When managers at Eastern Portfolio Advisors tell a community banker which securities to buy, they could be helping a competitor.
That's because the investment advisory firm serving community banks and credit unions is a subsidiary of Eastern Bank Corp. in Lynn, Mass.
"It's a little different, but it works," said Stanley Lukowski, president and chief executive of Eastern Bank Corp.
Eastern Portfolio's nine-member staff provides investment advice and asset-liability modeling for clients throughout Massachusetts, Maine, New Hampshire, Vermont, and Connecticut, including three Eastern Bank competitors. It also has two clients in California. These institutions range in size from $50 million to $900 million of assets.
The company advises 42 clients on their portfolios, helping them manage interest rate risk but basing all decisions solely on their clients' corporate philosophies.
"It's a great process," said David L. Thomas, managing director of Eastern Portfolio. "It helps them be self-directed and look ahead, versus letting the competition dictate what they're going to do."
For 25 institutions, Eastern Portfolio officials take quarterly data from their clients and use an asset-liability model to project net interest income two years ahead.
And since Eastern's fee is based on a client's asset size, not on commissions, the company avoids any conflicts of interest.
The subsidiary is maintained as a separate source of fee income for Eastern Bank Corp., with all information kept strictly confidential.
Eastern has even offered workshops to train Federal Deposit Insurance Corp. examiners to scrutinize interest rate risk management using asset- liability models, Mr. Thomas said.
Although large regional institutions and brokerage firms used to offer similar investment services, officials said they don't know of any other advisory firm that's owned by a community bank.
"It's actually been really nice," Mr. Thomas said. "Eastern's very, very sensitive to the totally separate nature of what we do."
