Rockland Trust has 'healthy' expectations

Merger with Ben Franklin just clicked

(David L. Ryan/Globe Staff)

A deal by Rockland Trust Co.'s parent Independent Bank Corp. of Rockland to purchase Benjamin Franklin Bancorp of Franklin on Nov. 9 for $125 million in stock marked the second-largest bank deal in Massachusetts this year and stands to reinforce Rockland Trust's standing as the state's seventh-largest bank. But it also comes amid a slowing economy that poses challenges for bankers and borrowers alike. Rockland chief executive Christopher Oddleifson spoke recently with Globe business reporter Ross Kerber about the merger and the outlook for the combined entities.

How did this deal come about?
Ben Franklin chief executive Thomas Venables and I serve on the board of the Massachusetts Bankers Association and had gotten to know each other, and we both shared a common vision that there's room in Massachusetts for a stronger regional community commercial bank. He's grown his institution to $1 billion in assets, so does he invest to add another billion, or does he make a change? He and his board decided we're an appropriate partner. When you look at the map and see their branches and ours, it's like a puzzle that clicks together.

You're mostly in the South Shore, and they're mainly in the southwestern suburbs, but do you expect to sell or close any branches?
No, we'll keep them all, they're all in new and attractive markets. For our footprint the average household income is $71,000 and for theirs, it's $86,000. Massachusetts overall is $68,000 on average.

You mentioned your business lending, which will make up 61 percent of the combined bank's loan portfolio. Won't a slowing economy have an impact on that?
Well, New England and Massachusetts are good places to be right now. It looks like unemployment is eking up a bit, but overall we didn't have a lot of the speculative rise over the last 10 years, so as a result, we haven't as hard a fall. Our commercial loan book is conservative and our losses are relatively low. We're seeing the strongest commercial loan demand we've seen in a long time.

Is that because bigger national banks are lending less or tightening their terms?
I don't have data, but we're having lending opportunities we wouldn't have had in the past from companies in Massachusetts and a few in Rhode Island. That doesn't mean we'll be insulated, we will see unemployment go up by a percentage point or two in Massachusetts.

Will there be any layoffs as a result of the merger?
First, this is a healthy bank acquiring a healthy bank, this is different than some of the deals you're hearing about these days like the purchase of Washington Mutual. But there will probably be some redundant departments. We're looking for a cost savings of about 35 percent of their expense base from departments like operations and administration. We'll work to place those folks at Rockland or help them find other places. Ben Franklin has 168 employees, and there are 854 at Rockland. But a lot of the cost savings will come from areas like technology, avoiding the need to upgrade their systems.

Will Rockland be selling stock to the US Treasury like other banks?
We've made a decision on that but we haven't publicly announced it. The deal for Ben Franklin is all stock, not cash, so there's no connection between it and whether we get the government funding or not.

Are bank customers nervous about the economy and the health of the financial system?
We did a massive outreach program, sending letters to commercial customers and clients about our situation, and we've had a handful of customers who have wanted to know more facts, but we've really preempted the concerns. Also, the increase in the FDIC's insurance levels [from $100,000 to $250,000 per individual depositor] was very helpful. Also, we are in a program called the Certificate of Deposit Account Registry Service that insures up to $50 million of deposits, and that's helpful.

Is this downturn most like the ones people remember from 2002, or the early 1990s or 1980s?
We're in uncharted waters. The great debate over how the Treasury should use the $700 billion aid package tells me that nobody knows the answer. But the Treasury and the Federal Reserve are much more active than they were in the Great Depression, so I don't think we're headed there. But we have some structural things like heavy debt levels, and looking at the entitlement programs we have at the federal and state levels in healthcare, pension, and Social Security. Those are tough and knotty issues. But then, the United States has historically been very innovative, so I have a lot of hope that this will all be sorted out.