In their bank’s fourth quarter earnings call Jan. 23, Eastern Bank executives stressed they aren’t focused on M&A this year.
“Now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns,” Eastern Bank executive chair Bob Rivers told stock analysts. “As a result, we will not pursue any acquisitions, as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future. We are excited about the organic growth opportunities we see in the market, in both our banking and fee based businesses, and expect to continue returning excess capital through share with purchases and currently growing the dividend. We believe this approach will deliver meaningful value to our shareholders.”
The bank came under fire from a prominent activist investor this fall, whose leaders claimed that recent mergers, including Eastern’s recent purchase of Brockton-based HarborOne, had hurt shareholders. Bank executives said when the HarborOne merger was announced that it would give the bank access to a largely new market and consolidate its position as the biggest Boston-based bank.
Bank executives often say after a merger the size of the Eastern-HarborOne deal, it can take can take up to a year to integrate the two institutions and workforces.
Eastern reported a net income of $99.5 million for the fourth quarter, or $0.46 per diluted share and operating net income of $94.7 million, or $0.44 per diluted share. The bank also reported a 1.36 percent (1.3 percent on an operating basis) return on average assets and a 14.4 percent (13.8 percent operating basis) return on average tangible common equity.
“We’re not pursuing acquisition,”Eastern Bank CEO Dennis Sheahan said during the earnings call. “We’re we’re entirely focused on the growth of this company, the organic growth. We’re excited about the potential in each of our businesses. That’s what we’re leaning into. We recognize returning capital to our shareholders is the best use in terms of the excess capital, so we’re leaning heavily into buybacks.”
Eastern repurchased 3.1 million shares of common stock for $55.4 million in the fourth quarter.
While Eastern is focused on growth, its non-performing loans increased by $103.1 million to $172.3 million, or 0.75 percent of total loans. Executives said the increase was expected, and tied to the acquisition of HarborOne.
Eastern’s allowance for loan losses ended the year at $332 million, or 1.44 percent of total loans. The bank noted that it is currently not looking to sell off these loans and believes it can resolve some of the non-performing loans in the first and second quarter.
