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Eastern Bank to buy Wainwright

$163m cash deal to boost firm’s lending to nonprofit groups

By Todd Wallack
Globe Staff / June 30, 2010

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Eastern Bank Corp., the largest community bank based in Massachusetts, has agreed to buy Wainwright Bank & Trust Co., a smaller Boston institution known for its social activism and lending to nonprofit organizations.

The $163 million cash deal will allow Eastern to increase its presence in Boston and surrounding communities. Eastern’s 81 branches are concentrated in the outer suburbs and cities, and on Cape Cod. Wainwright has 12 branches including four in Boston, four in Cambridge, and one each in Brookline, Newton, Somerville, and Watertown.

Eastern chief executive Richard E. Holbrook said the deal will help it fill a void in its coverage area and allow Eastern to step up its lending to nonprofits and community groups.

“We believe this is a great franchise,’’ Holbrook said.

Wainwright chief executive Jan A. Miller estimated that roughly half of the bank’s commercial loans are to nonprofits and other community groups, far more than most banks. At Eastern, for example, around 6 percent of loans are to nonprofits. Since its founding in 1987, Wainwright said it has committed more than $800 million in loans to “socially responsible development projects,’’ including ones related to the environment, affordable housing, AIDS, homeless shelters, and immigration.

Wainwright also sponsors an annual Social Justice award recognizing work in community organizations.

The bank also has strong ties to the gay and lesbian community. In 1993, Wainwright said it became the first bank to advertise in a gay newspaper in Boston and the first to sponsor the city’s Gay Pride parade. It also said it also helped persuade the Massachusetts Bankers Association to offer domestic partner health benefits to 160 member banks.

Bay Windows, a Boston newspaper serving the gay and lesbian community, posted a story about the sale on its website yesterday with the headline “Boston’s gay bank bought out.’’

Miller said both banks are committed to investing in their communities. Eastern, for instance, also contributes 10 percent of its profits to charity. And Eastern said it will continue Wainwright’s Social Justice award and use the bank’s expertise to increase its nonprofit lending. Wainwright’s Miller said he couldn’t think of anything Eastern is doing that conflicts with Wainwright’s values and mission.

“Our cultures are very similar,’’ said Miller, who will become the president of Eastern’s holding company and an executive vice president after the merger. “It’s really a good match.’’

The Wainwright brand, however, will disappear after the closing, expected in the fourth quarter. Bank executives believe Wainwright customers will likely stick with the combined bank. Eastern’s chief executive noted the bank already has a diverse range of customers and experience working in inner-city neighborhoods, including some in Lowell, Salem, and Lynn.

One Wainwright customer is Hope House, a nonprofit that provides assistance for recovering alcoholics and substance abusers. The bank helped provide Hope House with $10 million in tax credits and $7.4 million in financing for a new facility in Roxbury.

Hope House executive director Tom Duffly said that Wainwright has been a “terrific organization,’’ but that he didn’t know much about Eastern. Nevertheless, Duffly said Hope House probably wouldn’t move its accounts unless it encounters any problems after the sale.

Eastern, founded in 1818, had assets of $6.6 billion, compared to $1.0 billion for Wainwright.

Eastern’s Holbrook said he isn’t planning to close any branches, but will probably consolidate some administrative functions.

Under terms of the deal, Eastern’s $19 a share offer is double Wainwright’s closing stock price of $9.62 Monday, an unusually high premium.

One reason for the rich premium is that several other banks were also competing to buy Wainwright, to expand their Boston presence. Wainwright hired Sandler O’Neill + Partners, to solicit bids from interested banks before agreeing to be acquired by Eastern. Wainwright did not name any of the other bidders.

The deal must be approved by Wainwright shareholders and regulators. Eastern is mutually owned by its depositors, rather than stockholders, so it is not publicly traded.

Todd Wallack can be reached at twallack@globe.com.