Eastern Bank (EBC)

Regional banking company Eastern Bankshares (NASDAQ:EBC) met Wall Streets revenue expectations in Q4 CY2025, with sales up 28.3% year on year to $283.5 million. Its non-GAAP profit of $0.44 per share was 6.9% above 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.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, Eastern Bank grew its revenue at a decent 11.8% compounded annual growth rate. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Eastern Bank’s annualized revenue growth of 24% over the last two years is above its five-year trend, suggesting its demand 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 year-on-year revenue growth of 28.3% was excellent, and its $283.5 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 79.3% of the company’s total revenue during the last five years, meaning lending operations are Eastern Bank’s largest source of revenue.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

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.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, Eastern Bank’s efficiency ratio has swelled by 13.4 percentage points, going from 64.7% to 56%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q4, Eastern Bank’s efficiency ratio was 66.8%, falling short of analysts’ expectations by 1,152.3 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects Eastern Bank to rein in some of its expenses as it anticipates an efficiency ratio of 52.6%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Eastern Bank’s EPS grew at an astounding 22% compounded annual growth rate over the last five years, higher than its 11.8% annualized revenue growth. However, we take this with a grain of salt because its efficiency ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

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

For Eastern Bank, its two-year annual EPS growth of 20.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, Eastern Bank reported adjusted EPS of $0.44, up from $0.34 in the same quarter last year. This print beat analysts’ estimates by 6.9%. Over the next 12 months, Wall Street expects Eastern Bank’s full-year EPS of $1.56 to grow 23.3%.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Eastern Bank’s TBVPS declined at a 6.2% annual clip over the last five years. The trend unfortunately shows few signs of slowing as TBVPS also declined by 6.5% annually two-year basis, falling from $14.76 to $12.90 per share.

Over the next 12 months, Consensus estimates call for Eastern Bank’s TBVPS to grow by 7.4% to $13.86, lousy growth rate.

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 15.6%, 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 3%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We enjoyed seeing Eastern Bank beat analysts’ tangible book value per share expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue was in line. Overall, this print had some key positives. The stock remained flat at $20.37 immediately following the results.

Updated: January 22, 2026 at 11:43 PM EST

Are you wondering whether to buy Eastern Bank or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

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

Eastern Bank’s P/B ratio based on the next 12 months is 1.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $22.42 on the company (compared to the current share price of $20.37).