0001558370-21-006374.txt : 20210507 0001558370-21-006374.hdr.sgml : 20210507 20210507084157 ACCESSION NUMBER: 0001558370-21-006374 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 99 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210507 DATE AS OF CHANGE: 20210507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HarborOne Bancorp, Inc. CENTRAL INDEX KEY: 0001769617 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38955 FILM NUMBER: 21900408 BUSINESS ADDRESS: STREET 1: 770 OAK STREET CITY: BROCKTON STATE: MA ZIP: 02301 BUSINESS PHONE: 508-895-1000 MAIL ADDRESS: STREET 1: 770 OAK STREET CITY: BROCKTON STATE: MA ZIP: 02301 FORMER COMPANY: FORMER CONFORMED NAME: HarborOne Bancorp, Inc./NEW DATE OF NAME CHANGE: 20190815 FORMER COMPANY: FORMER CONFORMED NAME: HarborOne NorthEast Bancorp, Inc. DATE OF NAME CHANGE: 20190304 10-Q 1 hone-20210331x10q.htm 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38955

HarborOne Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts

 

81-1607465

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

770 Oak Street, Brockton, Massachusetts

02301

(Address of principal executive offices)

(Zip Code)

(508) 895-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

HONE

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 3, 2021, there were 56,175,161 shares of the Registrant’s common stock, par value $0.01 per share, outstanding

Index

PAGE

PART I.

FINANCIAL INFORMATION

ITEM 1.

Financial Statements

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)

1

Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020 (unaudited)

2

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (unaudited)

3

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)

4

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)

5

Notes to Consolidated Financial Statements (unaudited)

7

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

62

ITEM 4.

Controls and Procedures

62

PART II.

OTHER INFORMATION

ITEM 1.

Legal Proceedings

63

ITEM 1A.

Risk Factors

63

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

ITEM 3.

Defaults Upon Senior Securities

64

ITEM 4.

Mine Safety Disclosures

64

ITEM 5.

Other Information

64

ITEM 6.

Exhibits

65

EXHIBIT INDEX

65

SIGNATURE

66

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

March 31, 

December 31, 

(in thousands, except share data)

    

2021

2020

 

Assets

    

 

Cash and due from banks

$

37,074

$

31,777

Short-term investments

281,451

174,093

Total cash and cash equivalents

318,525

205,870

Securities available for sale, at fair value

304,168

276,498

Federal Home Loan Bank stock, at cost

7,572

8,738

Loans held for sale, at fair value

210,494

208,612

Loans

3,461,479

3,494,642

Less: Allowance for loan losses

(55,384)

(55,395)

Net loans

3,406,095

3,439,247

Accrued interest receivable

11,308

11,874

Other real estate owned and repossessed assets

530

595

Mortgage servicing rights, at fair value

33,939

24,833

Property and equipment, net

50,630

49,580

Retirement plan annuities

13,851

13,747

Bank-owned life insurance

88,443

87,950

Goodwill

69,802

69,802

Intangible assets

4,047

4,370

Other assets

86,554

81,899

Total assets

$

4,605,958

$

4,483,615

Liabilities and Stockholders' Equity

Deposits:

Demand deposit accounts

$

777,959

$

689,672

NOW accounts

224,869

218,584

Regular savings and club accounts

1,113,450

998,994

Money market deposit accounts

861,867

866,661

Term certificate accounts

696,438

732,298

Total deposits

3,674,583

3,506,209

Short-term borrowed funds

35,000

Long-term borrowed funds

97,488

114,097

Subordinated debt

34,064

34,033

Mortgagors' escrow accounts

8,468

7,736

Accrued interest payable

739

1,262

Other liabilities and accrued expenses

92,543

88,964

Total liabilities

3,907,885

3,787,301

Commitments and contingencies (Notes 9 and 10)

Common stock, $0.01 par value; 150,000,000 shares authorized; 59,086,187 and 58,834,970 shares issued; 56,228,762 and 57,205,458 shares outstanding at March 31, 2021 and December 31, 2020, respectively

585

584

Additional paid-in capital

465,832

464,176

Retained earnings

294,116

277,312

Treasury stock, at cost, 2,857,425 and 1,629,512 shares at March 31, 2021 and December 31, 2020, respectively

