HarborOne Bancorp, Inc. Announces 2023 Second Quarter Earnings

BROCKTON, Mass.--(BUSINESS WIRE)-- HarborOne Bancorp, Inc. (the “Company” or “HarborOne”) (NASDAQ: HONE), the holding company for HarborOne Bank (the “Bank”), announced net income of $7.5 million, or $0.17 per diluted share, for the second quarter of 2023, compared to net income of $7.3 million, or $0.16 per diluted share, for the preceding quarter and net income of $10.0 million, or $0.21 per diluted share, for the same period last year.

Selected Financial Highlights:

• Loan growth of $75.6 million, or 1.6%, and deposit growth of $45.8 million, or 1.1%, on a linked-quarter basis.
• The closure of one branch and the relocation of another branch were completed, providing long-term expense savings.
• Completed share repurchase program and received regulatory non-objection for sixth share repurchase program.

“During the second quarter, we completed our fifth share repurchase program and received regulatory approval to commence our sixth program,” said Joseph F. Casey, President and CEO. “Despite continued economic headwinds, our book value per share and tangible book value per share increased for the last three consecutive quarters. Additionally, the pace of deposit cost increases has slowed and we had solid customer deposit growth in Q2, with the average balance increasing at an annualized growth rate of 9.5%.”

Net Interest Income

The Company’s net interest and dividend income was $32.1 million for the quarter ended June 30, 2023, compared to $34.4 million for the quarter ended March 31, 2023, and $37.2 million for the quarter ended June 30, 2022. The tax equivalent interest rate spread and net interest margin were 1.89% and 2.45%, respectively, for the quarter ended June 30, 2023, compared to 2.28% and 2.78%, respectively, for the quarter ended March 31, 2023, and 3.39% and 3.48%, respectively, for the quarter ended June 30, 2022. The Company continues to evaluate and execute strategies to mitigate interest rate risk and manage net interest margin, including designated fair value and cash flow hedges, competitive deposit and loan pricing and brokered certificates of deposit.

On a linked-quarter basis, the decreases in net interest and dividend income, tax equivalent interest rate spread, and net interest margin primarily reflect an increase in interest-bearing liabilities, with higher cost of funding, partially offset by increased loan balances and yields with liability repricing outpacing assets. The cost of funds was 235 basis points for the quarter ended June 30, 2023, compared to 188 basis points for the preceding quarter. Income on other interest-earning assets increased $2.1 million on a linked-quarter basis, primarily reflecting an increase in the average balance invested in federal funds.

The $5.1 million decrease in net interest and dividend income from the prior year quarter reflects an increase of $26.0 million, or 978.1%, in total interest expense, partially offset by an increase of $20.9 million, or 52.5%, in total interest and dividend income. The changes reflect rate and volume changes in both interest-bearing assets and liabilities. The cost of interest-bearing liabilities increased 240 basis points, while the average balance increased $1.08 billion, and the yield on interest-earning assets increased 90 basis points, while the average balance increased $1.00 billion.

Noninterest Income

Total noninterest income increased $4.0 million, or 45.7%, to $12.7 million for the quarter ended June 30, 2023, from $8.7 million for the quarter ended March 31, 2023. Higher gain-on-sale margins and volume provided gain on loan sales of $3.3 million for the quarter ended June 30, 2023 compared to $2.2 million in gain on sales for the preceding quarter, from mortgage loan closings of $172.2 million and $125.6 million, respectively. Deposit account fees were $5.0 million for the quarter ended June 30, 2023, compared to $4.7 million for the quarter ended March 31, 2023.

The increase in the fair value of mortgage servicing rights for the three months ended June 30, 2023 was $915,000 as compared to a decrease of $1.3 million in the fair value of mortgage servicing rights for the three months ended March 31, 2023. The valuation was positively impacted by key benchmark mortgage rates used in the valuation. The impact of principal payments on the underlying mortgages on the mortgage servicing rights was $479,000 and $371,000 for the quarters ended June 30, 2023 and March 31, 2023, respectively.

Total noninterest income decreased $1.4 million, or 10.2%, compared to the quarter ended June 30, 2022, primarily due to a $2.0 million, or 24.5%, decrease in mortgage banking income, driven by the decrease in loan demand as a result of interest rate increases. The prior year quarter also reflected a $1.6 million increase in the fair value of mortgage servicing rights.

Noninterest Expense

Total noninterest expenses were $31.7 million for the quarter ended June 30, 2023, an increase of $216,000, or 0.7%, from the quarter ended March 31, 2023. Deposit insurance expense increased $666,000 and compensation and benefits increased $421,000, primarily reflecting increased mortgage origination commission partially offset by decreased payroll tax expense. There were additional decreases in occupancy and equipment expense of $407,000, reflecting recent cost saving measures.

Total noninterest expenses decreased $3.2 million, or 9.2%, from the quarter ended June 30, 2022. Compensation and benefits decreased $3.2 million, primarily reflecting decreased mortgage origination commission and incentive accruals, and professional fees decreased $566,000, partially offset by a deposit insurance expense increase of $822,000.

During the second quarter of 2023 the Bank took cost-saving and organizational efficiency measures with an estimated annual savings of $2.9 million and recognized severance expense of $452,000. Additionally, the Bank closed one branch and relocated another branch, which will both provide additional long-term expense savings.

