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Eastern Bank says it’s agreed to buy HarborOne Bank in a cash-and-stock deal that will give the former a substantial beachhead in the Rhode Island market.
If approved by regulators, the deal will give Eastern Bank $31.31 billion in assets and around $24 billion in deposits.
The deal is being funded by Eastern’s issuance of 25.2 million shares of common stock and paying about $99 million in cash to HarborOne shareholders. The HarborOne shareholders will be given their choice of either 0.765 shares of Eastern’s common stock or $12 in cash per share.
Based on Eastern’s $15.48 per-share closing price on April 23, the transaction is valued at $490 million.
The deal is expected to close in the fourth quarter of this year, but Eastern executives said in Friday morning’s earnings call that could be put off to the first quarter of 2026 if there’s any delay in getting approval from the three bank regulators that need to sign off on it, plus the required waiting period once approval is secured. The systems conversion is expected to take place in the first quarter of 2026, Eastern executives said Friday.
HarborOne shareholders still also need to approve the merger. HarborOne was founded as a credit union in Brockton in 1917 before converting to a bank in 2013. It has 30 branches in Boston, its southern suburbs and the Providence, Rhode Island area.
Along with the merger, Eastern Bank’s and HarborOne’s foundations say they’ll dedicate $20 million in programming to financial literacy and business resources currently offered through HarborOne’s HarborOne U program.
‘A Clear Path to Higher Returns’
While it’s only been two quarters since Eastern consummated its merger with Cambridge Trust, Eastern executives have been on the record saying they wouldn’t rule out a merger deal if one came along.
During Friday’s call, CEO Denis Sheahan said he wouldn’t comment on a stock analyst’s questions about whether HarborOne had auctioned itself to potential buyers, or whether Eastern had bid for Brookline Bank’s parent company, which in December announced plans to merge with Berkshire Bank.
If it goes through, the merger cements Eastern’s position as the local bank with the biggest deposit-share in the Boston market just behind Santander Bank, and Sheahan told investors the bank could surpass the latter for the third-biggest holder of deposits in the metro behind Bank of America andd Citizens.
The deal also puts it comfortably ahead of its main local rival, Rockland Trust, which expects to have $25 billion in assets and $8.7 billion in wealth assets under administration plus $20 billion in deposits once it acquires Lowell-based Enterprise Bank later this year.
Sheahan called the deal a “natural fit” during Tuesday’s call, saying both banks shared “values, vision and focus on community-centered banking” and that the deal “represents a clear path to higher returns.”
The deal will also help grow Eastern’s earnings by 16 percent and take slightly less than three years to pay for itself.
The bank expects to not only be able to earn more fees by cross-selling its wealth management products to current HarborOne customers, it also expects to be able to grow its commercial lending and residential mortgage businesses. The bank also plans to sell off HarborOne’s securities portfolio to help pay off loans the latter took out from the Federal Home Loan Bank of Boston.
Future of Mortgage Ops Undecided
Despite being a $5.7 billion-asset bank, HarborOne is a major mortgage lender in Massachusetts. Data from The Warren Group, publisher of Banker & Tradesman, puts its mortgage subsidiary as the fourth-biggest bank lender for single-family properties in Massachusetts by number of loans, and one of the 10 biggest mortgage lenders in New Hampshire by both volume and number of loans.
Eastern CFO David Rosato said in Friday’s call that his bank hadn’t yet decided what to do with HarborOne Mortgage.
“The reality is they’re a much bigger player than we are. They originated just south of $700 million in what was a very slow market while we originated just south of $300 million,” he said. “It’s a very well-run operation set up as a subsidiary of the bank. our plan is to think through our business and their business and optimize what the combined entity should look like for Eastern.”
Rosato added that HarborOne Mortgage represents “a real fee opportunity that’s available for us, but again we have to work through it with their team and right-size it for our vision.”
That decision, plus branch consolidation, could help drive significant cost savings in the merger. Eastern executives said they expect to find roughly $55 million in savings, or 40 percent of HarborOne’s pre-tax, non-interest operating expenses, once the merger is done.
HarborOne’s branch network overlaps with Eastern’s in several places, particularly in Boston, but helps it fill out its footprint in the suburbs and exurbs between Boston and Providence. HarborOne has nine branches and $694.23 million in deposits in Rhode Island, while Eastern has no branches.
Sheahan said that represents an opportunity for Eastern Bank.
“When you look at the market share in that state, it’s dominated by larger companies and we’re going to try and put a dent in that,” he said Tuesday, responding to an analyst’s question.
