IPO Launch: Eastern Bankshares Goes Public In $1.8 Billion Deal


Eastern Bankshares (EBC) has raised $1.8 billion in an IPO of its common stock, according to an S-1 registration statement.

Boston, Massachusetts-based Eastern was founded over 200 years ago as a local savings bank and expanded to provide community banking and insurance services to individuals and businesses in Massachusetts, New Hampshire and Rhode Island.

The firm has expanded its branch network according to the map below:


Management is headed by Chairman and CEO Robert Rivers, who has been with the firm since 2006 and was previously an EVP for Retail Banking at the former Commercial Federal Bank in Omaha, Nebraska.

Below is a brief overview video of a message from the bank's CEO:

Source: easternbank

The company’s primary offerings include:

  • Consumer and business lending
  • Deposit
  • Wealth management
  • Insurance products

The bank has been structured as a mutual holding company and the offering will transition the bank to a stock form of organization.

The bank pursues new customer relationships through mostly traditional media as well as more recently, mobile app marketing and online activity.

Salaries & Employee Benefits expenses as a percentage of total revenue have been rising as revenues have fluctuated.

The firm's primary market area is the Boston-Worcester-Providence CSA, which had a median household income of $80,000 in 2018 versus $62,000 for the U.S. market.

The area has more than 100 colleges and universities and over 43% of the population of the CSA age 25 or older has a bachelor's degree or higher, so the region is highly educated.

The CSA also is home to significant ongoing new business formation, with a high degree of venture capital funding for startup companies of all kinds, with special emphasis on life science firms.

So, the region provides Eastern with significant opportunities for deposit base growth and lending opportunities.

The bank had a 2.48% market share as of June 30, 2019 for the areas in which it had at least one branch and management says it faces intense competition for its commercial banking segment.

Eastern’s recent financial results can be summarized as follows:

  • A drop in total interest income for Q1 2020
  • Lower net interest income after provision for loan losses
  • Slightly variable net interest margin
  • Low net charge-offs to average loans
  • A swing to cash used in operations in Q1 2020

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of March 31, 2020, Eastern had $2.3 billion in cash, equivalents and securities.

Eastern is raising $1.8 billion in gross proceeds from an IPO of approximately 175 million shares of its common stock, sold at a price of $10.00 per share.

Assuming a successful IPO, the company’s market capitalization at IPO would approximate $1.8 billion, excluding the effects of underwriter over-allotment options.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 93.9%.

Management says it will use the net proceeds from the IPO as follows:

to invest in securities;

to repurchase shares of our common stock, including repurchases to fund stock-based benefit plans;

to finance the potential acquisition of financial institutions or financial services companies, although we do not currently have any agreements or understandings regarding any specific acquisition transaction;

to pay cash dividends to shareholders; and

for other general corporate purposes.

The listed advisor is Keefe, Bruyette & Woods.


Eastern is seeking to switch from a mutual holding company to a stock form of ownership.

The firm initially offered shares to persons in its network and coverage areas and now has sold them to the wider public.

The bank’s financials show good loan underwriting results, strong net interest margin, but a drop in topline revenue in Q1 2020 likely due to the Covid-19 pandemic.

Salaries & Employee Benefits expenses have risen as revenue has fluctuated and the bank has swung to negative cash flow from operations, at least temporarily.

The market opportunity for providing community banking services to the Northeast is large and likely to grow at a slow rate in the foreseeable future.

EBC did not provide guidance on its projected dividend rate, if any. Typical dividends for community banks run in the 1% to 2% range, so the lack of dividend guidance is a negative.

Community style banks that have gone public in the last few years haven’t performed with any great distinction, so my guess is that EBC will be no different.

With extremely low interest rate policies by the Federal Reserve expected to continue for several years, the pressure of a low margin environment on bank profits will also likely continue.

I don’t see any reason for outperformance by EBC, so my opinion on the IPO and stock going forward is NEUTRAL.


Expected IPO Pricing Date: October 15, 2020

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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