Asset Quality and Allowance for Credit Losses

Total nonperforming assets were $20.2 million at June 30, 2023, compared to $12.3 million at March 31, 2023 and $24.4 million at June 30, 2022. Nonperforming assets as a percentage of total assets were 0.36% at June 30, 2023, 0.22% at March 31, 2023, and 0.52% at June 30, 2022. During the quarter ended June 30, 2023, a $2.9 million charge off was recorded on a metro office space commercial real estate credit, and it was placed on nonaccrual. As of June 30, 2023, the carrying value of the credit is $7.0 million.

The provision for credit losses for the quarter ended June 30, 2023 was $3.3 million and primarily reflects replenishment as a result of the charge-off and provisioning for loan growth. Net charge-offs totaled $2.7 million, or 0.23% of average loans outstanding on an annualized basis, for the quarter ended June 30, 2023. Net recoveries totaled $11,000 for the quarter ended March 31, 2023, and $504,000 for the quarter ended June 30, 2022.

The allowance for credit losses (“ACL”) on loans was $47.8 million, or 1.02% of total loans, at June 30, 2023, compared to $47.0 million, or 1.02% of total loans, at March 31, 2023 and $43.6 million, or 1.11% of total loans, at June 30, 2022. The ACL on unfunded commitments, included in other liabilities on the unaudited Consolidated Balance Sheets, amounted to $4.8 million at June 30, 2023 as compared to $5.0 million at March 31, 2023 and $5.1 million at June 30, 2022.

We believe that we are well positioned to withstand a downturn in the credit cycle should one materialize. We continue to closely monitor our loan portfolio for signs of deterioration. Management continues to be focused on commercial real estate in light of speculation that commercial real estate values may deteriorate as the market adjusts to higher vacancies and rates. Our commercial real estate portfolio is centered in New England, with approximately 75% in Massachusetts and Rhode Island. Approximately 60% of commercial real estate loans are fixed-rate loans with limited near-term maturity risk.

Management has also identified certain sectors within the commercial real estate segment that may be particularly susceptible to increased credit risk as a result of trends that were precipitated by the COVID-19 pandemic and may be exacerbated by current economic conditions. This includes business-oriented hotels, non-anchored retail space and metro office space. As of June 30, 2023, business-oriented hotels loans included 13 loans with a total outstanding balance of $114.8 million, non-anchored retail space loans included 28 loans with a total outstanding balance of $41.5 million, and metro office space loans included two loans with a total outstanding balance of $11.9 million. As of June 30, 2023, there was one metro office space loan with a carrying value of $7.0 million, that was rated doubtful and on nonaccrual and one business-oriented hotel credit with a carrying value of $1.8 million that was rated substandard and on nonaccrual. The other loans in these groups were performing in accordance with their terms.

Balance Sheet

Total assets increased $86.4 million, or 1.6%, to $5.66 billion at June 30, 2023, from $5.57 billion at March 31, 2023. The increase primarily reflects an increase of $75.6 million in loans.

Available-for-sale securities were $292.0 million and $303.1 million at June 30, 2023 and March 31, 2023, respectively. The unrealized loss on securities available for sale increased to $66.5 million as of June 30, 2023, as compared to $61.2 million of unrealized losses as of March 31, 2023. Securities held to maturity were $19.8 million, or 0.35% of total assets, with a fair value of $19.0 million.

Loans increased $75.6 million, or 1.6%, to $4.70 billion at June 30, 2023, from $4.62 billion at March 31, 2023. The increase in loans for the three months ended June 30, 2023 was primarily due to increases in commercial and industrial loans of $30.4 million, commercial construction loans of $16.2 million, and residential real estate loans of $33.8 million, partially offset by a decrease in consumer loans of $4.8 million. Management continues to seek prudent commercial lending opportunities to deepen relationships with existing customers and develop new relationships with strong borrowers.

Total deposits were $4.29 billion at June 30, 2023 and $4.24 billion at March 31, 2023. Compared to the prior quarter, non-certificate accounts decreased $35.7 million, brokered deposits decreased $7.9 million, and term certificate accounts increased $89.4 million, primarily due to an 11-month term rate special offered during the quarter. As of June 30, 2023, FDIC-insured deposits were approximately 69% of total deposits, including Bank subsidiary deposits. Including Depositors Insurance Fund (“DIF”), excess insurance coverage that remains available until February 24, 2024, insured deposits are approximately 88% of total deposits, including Bank subsidiary deposits. The Bank exited the DIF as of February 24, 2023; however, insurance remains in place for funds on deposit as of that date for one year or until maturity for term certificates.

FHLB borrowings increased $13.9 million to $604.6 million at June 30, 2023 from $590.7 million at March 31, 2023. At June 30, 2023, FHLB short-term borrowings were $414.0 million as the Bank utilized available credit to enhance liquidity. In the second quarter of 2023, the Bank established access to the Bank Term Funding Program (“BTFP”) with the Federal Reserve to enhance its liquidity position. As of June 30, 2023, there were no outstanding advances under the BTFP and the Bank had $1.0 billion in available borrowing capacity across multiple relationships.

