HarborOne Bancorp’s stock is down more than $2 since it announced the acquisition of Warwick, Rhode Island-based Coastway Bancorp on March 14.
The company’s stock was $17.48 as of March 23. Shares had gotten over $22 before the deal was announced and HarborOne purchased Coastway shares for $28.25 in an all-cash transaction valued at $125.6 million.
The deal makes it more likely that HarborOne will convert to a fully stock-owned company, according to American Banker.
Mark Fitzgibbon, an analyst at Sandler O’Neill, told the publication that the all-cash deal will deplete HarborOne’s excess capital, increasing the likelihood that it will eventually convert to a fully stock-owned company.
“That time frame has moved up dramatically,” he said.
About five years ago, HarborOne was a credit union; the organization transitioned to a bank in June 2013. It acquired Merrimack Mortgage Co. Inc. of Manchester, New Hampshire, in April 2015, marking its first major acquisition since its 2013 conversion to a bank charter.
The bank then reorganized into a mutual holding company and issued a partial IPO in March 2016.
According to Fitzgibbon, it could take more than six years for the company to earn back the expected dilution to its tangible book value, which seemed to spook some of its investors.
HarborOne’s President and CEO Joe Casey told American Banker the company would prefer to stay in its current form as a mutual holding company so it can continue to purchase other mutual banks.
“Our preference would be, as long as we have the structure, to merge with other mutual banks,” he said. “Those are economically superior than doing a dilutive transaction. Until we’re successful in that regard, we would consider acquisitions of publicly traded institutions, but there are not a lot available.”
The Coastway deal puts HarborOne at nearly $3.4 billion in assets, making it the 12th largest bank in Massachusetts. It would also add nine branches in the greater Providence area and three mortgage lending offices, as well as make the bank the number one mortgage lender in Rhode Island.
