BROCKTON, Mass. – A slowdown in the mortgage banking business hurt HarborOne Bancorp Inc.’s quarterly profits, which fell 30% compared with a year ago, the company reported on Wednesday.
The parent company for Harbor One Bank, which has eight branches in Rhode Island since it acquired Coastway Bancorp in 2018, reported $10 million in earnings for the quarter that ended June 30.
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Earnings per diluted share fell 6 cents to 21 cents per share.
The decline in revenues was driven primarily by a slowdown in the mortgage banking business as fewer borrowers take out loans amid a rising interest rate environment, and the gain-on-sale margin narrows, the company stated. The $8 million in mortgage banking income marked a nearly 50% cut over the second quarter of 2021.
Total non-interest income also fell by 35% to $14.1 million.
While rising interest rates have put a damper on the residential real estate industry, they helped to boost the company’s interest income, which rose 11.1% year-over-year to $39.9 million.
Interest expenses declined 20.7% to $2.7 million.
The company also added $2.5 million to its loan loss reserves set aside for bad loans, reflecting new federal accounting standards and continued caution around potentially risky credit that “may be exacerbated by current economic conditions,” the company stated. By comparison, the company released $4.3 million in credit loss provisions in the second quarter of 2021, mirroring the move made by financial institutions nationwide as they felt the risk of loan defaults from the pandemic had been lowered.
Net interest margin, the difference between interest income generated versus the amount of interest paid, increased 42 basis points to 3.48%.
Non-interest expenses were down 9.4% to $35.0 million, including cuts to employee compensation and benefits due to a decline in the residential mortgage business and corresponding commissions, the company stated. President and CEO Joseph Casey also said the mortgage team has “identified another $1 million in expense savings” that will begin in the third quarter.
Quarterly assets stood at $4.7 billion, a 1.2% increase over a year ago, including $3.9 million in loans. The 14.4% rise in total loans primarily reflects increases in commercial and residential real estate loans, partially offset by a decline in consumer loans.
As of June 30, the company had $2.5 million in outstanding Paycheck Protection Program loans, for which it expected the forgiveness process to be finished by the end of the third quarter.
Total deposits of $3.9 billion marked a 4.3% rise over a year ago, with growth in regular savings and club accounts, money market deposits and negotiable order of withdrawal accounts.
The bank ranks ninth in terms of Rhode Island deposit market share with $656.1 million in deposits as of June 2021, according to the Federal Deposit Insurance Corp.
“HarborOne had a solid quarter of growth in loans, deposits, and margin, with a continued focus on strong credit quality in the first half of the year,” Casey said in a statement.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
