HarborOne Bancorp, Inc. Announces 2021 First Quarter Earnings

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  • HONE

HarborOne Bancorp, Inc. (the "Company" or "HarborOne") (NASDAQ: HONE), the holding company for HarborOne Bank (the "Bank"), announced net income of $19.4 million, or $0.37 per basic and diluted share, for the first quarter of 2021, compared to $17.6 million, or $0.33 per basic and diluted share, for the preceding quarter and $4.7 million, or $0.09 per basic and diluted share, for the same period last year. The current quarter results reflect $91,000 in non-interest expense related to the COVID-19 pandemic; however no provision for loan losses directly related to the COVID-19 pandemic was recorded in the quarter ended March 31, 2021. COVID-19 pandemic charges included in the quarters ended December 31, 2020 and March 31, 2020 were provision for loan losses of $1.7 million and $1.5 million, respectively, and non-interest expense of $47,000 and $329,000, respectively.

Selected First Quarter Financial Highlights:

  • Reported EPS of $0.37 per share, up 12% on a linked quarter basis.

  • Increased quarterly dividend by approximately 67%, to $0.05 per share.

  • Recorded a provision expense of $91,000, reflecting a stabilizing outlook, loan growth and minimal charge-offs.

  • HarborOne Mortgage reported net income of $11.7 million on $760 million of loan closings and a positive fair value adjustment of $4.4 million on mortgage servicing rights.

  • Improved return on average assets to 1.73% and improved return on average equity to 11.13%.

  • Deposit growth of $168.4 million, or 4.8%, on a linked quarter basis with improved cost of funds.

"The fundamentals of the business remain sound and we continue to execute against our strategic plan," said Jim Blake CEO. "Our new digital appointment banking program is live and we will soon be opening two new branches." Added Joseph Casey, President and COO, "We have great confidence that we have the right tools and the right team to continue to fuel customer success as we slowly emerge from the impacts of the pandemic."

Net Interest Income
The Company’s net interest and dividend income was $32.1 million for the quarter ended March 31, 2021, down $698,000, or 2.1%, from $32.8 million for the quarter ended December 31, 2020 and up $5.4 million, or 20.0%, from $26.7 million for the quarter ended March 31, 2020. The tax equivalent interest rate spread and net interest margin were 2.99% and 3.14%, respectively, for the quarter ended March 31, 2021, compared to 3.03% and 3.22%, respectively, for the quarter ended December 31, 2020, and 2.58% and 2.91%, respectively, for the quarter ended March 31, 2020. Net interest margin and the tax equivalent interest rate spread were negatively impacted by accelerated residential real estate mortgage payoffs, the effect of which also drove the yields on mortgage-backed securities and residential real estate loans lower as compared to the preceding quarter. The decrease in the yield on interest-earning assets was partially offset by the continued favorable repricing of deposits. It is expected that interest rates will remain low during 2021, resulting in continued margin pressure.

The quarter over quarter decrease in net interest and dividend income included a decrease of $1.9 million, or 5.0%, in total interest and dividend income and a decrease of $1.2 million, or 23.6%, in total interest expense. The decrease in total interest and dividend income primarily reflected a 20-basis point decrease in the yield on average earning assets. The yield on loans was 3.93% for the quarter ended March 31, 2021, down from 4.00% for the quarter ended December 31, 2020, primarily a result of a 17-basis point decrease in the yield on residential real estate loans as higher rate mortgage loans continue to pay off. Also impacted by mortgage payoffs, the yield on investment securities decreased 69 basis points, primarily a result of accelerated amortization of premiums on mortgage-backed securities. The three months ended March 31, 2021 and December 31, 2020 include the recognition of deferred fees on Paycheck Protection Program loans in the amount of $1.5 million and $1.3 million, respectively. Interest on loans in the first quarter included $1.2 million in accretion income from the fair value discount on loans acquired from Coastway Bancorp, Inc. and $153,000 in prepayment penalties on commercial loans. Accretion income and prepayment penalties in the preceding quarter were $1.4 million and $244,000, respectively.

The decrease in total interest expense primarily reflected a decrease in interest rates, resulting in a 15-basis point decrease in the cost of interest-bearing deposits. The mix of deposits continues to shift as customers move to more liquid options. The average balance of certificates of deposit accounts decreased quarter over quarter by $41.8 million, while the savings account average balance increased $90.0 million from the preceding quarter. Average FHLB advances decreased $17.4 million as the need for short-term borrowed funds diminished, and the cost of borrowed funds decreased 4 basis points, resulting in a decrease of $119,000 in interest expense on FHLB borrowings.

The increase in net interest and dividend income from the prior year quarter reflected a decrease of $6.7 million, or 63.8%, in total interest expense, partially offset by a $1.3 million, or 3.6%, decrease in total interest and dividend income. The decreases reflect rate and volume changes in both interest-bearing assets and liabilities. The cost of interest-bearing liabilities decreased 96 basis points while the average balance increased $135.0 million. The yield on interest-earning assets decreased 55 basis points while the average balance increased $456.7 million.

