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Four Massachusetts-based banks have suffered from lower profit margins in the second quarter due to higher costs of deposits payouts amid the high interest-rate environment and tight competition for customers.
Amesbury-based BankProv recorded $3.5 million net income in the second quarter, which was higher than the first quarter’s $2.5 million but lower than the $5.6 million in the second quarter a year ago.
Net interest and dividend income was down by 5.8 percent to $14.9 million on a quarterly basis primarily due to higher interest expense from deposits. This brought down net interest margin to 3.69 percent from 4.32 percent last quarter.
“Net interest margin has declined significantly due to our cost of funds outpacing yield on assets. The ten rate hikes since the beginning of 2022, coupled with the speed in which deposits can be moved, has pressured banks to increase deposit rates at a faster pace to remain competitive,” Carol Houle, co-CEO and chief financial officer at Bank Prov, said in the bank’s earnings statement.
Brockton-based HarborOne Bank saw $7.5 million net income in the quarter versus $7.3 million in the prior quarter and $10 million in the second quarter of 2022.
On a quarterly basis, HarborOne’s net interest income was lower at $32.1 million from $34.4 million last quarter as there were higher costs of funds and interest-bearing liabilities. Net interest margin also decreased to 2.45 percent from 2.78 percent.
Despite this, HarborOne President and CEO Joseph F. Casey noted in a statement that the pace of deposit cost increases is slowing and the bank exhibited solid customer deposit growth during the quarter.
Westfield Bank’s net income slumped to $2.8 million in the quarter compared to $5.3 million in the first quarter and $5.5 million in the second quarter of 2022.
Net interest income decreased by 9 percent to $16.8 million versus $18.5 million in the first quarter attributed to increased interest expenses on competitive deposits pricing. Similarly, net interest margin declined to 2.81 percent from 3.14 percent in the past quarter.
“Our financial performance largely has been impacted by higher funding costs in response to the rapid increase in interest rates over the last twelve months. As we continue to manage the balance sheet in this uncertain environment, we are also focused on expense management initiatives to mitigate top line pressures. The company continues to focus on our loan and deposit growth initiatives and retention of our customers. We saw growth in our loan portfolio and will strive to continue to grow,” James C. Hagan, Westfield Bank president and CEO, said in a statement.
Hagan noted that the bank is also “working to onboard new talent and new depositor and borrowing relationships, both of which will assist us in our growth.”
Quincy-based Colonial Federal Savings Bank saw second-quarter net income fall to $105,000 from $355,000 in the first quarter and $564,000 in the second quarter a year ago due to growth in deposit costs and lower loan demand.
Net interest income decreased by 11.9 percent to $1.9 million from $2.2 million the previous quarter mainly on higher average paid for certificates of deposits. The net interest margin decreased by 28 basis points to 2.31 percent from 2.59 percent in the first quarter.
Michael E. McFarland, ColonialFed president and CEO, said in a statement: “We continued to experience significant headwinds from the higher interest rate environment and the corresponding decline in loan demand. Looking ahead, we are cautiously optimistic that the worst impacts of inflation have subsided and we are encouraged by a resilient residential real estate market.”
