For Rockville Bank, Could Going Public Hurt the Public?

The Dodd-Frank Wall Street Reform Act, which was enacted in July 2010 on the heels of the recent financial crisis that culminated in taxpayer bailout of banks deemed too big to fail, has compelled small entities like Rockville Bank to become publicly-traded corporations.

While bigger is certainly better in terms of capitalization, there is a possibility that the larger banks get, the less personal they become. And that’s not a good thing for banks that have positioned themselves as an extension of the community.

The issue was not lost on Rockville Bank's executives.

“As banks get larger, they have to be careful not to forget who they are,” said William H.W. Crawford IV, who will succeed William J. McGurk as chairman and CEO on April 26.

He pointed out bigger economies of scale would help lower overall costs, which will in-turn benefit customers in the long-term.

“The Dodd-Frank law increased compliance costs with regulators and also increased technology costs. Going public gives us greater capital to reinvest in our business and in our communities – we will make larger loans, more loans, extend our branch networks, hire more people, and acquire some of the smaller banks where it may just not be feasible for them to continue to go forward because of regulatory costs and technology,” Crawford said.

Currently the bank has $1.7 billion in assets.

“That’s enough to double the size of the bank,” he said.

Now that there’s more money to lend, the issue is if the economy is ready to absorb it. 

“We’re looking for every good loan we can find, and that’s a challenge in a slow economy. The demand for loans in the mortgage area is not strong. But we’re having a lot of success moving customers from big banks to Rockville – especially small business owners who want to be with a community bank,” he said.

Sharon Roberts, who owns a small metal fabrication business, has a commercial account with Rockville.

“I’d rather be with them than with a big bank such as Bank of America, which is too huge. I’m not worried if Rockville gets bigger because it has been good banking with them,” she said. “Down the road, I plan to apply for a loan to expand my business.”  

Last year, the bank’s commercial loan portfolio grew by 16 percent while its checking account base posted a double-digit growth.

Peggy Yost, who’s been a customer for the last seven years, was disappointed that she could not obtain stock in the newly public bank.

“I’m not worried about the service at all at this point,” she said.

Damon DelMonte, an analyst at Keefe, Bruyette & Woods, who tracks Rockville Bank, said mutual holding companies like Rockville are starting to go public on the heels of regulatory changes, coupled with a more favorable capital market.

“Contrary to losing its community approach, I think Rockville will become more entrenched in the communities it serves. Just because it has more capital to lend doesn’t mean it should lose its customer focus,” he said.

The bank currently has 21 branches in north central Connecticut,  including in Suffield, Somers, Ellington, East Windsor, Tolland, Enfield, Vernon, and Manchester.