Banker & Tradesman file photo
Rockland Trust Co. continues to bring in more noninterest-bearing deposits, and the bank’s executives see benefits from its focus on core deposits as interest rates continue to increase.
“While our core deposit franchise has always been a source of tremendous economic value, with the rising interest rate environment, we are now seeing the impact in our [net interest margin] and net income,” Rockland Trust’s CEO Chris Oddleifson said during the bank’s third quarter earnings call last week.
Rockland Trust saw earnings increase 16 percent from the second quarter. The bank’s parent company had third quarter net income of $71.9 million, or $1.57 per diluted share, compared to second quarter net income of $61.8 million, or $1.32 per diluted share. Before the bank’s November 2021 acquisition of East Boston Savings Bank, Rockland Trust had net income of $40 million, or $1.21 per diluted share, in the third quarter of 2021.
The bank’s net interest margin increased 37 basis points from the second quarter to 3.64 percent.
Rockland Trust did see total deposits decrease 1.8 percent from the second quarter, which the bank primarily attributed to continued runoff in time deposits with higher rates and other rate-sensitive deposits. Certificate of deposit balances decreased by 10.1 percent during the third quarter.
The bank saw non-interest-bearing and money market deposits increase in the third quarter. Rockland Trust had $16.34 billion in deposits as of Sept. 30, with non-interest-bearing deposits increasing during the quarter by 1.1 percent to $5.62 billion, while money market deposits increased 0.7 percent to $3.44 billion.
The bank’s core deposits, which exclude certificates of deposits, made up 87.8 percent of the bank’s total deposits at the end of the quarter compared to 86.8 percent in the second quarter.
The total cost of deposits for the quarter increased 10 basis points to 0.15 percent.
In response to an analyst’s question during the earnings call, Rockland Trust’s chief financial officer, Mark Ruggiero, said the bank has felt some pressure from customers about paying low deposit rates, noting that the pressures were “in pockets.”
Ruggiero said that the bank did lose some of these deposits in the third quarter, including municipal and large commercial deposits. The bank’s municipal deposits were down $139 million, or 10.3 percent, to $1.2 billion in the third quarter.
He said that the bank has been aggressive in pricing deposits where it experiences pressure and plans to continue with this approach. He added that most deposits were not sensitive to interest rates.
“A hundred-year focus on core operating accounts, primarily on the consumer side, result in the majority of our deposit base being less rate-sensitive,” Ruggiero said.
Balancing its approach toward rate-sensitive deposits with core deposits gives Rockland Trust a combination, Ruggiero said, that “will continue to land us in a spot that performs better than most of the industry.”