Total stockholders’ equity was $595.5 million at June 30, 2023, compared to $599.8 million at March 31, 2023 and $624.5 million at June 30, 2022. Stockholders’ equity decreased 0.7% when compared to the prior quarter, as earnings were offset by share repurchases. The Company repurchased 472,308 shares at an average price of $12.30, including $0.13 per share of excise tax, during the three months ended June 30, 2023. A share repurchase program that commenced in the first quarter of 2023 was completed in the second quarter of 2023, and the Company plans to commence a sixth share repurchase program during the third quarter of 2023. The tangible-common-equity-to-tangible-assets ratio ⁽¹⁾ was 9.38% at June 30, 2023, 9.60% at March 31, 2023, and 11.92% at June 30, 2022. At June 30, 2023, the Company and the Bank had strong capital positions, exceeded all regulatory capital requirements, and are considered well-capitalized.

About HarborOne Bancorp, Inc.

HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, a Massachusetts-chartered trust company. HarborOne Bank serves the financial needs of consumers, businesses, and municipalities throughout Eastern Massachusetts and Rhode Island through a network of 30 full-service banking centers located in Massachusetts and Rhode Island, and commercial lending offices in Boston, Massachusetts and Providence, Rhode Island. HarborOne Bank also provides a range of educational resources through “HarborOne U,” with free digital content, webinars, and recordings for small business and personal financial education. HarborOne Mortgage, LLC, a subsidiary of HarborOne Bank, provides mortgage lending services throughout New England and other states.

⁽¹⁾ This non-GAAP ratio is total stockholders' equity less goodwill and intangible assets to total assets less goodwill and intangible assets.

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. We may also make forward-looking statements in other documents we file with the Securities and Exchange Commission (“SEC”), in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. 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, changes in general business and economic conditions (including inflation and concerns about inflation) 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; ongoing 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; cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest, and future pandemics; changes in regulation; 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 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’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 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)
		June 30,				March 31,				December 31,				September 30,				June 30,
(in thousands)		2023				2023				2022				2022				2022
Assets
Cash and due from banks		$	43,525			$	38,989			$	39,712			$	39,910			$	35,843
Short-term investments			209,326				210,765				58,305				46,044				48,495
Total cash and cash equivalents			252,851				249,754				98,017				85,954				84,338
Securities available for sale, at fair value			292,012				303,059				301,149				304,852				334,398
Securities held to maturity, at amortized cost			19,839				19,838				19,949				15,000				10,000
Federal Home Loan Bank stock, at cost			27,123				23,589				20,071				15,973				5,625
Asset held for sale			966				—				—				—				—
Loans held for sale, at fair value			20,949				13,956				18,544				18,805				31,679
Loans:
Commercial real estate			2,286,688				2,286,727				2,250,344				2,041,905				1,847,619
Commercial construction			228,902				212,689				199,311				185,062				158,762
Commercial and industrial			453,422				423,036				424,275				397,112				407,182
Total commercial loans			2,969,012				2,922,452				2,873,930				2,624,079				2,413,563
Residential real estate			1,701,766				1,667,934				1,634,319				1,520,809				1,423,074
Consumer			27,425				32,246				41,421				52,466				75,312
Loans			4,698,203				4,622,632				4,549,670				4,197,354				3,911,949
Less: Allowance for credit losses on loans			(47,821	)			(46,994	)			(45,236	)			(44,621	)			(43,560	)
Net loans			4,650,382				4,575,638				4,504,434				4,152,733				3,868,389
Mortgage servicing rights, at fair value			48,176				47,080				48,138				49,861				47,130
Goodwill			69,802				69,802				69,802				69,802				69,802
Other intangible assets			1,893				2,082				2,272				2,461				2,695
Other assets			275,261				268,060				277,169				272,202				249,988
Total assets		$	5,659,254			$	5,572,858			$	5,359,545			$	4,987,643			$	4,704,044
Liabilities and Stockholders' Equity
Deposits:
Demand deposit accounts		$	717,572			$	726,548			$	762,576			$	795,945			$	775,154
NOW accounts			286,956				287,376				297,692				308,191				316,839
Regular savings and club accounts			1,390,906				1,455,318				1,468,172				1,289,825				1,282,913
Money market deposit accounts			834,120				796,008				861,704				889,517				885,673
Term certificate accounts			742,931				653,553				497,975				484,936				487,354
Brokered deposits			315,003				322,927				301,380				114,696				100,000
Total deposits			4,287,488				4,241,730				4,189,499				3,883,110				3,847,933
FHLB borrowings			604,568				590,665				400,675				345,684				105,693
Subordinated debt			34,348				34,317				34,285				34,254				34,222
Other liabilities and accrued expenses			137,318				106,352				118,110				113,225				91,718
Total liabilities			5,063,722				4,973,064				4,742,569				4,376,273				4,079,566
Common stock			597				597				596				593				593
Additional paid-in capital			484,544				483,831				483,031				480,617				479,519
Unearned compensation - ESOP			(26,704	)			(27,164	)			(27,623	)			(28,083	)			(28,542	)
Retained earnings			364,709				360,454				356,438				350,049				339,471
Treasury stock			(181,324	)			(175,514	)			(148,384	)			(143,125	)			(132,296	)
Accumulated other comprehensive loss			(46,290	)			(42,410	)			(47,082	)			(48,681	)			(34,267	)
Total stockholders' equity			595,532				599,794				616,976				611,370				624,478
Total liabilities and stockholders' equity		$	5,659,254			$	5,572,858			$	5,359,545			$	4,987,643			$	4,704,044

