Eastern Bank in Boston has not been much of an acquirer in recent years, but that could change under its new chairman and chief executive, Richard E. Holbrook.
Mr. Holbrook, its president from 2001 until assuming his new duties Jan. 1, said in an interview last week that the $6.7 billion-asset Eastern is "going to be aggressive" in pursuing acquisitions in Massachusetts and other New England states.
In the last nine years Eastern has bought just two banks, but he said he expects the dealmaking pace to pick up as more banks and thrifts decide to sell themselves rather than try to slug it out in an increasingly competitive banking environment.
Eastern is well positioned to capitalize on acquisition opportunities, Mr. Holbrook said, because of its size - its parent, Eastern Bank Corp., is the largest banking or thrift company based in Massachusetts - and because of its unique business model. Since Eastern Bank is a mutual thrift that acts much like a commercial bank, it could be an attractive merger partner for both banks and thrifts, he said.
Do not expect Eastern to go public to finance its growth, however. Like his predecessor, Stanley J. Lukowski, Mr. Holbrook says he views mutuality as a competitive advantage that lets Eastern put customers, not shareholders, first.
"Our plan is 100% committed to remaining a mutual institution," he said.
Eastern has $750 million of capital it can use to buy publicly owned companies, Mr. Holbrook said. Also, since it is a mutual thrift, it can merge with other mutuals that are looking to remain private, he said.
Eastern's last deal was in early 2005, when it absorbed another mutual, Plymouth Bancorp Inc., the $1.5 billion-asset parent of Plymouth Savings Bank. Before that, Eastern's last deal was in 1998, when it bought the $444 million-asset Hibernia Savings Bank in Quincy for $80 million in cash.
When Mr. Lukowski took over as the chairman and CEO in 1992, Eastern had just $180 million of assets. Mr. Holbrook said 75% of its growth since then has been organic.
Still, Mr. Holbrook said he doubts its organic growth would have been so strong if Eastern had not moved into new markets with the Plymouth and Hibernia acquisitions. Its aim, he said, is to seek out acquisition opportunities first in Massachusetts - where it has the No. 8 market share, according to the Federal Deposit Insurance Corp. - and then in Rhode Island, southern New Hampshire, and southern Maine.
"In Massachusetts right now, we're a fairly small percentage of the marketplace. We think we have an awful lot of opportunity to grow within this state, but that said, there are a declining number of banking institutions available here," Mr. Holbrook said. Moving into other states is "not necessarily on the horizon in the next year or so, but it will be in the reasonably short to intermediate term."
He would not specify the asset size of potential targets, but he said small banks in particular are likely to be looking for partners, because of shrinking margins and escalating technology, compliance, and governance expenses.
"I think some of the opportunities we look at will be larger than $1 billion, and some will be less than that," he said.
Eastern also is looking for other types of financial services companies to acquire, including insurance agencies, investment management firms, and commercial brokerages, Mr. Holbrook said. His holding company bought five small insurance agencies last year alone, or double the number it had acquired since getting into that business with a 2002 deal for Allied American Insurance Agency Inc.
About a year and a half ago Eastern exited the capital equipment leasing business, because "the economics simply didn't work for us," but buying other types of leasing operations is among the possibilities, he said.
Though Eastern is a state-chartered savings bank, Mr. Holbrook often refers to it as a "mutual commercial bank." He calls the term a reflection of how it has expanded beyond the traditional thrift model. "We haven't been a thrift in a long time."
Eastern even entered the correspondent banking business in the spring of 2004, capitalizing on consolidation that dwindled the number of competitors in that niche. It started with five customers but now works with more than 60 community banks and credit unions. It boasts that one of every three banks in its market is a customer.
"It's a profitable business for us, and at the same time, it enables us to get to know those banks better," he said.
Mr. Holbrook, 55, joined Eastern as its chief financial officer in 1996, when it had 21 branches and $1.9 billion of assets. It now has 73 branches, and Mr. Holbrook said his mission is to continue to build on its growth in the last decade.
"My goal is to make certain that 10 years from now Eastern Bank continues to be a relevant and significant competitor in the banking market here in New England," he said.