Noninterest Income
Total noninterest income increased $782,000, or 2.1%, to $37.8 million for the quarter ended March 31, 2021, from $37.0 million for the quarter ended December 31, 2020. Strong mortgage demand spurred by low mortgage rates continued to provide higher- than-usual mortgage origination activity and other mortgage banking income for HarborOne Mortgage, LLC. The $760.2 million in mortgage loan closings resulted in a gain on loan sales of $24.8 million for the quarter ended March 31, 2021, as compared to $28.3 million for the preceding quarter. Other mortgage banking income was flat. Residential mortgage loan payoffs resulted in a decrease of mortgage servicing rights in the amount of $1.6 million and $1.4 million for the three months ended March 31, 2021 and December 31, 2020, respectively. The change in the fair value of the mortgage servicing rights is consistent with the change in the 10-year Treasury Constant Maturity rate, as interest rates rise and prepayment speeds slow, mortgage servicing rights values tend to increase. The 10-year Treasury Constant Maturity rate increased 81 basis points in the first quarter of 2021, resulting in a $5.0 million increase in fair value of mortgage servicing rights. The fair value of the mortgage servicing rights increased $366,000 for the quarter ended December 31, 2020. The low interest rate environment spurred increased purchase and refinance activity during 2020 and, despite an increase in mortgage rates, loan demand remained strong in the first quarter of 2021 with a locked residential mortgage pipeline at March 31, 2021 of $412.7 million. The uptick in mortgage rates and low for-sale inventory is expected to dampen the results of HarborOne Mortgage, LLC during the remainder of 2021 as compared to 2020.

Total noninterest income increased $19.2 million, or 102.9%, as compared to the quarter ended March 31, 2020, primarily due to a $22.5 million, or 219.8%, increase in mortgage banking income, primarily driven by volume.

Noninterest Expense
Total noninterest expenses were $42.8 million for the quarter ended March 31, 2021, an increase of $1.5 million, or 3.7%, from the quarter ended December 31, 2020, primarily driven by a $711,000 increase in occupancy and equipment expense, a $332,000 increase in compensation and benefits expense, and a $331,000 increase in professional fees. The increase in occupancy expense reflects increases related to grounds maintenance and software related expense. For the three months ended March 31, 2021, COVID-19 pandemic expenses, which are also included in other expenses, amounted to $91,000 compared to $47,000 in the preceding quarter. Due to the uncertain nature of the COVID-19 pandemic, we may continue to have additional expenses for personnel, cleaning, and other initiatives to support our employees and customers.

Total noninterest expenses increased $7.6 million, or 21.7%, from the quarter ended March 31, 2020. Compensation and benefits increased $6.3 million, loan expenses increased $1.2 million, and occupancy and equipment expense increased $693,000, partially offset by a $1.0 million decrease in other expenses. The increase in compensation and benefits and loan expenses primarily reflected the increased volume of residential real estate mortgage originations. The decrease in other expenses reflects a decrease of $238,000 in COVID-19 pandemic expense and a $248,000 decrease in the Board of Directors’ equity award expense as original grants were fully vested in the third quarter of 2020.

Income Tax Provision
The effective tax rate was 28.1% for the quarter ended March 31, 2021, compared to 15.7% for the quarter ended December 31, 2020 and 26.5% for the quarter ended March 31, 2020. The effective tax rate for the quarter ended December 31, 2020 was impacted by a 2016 federal tax refund of $1.9 million recognized on the expiration of the statute of limitations.

Provision for Loan Losses and Asset Quality
The Company recorded a provision for loan losses of $91,000 for the quarter ended March 31, 2021, compared to $7.6 million for the quarter ended December 31, 2020 and $3.7 million for the quarter ended March 31, 2020. The allowance for loan losses was $55.4 million, or 1.60%, of total loans at March 31, 2021, compared to $55.4 million, or 1.59%, of total loans at December 31, 2020 and $26.4 million, or 0.83%, of total loans at March 31, 2020. Changes in the provision for loan losses are based on management’s assessment of loan portfolio growth and composition changes, historical charge-off trends, and ongoing evaluation of credit quality and current economic conditions.

The provision for loan losses for the quarter ended March 31, 2021 included adjustments based on our quarterly analysis of our historical and peer loss experience rates and commercial loan growth. Given stabilized credit quality trends, we made no additional provision directly related to the COVID-19 pandemic in the first quarter of 2021 as loan deferrals have largely expired without significant delinquency issues, and trends in the at-risk portfolios remained positive. The provision for loan losses for the quarter ended December 31, 2020 included adjustments for our quarterly analysis of our historical and peer loss experience rates, commercial real estate loan growth, and a $1.7 million provision directly related to the estimate of inherent losses resulting from the impact of the COVID-19 pandemic. The preceding quarter allowance for loan losses also reflects an additional provision expense and charge-off in the amount of $937,000 related to two non-performing commercial loans that were transferred out of portfolio and subsequently sold during the quarter ended December 31, 2020. The provision for loan losses for the quarter ended March 31, 2020 primarily included an additional provision to cover a $1.2 million commercial real estate loan charge-off unrelated to the COVID-19 pandemic, and a $1.5 million provision directly related to the initial estimate of inherent losses resulting from the impact of the COVID-19 pandemic.

In estimating the provision for the COVID-19 pandemic, management considered economic factors, including unemployment rates and the interest rate environment, the volume and dollar amount of requests for payment deferrals, the loan risk profile of each loan type, and whether the loans were purchased. As a result of generally stable trends, management determined additional provisions related to the COVID-19 pandemic were not warranted in the first quarter of 2021. An additional 10 basis points of provisions were provided to the commercial loan categories for the three months ended December 31, 2020, amounting to $1.7 million. No additional provisions specific to the COVID-19 pandemic were provided for the residential real estate or consumer loan portfolios in the fourth quarter of 2020. The additional provisions provided to each category for the three months ended March 31, 2020 amounted to allocations of $310,000 to the residential real estate portfolio, $965,000 to the commercial portfolio, and $189,000 to the consumer portfolio.

