Core Viewpoint - HarborOne Bancorp (HONE) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise their earnings estimates [1][2] Earnings Estimate Revisions - Current-quarter earnings estimate is $0.18 per share, reflecting a -10% change from the previous year, but has increased by 7.58% over the last 30 days due to three upward revisions [4] - For the full year, the earnings estimate stands at $0.68 per share, representing a +9.68% change from the year-ago figure, with a 5.47% increase in consensus estimates driven by three upward revisions [5] Analyst Sentiment - There is strong agreement among analysts in revising earnings estimates upward, leading to a Zacks Rank 2 (Buy) for HarborOne Bancorp, indicating positive sentiment and potential for outperformance [3][6] Stock Performance - HarborOne Bancorp shares have increased by 18.6% over the past four weeks, suggesting investor confidence in the company's earnings growth prospects [7]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: HarborOne Bancorp (HONE) - HONE currently holds a Momentum Style Score of A, indicating strong momentum potential [2][3] - Over the past week, HONE shares increased by 7.78%, outperforming the Zacks Banks - Northeast industry, which rose by 4.74% [4] - In a longer timeframe, HONE's monthly price change of 22.82% is significantly better than the industry's 14.15% performance [4] Trading Volume - HONE's average 20-day trading volume is 132,511 shares, which serves as a bullish indicator when combined with rising stock prices [5] Earnings Estimates - Recent trends show that 2 earnings estimates for HONE have increased, while none have decreased, raising the consensus estimate from $0.64 to $0.66 over the past 60 days [12] - For the next fiscal year, 2 estimates have also moved upwards with no downward revisions [12] Performance Comparison - Over the past quarter, HONE shares have risen by 27.38%, and by 27.74% over the last year, significantly outperforming the S&P 500, which increased by 7.18% and 20.85% respectively [11] Investment Recommendation - Given the strong performance metrics and positive earnings outlook, HONE is rated as a 2 (Buy) stock, making it a promising candidate for investors seeking momentum opportunities [7][9]

HarborOne Bancorp, which belongs to the Zacks Banks - Northeast industry, posted revenues of $43.27 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 1.99%. This compares to year-ago revenues of $44.76 million. The company has topped consensus revenue estimates three times over the last four quarters. What's Next for HarborOne Bancorp? Ahead of this earnings release, the estimate revisions trend for HarborOne Bancorp: mixed. While the magnitude and direction of estimate rev ...

HarborOne Bancorp, Inc. Announces 2024 Second Quarter Results Selected Financial Highlights: Noninterest Income Total noninterest income improved $1.2 million, or 11.0%, to $11.9 million for the quarter ended June 30, 2024, from $10.7 million for the quarter ended March 31, 2024. HarborOne Mortgage, LLC ("HarborOne Mortgage") capitalized on the seasonal increase in residential real estate sales, with gain on loan sales of $3.1 million from mortgage closings of $173.0 million for the quarter ended June 30, 2 ...

For the quarter ended March 2024, HarborOne Bancorp (HONE) reported revenue of $41.32 million, down 4.1% over the same period last year. EPS came in at $0.17, compared to $0.16 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $39.98 million, representing a surprise of +3.36%. The company delivered an EPS surprise of +30.77%, with the consensus EPS estimate being $0.13.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall ...

Exhibit 99.1 HarborOne Bancorp, Inc. Announces 2024 First Quarter Results Contact: Joseph F. Casey, President and CEO Brockton, Massachusetts (April 25, 2024): HarborOne Bancorp, Inc. (the "Company" or "HarborOne") (NASDAQ: HONE), the holding company for HarborOne Bank (the "Bank"), announced net income of $7.3 million, or $0.17 per diluted share, for the first quarter of 2024, compared to a net loss of $7.1 million, or $0.17 per diluted share for the preceding quarter, and net income of $7.3 million, or $0 ...

