Page 15 - BusinessWest January 23, 2023

“Last year, we thought we were in for a couple of rate increases, but the rates went much higher than everyone thought they would. When you do strategic planning, you make assumptions about what the rate environment will be, and we were all wrong last year.”
merged into Abingdon Bank, another Hometown hold- ing, more than doubling its presence on the South Shore.
“We’re in a very low-margin industry,” said bank- ESB and Hometown President and CEO Matt Sosik, explaining why growing geographically to create scale is an important part of the company’s strategy. “Any business person will tell you costs are rising, whether it’s insurance, utilities, fuel oil, you name it — and, of course, wages. It’s the same for us, and if we’re not growing, we’re going backward.”
That said, “we had our best earnings year ever in 2022, and it wasn’t even anywhere near second place,” Sosik noted.
Part of that was the fact that interest rates for bor- rowers rose so quickly that the lag between those rates and the rates paid to depositors generated income
for banks. But heading into 2023, margins are again shrinking as deposit costs rise, and a slowing economy has some people worried about a possible recession, which would further soften the loan market.
“The most interest-sensitive customers are resi- dential borrowers, and as residential mortgage rates rose throughout 2022, we saw the volume of residen- tial lending, especially refinances, drop dramatically,” Sosik said. “Commercial lending is definitely impacted as well, though not to the same extent.”
Tony Worden, president and CEO of Greenfield Cooperative Bank, agreed.
“Obviously, the residential market became soft
because of what’s going on with rates as the year
progressed,” he told BusinessWest. “And frankly, the commercial lending market became softer because people don’t know what the economy is going to do going forward; they’re keeping their powder dry, as they say. They don’t want to make big decisions if they don’t know how the economy will turn out.
“This year, everyone is holding their breath to see what the
Matt Sosik says fundamentals like low inventory have kept housing prices high.
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