Management continues to evaluate our loan portfolio, particularly the commercial loan portfolio, in light of current economic conditions, the mitigating effects of government stimulus, and loan modification efforts designed to limit the long-term impacts of the COVID-19 pandemic. Our commercial loan portfolio is diversified across many sectors and is largely secured by commercial real estate loans, which make up 71.8% of the total commercial loan portfolio. Management has identified six sectors as the most susceptible to increased credit risk as a result of the COVID-19 pandemic: retail, office space, hotels, health and social services, restaurants, and recreation. The total loan portfolio of the six commercial sectors identified as at risk totaled $917.9 million, which represents 42.3% of the commercial loan portfolio. The at-risk sectors include $719.2 million in commercial real estate loans, $159.6 million in commercial and industrial loans, and $39.1 million in commercial construction loans. Non-performing loans included in the at-risk sectors amounted to $12.7 million at March 31, 2021, of which $12.2 million was included in the hotels sector.

As of March 31, 2021, the retail sector was $262.1 million, or 12.1%, of total commercial loans, and included $220.0 million in commercial real estate loans, $25.8 million in commercial and industrial loans, and $16.3 million in commercial construction loans. U.S. Small Business Administration Paycheck Protection Program ("PPP") loans included in this sector totaled $1.9 million. We have provided deferrals for loans in this sector with outstanding principal balances of $45.2 million. We originated $5.4 million loans during the first quarter that are within the retail sector. The new loans are supported by leases to credit-related tenants, owner-occupants, and/or supplemental facilities to existing borrowers in good standing.

As of March 31, 2021, the office space sector was $204.6 million, or 9.4%, of total commercial loans, and included $187.8 million in commercial real estate loans, $15.9 million in commercial and industrial loans, and $854,000 in commercial construction loans. We provided deferrals for loans in the sector with outstanding principal balances of $13.5 million. No PPP loans were originated in this sector. We originated $12.0 million loans during the first quarter that are within the office space sector.

As of March 31, 2021, the hotel sector was $196.6 million, or 9.1%, of total commercial loans, and included $186.1 million in commercial real estate loans, $2.4 million in commercial and industrial loans, and $8.1 million in commercial construction loans. PPP loans included in the sector totaled $194,000. We have provided deferrals for loans in this sector with outstanding principal balances of $115.9 million, $99.0 million that have expired deferral periods and are paying as agreed, and $254,000 that have expired deferral periods and are greater than 30 days delinquent. At March 31, 2021, nonperforming loans included in the hotel sector amount to $12.2 million. One of the non-accrual loans amounts to $9.0 million with a deferral period that expires in the second quarter of 2021, however it was determined in the fourth quarter of 2020 that weaknesses in the borrower’s credit warranted a downgrade to substandard and nonaccrual status. A specific reserve of $1.8 million has been allocated to this loan.

The health and social services sector amounted to $182.4 million, or 8.4%, of total commercial loans, as of March 31, 2021 and included $100.8 million in commercial real estate loans, $79.9 million in commercial and industrial loans, and $1.8 million in commercial construction loans. Paycheck Protection Program loans included in the sector totaled $26.8 million, and we have provided deferrals for loans in this sector with outstanding principal balances of $12.5 million.

As of March 31, 2021, the restaurant sector amounted to $52.4 million, or 2.4%, of total commercial loans, including $4.1 million in PPP loans. We provided deferrals for loans in this sector with outstanding principal balances of $16.4 million. The recreation sector amounted to $19.9 million, or 0.9%, of total commercial loans, including $873,000 in PPP loans. We provided deferrals for loans in this sector with outstanding principal balances of $15.5 million.

We provided access to the PPP to both our existing customers and new customers, to ensure small businesses in our communities have access to this important lifeline for their businesses. During the first quarter of 2021 we originated $81.6 million in PPP with processing fees of $3.9 million and processed forgiveness on $43.9 million loans. As of March 31, 2021, PPP loans amounted to $164.3 million and there was $5.0 million in deferred processing fee income that will be recognized over the life of the loans.

We are also working with commercial loan customers that may need payment deferrals or other accommodations to keep their loans out of default through the COVID-19 pandemic. As of March 31, 2021, we have 169 payment deferrals on commercial loans with a total principal balance of $301.8 million, or 13.9%, of total commercial loans, of which $219.0 million are loans included in an at-risk sector. As of March 31, 2021, 89.1% of the commercial deferrals have expired and the borrower is making payments as agreed, 0.01% of the commercial deferrals have expired and the borrower is delinquent, and 10.8% are in active deferral period. The active commercial deferrals expire during 2021. We continue to consider requests for additional deferrals or new deferrals at March 31, 2021 for commercial credits.

The residential loan and consumer loan portfolios have not experienced significant credit quality deterioration as of March 31, 2021; however, the continuing impact and uncertain nature of the COVID-19 pandemic may result in increases in delinquencies, charge-offs and loan modifications in these portfolios through the remainder of 2021. As of March 31, 2021, we had 163 payment deferrals on residential mortgage loans with a total principal balance of $46.1 million, or 4.3% of total residential loans, of which 88.9% of the deferrals have expired and are paying as agreed, 3.2% have expired and are delinquent and 7.9% are in active deferral periods. We had 434 payment deferrals on consumer loans with a total principal balance of $10.3 million, or 4.5%, of total consumer loans, of which 93.6% of the deferrals have expired and are paying as agreed. Requests for additional extensions on residential mortgage loans and consumer loans were not significant as of March 31, 2021.

