For nearly two decades, the musical chairs of deal-making in the financial industry left Boston without a major independent bank to call its own.
That may soon change, starting potentially with Eastern Bank’s $642 million acquisition of rival Century Bank announced late Wednesday. The deal would be Eastern’s first bank acquisition since it converted from a mutually owned bank to a public company in October, and its largest by far.
With a $1.7 billion war chest from the initial public offering, Eastern chief executive Bob Rivers has made no secret of his desire to buy up smaller banks. While being a mutual bank and owned on behalf of its account holders had benefits, most notably being free of pressures from Wall Street, it didn’t offer access to much capital. Rivers was stuck on the sidelines as public banks with more money to spend won deals.
Now, even after Century is subsumed into Eastern this fall, Rivers would still have two-thirds of that pot to deploy, making him more of a player to watch on the Boston business scene.
“This really validates why we went public and raised the capital, to build scale,” Rivers said in an interview. “There was no way we could have done this deal as a mutual.”
Rivers said he expects to make more bank acquisitions, with the next target likely to be within Eastern Massachusetts or southern New Hampshire, or in neighboring regions, such as the Worcester area.
Eastern still won’t be anywhere near the size of FleetBoston Financial, the Boston banking behemoth created through the merger of several big regional banks during the 1990s that was eventually sold to Bank of America in 2004 for $47 billion.
But Eastern will be much bigger than any other locally based retail bank in the state. And with $22 billion in assets, it would be the third largest independent bank in New England, after Citizens and Webster. (One other large independent, People’s United, is in the process of being bought by M&T Bank of Buffalo.)
Boston has always been a banking center, but lost clout with the Fleet sale. While several key executives from Boston remain with Bank of America, most notably chief executive Brian Moynihan and vice chair Anne Finucane, the center of gravity for the huge national bank is far from here.
For much of the past decade, two Connecticut players — People’s United, out of Bridgeport, and Webster in Waterbury — were the largest independents in New England. Then Citizens Financial spun out of the Royal Bank of Scotland, creating a big independent bank in Providence. Meanwhile, Spanish giant Santander made Boston its US beachhead.
While Rivers won’t talk about how the deal with Century came about, Eastern and Century executives know each other well. They battle over the same business customers, and support some of the same charities. Rivers had even been a neighbor in Needham of Barry Sloane, who became chairman of Century after the death of his father, founder Marshall Sloane, in 2019. (Sloane is not expected to stay with Eastern after the deal closes and the Century name goes away.)
Closures of some bank branches are inevitable. Nearly all of Century’s 27 branches are within 3 miles of an Eastern branch; combined, the two banks have 116. Century, which is based in Medford, employs about 400 people, compared to 1,900 for Eastern, which has its headquarters in the Financial District. Eastern expects to reduce costs by $37 million a year from the combination, which indicates there could be job losses ahead.
The Century deal makes Eastern the biggest financier in the emerging marijuana industry, as the smaller bank embraced a sector that Eastern and most others had assiduously avoided. Meanwhile, Century customers will get access to broader wealth management and insurance services under Eastern.
Business customers will have a more muscular lending partner. For now, Eastern’s biggest real estate loans range up to $25 million, which should increase as the bank grows. Rivers also argues Eastern is better equipped to stay on top of expensive technological advances, particularly with mobile banking, as a bigger institution.
“For their first deal out of the gate, this deal makes a lot of sense,” said Damon DelMonte, an analyst with investment bank Keefe, Bruyette & Woods. “This is going to give customers in the Greater Boston area access to more products and services.”
In his four-plus years as chief executive, Rivers has used Eastern to pursue his interest in civic affairs and public service. He has deployed bank resources to support causes including LGBTQ rights, Black-owned businesses, and economic development in Gateway Cities such as Lawrence and Brockton. His latest project: launching a business coalition to boost early childhood education across Massachusetts.
As a public bank beholden to shareholders, Eastern cannot donate as much of its annual profits to its charitable arm as before. So at the time of the IPO, Eastern endowed its foundation with 7.5 million shares, to front-load it with money. The Eastern Bank Charitable Foundation now has about $280 million, more than twice as much as a year ago.
There once was a time when investors might have discouraged such acts of civic largesse as potentially expensive distractions. But Wall Street is now often hailing good deeds, with investors on the hunt for companies with solid records on environmental, social, or corporate governance matters, known in industry parlance as ESG investing.
“Our social positions are not agreed upon by everybody,” Rivers said. “But in the investment community, increasingly there’s a receptivity to it, there’s a point of differentiation. There’s no reason to stop that. Now we have even more firepower.”
But there’s another reality of being a publicly traded company: Eastern’s independence could be jeopardized, eventually. The bank can be sold to another acquirer, per state rules, after three years from the IPO. But Rivers, 56, said he has no plans to go anywhere once that holding period is up.
Smaller banks can be personal, problems more easily resolved. But Rivers wants to make the case that bigger can be better in banking.
“There’s an opportunity for a [major] Boston bank in this marketplace,” Rivers said. “We want to be the one that fills it.”