Dive Brief:

• Eastern Bank executives stressed Friday the bank won’t pursue more acquisitions, after the Boston-based lender faced pressure last year from an activist investor.
• “We are frequently asked about M&A. Simply put, we are not focused on M&A,” CEO Denis Sheahan said during the company’s fourth-quarter earnings call. “We have plenty of opportunities to organically grow the company’s earnings and enhance profitability, and that is our focus. We will allocate capital towards organic growth efforts and returning excess capital to shareholders, while still maintaining appropriate capital levels.”
• Eastern, which now has $30.6 billion in assets, closed its acquisition of HarborOne in late October. The core system conversion is scheduled for February, Eastern CFO David Rosato said Friday.

Dive Insight:

Activist investor HoldCo Asset Management singled out Eastern Bank last October, blasting the lender’s acquisitive history and urging the bank to sell itself to a larger regional entity such as M&T Bank. HoldCo, at that point, had a 3.1% stake in Eastern, the investor said. 

That demand was made just as Eastern was preparing to close its $490 million acquisition of Brockton, Massachusetts-based HarborOne, announced last April. The deal pushed Eastern’s brick-and-mortar footprint into Rhode Island for the first time, and added 30 locations to the lender’s 109-branch presence.

That followed Eastern’s purchases of Cambridge Bank for $528 million in 2023, and Century Bank for $642 million in 2021.

Days after the first missive, HoldCo issued a second presentation, specifically calling out comments Eastern’s Executive Chair Bob Rivers made on a podcast last year, in which he appeared “to freely admit that shareholders are not the first priority,” the activist investor said. HoldCo also took aim at Rivers’ sizable compensation.

Rivers and Sheahan repeatedly underscored Friday that acquisitions are not part of the bank’s 2026 outlook. 

Having attained “the size and scale to compete effectively,” Rivers said during the bank’s earnings call, “now is the time for us to realize the full potential of what we have built to deliver organic growth and solid financial returns. As a result, we will not pursue any acquisitions as we are completely focused on organic growth and returning capital to our shareholders for the foreseeable future.”

Sheahan said the bank sees organic growth opportunities in both legacy and newer markets. “We see a significant runway to take share with our commercial banking and wealth management businesses and improve deposit growth,” he said. 

The bank expects to generate more capital than can be deployed through organic growth alone, Sheahan said, so executives plan “to aggressively return excess capital to shareholders,” mainly via share repurchases. The bank intends to undertake another buyback program this year after the current one ends.

“We believe that focusing on meaningful organic growth opportunities we have in front of us and returning excess capital – not M&A – will deliver meaningful value to shareholders for the foreseeable future,” Sheahan said. 

HoldCo founders Vik Ghei and Misha Zaitzeff didn’t immediately respond to a request for comment. The activist investor has similarly taken aim at Comerica and its acquisition by Fifth Third, as well as KeyBank, First Interstate Bank and Columbia Bank; HoldCo has typically pushed banks it has a stake in to sell themselves or swear off acquisitions. 

Ghei has told Banking Dive the firm wants to see banks employ more rigor in assessing acquisitions. 

“A management team will have to be prepared to defend an acquisition and that alone, in our opinion, is probably going to dramatically lessen the number of acquisitions that otherwise would have happened,” he said of the bank M&A outlook this year.

Laurie Havener Hunsicker, an analyst with Seaport Research Partners, said Eastern’s forgoing of M&A was “certainly more definitive” than last quarter.

“We’re going to do all the blocking and tackling of growing this business, one customer at a time, and that’s what we’re looking forward to,” Sheahan responded.