Banker & Tradesman file photo

As Eastern Bank prepares to go public later this year, its year-to-date earnings show the effects of the pandemic, as the bank has downgraded the risk ratings for much of its hotel and restaurant portfolio.

Eastern Bank’s net income for the first six months of 2020 was $38.3 million, down 47.7 percent compared to the same time period last year, when net income was $68 million, according to an updated SEC filing ahead of Eastern’s planned public offering.

The Boston-based bank had announced on June 18 that it would convert from a mutual to a stock bank later this year.

Citing concerns about the pandemic’s economic impact, Eastern Bank increased its allowance for loan losses by $34.3 million during the first six months of 2020 to $116.6 million, or 1.17 percent of total loans. The allowance on Dec. 31 was $82.3 million, or 0.92 percent of total loans.

The provision for loan losses increased by $32.7 million to $37.2 million for the six months ending June 30, compared to $4.5 million for the same time period last year.

The bank said in the securities filing that it had downgraded the risk ratings for most of its loans secured by hotels and restaurants, as well as some other commercial loans for customers expecting to face financial difficulties.

The downgrades affecting $1.7 billion of commercial loans included $511.9 million to the special mention, or worse, risk rating category.

The bank modified approximately $946.1 million of loans during the first six months of 2020, with about 56 percent receiving payment deferrals of both interest and principal and 44 percent deferring only principal payments. The modifications affected $558.9 million of commercial real estate loans, including construction loans, $157.4 million of commercial and industrial loans, $106.9 million of business banking loans, $92.8 million of residential real estate loans and $30.1 million of consumer loans, including home equity loans, according to the SEC filing.

Restaurants receiving COVID-19 related modifications had $148.37 in commercial and industrial loan balances, and $51.56 million in commercial real estate loan balances. Hotels had $179.58 million in CRE loan balances.

The bank’s total loan portfolio was $10 billion as of June 30, up from $9 billion at the end of 2019. The increase includes Paycheck Protection Program loans, with Eastern processing 8,100 PPP loans for $1.1 billion. Other consumer loans dropped during the first half of the year by $67.7 million, including a $62.6 million decrease in the auto portfolio. Eastern began exiting its indirect auto lending business in 2018.

Eastern’s total assets are now $13.99 billion, up from $11.63 billion at the end of 2019 and $11.52 billion on June 30, 2019.

Deposits increased to $11.9 billion as of June 30, up from $9.6 billion on Dec. 31. Eastern saw increases of $571.6 million in interest checking deposits and $1.2 billion in demand deposits.

The bank’s net interest margin was 3.49 percent in the first six months of 2020, down from 4.03 percent during the same period last year.