HarborOne Bancorp, Inc. Consolidated Statements of Net Income - Trend (Unaudited)
		Quarters Ended
		June 30,			March 31,				December 31,				September 30,			June 30,
(in thousands, except share data)		2023			2023				2022				2022			2022
Interest and dividend income:
Interest and fees on loans		$	55,504		$	52,771			$	49,177			$	42,065		$	37,522
Interest on loans held for sale			326			286				334				377			331
Interest on securities			2,035			2,079				2,045				1,971			1,873
Other interest and dividend income			2,935			803				359				143			131
Total interest and dividend income			60,800			55,939				51,915				44,556			39,857
Interest expense:
Interest on deposits			20,062			15,913				8,499				3,491			2,019
Interest on FHLB and FRB borrowings			8,114			5,105				3,703				1,209			119
Interest on subordinated debentures			524			523				524				524			524
Total interest expense			28,700			21,541				12,726				5,224			2,662
Net interest and dividend income			32,100			34,398				39,189				39,332			37,195
Provision for credit losses			3,283			1,866				2,108				668			2,546
Net interest and dividend income, after provision for credit losses			28,817			32,532				37,081				38,664			34,649
Noninterest income:
Mortgage banking income:
Gain on sale of mortgage loans			3,300			2,224				2,301				3,809			4,538
Changes in mortgage servicing rights fair value			436			(1,692	)			(2,631	)			1,816			862
Other			2,312			2,216				2,325				2,453			2,612
Total mortgage banking income			6,048			2,748				1,995				8,078			8,012
Deposit account fees			5,012			4,733				5,031				4,870			4,892
Income on retirement plan annuities			128			119				118				119			112
Bank-owned life insurance income			511			500				501				503			494
Other income			963			590				2,255				675			593
Total noninterest income			12,662			8,690				9,900				14,245			14,103
Noninterest expenses:
Compensation and benefits			18,220			17,799				20,104				20,991			21,455
Occupancy and equipment			4,633			5,040				4,935				4,829			4,575
Data processing			2,403			2,346				2,359				2,311			2,259
Loan expense			417			313				169				355			385
Marketing			925			1,181				862				850			986
Professional fees			1,114			1,501				1,446				1,457			1,680
Deposit insurance			1,176			510				385				357			354
Other expenses			2,837			2,819				4,384				3,323			3,260
Total noninterest expenses			31,725			31,509				34,644				34,473			34,954
Income before income taxes			9,754			9,713				12,337				18,436			13,798
Income tax provision			2,275			2,416				2,760				4,678			3,811
Net income		$	7,479		$	7,297			$	9,577			$	13,758		$	9,987
Earnings per common share:
Basic		$	0.17		$	0.16			$	0.21			$	0.30		$	0.21
Diluted		$	0.17		$	0.16			$	0.21			$	0.30		$	0.21
Weighted average shares outstanding:
Basic			43,063,507			44,857,224				45,321,491				45,830,737			46,980,830
Diluted			43,133,455			45,284,240				45,861,658				46,420,527			47,536,033

HarborOne Bancorp, Inc. Consolidated Statements of Net Income - Trend (Unaudited)
		For the Six Months Ended June 30,
(dollars in thousands, except share data)		2023				2022			$ Change				% Change
Interest and dividend income:
Interest and fees on loans		$	108,275			$	71,098		$	37,177			52.3		%
Interest on loans held for sale			612				595			17			2.9
Interest on securities			4,114				3,574			540			15.1
Other interest and dividend income			3,738				192			3,546			1846.9
Total interest and dividend income			116,739				75,459			41,280			54.7
Interest expense:
Interest on deposits			35,975				3,640			32,335			888.3
Interest on FHLB and FRB borrowings			13,219				307			12,912			4205.9
Interest on subordinated debentures			1,047				1,047			—			0.0
Total interest expense			50,241				4,994			45,247			906.0
Net interest and dividend income			66,498				70,465			(3,967	)		(5.6	)
Provision for credit losses			5,149				2,884			2,265			78.5
Net interest and dividend income, after provision for credit losses			61,349				67,581			(6,232	)		(9.2	)
Noninterest income:
Mortgage banking income:
Gain on sale of mortgage loans			5,524				9,860			(4,336	)		(44.0	)
Changes in mortgage servicing rights fair value			(1,256	)			6,147			(7,403	)		(120.4	)
Other			4,528				5,170			(642	)		(12.4	)
Total mortgage banking income			8,796				21,177			(12,381	)		(58.5	)
Deposit account fees			9,745				9,364			381			4.1
Income on retirement plan annuities			247				219			28			12.8
Bank-owned life insurance income			1,011				977			34			3.5
Other income			1,553				1,427			126			8.8
Total noninterest income			21,352				33,164			(11,812	)		(35.6	)
Noninterest expenses:
Compensation and benefits			36,019				42,178			(6,159	)		(14.6	)
Occupancy and equipment			9,673				10,003			(330	)		(3.3	)
Data processing			4,749				4,500			249			5.5
Loan expense			730				863			(133	)		(15.4	)
Marketing			2,106				2,204			(98	)		(4.4	)
Professional fees			2,615				3,219			(604	)		(18.8	)
Deposit insurance			1,686				703			983			139.8
Other expenses			5,656				6,119			(463	)		(7.6	)
Total noninterest expenses			63,234				69,789			(6,555	)		(9.4	)
Income before income taxes			19,467				30,956			(11,489	)		(37.1	)
Income tax provision			4,691				8,702			(4,011	)		(46.1	)
Net income		$	14,776			$	22,254		$	(7,478	)		(33.6	)	%
Earnings per common share:
Basic		$	0.34			$	0.47
Diluted		$	0.33			$	0.46
Weighted average shares outstanding:
Basic			43,955,411				47,406,257
Diluted			44,203,893				48,110,863