Net charge-offs totaled $102,000 for the quarter ended March 31, 2021, or 0.01%, of average loans outstanding on an annualized basis, compared to $1.4 million, or 0.16% of average loans outstanding on an annualized basis, for the quarter ended December 31, 2020 and $1.4 million, or 0.18%, of average loans outstanding on an annualized basis, for the quarter ended March 31, 2020. Net-charge offs for the quarter ended December 31, 2020 included a charge-off in the amount of $937,000 recorded on the sale of two nonperforming commercial loans and net charge-offs for the quarter ended March 31, 2020 included a $1.2 million charge-off on a commercial real estate loan.

Credit quality performance has remained strong with total nonperforming assets of $32.9 million at March 31, 2021, compared to $34.7 million at December 31, 2020 and $32.1 million at March 31, 2020. The decrease in nonperforming assets from the preceding quarter reflects a $1.0 million decrease in nonperforming residential real estate loans. Nonperforming assets as a percentage of total assets were 0.71% at March 31, 2021, 0.77% at December 31, 2020, and 0.78% at March 31, 2020.

Balance Sheet
Total assets increased $122.3 million, or 2.7%, to $4.61 billion at March 31, 2021 from $4.48 billion at December 31, 2020. The increase primarily reflects an increase of $107.4 million in short-term investments and a $27.7 million increase in securities available for sale.

Net loans decreased $33.2 million, or 1.00%, to $3.41 billion at March 31, 2021 from $3.44 billion at December 31, 2020. The net decrease in loans for the three months ended March 31, 2021 was primarily due to decreases in consumer loans of $45.6 million and residential real estate loans of $43.6 million, partially offset by increases in commercial and industrial loans of $35.3 million, commercial construction loans of $12.9 million and commercial real estate loans of $7.8 million. The allowance for loan losses was flat at $55.4 million at March 31, 2021 and December 31, 2020.

Total deposits increased $168.4 million, or 4.8%, to $3.67 billion at March 31, 2021 from $3.51 billion at December 31, 2020. Compared to the prior quarter, non-certificate accounts increased $204.2 million and term certificate accounts decreased $35.9 million. FHLB borrowings decreased $51.6 million, or 34.6%, to $97.5 million at March 31, 2021 from $149.1 million at December 31, 2020.

Total stockholders’ equity was $698.1 million at March 31, 2021, compared to $696.3 million at December 31, 2020 and $675.1 million at March 31, 2020. The Company adopted a share repurchase program on September 3, 2020 to repurchase up to 2,920,900 shares of the Company’s common stock, or approximately 5% of the Company’s outstanding shares. The Company repurchased 1,202,730 shares at an average cost of $12.13 per share in the first quarter of 2021 and 1,533,500 shares in the fourth quarter of 2020 at an average cost of $10.27 per share, recorded in treasury stock on the balance sheet. The Company adopted a second share repurchase program on April 16, 2021 to repurchase up to 2,790,903 shares of the Company’s common stock, or approximately 5% of the Company’s outstanding shares pending a non-objection from the Federal Reserve Bank of Boston. The tangible common equity to tangible assets ratio was 13.77% at March 31, 2021, 14.11% at December 31, 2020, and 14.90% at March 31, 2020. At March 31, 2021, the Company and the Bank had strong capital positions and exceeded all regulatory capital requirements.

About HarborOne Bancorp, Inc.
HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, a Massachusetts-chartered savings bank. HarborOne Bank serves the financial needs of consumers, businesses, and municipalities throughout Eastern Massachusetts and Rhode Island through a network of 26 full-service branches located in Massachusetts and Rhode Island, and a commercial lending office in each of Boston, Massachusetts and Providence, Rhode Island. The Bank also provides a range of educational services through "HarborOne U," with classes on small business, financial literacy and personal enrichment at two campuses located adjacent to our Brockton and Mansfield locations. HarborOne Mortgage, LLC, a subsidiary of HarborOne Bank, is a full-service mortgage lender with more than 30 offices in Massachusetts, Rhode Island, New Hampshire, Maine, and New Jersey and is licensed to lend in five additional states.

Forward Looking Statements
Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as "believes," "will," "would," "expects," "project," "may," "could," "developments," "strategic," "launching," "opportunities," "anticipates," "estimates," "intends," "plans," "targets" and similar expressions. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, the negative impacts and disruptions of the COVID-19 pandemic and the measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; changes in-- general business and economic conditions on a national basis and in the local markets in which the Company operates, including changes that adversely affect borrowers’ ability to service and repay the Company’s loans; changes in customer behavior; turbulence in the capital and debt markets and the impact of such conditions on the Company’s business activities; changes in interest rates; increases in loan default and charge-off rates; decreases in the value of securities in the Company’s investment portfolio; fluctuations in real estate values; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; competitive pressures from other financial institutions; acquisitions may not produce results at levels or within time frames originally anticipated; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters, and future pandemics; changes in regulation; reputational risk relating to the Company’s participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; changes in accounting standards and practices; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; demand for loans in the Company’s market area; the Company’s ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that the Company may not be successful in the implementation of its business strategy; changes in assumptions used in making such forward-looking statements and the risk factors described in the Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (the "SEC"), which are available at the SEC’s website, www.sec.gov. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, HarborOne Bancorp, Inc.’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.

