Eastern Bank (EBC)

Regional banking company Eastern Bankshares (NASDAQ:EBC) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 14.4% year on year to $241.5 million. Its non-GAAP profit of $0.37 per share was 6.9% below analysts’ consensus estimates.

Company Overview

Founded in 1818 as one of America's oldest mutual banks before converting to a public company in 2020, Eastern Bankshares (NASDAQ:EBC) operates as a bank holding company providing commercial and retail banking services primarily in Massachusetts, New Hampshire, and Rhode Island.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Eastern Bankshares competes with other regional banks operating in New England, including Berkshire Hills Bancorp (NYSE:BHLB), Brookline Bancorp (NASDAQ:BRKL), and People's United Financial (now part of M&T Bank, NYSE:MTB), as well as larger national banks like Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) that have significant presence in the region.

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Over the last five years, Eastern Bank grew its revenue at an impressive 10.4% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Eastern Bank’s annualized revenue growth of 18.6% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Eastern Bank’s revenue grew by 14.4% year on year to $241.5 million but fell short of Wall Street’s estimates.

Net interest income made up 78.6% of the company’s total revenue during the last five years, meaning lending operations are Eastern Bank’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.

Over the last five years, Eastern Bank’s efficiency ratio has swelled by 15.2 percentage points, going from 64.7% to 54.3%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, Eastern Bank’s efficiency ratio was 58.2%, falling short of analysts’ expectations by 473.7 basis points (100 basis points = 1 percentage point). This result was 1.9 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Eastern Bank to rein in some of its expenses as it anticipates an efficiency ratio of 51.8%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Eastern Bank’s full-year EPS grew at an astounding 13.2% compounded annual growth rate over the last four years, better than the broader banking sector.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Eastern Bank’s EPS grew at an astounding 6.4% compounded annual growth rate over the last two years. This performance was better than most banking businesses.

We can take a deeper look into Eastern Bank’s earnings quality to better understand the drivers of its performance. A two-year view shows Eastern Bank has diluted its shareholders, growing its share count by 22.8%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings.

In Q3, Eastern Bank reported adjusted EPS of $0.37, up from $0.25 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Eastern Bank’s full-year EPS of $1.46 to grow 29.8%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Eastern Bank’s TBVPS grew at an incredible 12.9% annual clip over the last five years. However, TBVPS growth has recently decelerated to 6.5% annual growth over the last two years (from $11.58 to $13.14 per share).

Over the next 12 months, Consensus estimates call for Eastern Bank’s TBVPS to remain flat at roughly $13.26, a disappointing projection.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Eastern Bank has averaged a Tier 1 capital ratio of 16.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Eastern Bank has averaged an ROE of 2.1%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was encouraging to see Eastern Bank beat analysts’ tangible book value per share expectations this quarter. On the other hand, its net interest income missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.2% to $17.60 immediately after reporting.

Updated: December 3, 2025 at 11:49 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Eastern Bank.

Eastern Bank isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was decent over the last five years and is expected to accelerate over the next 12 months, its relatively low ROE suggests management has struggled to find compelling investment opportunities. And while the company’s estimated net interest income growth for the next 12 months is great, the downside is its estimated sales for the next 12 months are weak.

Eastern Bank’s P/B ratio based on the next 12 months is 1.1x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $21.75 on the company (compared to the current share price of $18.82).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.