HarborOne Bancorp, Inc. Average Balances / Yields (Unaudited)
		Quarters Ended
		June 30, 2023								March 31, 2023								June 30, 2022
		Average								Average								Average
		Outstanding						Yield/		Outstanding						Yield/		Outstanding						Yield/
		Balance			Interest			Cost (8)		Balance			Interest			Cost (7)		Balance			Interest			Cost (7)
		(dollars in thousands)
Interest-earning assets:
Investment securities (1)		$	381,762		$	2,035		2.14	%	$	387,303		$	2,079		2.18	%	$	391,448		$	1,873		1.92	%
Other interest-earning assets			238,891			2,935		4.93			63,426			803		5.13			64,678			131		0.81
Loans held for sale			19,614			326		6.67			18,108			286		6.41			29,474			331		4.51
Loans
Commercial loans (2)(3)			2,938,292			38,842		5.30			2,901,464			36,837		5.15			2,384,630			25,295		4.25
Residential real estate loans (3)(4)			1,682,860			16,456		3.92			1,647,109			15,616		3.85			1,330,772			11,182		3.37
Consumer loans (3)			29,025			419		5.79			36,310			519		5.80			88,943			1,045		4.71
Total loans			4,650,177			55,717		4.81			4,584,883			52,972		4.69			3,804,345			37,522		3.96
Total interest-earning assets			5,290,444			61,013		4.63			5,053,720			56,140		4.51			4,289,945			39,857		3.73
Noninterest-earning assets			305,132								313,309								311,998
Total assets		$	5,595,576							$	5,367,029							$	4,601,943
Interest-bearing liabilities:
Savings accounts		$	1,421,622			6,165		1.74		$	1,459,392			5,445		1.51		$	1,266,912			626		0.20
NOW accounts			280,501			59		0.08			275,801			36		0.05			311,241			38		0.05
Money market accounts			802,373			6,256		3.13			824,694			5,238		2.58			885,305			635		0.30
Certificates of deposit			708,087			5,273		2.99			552,636			2,685		1.97			484,484			670		0.55
Brokered deposits			281,614			2,309		3.29			330,426			2,509		3.08			100,000			50		0.20
Total interest-bearing deposits			3,494,197			20,062		2.30			3,442,949			15,913		1.87			3,047,942			2,019		0.27
FHLB and FRB borrowings			666,345			8,114		4.88			448,096			5,105		4.62			34,763			119		1.36
Subordinated debentures			34,331			524		6.12			34,298			523		6.18			34,207			524		6.14
Total borrowings			700,676			8,638		4.94			482,394			5,628		4.73			68,970			643		3.74
Total interest-bearing liabilities			4,194,873			28,700		2.74			3,925,343			21,541		2.23			3,116,912			2,662		0.34
Noninterest-bearing liabilities:
Noninterest-bearing deposits			712,081								721,536								768,088
Other noninterest-bearing liabilities			88,363								101,820								75,186
Total liabilities			4,995,317								4,748,699								3,960,186
Total stockholders' equity			600,259								618,330								641,757
Total liabilities and stockholders' equity		$	5,595,576							$	5,367,029							$	4,601,943
Tax equivalent net interest income						32,313								34,599								37,195
Tax equivalent interest rate spread (5)								1.89	%							2.28	%							3.39	%
Less: tax equivalent adjustment						213								201								—
Net interest income as reported					$	32,100							$	34,398							$	37,195
Net interest-earning assets (6)		$	1,095,571							$	1,128,377							$	1,173,033
Net interest margin (7)								2.43	%							2.76	%							3.48	%
Tax equivalent effect								0.02								0.02								—
Net interest margin on a fully tax equivalent basis								2.45	%							2.78	%							3.48	%
Ratio of interest-earning assets to interest-bearing liabilities			126.12	%							128.75	%							137.63	%
Supplemental information:
Total deposits, including demand deposits		$	4,206,278		$	20,062				$	4,164,485		$	15,913				$	3,816,030		$	2,019
Cost of total deposits								1.91	%							1.55	%							0.21	%
Total funding liabilities, including demand deposits		$	4,906,954		$	28,700				$	4,646,879		$	21,541				$	3,885,000		$	2,662
Cost of total funding liabilities								2.35	%							1.88	%							0.27	%

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

(2) Includes industrial revenue bonds for the six months ended June 30, 2023. Interest income from tax exempt loans is computed on a taxable equivalent basis using a rate of 21%. The yield on commercial loans before tax equivalent adjustment at June 30, 2023 was 5.20%.