Use of Non-GAAP Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures. The Company’s management believes that the supplemental non-GAAP information, which consists of the tax equivalent basis for yields, the efficiency ratio, tangible common equity to tangible assets ratio and tangible book value per share is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.

HarborOne Bancorp, Inc.

Consolidated Balance Sheet Trend

(Unaudited)

March 31,

December 31,

September 30,

June 30,

March 31,

(in thousands)

2021

2020

2020

2020

2020

Assets

Cash and due from banks

$

37,074

$

31,777

$

29,180

$

30,355

$

35,264

Short-term investments

281,451

174,093

108,338

218,617

200,156

Total cash and cash equivalents

318,525

205,870

137,518

248,972

235,420

Securities available for sale, at fair value

304,168

276,498

280,308

262,710

249,789

Federal Home Loan Bank stock, at cost

7,572

8,738

11,631

15,786

13,530

Asset held for sale

8,536

8,536

Loans held for sale, at fair value

210,494

208,612

190,373

158,898

118,316

Loans:

Commercial real estate

1,559,056

1,551,265

1,380,071

1,317,145

1,211,435

Commercial construction

112,187

99,331

211,953

194,549

160,993

Commercial and industrial

499,728

464,393

480,129

456,192

317,559

Total commercial loans

2,170,971

2,114,989

2,072,153

1,967,886

1,689,987

Residential real estate

1,062,229

1,105,823

1,130,935

1,151,606

1,102,639

Consumer

228,279

273,830

312,743

354,530

391,244

Loans

3,461,479

3,494,642

3,515,831

3,474,022

3,183,870

Less: Allowance for loan losses

(55,384

)

(55,395

)

(49,223

)

(36,107

)

(26,389

)

Net loans

3,406,095

3,439,247

3,466,608

3,437,915

3,157,481

Mortgage servicing rights, at fair value

33,939

24,833

20,159

16,127

13,207

Goodwill

69,802

69,802

69,802

69,802

69,802

Other intangible assets

4,047

4,370

4,694

5,141

5,588

Other assets

251,316

245,645

247,226

241,019

229,537

Total assets

$

4,605,958

$

4,483,615

$

4,428,319

$

4,464,906

$

4,101,206

Liabilities and Stockholders' Equity

Deposits:

Demand deposit accounts

$

777,959

$

689,672

$

650,336

$

642,971

$

439,793

NOW accounts

224,869

218,584

202,020

199,400

174,971

Regular savings and club accounts

1,113,450

998,994

912,017

876,753

744,564

Money market deposit accounts

861,867

866,661

815,644

831,653

809,622

Term certificate accounts

696,438

732,298

785,871

757,897

852,274

Total deposits

3,674,583

3,506,209

3,365,888

3,308,674

3,021,224

Short-term borrowed funds

35,000

95,000

200,000

104,000

Long-term borrowed funds

97,488

114,097

141,106

141,114

181,123

Subordinated debt

34,064

34,033

34,002

33,970

33,938

Other liabilities and accrued expenses

101,750

...

97,962

98,220

96,693

85,782

Total liabilities

3,907,885

3,787,301

3,734,216

3,780,451

3,426,067

Common stock

585

584

584

584

584

Additional paid-in capital

465,832

464,176

463,531

462,881

461,616

Unearned compensation - ESOP

(30,840

)

(31,299

)

(31,759

)

(32,218

)

(32,678

)

Retained earnings

294,116

277,312

261,304

251,032

242,080

Treasury stock

(31,460

)

(16,644

)

(1,333

)

(721

)

(721

)

Accumulated other comprehensive income

(160

)

2,185

1,776

2,897

4,258

Total stockholders' equity

698,073

696,314

694,103

684,455

675,139

Total liabilities and stockholders' equity

$

4,605,958

$

4,483,615

$

4,428,319

$

4,464,906

$

4,101,206

HarborOne Bancorp, Inc.

Consolidated Statements of Net Income - Trend

(Unaudited)

Quarters Ended

March 31,

December 31,

September 30,

June 30,

March 31,

(in thousands, except share data)

2021

2020

2020

2020

2020

Interest and dividend income:

Interest and fees on loans

$

33,860

$

35,274

$

34,496

$

33,970

$

34,025

Interest on loans held for sale

1,324

1,267

1,060

988

577

Interest on securities

585

1,064

1,317

1,424

1,808

Other interest and dividend income

78

115

175

239

759

Total interest and dividend income

35,847

37,720

37,048

36,621

37,169

Interest expense:

Interest on deposits

2,720

3,775

4,520

5,805

8,693

Interest on FHLB borrowings

552

671

835

845

1,253

Interest on subordinated debentures

523

524

524

524

523

Total interest expense

3,795

4,970

5,879

7,174

10,469

Net interest and dividend income

32,052

32,750

31,169

29,447

26,700

Provision for loan losses

91

7,608

13,454

10,004

3,749

Net interest and dividend income, after provision for loan losses

31,961

25,142

17,715

19,443

22,951

Noninterest income:

Mortgage banking income:

Gain on sale of mortgage loans

24,802

28,274

34,055

30,862

12,278

Changes in mortgage servicing rights fair value

3,409

(1,041

)

(193

)

(1,111

)

(4,387

)

