A buying frenzy hit the Northeast at the end of 2018, shrinking the number of eligible stock banks for sale. The pool especially took a hit in the Boston area when Rockland Trust bought Blue Hills Bank and People’s United Bank bought Belmont Savings Bank. 

While not impossible, Berkshire Bank and Rockland Trust have been in acquisition mode themselves, so the chances they are bought in the near term is very unlikely. Boston Private recently named a new CEO, while Century Bank is family-owned and is rarely mentioned in the conversation. 

Now, the parent companies of East Boston Savings Bank and Brookline Bank have emerged as potential targets for any banks looking for new acquisitions in the highly coveted Boston market. 

Aging Boards, Widespread Branches Shift Expectations 

“I think the expectation when East Boston did the [stock] conversion is that these guys would ultimately be a seller,” Collyn Gilbert, managing director at Keefe, Bruyette & Woods, told Banker & Tradesman. “The Boston market is coveted and a consolidating market, so it makes sense for EBSB to be a target.” 

The parent company of EBSB also has an extremely old board of directors, which is a big factor at looking at whether a bank will sell. Board Chairman, President and CEO Richard Gavegnano is 70, according to Bloomberg. 

At least four directors are over 70 and at least six are over 60, according to Bloomberg. 

Brookline Bancorp has remained on research firm Compass Point’s “Takeout List,” as of earlier this month, and the bank’s two dozen branches, many of which are in Boston or surround the city, make it a desirable franchise for a bank looking to bolster its presence in the Boston area.  

Additionally, President and CEO Paul Perrault is 66 years old, and Brookline’s board of directors has several older board members. Three are in their 80s, four are in their 70s and four in their 60s, according to Bloomberg. 

Factors Potential Buyers Will Consider 

While EBSB and Brookline seem like banks that will ultimately be sold, there are still a number of factors that could make it difficult for them to find the right buyer. 

Brookline Bank has taken several actions in recent years that would suggest it might be more interested in being a buyer than a seller. The company raised $86 million in capital in 2017 and then acquired First Commons Bank later that year. The company declined to comment about its plans for the bank. 

EBSB has more than doubled in size in the last five years. The bank grew from roughly $2.7 billion in assets to $6.1 billion in assets between the end of 2013 and the end of 2018, according to the FDIC, in part by growing its commercial real estate portfolio. 

The bank increased commercial real estate volume from $1.07 billion at the end of 2013 to more than $2.6 billion at the end of 2018. While an impressive feat, the loans give the bank significant credit exposure. 

East Boston Savings Bank CEO Richard Gavegnano

“They have had really robust growth rates,” Gilbert said, adding that she does not see a lot of cost savings for any bank that might buy the EBSB franchise. “Does the market have that much growth to give or are they going outside risk circles to get that growth? You won’t know until we go through the credit cycle and it gets tested.” 

That could eliminate some potential buyers like Berkshire Bank. While the company just moved its headquarters to Boston and is interested in growing in the city, it might not be big enough to absorb EBSB and the credit that comes with it. 

EBSB Could Face Challenges to Growth as Market Cools 

Another issue for EBSB is that sustaining this growth and funding it will be difficult in a competitive market that is showing some signs of slowing, particularly with all banks seeing slower growth in commercial real estate. 

Even with the opportunities that exist, EBSB’s 115 percent loan-to-deposit ratio will make funding the kind of growth it’s been used to even more difficult. 

Bram Berkowitz

Gavegnano declined to comment on potential EBSB acquisition opportunities, but did say that the bank is focused on continuing to grow its Boston franchise and capturing strong lending relationships and high-quality loans. 

He also said the bank would begin to slow its branch growth. In recent years, the bank has put up many new branches, including six in 2018. It’s opening two more this quarter, but should cap out at 40, at least for a while, he said. 

“Whoever acquires them has to know that EBSB has a unique culture,” Gilbert said. “That has to be a consideration for the buyer. The bank has a very unique story and you have to find the right fit.” 

An earlier version of this article incorrectly identified Brookline Bancorp president and CEO Paul Perrault as president and CEO of Brookline Bank. Additionally, this article incorrectly identified a photo of Brookline Bank president and CEO Daryl Fess as Perrault.

After Bank-Buying Spree In 2018, New Purchases Are Eyed

by Bram Berkowitz time to read: 3 min
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