Banker & Tradesman file photo
East Boston Savings Bank had record earnings in the second quarter despite the coronavirus pandemic, due in part to gains on a real estate sale.
The bank had second quarter net income of $17.3 million, or $0.34 per diluted share, up 14 percent from $15.2 million, or $0.29 per diluted share, in the second quarter of 2019. Net income in the first quarter was $13 million, or $0.25 per diluted share.
The first six months of 2020 also saw record earnings, with net income of $30.3 million, or $0.60 per diluted share, slightly more than the net income of $30.2 million, or $0.59 per diluted share, for the same period last year.
The second quarter earnings included a $4.2 million gain on the sale of the bank’s former operations center in South Boston, according to the bank’s second quarter earnings statement. A decline in operating expenses and continued growth in net interest income also contributed to higher earnings.
Net interest income was $47.4 million for the second quarter, up 5 percent from the first quarter and 11.5 percent from the second quarter of 2019. The second quarter net interest margin was 3.10 percent compared to 2.99 in the first quarter and 2.82 percent in the second quarter last year.
Richard Gavegnano, East Boston Savings Bank’s chairman, president and CEO, said in a statement that higher net interest income resulted from maintaining loan yields while aggressively reducing funding costs. He added that the bank expects the cost of funds to continue to decline as deposits mature at significantly lower rates.
Because of economic uncertainties related to the pandemic, the bank increased the provision for loan losses to $9.6 million in the second quarter, higher than the first quarter provision of $725,000. The allowance for loan losses was $60.5 million or 1.06 percent of total loans in the second quarter compared to $50.9 million or 0.89 percent of total loans in the first quarter and $50.3 million or 0.87 percent of total loans at end of 2019.
The bank has modified approximately 13 percent of its loan portfolio due to COVID-19 through June 30.
“We are experiencing one of the most unique periods in our long history and management has shifted their focus and allocated available resources to minimizing COVID-19’s impact on the bank and our customers, community and shareholders,” Gavegnano said. “We have kept our branches available, supported our loan customers with temporary modifications and ensured our employees did this in the safest manner possible.”
The bank had total assets of $6.4 billion as of June 30, up from $6.35 billion on March 31 and $6.34 billion at the end of 2019. Net loans in the second quarter were $5.65 billion up $14.5 million from the first quarter but down $43.2 million from the end of 2019.
The bank said the decrease in loans for the six months ending June 30 was primarily due to decreases of $140.6 million in commercial real estate loans, $61.5 million in multi-family loans and $23.7 million in one- to four-family loans. These decreases were partially offset by increases of $155.7 million in commercial and industrial loans, $35.5 million in construction loans and $4.8 million in home equity lines of credit. The commercial and industrial loans included about 400 Paycheck Protection Program loans for $123.7 million.
Total deposits were $4.82 billion on June 30 down $1.6 million from March 31 and $101.1 million from Dec. 31. The net decrease in deposits for the first six months of 2020 reflected a $338.8 million decrease in certificates of deposit, including a $239.4 million reduction in brokered deposits.
