By William Hall
Another merger of Bay State financial institutions is in the works — and for the leaders of Eastern Bank and HarborOne Bank, this one is personal.
Under a pending agreement, Boston-based Eastern Bankshares Inc. (Nasdaq: EBC) would acquire Brockton-based HarborOne Bancorp Inc. (Nasdaq: HONE) for roughly $490 million. Eastern plans to pay HarborOne stockowners 25.2 million Eastern shares plus $99 million in cash.
The deal, announced last week, requires approval of regulators and shareholders and is expected to close in the fourth quarter of this year. The combined holding company would have nearly $31 billion in assets.
In an interview, Eastern Executive Chair Bob Rivers explained some of the reasons he’s keen on the addition of HarborOne.
“This deal is particularly attractive to us not only in terms of a strategic fit, geographic reach and the depth it gives us, but it’s also very personal to me,” he said. “I grew up in Stoughton, so ‘my city’ was really Brockton. I got to know Brockton in my early years.”
HarborOne’s president and CEO, Joseph Casey, also expressed personal enthusiasm. The deal, he told the Business Journal on Friday afternoon, originated from ongoing talks with Rivers.
“It’s definitely because of the relationship over the years,” he said. “These two financial institutions truly share values — a people-first approach to cultivating customer relationships, and a strong, ongoing commitment to strengthening our communities. We saw no other potential partner of the caliber of Eastern.”
Geographic gain, and then some
The deal would add scale and territory for both banks, their leaders emphasized.
“At Eastern, our historical strength has been on the North Shore, less so south of Boston, although we do have a substantial presence there,” Rivers said. “HarborOne adds to that, as well as in Rhode Island. This is also better for HarborOne, because it expands their presence everywhere else that we are.”
Eastern Bank operates 109 branches, primarily in Eastern Massachusetts, along with a scattering in Southern New Hampshire and a wealth management office in Connecticut. While the bank also serves customers in Rhode Island, Eastern has no physical branches there.
HarborOne Bank has nine branches in Rhode Island, plus 21 in Massachusetts, primarily across the southeastern part of the state. Although they also include four branches in the city, Casey said, “We’ve had a strategic initiative to expand in Boston, which we started a few years ago.”
Plans call for HarborOne branches, services and customer accounts to be converted to Eastern’s, starting in early 2026.
There is some overlap among the Eastern and HarborOne outposts. In the acquisition announcement, HarborOne said it expects that “most” of its branches will continue operation, including the three in Brockton, and that all of the company’s branch employees will be retained. Eastern has about 2,000 employees.
Besides a geographic fit, the bankers see additional upside. With the acquisition, Eastern would gain HarborOne’s residential mortgage subsidiary, which last year did $664 million of business across 11 states. That’s more than twice Eastern’s home lending business — despite Eastern being a far larger institution.
Eastern’s current assets, $25 billion, are more than four times those of HarborOne. The banks now rank fifth and 16th in Massachusetts market share, respectively, according to a Business Journal analysis of local deposits.
At the same time, the acquisition would give HarborOne deeper pockets to support the communities it serves.
Eastern Bank and its philanthropic arm have already been big boosters in the Brockton area. But with the deal, Eastern has said, it “will dedicate $20 million in programming, including financial literacy and business resources” to communities served by both banks.
Mixed outlook for M&A
News of the Eastern-HarborOne acquisition comes as banking M&A is generally on the rise.
U.S. banks announced 34 deals during the first quarter of this year, adding up to an estimated $1.61 billion in value, according to S&P Global Market Intelligence data. That’s more than double the value of mergers and acquisitions during the first quarter of 2024.
The current upswing accelerated last month; 15 of the first quarter’s 34 deals were announced in March.
During the first quarter of 2023, as the industry was rocked by several high-profile bank failures, M&A slowed to just $433.8 million. In 2022, the first-quarter total was $1.53 billion, the S&P data shows.
Massachusetts has seen its share of bank deals. Eastern itself completed a $528 million acquisition of Cambridge Trust Co. last July. More recently, deals have been announced between the holding companies of Berkshire Bank and Brookline Bank, Rockland Trust and Enterprise Bank & Trust, and a pair of cooperative banks in Reading and Wakefield.
At Eastern and HarborOne, both execs said the new presidential administration could ease the federal regulatory process required for bank mergers. For instance, the Federal Deposit Insurance Corp., the government agency that insures and regulates thousands of banks across the U.S., wants to eliminate a 2024 policy requiring greater scrutiny of proposed M&A — and instead return to the previous policy, which had been in place since 2008.
“We’re kind of hoping, but not planning on (easier regulation),” Casey said. “M&A is up … and we don’t anticipate any kind of delay. But there’s been a downsizing of regulatory staff too, so it’s a little bit concerning if there’s no one there to review the application.”
Rivers concurred.
“Certainly, when you look at other deals that have been going through the application process recently, they seem to be moving quicker,” he said. “But of course, there have been large cuts in some of the regulatory agencies. So it’s a bandwidth issue … you still need folks that are going to sign off on these things.”