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

(4) Includes the basis adjustments of certain loans included in fair value hedging relationships.

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

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

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

(8) Annualized.

HarborOne Bancorp, Inc. Average Balances / Yields (Unaudited)
		For the Six Months Ended
		June 30, 2023								June 30, 2022
		Average								Average
		Outstanding						Yield/		Outstanding						Yield/
		Balance			Interest			Cost (8)		Balance			Interest			Cost (8)
		(dollars in thousands)
Interest-earning assets:
Investment securities (1)		$	384,517		$	4,114		2.16	%	$	392,401		$	3,574		1.84	%
Other interest-earning assets			151,644			3,738		4.97			107,386			192		0.36
Loans held for sale			18,865			612		6.54			29,657			595		4.05
Loans
Commercial loans (2)(3)			2,919,980			75,679		5.23			2,338,245			47,390		4.09
Residential real estate loans (3)(4)			1,665,083			32,072		3.88			1,276,041			21,324		3.37
Consumer loans (3)			32,647			938		5.79			103,512			2,384		4.64
Total loans			4,617,710			108,689		4.75			3,717,798			71,098		3.86
Total interest-earning assets			5,172,736			117,153		4.57			4,247,242			75,459		3.58
Noninterest-earning assets			309,198								319,362
Total assets		$	5,481,934							$	4,566,604
Interest-bearing liabilities:
Savings accounts		$	1,440,403			11,610		1.63		$	1,216,578			992		0.16
NOW accounts			278,164			95		0.07			306,287			74		0.05
Money market accounts			813,472			11,494		2.85			872,122			938		0.22
Certificates of deposit			630,791			7,958		2.54			503,243			1,399		0.56
Brokered deposits			305,885			4,818		3.18			100,000			237		0.48
Total interest-bearing deposits			3,468,715			35,975		2.09			2,998,230			3,640		0.24
FHLB and FRB borrowings			557,823			13,219		4.78			45,176			307		1.37
Subordinated debentures			34,315			1,047		6.15			34,190			1,047		6.18
Total borrowings			592,138			14,266		4.86			79,366			1,354		3.44
Total interest-bearing liabilities			4,060,853			50,241		2.49			3,077,596			4,994		0.33
Noninterest-bearing liabilities:
Noninterest-bearing deposits			716,782								753,414
Other noninterest-bearing liabilities			95,054								80,943
Total liabilities			4,872,689								3,911,953
Total stockholders' equity			609,245								654,651
Total liabilities and stockholders' equity		$	5,481,934							$	4,566,604
Tax equivalent net interest income						66,912								70,465
Tax equivalent interest rate spread (5)								2.08	%							3.25	%
Less: tax equivalent adjustment						414								—
Net interest income as reported					$	66,498							$	70,465
Net interest-earning assets (6)		$	1,111,883							$	1,169,646
Net interest margin (7)								2.59	%							3.35	%
Tax equivalent effect								0.02								—
Net interest margin on a fully tax equivalent basis								2.61	%							3.35	%
Ratio of interest-earning assets to interest-bearing liabilities			127.38	%							138.01	%
Supplemental information:
Total deposits, including demand deposits		$	4,185,497		$	35,975				$	3,751,644		$	3,640
Cost of total deposits								1.73	%							0.20	%
Total funding liabilities, including demand deposits		$	4,777,635		$	50,241				$	3,831,010		$	4,994
Cost of total funding liabilities								2.12	%							0.26	%

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

(2) Includes industrial revenue bonds for the six months ended June 30, 2023. Interest income from tax exempt loans is computed on a taxable equivalent basis using a rate of 21%. The yield on commercial loans before tax equivalent adjustment at June 30, 2023 was 5.20%.

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

(4) Includes the basis adjustments of certain loans included in fair value hedging relationships.

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

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

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

(8) Annualized.

