A Hingham Institution for Savings branch in Boston's South End. Photo courtesy of Hingham Institution for Savings.
In spite of recording higher profits in the second quarter, Hingham Institution for Savings felt the profit pinch in the third quarter due to higher costs of deposits outweighing interest yields on loans.
Hingham IFS saw net income falling to $3.29 million or $1.50 per share diluted in the third quarter from $10.5 million or $4.77 per share diluted for the same quarter last year. January to September net profit was also down to $20.05 million or $9.14 per share diluted compared to the $25.5 million or $11.60 per share diluted in the same nine-month period last year.
Net interest margin declined to 1.05 percent from 2.76 percent in the same period last year and 1.28 percent in the previous quarter. This is due to a high increase in the cost of deposits from wholesale borrowings, wholesale deposits, and higher rates on retail and commercial deposits.
Despite the higher interest rates affecting the bank’s bottom line, Hingham IFS Chairman Robert H. Gaughen Jr. said in a statement he remains positive that if the Federal Reserve decides to raise rates, the bank will be able to “obtain higher rates on new and adjusting loans and incremental funding pressure abates.”
The bank focused its lending efforts in Boston and Washington D.C. markets during the third quarter, especially in multifamily commercial real estate. This led to growth in net loans to $3.8 billion, which is 7 percent higher than last Sept. 30, 2022.
As borrowers in these markets become less active, Hingham IFS said it will focus it is looking to expand lending in the San Francisco Bay Area due to the opportunity it presents.
“The bank continues to search for talented commercial bankers in San Francisco with experience in multifamily lending and strong deposit-focused relationships,” the bank said.
Retail and business deposits grew by 2 percent to $1.922 billion as of Sept. 30 from the same time a year ago. The bank saw a decrease in non-interest-bearing deposits as customers shifted to higher-rate alternatives at the bank.
Hingham IFS said it will continue to develop new relationships with commercial, non-profit, and existing deposit customers. It’s also continuing to look for new hires to join its new Washington, D.C. branch, it said.
The bank’s total assets reached $4.357 billion as of Sept. 30, which was 7 percent higher than the same period a year ago.
“We remain focused on careful capital allocation, defensive underwriting and disciplined cost control – the building blocks for compounding shareholder capital through all stages of the economic cycle. These remain constant, regardless of the macroeconomic environment in which we operate. It is important during difficult periods that we continue to prioritize long-term investments, despite the temporary but very significant pressure on margins and lower net income,” Gaughen said in a statement.
“This means working to attract new core deposit and loan customers, as well as talented staff that can help us continue to build our business well into the future,” he added.
