LYNN — In a move that reverses two centuries of mutuality, Eastern Bank Thursday told its employees that it intends to go public in the largest such conversion in banking history, CEO Bob Rivers said Thursday.
Established 202 years ago in Salem, Eastern has been the oldest and largest mutual bank in the United States. Bob Rivers, who took over as CEO 3½ years ago, extolled the virtues of it remaining a mutual bank at the time.
“But,” Rivers said, “A lot of people back then were concerned about whether we were going to change, and that caused me, at the time, to restate the five things that weren’t going to change, and No. 1 was a commitment to mutuality.
“However, No. 3 was our commitment to growth. How those two things played against each other is how this happened.”
Mutual banks are responsible solely to their depositors, whereas publicly held banks have shareholders.
Rivers said that the change will be the largest conversion in banking history, but it would not dampen Eastern’s commitment to its North Shore roots. For one thing, he said, the office building at the end of Market Street still contains 500 of the bank’s nearly 2,000 employees. And Rivers said that while Boston may be the bank’s official corporate headquarters, “I still consider Lynn our real headquarters.”
Rivers said the bank needed to grow much more to be competitive with other institutions.
“Being committed to a mutual structure, legally, limits your growth,” he said. “In the last three years we had record earnings, but our growth was not fast enough to keep up long-term with our competition.
“We have grown organically and through acquisitions every few years, but lately we haven’t been able to do that. The only way we could was to become a public company.”
The goal, Rivers said, was to grow the bank from $12 billion to $40 billion in assets in 10 years. But he said that the institution is not planning to widen its scope beyond New England.
“Most of it (expansion) is going to be where we are,” he said. “We’re most concentrated on the North Shore. We’re pretty thin in other parts of our market. We have to fill in. If we moved to the western part of the state, it would be an extension of our Metro West franchise. If we expand to other states, it would be right along the borders. You won’t see us go too far afield. It makes it easier to stay close to our customers.”
However, Rivers said, the decision was still very emotional for him, given his often-stated endorsement of mutuality.
“It was very tough,” he said. “I initiated the conversation and the board of directors started talking about it 11 months ago. We deliberated the whole second half of last year. I had come to the conclusion that we could no longer remain in a mutual structure and took it to the board.
“It was a tough, emotional decision, but ultimately the thing that’s most important to me, and the others, is that Eastern survives. We want to stay around for another two centuries.”
Eastern, as well as being among Lynn’s top employers, has also been one of the city’s leading philanthropic institutions through its charitable foundation. Rivers does not see that changing.
Eastern’s foundation will get four percent of this fall’s projected initial public offering (IPO) proceeds, which will bring its assets up to $180 million, according to some estimates. Rivers believes the move will bring Eastern closer to the Lynn and North Shore community.
“The amount of money we have philanthropically will never be greater,” he said. “I don’t think our commitment to the community can be stronger, not just in terms of philanthropy, but in the number of employees we have. Our advocacy to social justice will be just as strong.
“As we spread our franchise down to the South Shore, and to New Hampshire, some of our senior leadership on the North Shore might lessen, but our largest employee base is Lynn. We are one of the largest employers in Lynn.”
And, he said, those local employees and depositors will be first in line for the offering, “whether they’re businesses or individual customers and their families. I don’t think this will affect banking services. We’ll continue to function in the great way we’ve always functioned.
“We intend to do what we’ve always done. I’m sure there will be things about this change people aren’t going to be happy with. But they can bank, or do their investing, elsewhere. I really hope they don’t, but they can.”