HarborOne Bancorp, Inc. Average Balances and Yield Trend (Unaudited)
		Average Balances - Trend - Quarters Ended
		June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
		(in thousands)
Interest-earning assets:
Investment securities (1)		$	381,762		$	387,303		$	388,247		$	390,577		$	391,448
Other interest-earning assets			238,891			63,426			42,640			27,723			64,678
Loans held for sale			19,614			18,108			22,350			28,046			29,474
Loans
Commercial loans (2)(3)			2,938,292			2,901,464			2,770,667			2,522,359			2,384,630
Residential real estate loans (3)(4)			1,682,860			1,647,109			1,566,389			1,470,305			1,330,772
Consumer loans (3)			29,025			36,310			45,629			63,220			88,943
Total loans			4,650,177			4,584,883			4,382,685			4,055,884			3,804,345
Total interest-earning assets			5,290,444			5,053,720			4,835,922			4,502,230			4,289,945
Noninterest-earning assets			305,132			313,309			311,372			308,734			311,998
Total assets		$	5,595,576		$	5,367,029		$	5,147,294		$	4,810,964		$	4,601,943
Interest-bearing liabilities:
Savings accounts		$	1,421,622		$	1,459,392		$	1,408,493		$	1,293,598		$	1,266,912
NOW accounts			280,501			275,801			291,890			305,777			311,241
Money market accounts			802,373			824,694			878,609			893,452			885,305
Certificates of deposit			708,087			552,636			487,121			486,923			484,484
Brokered deposits			281,614			330,426			148,460			102,875			100,000
Total interest-bearing deposits			3,494,197			3,442,949			3,214,573			3,082,625			3,047,942
FHLB and FRB borrowings			666,345			448,096			392,508			196,036			34,763
Subordinated debentures			34,331			34,298			34,268			34,237			34,207
Total borrowings			700,676			482,394			426,776			230,273			68,970
Total interest-bearing liabilities			4,194,873			3,925,343			3,641,349			3,312,898			3,116,912
Noninterest-bearing liabilities:
Noninterest-bearing deposits			712,081			721,536			788,572			789,214			768,088
Other noninterest-bearing liabilities			88,363			101,820			101,621			80,304			75,186
Total liabilities			4,995,317			4,748,699			4,531,542			4,182,416			3,960,186
Total stockholders' equity			600,259			618,330			615,752			628,548			641,757
Total liabilities and stockholders' equity		$	5,595,576		$	5,367,029		$	5,147,294		$	4,810,964		$	4,601,943
		Annualized Yield Trend - Quarters Ended
		June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Interest-earning assets:
Investment securities (1)			2.14	%		2.18	%		2.09	%		2.00	%		1.92	%
Other interest-earning assets			4.93	%		5.13	%		3.34	%		2.05	%		0.81	%
Loans held for sale			6.67	%		6.41	%		5.93	%		5.33	%		4.51	%
Commercial loans (2)(3)			5.30	%		5.15	%		4.92	%		4.45	%		4.25	%
Residential real estate loans (3)(4)			3.92	%		3.85	%		3.64	%		3.50	%		3.37	%
Consumer loans (3)			5.79	%		5.80	%		5.50	%		4.99	%		4.71	%
Total loans			4.81	%		4.69	%		4.47	%		4.11	%		3.96	%
Total interest-earning assets			4.63	%		4.51	%		4.27	%		3.93	%		3.73	%
Interest-bearing liabilities:
Savings accounts			1.74	%		1.51	%		1.01	%		0.37	%		0.20	%
NOW accounts			0.08	%		0.05	%		0.05	%		0.05	%		0.05	%
Money market accounts			3.13	%		2.58	%		1.50	%		0.61	%		0.30	%
Certificates of deposit			2.99	%		1.97	%		0.86	%		0.64	%		0.55	%
Brokered deposits			3.29	%		3.08	%		1.32	%		0.27	%		0.20	%
Total interest-bearing deposits			2.30	%		1.87	%		1.05	%		0.45	%		0.27	%
FHLB and FRB borrowings			4.88	%		4.62	%		3.74	%		2.45	%		1.36	%
Subordinated debentures			6.12	%		6.18	%		6.07	%		6.07	%		6.14	%
Total borrowings			4.94	%		4.73	%		3.93	%		2.99	%		3.74	%
Total interest-bearing liabilities			2.74	%		2.23	%		1.39	%		0.63	%		0.34	%

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

(2) Includes industrial revenue bonds for the quarters ended March 31, 2023 and December 31, 2022. Interest income from tax exempt loans is computed on a taxable equivalent basis using a rate of 21% for the quarters presented. The yield on commercial loans before tax equivalent adjustment at March 31, 2023 and December 31, 2022 was 5.12% and 4.90%, respectively.

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

(4) Includes the basis adjustments of certain loans included in fair value hedging relationships.

HarborOne Bancorp, Inc. Selected Financial Highlights (Unaudited)
		Quarters Ended
		June 30,			March 31,			December 31,			September 30,			June 30,
Performance Ratios (annualized):		2023			2023			2022			2022			2022
(dollars in thousands)
Return on average assets (ROAA)			0.54	%		0.54	%		0.74	%		1.14	%		0.87	%
Return on average equity (ROAE)			4.98	%		4.72	%		6.22	%		8.76	%		6.22	%
Total noninterest expense		$	31,725		$	31,509		$	34,644		$	34,473		$	34,954
Less: Amortization of other intangible assets			189			189			189			235			235
Total adjusted noninterest expense		$	31,536		$	31,320		$	34,455		$	34,238		$	34,719
Net interest and dividend income		$	32,100		$	34,398		$	39,189		$	39,332		$	37,195
Total noninterest income			12,662			8,690			9,900			14,245			14,103
Total revenue		$	44,762		$	43,088		$	49,089		$	53,577		$	51,298
Efficiency ratio (1)			70.45	%		72.69	%		70.19	%		63.90	%		67.68	%

