MANCHESTER— Eastern Bank Corp.’s purchase of Bedford-based Centrix Bank & Trust would mean more banking services for Centrix customers but layoffs for an undetermined number of Centrix employees, officials said Tuesday.
The $134 million all-cash deal will take an estimated six to seven months to gain the necessary banking and regulatory approvals before Eastern Bank can put its name on seven Centrix locations around New Hampshire, stretching from Milford to Portsmouth, officials said.
The deal would mean current Centrix customers will see “the introduction of additional products and services, such as wealth management, mobile banking and expanded capabilities for international banking,” said Joseph Reilly, Centrix president and CEO, who will serve as regional president for New Hampshire under Eastern Bank.
Eastern Bank already makes more than 1,000 auto loans a year through New Hampshire auto dealers, according to Richard Holbrook, chairman and CEO of Eastern Bank.
It also sells insurance to New Hampshire companies and counts 50 to 100 New Hampshire residents as Eastern Bank workers who commute to Massachusetts.
The deal is “a natural extension of our existing market,” Holbrook said. “It’s contiguous with the Merrimack Valley (of Massachusetts), where we have a significant presence already.”
Founded in 1999, Centrix has seven locations, one each in Manchester, Bedford, Concord, Dover, Milford, Nashua and Portsmouth.
Holbrook said he expects to maintain the current locations and “be adding to that over time.”
Officials said an undetermined number of Centrix’s 135 employees will be laid off. Centrix has about 9,500 customers and an estimated 350 shareholders.
As a mutual bank that is funded through its depositors, Eastern Bank functions with less risk taking than some publicly-traded banks, Holbrook said.
“Mutuals over the years have tended to be more conservative in lending and operations,” Holbrook said in an interview. “As a mutual without shareholders, Wall Street doesn’t care about us, so we’re not worried about this quarter’s earnings but the long-term.”
He said his bank funds its capital needs solely out of its earnings.
Christiana Thornton, president of the New Hampshire Bankers Association, said outside banks see New Hampshire as fertile ground.
“In terms of banks coming into New Hampshire from neighboring states, including Massachusetts, we’ve seen an increase in the number of out-of-state banks with interest in growing their business into New Hampshire,” Thornton said. “In an economic downturn, I think all institutions are looking for increased opportunities in different markets.”
Holbrook said Centrix’s customer base leans heavily toward the commercial side. Eastern Bank hopes to provide more services as well as offer companies insurance options in an effort to leverage the existing clients.
Last fall, Centrix “came to a conceptual decision as we looked at the landscape over the next three to five years, the slope was going to get steeper” to meet various federal requirements, Reilly said.
Reilly said a “contributing factor” for the sale was federal Dodd-Frank legislation, passed in response to the 2008 financial crisis and ensuing recession. That law imposed new regulations on banks, financial institutions and investment firms.
Talks with Eastern Bank began in January, and Centrix’s board of directors Monday unanimously approved the deal. Eastern Bank approved the definitive acquisition agreement on Feb. 27.
Under the terms, Centrix shareholders will receive $41 in cash in exchange for each share of Centrix common stock, a 49 percent premium over Monday afternoon’s closing price of $27.50 per share.
As of Dec. 31, 2013, Eastern Bank’s consolidated assets totaled about $8.7 billion while Centrix had assets of $909 million.
At that time, Eastern Bank had $5.3 billion in loans, including $3 billion in commercial loans. Centrix had $677.4 million in loans, with about 75 percent being commercial loans helping New Hampshire businesses.
Eastern bank employs 1,700 people and has more than 90 retail locations.
Thornton said the Dodd-Frank law means banks must read and implement regulations contained in thousands of pages, resulting in some banks looking to make strategic moves.
“For some of the smaller institutions, ... some of them would point to the increased costs of compliance as one of the top reasons banks are considering other opportunities whether it be through partnerships or mergers or acquisitions,” Thornton said.
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