Other

4,515

4,522

4,259

4,049

2,343

Total mortgage banking income

32,726

31,755

38,121

33,800

10,234

Deposit account fees

3,852

3,667

3,451

2,969

3,931

Income on retirement plan annuities

104

106

104

103

101

Gain on sale and call of securities, net

8

2,525

Bank-owned life insurance income

493

550

560

554

551

Other income

634

949

2,203

1,143

1,296

Total noninterest income

37,809

37,027

44,439

38,577

18,638

Noninterest expenses:

Compensation and benefits

27,454

27,122

29,839

27,469

21,185

Occupancy and equipment

5,256

4,545

4,581

4,152

4,563

Data processing

2,343

2,235

2,119

2,277

2,180

Loan expense

2,435

2,689

3,167

2,702

1,253

Marketing

813

640

817

1,057

876

Professional fees

1,583

1,252

1,458

1,518

1,228

Deposit insurance

320

320

310

279

271

Other expenses

2,598

2,483

3,409

4,323

3,604

Total noninterest expenses

42,802

41,286

45,700

43,777

35,160

Income before income taxes

26,968

20,883

16,454

14,243

6,429

Income tax provision

7,576

3,283

4,561

3,668

1,705

Net income

$

19,392

$

17,600

$

11,893

$

10,575

$

4,724

Earnings per common share:

Basic

$

0.37

$

0.33

$

0.22

$

0.19

$

0.09

Diluted

$

0.37

$

0.33

$

0.22

$

0.19

$

0.09

Weighted average shares outstanding:

Basic

52,537,409

53,947,868

54,465,339

54,450,146

54,392,465

Diluted

53,000,830

53,973,737

54,465,339

54,450,146

54,392,465

HarborOne Bancorp, Inc.

Consolidated Statements of Net Income

(Unaudited)

For the Three Months Ended March 31,

(dollars in thousands, except share data)

2021

2020

$ Change

% Change

Interest and dividend income:

Interest and fees on loans

$

33,860

$

34,025

$

(165

)

(0.5

)%

Interest on loans held for sale

1,324

577

747

129.5

Interest on securities

585

1,808

(1,223

)

(67.6

)

Other interest and dividend income

78

759

(681

)

(89.7

)

Total interest and dividend income

35,847

37,169

(1,322

)

(3.6

)

Interest expense:

Interest on deposits

2,720

8,693

(5,973

)

(68.7

)

Interest on FHLB borrowings

552

1,253

(701

)

(55.9

)

Interest on subordinated debentures

523

523

0.0

Total interest expense

3,795

10,469

(6,674

)

(63.8

)

Net interest and dividend income

32,052

26,700

5,352

20.0

Provision for loan losses

91

3,749

(3,658

)

(97.6

)

Net interest and dividend income, after provision for loan losses

31,961

22,951

9,010

39.3

Noninterest income:

Mortgage banking income:

Gain on sale of mortgage loans

24,802

12,278

12,524

102.0

Changes in mortgage servicing rights fair value

3,409

(4,387

)

7,796

177.7

Other

4,515

2,343

2,172

92.7

Total mortgage banking income

32,726

10,234

22,492

219.8

Deposit account fees

3,852

3,931

(79

)

(2.0

)

Income on retirement plan annuities

104

101

3

3.0

Gain on sale and call of securities, net

2,525

(2,525

)

(100.0

)

Bank-owned life insurance income

493

551

(58

)

(10.5

)

Other income

634

1,296

(662

)

(51.1

)

Total noninterest income

37,809

18,638

19,171

102.9

Noninterest expenses:

Compensation and benefits

27,454

21,185

6,269

29.6

Occupancy and equipment

5,256

4,563

693

15.2

Data processing

2,343

2,180

163

7.5

Loan expense

2,435

1,253

1,182

94.3

Marketing

813

876

(63

)

(7.2

)

Professional fees

1,583

1,228

355

28.9

Deposit insurance

320

271

49

18.1

Other expenses

2,598

3,604

(1,006

)

(27.9

)

Total noninterest expenses

42,802

35,160

7,642

21.7

Income before income taxes

26,968

6,429

20,539

319.5

Income tax provision

7,576

1,705

5,871

344.3

Net income

$

19,392

$

4,724

$

14,668

310.5

%

Earnings per common share:

Basic

$

0.37

$

0.09

Diluted

$

0.37

$

0.09

Weighted average shares outstanding:

Basic

52,537,409

54,392,465

Diluted

53,000,830

54,392,465

HarborOne Bancorp, Inc.

Average Balances / Yields

(Unaudited)

Quarters Ended

March 31, 2021

December 31, 2020

March 31, 2020

Average

Average

Average

Outstanding

Yield/

Outstanding

Yield/

Outstanding

Yield/

Balance

Interest

Cost (6)

Balance

Interest

Cost (6)

Balance

Interest

Cost (6)

(dollars in thousands)

Interest-earning assets:

Investment securities (1)

$

271,357

$

585

0.87

%

$

271,511

$

1,064

1.56

%

$

275,632

$

1,822

2.66

%

Other interest-earning assets

180,526

78

0.18

84,969

115

0.54

186,619

759

1.64

Loans held for sale

193,426

1,324

2.78

178,980

1,267

2.82

61,548

577

3.77

Loans

Commercial loans (2)

2,161,076

20,780

3.90

2,112,377

20,823

3.92

1,647,667

18,123

4.42

Residential real estate loans (2)