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

		At or for the Quarters Ended
		June 30,			March 31,				December 31,			September 30,				June 30,
Asset Quality		2023			2023				2022			2022				2022
(dollars in thousands)
Total nonperforming assets		$	20,210		$	12,300			$	14,840		$	23,367			$	24,441
Nonperforming assets to total assets			0.36	%		0.22		%		0.28	%		0.47		%		0.52		%
Allowance for credit losses on loans to total loans			1.02	%		1.02		%		0.99	%		1.06		%		1.11		%
Net charge-offs (recoveries)		$	2,671		$	(11	)		$	2,067		$	(799	)		$	(504	)
Annualized net charge-offs (recoveries)/average loans			0.23	%		—		%		0.19	%		(0.08	)	%		(0.05	)	%
Allowance for credit losses on loans to nonperforming loans			236.62	%		383.50		%		305.93	%		191.60		%		178.41		%

HarborOne Bancorp, Inc. Selected Financial Highlights (Unaudited)
		Quarters Ended
		June 30,			March 31,			December 31,			September 30,			June 30,
Capital and Share Related		2023			2023			2022			2022			2022
(dollars in thousands, except share data)
Common stock outstanding			46,575,478			47,063,087			48,961,452			49,202,660			49,989,007
Book value per share		$	12.79		$	12.74		$	12.60		$	12.43		$	12.49
Tangible common equity:
Total stockholders' equity		$	595,532		$	599,794		$	616,976		$	611,370		$	624,478
Less: Goodwill			69,802			69,802			69,802			69,802			69,802
Less: Other intangible assets (1)			1,893			2,082			2,272			2,461			2,695
Tangible common equity		$	523,837		$	527,910		$	544,902		$	539,107		$	551,981
Tangible book value per share (2)		$	11.25		$	11.22		$	11.13		$	10.96		$	11.04
Tangible assets:
Total assets		$	5,659,254		$	5,572,858		$	5,359,545		$	4,987,643		$	4,704,044
Less: Goodwill			69,802			69,802			69,802			69,802			69,802
Less: Other intangible assets			1,893			2,082			2,272			2,461			2,695
Tangible assets		$	5,587,559		$	5,500,974		$	5,287,471		$	4,915,380		$	4,631,547
Tangible common equity / tangible assets (3)			9.38	%		9.60	%		10.31	%		10.97	%		11.92	%

(1) Other intangible assets are core deposit intangibles.

(2) This non-GAAP ratio is total stockholders' equity less goodwill and intangible assets divided by common stock outstanding.

(3) This non-GAAP ratio is total stockholders' equity less goodwill and intangible assets to total assets less goodwill and intangible assets.

HarborOne Bancorp, Inc. Segments Statements of Net Income (Unaudited)
		HarborOne Mortgage										HarborOne Bank
		For the Quarter Ended										For the Quarter Ended
		June 30,			March 31,				June 30,			June 30,				March 31,				June 30,
		2023			2023				2022			2023				2023				2022
		(in thousands)
Net interest and dividend income		$	120		$	327			$	411		$	32,490			$	34,562			$	37,246
Provision for credit losses			—			—				—			3,283				1,866				2,546
Net interest and dividend income, after provision for credit losses			120			327				411			29,207				32,696				34,700
Mortgage banking income:
Gain on sale of mortgage loans			3,300			2,224				4,538			—				—				—
Intersegment gain (loss)			90			454				1,097			(358	)			(348	)			(1,095	)
Changes in mortgage servicing rights fair value			407			(1,556	)			735			29				(136	)			127
Other			2,117			2,015				2,393			195				201				219
Total mortgage banking income (loss)			5,914			3,137				8,763			(134	)			(283	)			(749	)
Other noninterest income			—			—				7			6,614				5,942				6,084
Total noninterest income			5,914			3,137				8,770			6,480				5,659				5,335
Noninterest expense			5,493			5,322				7,242			26,193				26,190				27,131
Income (loss) before income taxes			541			(1,858	)			1,939			9,494				12,165				12,904
Provision (benefit) for income taxes			232			(565	)			549			2,193				3,115				3,550
Net income (loss)		$	309		$	(1,293	)		$	1,390		$	7,301			$	9,050			$	9,354

		HarborOne Mortgage							HarborOne Bank
		For the Six Months Ended							For the Six Months Ended
		June 30,				June 30,			June 30,				June 30,
		2023				2022			2023				2022
		(in thousands)
Net interest and dividend income		$	447			$	761		$	67,052			$	70,670
Provision for credit losses			—				—			5,149				2,884
Net interest and dividend income, after provision for credit losses			447				761			61,903				67,786
Mortgage banking income:
Gain on sale of mortgage loans			5,524				9,860			—				—
Intersegment gain (loss)			544				1,934			(706	)			(1,703	)
Changes in mortgage servicing rights fair value			(1,149	)			5,430			(107	)			717
Other			4,132				4,718			396				452
Total mortgage banking income (loss)			9,051				21,942			(417	)			(534	)
Other noninterest income			—				16			12,556				11,971
Total noninterest income			9,051				21,958			12,139				11,437
Noninterest expense			10,815				15,003			52,383				53,956
(Loss) income before income taxes			(1,317	)			7,716			21,659				25,267
(Benefit) provision for income taxes			(333	)			2,090			5,308				7,107
Net (loss) income		$	(984	)		$	5,626		$	16,351			$	18,160

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20230724349614/en/

Linda Simmons, EVP, CFO

508-895-1000

lsimmons@harborone.com

Source: HarborOne Bancorp, Inc.