ROCKLAND, Mass. – Independent Bank Corp. (NASDAQ: INDB), parent of Rockland Trust Co., has announced that on Wednesday it plans to return the money it received three months ago from the U.S. Treasury Department.
The move would make Independent Bank Corp. one of the first financial institutions in the country to exit the federal government’s Troubled Asset Relief Program.
The news came as Treasury Secretary Timothy Geithner today told Congress the “vast majority” of banks in the U.S. have sufficient capital, Bloomberg News reported.
In a report released today, the International Monetary Fund estimated worldwide losses from bad loans and securities could hit $4.1 trillion by the end of next year. As recently as last October, the IMF estimated total losses from the crisis would be $1.4 trillion.
Independent Bank Corp. said Treasury officials – who are wary of having banks return the money before the financial system is stabilized – agreed last Wednesday that Independent was healthy enough to repay the money.
Independent said its board of directors unanimously agreed to repay the full $78 million preferred stock investment the Treasury made in the bank on Jan. 9 as part of its Capital Purchase Program (CPP), which was funded with money from the $700 billion financial rescue bill signed by President George W. Bush last September.
In addition to buying back the preferred shares held by Treasury, the bank said it will pay the department slightly more than $727,000 in accrued interest, because of the preferred shares’ 5 percent dividend.
Christopher Oddleifson, Independent Bank Corp.’s president and CEO, said in a statement that the bank enrolled in the program last fall at the urging of banking regulators, who said it was for the good of the economy.
“CPP participation, however, came to have a stigma associated with it, with media coverage mischaracterizing the program as a bailout and altogether ignoring the ongoing expense associated with receipt of a CPP investment,” Oddleifson said.
In addition, he said the program’s rules “significantly changed midstream,” alluding to retroactive limits that Congress placed on the compensation of executives at banks that received the money.
“When you begin to mess with the compensation down to the level of a good commercial lender or another good salesperson in this organization, you’re messing with the company’s future,” Denis Sheahan, the bank’s chief financial officer, told The Patriot Ledger newspaper in Quincy, Mass.
“After considering these factors, our Board of Directors unanimously determined that it would be in the best interests of our shareholders, customers, communities and employees to repay the CPP investment,” Oddleifson said.
In a related development, Independent Bank Corp. recently completed its acquisition of Benjamin Franklin Bancorp Inc. (NASDAQ: BFBC), the parent of Benjamin Franklin Bank, which is expected to be merged into Rockland Trust next month.
Independent Bank Corp. will release its first-quarter earnings report on Wednesday, April 29.
Independent Bank Corp. (Nasdaq: INDB) is the parent of Rockland Trust Co., a full-service community bank with assets of $3.6 billion that serves southeastern Massachusetts, Cape Cod and Rhode Island. Additional information is available at www.RocklandTrust.com.