1,084,292

10,340

3.87

1,106,286

11,242

4.04

1,100,177

11,544

4.22

Consumer loans (2)

253,014

2,740

4.39

292,665

3,209

4.36

415,317

4,358

4.22

Total loans

3,498,382

33,860

3.93

3,511,328

35,274

4.00

3,163,161

34,025

4.33

Total interest-earning assets

4,143,691

35,847

3.51

4,046,788

37,720

3.71

3,686,960

37,183

4.06

Noninterest-earning assets

330,257

317,663

314,193

Total assets

$

4,473,948

$

4,364,451

$

4,001,153

Interest-bearing liabilities:

Savings accounts

$

1,058,820

537

0.21

$

968,766

621

0.26

$

686,031

1,298

0.76

NOW accounts

212,282

37

0.07

205,845

40

0.08

158,702

31

0.08

Money market accounts

861,518

560

0.26

840,674

710

0.34

835,154

2,583

1.24

Certificates of deposit

608,089

1,444

0.96

649,919

2,206

1.35

794,883

4,357

2.20

Brokered deposits

100,000

142

0.58

109,788

198

0.72

92,189

424

1.85

Total interest-bearing deposits

2,840,709

2,720

0.39

2,774,992

3,775

0.54

2,566,959

8,693

1.36

FHLB advances

102,383

552

2.19

119,763

671

2.23

241,302

1,253

2.09

Subordinated debentures

34,048

523

6.23

34,015

524

6.13

33,919

523

6.20

Total borrowings

136,431

1,075

3.20

153,778

1,195

3.09

275,221

1,776

2.60

Total interest-bearing liabilities

2,977,140

3,795

0.52

2,928,770

4,970

0.68

2,842,180

10,469

1.48

Noninterest-bearing liabilities:

Noninterest-bearing deposits

706,274

656,227

419,620

Other noninterest-bearing liabilities

93,380

84,387

67,714

Total liabilities

3,776,794

3,669,384

3,329,514

Total stockholders' equity

697,154

695,067

671,639

Total liabilities and stockholders' equity

$

4,473,948

$

4,364,451

$

4,001,153

Tax equivalent net interest income

32,052

32,750

26,714

Tax equivalent interest rate spread (3)

2.99

%

3.03

%

2.58

%

Less: tax equivalent adjustment

14

Net interest income as reported

$

32,052

$

32,750

$

26,700

Net interest-earning assets (4)

$

1,166,551

$

1,118,018

$

844,780

Net interest margin (5)

3.14

%

3.22

%

2.91

%

Tax equivalent effect

Net interest margin on a fully tax equivalent basis

3.14

%

3.22

%

2.91

%

Average interest-earning assets to average interest-bearing liabilities

139.18

%

138.17

%

129.72

%

Supplemental information:

Total deposits, including demand deposits

$

3,546,983

$

2,720

$

3,431,219

$

3,775

$

2,986,579

$

8,693

Cost of total deposits

0.31

%

0.44

%

1.17

%

Total funding liabilities, including demand deposits

$

3,683,414

$

3,795

$

3,584,997

$

4,970

$

3,261,800

$

10,469

Cost of total funding liabilities

0.42

%

0.55

%

1.29

%

(1) Includes securities available for sale. Interest income from tax exempt securities is computed on a taxable equivalent basis using a tax rate of 21% for the quarters presented. The yield on investments before tax equivalent adjustments for the quarter ended March 31, 2020 was 2.64%.

(2) Includes nonaccruing loan balances and interest received on such loans.

(3) Tax equivalent interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average total interest-earning assets.

(6) Annualized.

HarborOne Bancorp, Inc.

Average Balances and Yield Trend

(Unaudited)

Average Balances - Trend - Quarters Ended

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

(in thousands)

Interest-earning assets:

Investment securities (1)

$

271,357

$

271,511

$

269,477

$

240,025

$

275,632

Other interest-earning assets

180,526

84,969

121,384

222,840

186,619

Loans held for sale

193,426

178,980

139,418

119,047

61,548

Loans

Commercial loans (2)

2,161,076

2,112,377

2,017,492

1,872,349

1,647,667

Residential real estate loans (2)

1,084,292

1,106,286

1,135,947

1,123,896

1,100,177

Consumer loans (2)

253,014

292,665

333,623

372,929

415,317

Total loans

3,498,382

3,511,328

3,487,062

3,369,174

3,163,161

Total interest-earning assets

4,143,691

4,046,788

4,017,341

3,951,086

3,686,960

Noninterest-earning assets

330,257

317,663

333,444

334,452

314,193

Total assets

$

4,473,948

$

4,364,451

$

4,350,785

$

4,285,538

$

4,001,153

Interest-bearing liabilities:

Savings accounts

$

1,058,820

$

968,766

$

897,751

$

842,560

$

686,031

NOW accounts

212,282

205,845

199,982

187,560

158,702

Money market accounts

861,518

840,674

825,732

826,939

835,154

Certificates of deposit

608,089

649,919

684,002

730,756

794,883

Brokered deposits

100,000

109,788

139,887

66,701

92,189

Total interest-bearing deposits

2,840,709

2,774,992

2,747,354

2,654,516

2,566,959

FHLB advances

102,383

119,763

149,750

258,679

241,302

Subordinated debentures

34,048

34,015

33,983

33,951

33,919

Total borrowings

136,431

153,778

183,733

292,630

275,221

Total interest-bearing liabilities

2,977,140

2,928,770

2,931,087

2,947,146

2,842,180

Noninterest-bearing liabilities:

Noninterest-bearing deposits

706,274

656,227

641,353

585,715

419,620

Other noninterest-bearing liabilities

93,380

84,387

89,319

72,808

67,714

Total liabilities

3,776,794

3,669,384

3,661,759

3,605,669

3,329,514

Total stockholders' equity

697,154

695,067

689,026

679,869

671,639

Total liabilities and stockholders' equity

$

4,473,948

$

4,364,451

$

4,350,785

$

4,285,538

$

4,001,153

Annualized Yield Trend - Quarters Ended

March 31, 2021

December 31, 2020

September 30, 2020

June 30, 2020

March 31, 2020

Interest-earning assets:

Investment securities (1)

0.87

%

1.56

%

1.95

%

2.40

%

2.66

%

Other interest-earning assets

0.18

%

0.54

%

0.57

%

0.43

%

1.64

%

Loans held for sale

2.78

%

2.82

%

3.02

%

3.34

%

3.77

%

Commercial loans (2)

3.90

%

3.92

%

3.76

%

3.91

%

4.42

%

Residential real estate loans (2)

3.87

%

4.04

%

4.14

%

4.23

%

4.22

%

Consumer loans (2)

4.39

%

4.36

%

4.29

%

4.27

%

4.22

%

Total loans

3.93

%

4.00

%

3.94

%

4.06

%

4.33

%

Total interest-earning assets

3.51

%

3.71

%

3.67

%

3.73

%

4.06

%

Interest-bearing liabilities:

Savings accounts

0.21

%

0.26

%

0.26

%

0.40

%

0.76

%

NOW accounts

0.07

%

0.08

%

0.08

%

0.07

%

0.08

%

Money market accounts

0.26

%

0.34

%

0.36

%

0.59

%

1.24

%

Certificates of deposit

0.96

%

1.35

%

1.68

%

1.91

%

2.20

%

Brokered deposits

0.58

%

0.72

%

0.72

%

1.56

%

1.85

%

Total interest-bearing deposits

0.39

%

0.54

%

0.65

%

0.88

%

1.36

%

FHLB advances

2.19

%

2.23

%

2.22

%

1.31

%

2.09

%

Subordinated debentures

6.23

%

6.13

%

6.13

%

6.21

%

6.20

%

Total borrowings

3.20

%

3.09

%

2.94

%

1.88

%

2.60

%

Total interest-bearing liabilities

0.52

%

0.68

%

0.80

%

0.98

%

1.48

%

(1) Includes securities available for sale and securities held to maturity.

(2) Includes nonaccruing loan balances and interest received on such loans.

HarborOne Bancorp, Inc.

Selected Financial Highlights

(Unaudited)

Quarters Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Performance Ratios (annualized):

2021

2020

2020

2020

2020

(dollars in thousands)

Return on average assets (ROAA)

1.73

%

1.61

%

1.09

%

0.99

%

0.47

%

Return on average equity (ROAE)

11.13

%

10.13

%

6.90

%

6.22

%

2.81

%

Total noninterest expense

$

42,802

$

41,286

$

45,700

$

43,777

$

35,160

Less: Amortization of other intangible assets

324

324

447

447

447

Total adjusted noninterest expense

$

42,478

$

40,962

$

45,253

$

43,330

$

34,713

Net interest and dividend income

$

32,052

$

32,750

$

31,169

$

29,447

$

26,700

Total noninterest income

37,809

37,027

44,439

38,577

18,638

Total revenue

$

69,861

$

69,777

$

75,608

$

68,024

$

45,338

Efficiency ratio (1)

60.80

%

58.70

%

59.85

%

63.70

%

76.56

%

(1) This non-GAAP measure represents adjusted noninterest expense divided by total revenue

At or for the Quarters Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Asset Quality

2021

2020

2020

2020

2020

(dollars in thousands)

Total nonperforming assets

$

32,886

$

34,696

$

40,925

$

38,599

$

32,134

Nonperforming assets to total assets

0.71

%

0.77

%

0.93

%

0.86

%

0.78

%

Allowance for loan losses to total loans

1.60

%

1.59

%

1.40

%

1.04

%

0.83

%

Net charge-offs

$

102

$

1,436

$

338

$

286

$

1,420

Annualized net charge-offs/average loans

0.01

%

0.16

%

0.04

%

0.03

%

0.18

%

Allowance for loan losses to nonperforming loans

171.20

%

162.40

%

122.86

%

94.86

%

83.52

%

HarborOne Bancorp, Inc.

Selected Financial Highlights

(Unaudited)

March 31,

December 31,

September 30,

June 30,

March 31,

Capital and Share Related

2021

2020

2020

2020

2020

(dollars in thousands, except share data)

Common stock outstanding

56,228,762

57,205,458

58,342,464

58,418,021

58,418,021

Book value per share

$

12.41

$

12.17

$

11.90

$

11.72

$

11.56

Tangible common equity:

Total stockholders' equity

$

698,073

$

696,314

$

694,103

$

684,455

$

675,139

Less: Goodwill

69,802

69,802

69,802

69,802

69,802

Less: Other intangible assets (1)

4,047

4,370

4,694

5,141

5,588

Tangible common equity

$

624,224

$

622,142

$

619,607

$

609,512

$

599,749

Tangible book value per share (2)

$

11.10

$

10.88

$

10.62

$

10.43

$

10.27