis points to 3.48% for the nine months ended September 30, 2025.
• Total gross loans grew by 4.1% to $18.8 billion as of September 30, 2025, from $18.1 billion at December 31, 2024, driven by commercial and industrial loans and commercial real estate investment loans.
• Non-performing loans (NPLs) decreased by 49.0% to $69.2 million as of September 30, 2025, from $135.8 million at December 31, 2024, representing 0.37% of total loans.
• The allowance for loan losses increased by 1.8% to $233.0 million as of September 30, 2025, primarily due to increased commercial loan balances and reserve rates, partially offset by a reduction in specific reserves from non-performing loan sales.
• The acquisition of HarborOne Bancorp, Inc. was completed on November 1, 2025, adding $5.5 billion in total assets and $4.3 billion in deposits.
• Total deposits decreased by 0.9% to $21.1 billion as of September 30, 2025, from $21.3 billion at December 31, 2024.

Sentiment

Score: 7

Explanation: The company demonstrated strong operational performance in Q3 2025 with significant increases in net income, net interest income, and improved asset quality metrics. While the year-to-date GAAP net loss is a negative, it is attributed to a strategic investment portfolio repositioning. The successful completion of the HarborOne acquisition positions the company for future growth. The underlying business health and strategic actions are positive, but the reported YTD loss tempers overall sentiment.

Positives

• Net income for the three months ended September 30, 2025, significantly rebounded to $106.1 million from a net loss of $6.2 million in the prior year period.
• Basic and diluted earnings per share improved to $0.53 for Q3 2025 from a loss of $0.03 for Q3 2024.
• Operating net income (non-GAAP) increased substantially by 44.3% for Q3 2025 and 73.8% for the nine months ended September 30, 2025, indicating strong core business performance.
• Net interest income increased by 17.9% for Q3 2025 and 38.0% for the nine months ended September 30, 2025.
• Net interest margin (FTE) expanded by 50 basis points to 3.47% in Q3 2025 and by 71 basis points to 3.48% year-to-date.
• Provision for allowance for loan losses decreased significantly to $7.1 million in Q3 2025 from $47.0 million in Q3 2024, and to $21.3 million year-to-date from $60.6 million in the prior year, reflecting improved credit quality.
• Non-performing loans (NPLs) decreased by 49.0% to $69.2 million, and NPLs as a percentage of total loans improved to 0.37% from 0.76%.
• The overall loan delinquency rate decreased to 0.43% at September 30, 2025, from 0.62% at December 31, 2024.
• Office-related commercial real estate (CRE) loans on non-accrual status decreased significantly to $28.4 million (2 loans) from $87.0 million (12 loans).
• The tangible shareholders equity to tangible assets ratio improved to 11.4% from 10.5%, indicating stronger capital adequacy.
• The acquisition of HarborOne Bancorp, Inc. was successfully completed on November 1, 2025, expanding the company's market presence and asset base.

Negatives

• A net loss of $11.3 million was reported for the nine months ended September 30, 2025, compared to net income of $58.8 million in the prior year period.
• The year-to-date net loss was primarily driven by $269.6 million in losses on sales of available-for-sale securities as part of an investment portfolio repositioning.
• Total deposits decreased by $202.0 million, or 0.9%, to $21.1 billion as of September 30, 2025, from $21.3 billion at December 31, 2024, primarily due to regular deposit outflows.
• Interest expense on deposits decreased due to a decrease in rates paid on deposits, which could indicate competitive pressure or a shift in deposit mix.

Risks

• Changes in regional, national, or international macroeconomic conditions, including tariffs, governmental shutdowns, inflation, recessionary pressures, or interest rates.
• The possibility that future credit losses, loan defaults, and charge-off rates are higher than expected due to changes in economic assumptions or adverse economic developments.
• Turbulence in the capital and debt markets and within the banking industry.
• Decreases in the value of securities and other assets.
• Decreases in deposit levels necessitating increased borrowing to fund loans, investments, and other needs.
• Competitive pressures from other financial institutions.
• Operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters, and future pandemics.
• Changes in regulation, regulatory policy, legislation, accounting standards and practices, and fiscal monetary policy, particularly in light of shifts in presidential administrations.
• The risk that goodwill and intangibles recorded in financial statements will become impaired.
• Risks related to the implementation of acquisitions, dispositions, and restructurings, including the 2024 merger with Cambridge Bancorp and the 2025 merger with HarborOne Bancorp, where revenue and expense synergies or other expected benefits may not materialize or may be more costly to achieve than anticipated, and combined businesses may not perform as expected.
• Potential risks related to the integration of completed or pending acquisitions.
• The risk that the company may not be successful in the implementation of its business strategy.
• Exposure to office-related commercial real estate (CRE) loans, given prevailing market conditions such as reduced occupancy due to hybrid and remote work arrangements and lower commercial real estate valuations.