(31,460)

(16,644)

Accumulated other comprehensive (loss) income

(160)

2,185

Unearned compensation - ESOP

(30,840)

(31,299)

Total stockholders' equity

698,073

696,314

Total liabilities and stockholders' equity

$

4,605,958

$

4,483,615

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

1

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Income (unaudited)

Three Months Ended March 31, 

(in thousands, except share data)

  

2021

  

2020

  

Interest and dividend income:

Interest and fees on loans

$

33,860

$

34,025

Interest on loans held for sale

1,324

577

Interest on taxable securities

585

1,742

Interest on non-taxable securities

66

Other interest and dividend income

78

759

Total interest and dividend income

35,847

37,169

Interest expense:

Interest on deposits

2,720

8,693

Interest on FHLB borrowings

552

1,253

Interest on subordinated debentures

523

523

Total interest expense

3,795

10,469

Net interest and dividend income

32,052

26,700

Provision for loan losses

91

3,749

Net interest and dividend income, after provision for loan losses

31,961

22,951

Noninterest income:

Mortgage banking income:

Gain on sale of mortgage loans

24,802

12,278

Changes in mortgage servicing rights fair value

3,409

(4,387)

Other

4,515

2,343

Total mortgage banking income

32,726

10,234

Deposit account fees

3,852

3,931

Income on retirement plan annuities

104

101

Gain on sale and call of securities, net

2,525

Bank-owned life insurance income

493

551

Other income

634

1,296

Total noninterest income

37,809

18,638

Noninterest expense:

Compensation and benefits

27,454

21,185

Occupancy and equipment

5,256

4,563

Data processing

2,343

2,180

Loan expenses

2,435

1,253

Marketing

813

876

Deposit expenses

440

499

Postage and printing

401

496

Professional fees

1,583

1,228

Foreclosed and repossessed assets

23

125

Deposit insurance

320

271

Other expenses

1,734

2,484

Total noninterest expense

42,802

35,160

Income before income taxes

26,968

6,429

Income tax provision

7,576

1,705

Net income

$

19,392

$

4,724

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

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

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HarborOne Bancorp, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended March 31, 

(in thousands)

    

2021

2020

Net income

$

19,392

$

4,724

Other comprehensive income:

Unrealized gain/loss on cash flow hedge:

Unrealized holding gains

1,733

Reclassification adjustment for net losses included in net income

112

Net change in unrealized gains on derivatives in cash flow hedging instruments

1,845

Related tax effect

(516)

Net-of-tax amount

1,329

Unrealized gain/loss on securities available for sale:

Unrealized holding (losses) gains

(4,713)

6,018

Reclassification of unrealized gain on securities transferred to available for sale

522

Reclassification adjustment for net realized gains

(2,525)

Net unrealized (losses) gains

(4,713)

4,015

Related tax effect

1,039

(1,237)

Net-of-tax amount

(3,674)

2,778

Total other comprehensive (loss) income

(2,345)

2,778

Comprehensive income

$

17,047

$

7,502

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

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HarborOne Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Accumulated

Common Stock

Additional

Treasury

Other

Unearned

Total

Outstanding

Paid-in

Retained

Stock,

Comprehensive

Compensation

Stockholders'

(in thousands, except share data)

Shares

Amount

Capital

Earnings

at Cost

Income (Loss)

- ESOP

Equity

Balance at December 31, 2019

54,418,021

$

584

$

460,232

$

237,356

$

(721)

$

1,480

$

(33,137)

$

665,794

Comprehensive income

4,724

2,778

7,502

ESOP shares committed to be released (57,681 shares)

121

459

580

Share-based compensation expense

1,263

1,263

Balance at March 31, 2020

54,418,021

$

584

$

461,616

$

242,080

$

(721)

$

4,258

$

(32,678)

$

675,139

Balance at December 31, 2020

57,205,458

$

584

$

464,176

$

277,312

$

(16,644)

$

2,185

$

(31,299)

$

696,314

Comprehensive income(loss)

19,392

(2,345)

17,047

Dividends declared of $0.05 per share

(2,588)

(2,588)

ESOP shares committed to be released (57,681 shares)