Future Outlook

The company anticipates modest changes in net interest income in rising and falling rate scenarios, with modeled deposit expense expected to outpace earning asset income in most rising rate scenarios and interest-earning asset yields falling faster than deposit costs in most falling rate scenarios. Management does not expect a material change to its current strategy over the near term, as simulation results are within policy limits. The U.S. economy is forecasted to grow slightly in 2025, with less uncertainty around fiscal policies, and the FOMC is expected to decrease federal funds rates again in 2025. The company may elect to raise additional capital beyond the next twelve months to fund strategic acquisitions, share repurchases, or other purposes.

Management Comments

• The Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented.
• The results for the three and nine months ended September 30, 2025, are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim period, or any future year or period.
• Changes to the computation of operating net income result in a more meaningful measure of financial performance and allow for better comparability to peer companies.
• The presentation of yields on a fully-taxable equivalent (FTE) basis allows for better comparability between institutions with different tax structures.
• The commercial loan portfolio composition is relatively diversified in terms of industry sectors, property types, and lending specialties, with a concentration in the New England geographical area (80.8% in Massachusetts and New Hampshire).
• The philosophy toward managing loan portfolios is predicated upon careful monitoring, stressing early detection and response to delinquent and default situations, with efforts to resolve such situations over the shortest possible timeframe.
• The company met all applicable regulatory capital requirements as of September 30, 2025, and December 31, 2024, and no conditions or events are believed to cause a change in categorization.

Industry Context

The banking industry is navigating a dynamic interest rate environment, with the Federal Open Market Committee (FOMC) having implemented multiple federal funds rate cuts in late 2024 and 2025, signaling a shift towards lower rates. This impacts banks' net interest margins and asset-liability management strategies. The company's strategic investment portfolio repositioning, while resulting in a short-term loss, aligns with efforts to optimize portfolios in response to market conditions. The successful completion of the HarborOne Bancorp acquisition reflects ongoing consolidation and growth strategies within the regional banking sector. The company also highlights the ongoing challenge of office-related commercial real estate (CRE) loan exposure, a broader industry concern due to changes in work arrangements and property valuations.

Legal Proceedings

• The company is not involved in any pending legal proceeding as a plaintiff or a defendant the outcome of which is believed to be material to its financial condition or results of operations.

Stakeholder Impact

• Shareholders: Impacted by improved Q3 net income and EPS, increased dividends ($0.13 per share in Q3 2025, $0.38 per share YTD), ongoing share repurchase programs, and potential future capital raises.
• Employees: Affected by share-based compensation plans, and an increase in salaries and employee benefits due to the Cambridge merger and regular wage increases.
• Customers: Benefit from expanded services and geographic reach through the HarborOne acquisition, and continued access to diverse deposit and lending products.
• Creditors: The company maintains strong liquidity with significant borrowing capacity from the FHLBB ($2.2 billion additional capacity) and Federal Reserve Bank of Boston ($3.7 billion additional capacity).

Next Steps

• Complete the purchase accounting for the HarborOne Bancorp merger.
• Continue to assess additional information and its implications for monetary policy by the FOMC.
• Management may evaluate other hedging strategies based on actual or projected changes in market rates or risk exposure.
• Potentially raise additional capital through equity or debt financing beyond the next twelve months for strategic acquisitions, share repurchases, or other purposes.

Key Dates

Recommendation

The company shows strong operational improvements, particularly in Q3 net income, net interest income, and asset quality. The strategic portfolio repositioning, while resulting in a year-to-date GAAP loss, is a one-time event aimed at optimizing the balance sheet. The completion of the HarborOne acquisition provides a clear growth trajectory. However, the macroeconomic uncertainties, particularly around interest rates and commercial real estate, warrant a 'hold' stance. Investors should monitor the integration of HarborOne, the realization of synergies, and the ongoing management of CRE exposure before considering a 'buy' recommendation.

Keywords

Banking, Financial Services, SEC Filing, 10-Q, Eastern Bankshares, EBC, Net Income, EPS, Net Interest Income, Loan Portfolio, Asset Quality, Non-Performing Loans, HarborOne Acquisition, Merger, Deposits, Interest Rates, Commercial Real Estate, Wealth Management