242

459

701

Restricted stock awards granted

188,377

Share-based compensation expense

772

772

Stock option exercised

62,840

1

642

643

Treasury stock purchased

(1,227,913)

(14,816)

(14,816)

Balance at March 31, 2021

56,228,762

$

585

$

465,832

$

294,116

$

(31,460)

$

(160)

$

(30,840)

$

698,073

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

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HarborOne Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)

    

Three Months Ended March 31, 

(in thousands)

    

2021

    

2020

Cash flows from operating activities:

Net income

$

19,392

$

4,724

Adjustments to reconcile net income to net cash used by operating activities:

Provision for loan losses

91

3,749

Net amortization of securities premiums/discounts

1,201

242

Proceeds from sale of loans

696,005

315,290

Loans originated for sale

(678,960)

(309,054)

Net (accretion) amortization of net deferred loan costs/fees and premiums

(393)

629

Depreciation and amortization of premises and equipment

1,325

1,005

Change in mortgage servicing rights fair value

(3,409)

4,387

Mortgage servicing rights capitalized

(5,697)

(444)

Accretion of fair value adjustment on loans and deposits, net

(1,212)

(383)

Amortization of other intangible assets

323

447

Amortization of subordinated debt issuance costs

31

31

Gain on sale and call of securities, net

(2,525)

Net gains on mortgage loan sales, including fair value adjustments

(18,927)

(14,000)

Bank-owned life insurance income

(493)

(551)

Income on retirement plan annuities

(104)

(101)

Net loss on disposal of premises and equipment

110

Net loss on sale and write-down of other real estate owned and repossessed assets

21

55

ESOP expense

701

580

Share-based compensation expense

772

1,263

Change in other assets

(3,128)

(25,901)

Change in other liabilities

3,579

21,341

Net cash used by operating activities

11,118

894

Cash flows from investing activities:

Activity in securities available for sale:

Maturities, prepayments and calls

46,956

13,947

Purchases

(80,540)

(62,755)

Sales

65,971

Activity in securities held to maturity:

Maturities, prepayment and calls

432

Sales

4,759

Net redemption of FHLB stock

1,166

3,591

Participation-in loan purchases

(17,535)

(679)

Net loan (originations) payments

51,982

(13,490)

Proceeds from sale of other real estate owned and repossessed assets

407

518

Additions to property and equipment

(2,375)

(750)

Net cash used by investing activities

61

11,544

(continued)

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

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HarborOne Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31, 

(in thousands)

    

2021

    

2020

          

Cash flows from financing activities:

Net increase in deposits

168,230

78,149

Net change in short-term borrowed funds

(35,000)

(79,000)

Proceeds from other borrowed funds and subordinated debt

3,400

40,000

Repayment of other borrowed funds

(20,009)

(30,009)

Net change in mortgagors' escrow accounts

732

2,226

Proceeds from exercise of stock options

643

Treasury stock purchased

(14,816)

Dividends paid

(1,704)

Net cash provided by financing activities

101,476

11,366

Net change in cash and cash equivalents

112,655

23,804

Cash and cash equivalents at beginning of period

205,870

211,616

Cash and cash equivalents at end of period

$

318,525

$

235,420

Supplemental cash flow information:

Interest paid on deposits

$

2,723

$

8,600

Interest paid on borrowed funds

1,597

2,367

Income taxes paid, net

1,779

3,748

Transfer of loans to other real estate owned and repossessed assets

363

393

Transfer of securities held to maturity to available for sale, fair value

22,051

Dividends declared

2,588

Supplemental disclosure related to adoption of ASU 2016-02, detailed in Note 1:

ROU asset

$

23,189

$

Operating lease liabilities

24,370

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The unaudited interim Consolidated Financial Statements of HarborOne Bancorp, Inc. (the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by the U.S. generally accepted accounting principles (“GAAP”). In the opinion of management, all adjustments and disclosures considered necessary for the fair presentation of the accompanying Consolidated Financial Statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2020 and 2019 and notes thereto included in the Company’s Annual Report on Form 10-K.

The unaudited interim Consolidated Financial Statements include the accounts of the Company; the Company’s subsidiaries, Legion Parkway Company LLC, a security corporation; HarborOne Bank (the “Bank”); and the Bank’s wholly-owned subsidiaries, which consist of HarborOne Mortgage, LLC (“HarborOne Mortgage”), a passive investment corporation, and two security corporations. The passive investment corporation maintains and manages certain assets of the Bank. The security corporations were established for the purpose of buying, holding and selling securities on their own behalf. All significant intercompany balances and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income.

Nature of Operations

The Company provides a variety of financial services to individuals and businesses through its 26 full-service branches in Massachusetts and Rhode Island, and a commercial lending office in each of Boston, Massachusetts and Providence, Rhode Island. HarborOne Mortgage maintains more than 30 offices in Massachusetts, Rhode Island, New Hampshire, Maine, and New Jersey and is licensed to lend in five additional states.  

The Company’s primary deposit products are checking, money market, savings and term certificate of deposit accounts, while its primary lending products are commercial real estate, commercial, residential mortgages, home equity, and consumer loans. The Company also originates, sells and services residential mortgage loans through HarborOne Mortgage.

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, and almost all public commerce and related business activities were, to varying degrees, curtailed. While some industries have been impacted more severely than others, all businesses have been impacted to some degree, and the outbreak has caused significant disruptions in the U.S. economy and adversely impacted a broad range of industries in which the Company’s customers operate and may impair their ability to fulfill their financial obligations to the Company. The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions.  

Congress, the President, and the Board of Governors of the Federal Reserve System (the “Federal Reserve”) have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion legislative package, was signed into law at the end of March 2020. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. Additionally, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was enacted on December 27, 2020, providing for a second round of PPP loans (“PPP-2”). Additionally, the Consolidated Appropriations Act passed on December 27, 2020 provided the option of postponing adoption of the standard until the earlier of the end of the national emergency declaration related to the COVID-19 pandemic or December 31, 2022. The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Act (the Economic Aid Act) amended the PPP by extending the authority of the SBA to guarantee loans and the ability of PPP lenders to disburse PPP loans until March 31, 2021. The PPP Extension Act of 2021, which was enacted on March 30, 2021, extends the PPP application deadline to May 31, 2021 and provides the SBA additional time to process applications through June 30, 2021. The Federal Reserve also took actions to mitigate the economic impact of the COVID-19 pandemic, including cutting the federal funds rate 150 basis points and targeting a 0 to 25 basis point rate. In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act as well as other legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.

The fiscal stimulus and relief programs have been an effective mitigant to credit losses in the near term and significant progress has been made in combating COVID-19; however, once these programs are discontinued the severity of potential losses is uncertain and depends on numerous factors and future developments. And while macroeconomic conditions have stabilized as of March 31, 2021, if there is a resurgence in the virus, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. Effects may include:

Net interest income could be reduced. In accordance with regulatory guidance, the Company is actively working with borrowers impacted by the COVID-19 pandemic to defer payments. While interest will continue to be recognized in accordance with GAAP, should eventual credit losses on these deferments emerge, interest income would be negatively impacted.
The provision for loan losses could increase. Continued uncertainty regarding the severity and duration of the COVID-19 pandemic and related economic effects will continue to affect the accounting for loan losses. It also is possible that asset quality could worsen, and loan charge-offs increase. The Company participated in the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) providing loans to small businesses negatively impacted by the COVID-19 pandemic. PPP loans are fully guaranteed by the U.S. government.
Noninterest income could be reduced. Uncertainty regarding the severity and duration of the COVID-19 pandemic could cause further volatility in the financial markets. The COVID-19 pandemic and the measures taken to control its spread may disrupt the mortgage loan origination process. Mortgage banking revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets.
Valuation and fair value measurement challenges may occur. Changes in the COVID-19 pandemic could cause a decline in the Company’s stock price or other triggering events could occur that would cause management to perform a goodwill impairment test that may result in an impairment charge being recorded to earnings for that period.

Summary of Significant Accounting Policies and Recently Adopted Accounting Standards Updates (“ASU”)

As an “emerging growth company”, as defined in Title 1 of the Jumpstart Our Business Startups (“JOBS”) Act, the Company has elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company’s emerging growth company status is scheduled to end December 31, 2021 unless a triggering event occurs sooner.

Significant accounting policies in effect and disclosed within the Company’s most recent audited consolidated financial statements as of December 31, 2020 remain substantially unchanged with the excepti