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) HarborOne Bancorp, a bank holding company, manages $5.67 billion in assets through its banking and mortgage segments, primarily lending in commercial and residential real estate [Human Capital Resources](index=6&type=section&id=Human%20Capital%20Resources) HarborOne had 529 employees as of December 31, 2023, with a diverse workforce, emphasizing an inclusive environment and professional development - As of December 31, 2023, the company's workforce was **61% female** and **22% racially or ethnically diverse**. The senior management team was **44.4% female**[20](index=20&type=chunk) - The company focuses on employee growth through training programs, customized corporate training, and educational reimbursement[22](index=22&type=chunk) [Market Area and Competition](index=8&type=section&id=Market%20Area%20and%20Competition) HarborOne's primary market is Eastern Massachusetts and Rhode Island, facing intense competition from diverse financial institutions across New England - The Bank's primary deposit-gathering area is concentrated in its branch communities, while its lending area extends across New England[26](index=26&type=chunk) - Competition is significant from larger financial institutions with greater resources, as well as from non-depository companies and online financial services, which have lowered barriers to entry[29](index=29&type=chunk)[31](index=31&type=chunk) [Lending Activities](index=8&type=section&id=Lending%20Activities) The company's $4.75 billion loan portfolio is dominated by commercial real estate (49.3%) and residential real estate (31.9%), with a portion of mortgages sold on the secondary market Loan Portfolio Composition (December 31, 2023) | Loan Category | Amount (billions) | % of Total Loans | | :--- | :--- | :--- | | Commercial Real Estate | $2.34 | 49.3% | | Residential Real Estate (1-4 Family) | $1.51 | 31.9% | | Commercial & Industrial | $0.47 | 9.8% | | Commercial Construction | $0.21 | 4.4% | | Second Mortgages & HELOCs | $0.18 | 3.7% | | Other (Consumer, Residential Construction) | $0.04 | 0.9% | - For the year ended December 31, 2023, the company originated **$1.11 billion** in loans, purchased **$32.6 million**, and sold **$480.7 million**[66](index=66&type=chunk) - The Bank's internal loans-to-one-borrower limit is **$85.0 million**, below the regulatory limit of **$111.6 million**. The largest lending relationship was **$41.0 million** as of year-end[80](index=80&type=chunk) [Investment Activities](index=18&type=section&id=Investment%20Activities) The company's $309.9 million investment portfolio, primarily in mortgage-backed securities and government obligations, aims for liquidity, risk mitigation, and returns Investment Portfolio Composition (December 31, 2023) | Security Type | Amount (millions) | % of Portfolio | | :--- | :--- | :--- | | Mortgage-Backed Securities & CMOs | $247.4 | 79.8% | | U.S. Government & GSE Obligations | $55.2 | 17.8% | | SBA Asset-Backed Securities | $6.6 | 2.1% | | Corporate Bonds | $1.0 | 0.3% | | **Total Securities** | **$309.9** | **100.0%** | - In addition to the securities portfolio, the company held **$27.1 million** in FHLB stock and **$94.7 million** in BOLI[88](index=88&type=chunk)[89](index=89&type=chunk) [Sources of Funds](index=19&type=section&id=Sources%20of%20Funds) Primary funding sources include $4.39 billion in deposits and $568.5 million in borrowings, supplemented by significant additional borrowing capacity from FHLB and BTFP - Total deposits reached **$4.39 billion** at December 31, 2023. This includes **$471.8 million** in municipal deposits from over 85 cities and towns[91](index=91&type=chunk) - The company utilizes brokered deposits, which totaled **$326.6 million** (**7.4% of total deposits**) at year-end[94](index=94&type=chunk) - Total borrowings were **$568.5 million**, consisting of FHLB advances. The company has significant additional liquidity access, including **$727.5 million** from the FHLB and **$360.9 million** from the FRBB's BTFP[96](index=96&type=chunk)[97](index=97&type=chunk) [Supervision and Regulation](index=21&type=section&id=Supervision%20and%20Regulation) HarborOne Bancorp and its subsidiary are extensively regulated by federal and state authorities, covering capital adequacy, consumer protection, and anti-money laundering, with the Bank classified as "well capitalized" - The Company is a bank holding company subject to regulation by the Federal Reserve, while the Bank is a state-chartered trust company regulated by the FDIC and state banking authorities[100](index=100&type=chunk)[101](index=101&type=chunk) - The Bank must comply with capital adequacy rules, including a capital conservation buffer of **2.5%**. As of December 31, 2023, the Bank was considered **"well capitalized"** under all regulatory definitions[123](index=123&type=chunk)[124](index=124&type=chunk) - The Bank is subject to the Community Reinvestment Act (CRA) and received an **"Outstanding"** rating on its most recent examination. New CRA regulations will become effective on January 1, 2026[118](index=118&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business risks from economic conditions, interest rate volatility, and credit concentrations in commercial real estate, alongside regulatory compliance and cybersecurity threats - **Business & Industry Risks:** Economic downturns, interest rate volatility, and inflation pose significant threats. Changes in interest rates led to a **$21.7 million (14.6%) decline** in net interest and dividend income in 2023[141](index=141&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) - **Credit Risks:** The large concentration in commercial real estate (**$2.34 billion, 49.3% of total loans**) and commercial loans (**$466.4 million, 9.8%**) carries higher risk than residential lending. The unseasoned nature of this portfolio makes future performance difficult to predict[146](index=146&type=chunk)[147](index=147&type=chunk) - **Mortgage Banking Risks:** Mortgage banking income is highly sensitive to interest rates and market demand, declining **$16.4 million (52.6%)** in 2023 due to a **43.4% decrease** in loan production[154](index=154&type=chunk) - **Regulatory Risks:** The company operates in a highly regulated environment. Failure to comply with laws like the Community Reinvestment Act (CRA) or anti-money laundering regulations can lead to sanctions, fines, and reputational damage[208](index=208&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) [Item 1B. Unresolved Staff Comments](index=56&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[220](index=220&type=chunk) [Item 1C. Cybersecurity](index=56&type=section&id=Item%201C.%20Cybersecurity) The company manages cybersecurity risks through a comprehensive Information Security Program, overseen by the Board and aligned with NIST and FFIEC frameworks - Oversight is managed by the Chief Risk Officer (CRO) and Chief Information Security Officer (CISO), with ultimate oversight from the Board of Directors and its Audit Committee[222](index=222&type=chunk)[227](index=227&type=chunk) - The Information Security Program aligns with the National Institute of Standards and Technology (NIST) Cybersecurity Framework and FFIEC guidelines, and is reviewed and approved annually by the Board[230](index=230&type=chunk)[233](index=233&type=chunk) - The company uses specialized service providers for continuous monitoring, threat containment, and penetration testing, and maintains a Vendor Management Program for third-party risk[234](index=234&type=chunk) [Item 2. Properties](index=59&type=section&id=Item%202.%20Properties) As of December 31, 2023, the company operated 30 branches and various offices with a net book value of $48.7 million for property and equipment - The company operates **30 full-service branches**, with a mix of owned and leased properties, and commercial lending offices in Boston and Providence[236](index=236&type=chunk) - The net book value of property and equipment was **$48.7 million** at year-end 2023[236](index=236&type=chunk) [Item 3. Legal Proceedings](index=59&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in material pending legal proceedings, with a class action lawsuit regarding overdraft fees settled in November 2023 - A class action lawsuit regarding overdraft fees on re-presented transactions received final court approval for settlement on November 14, 2023[238](index=238&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[239](index=239&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=60&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock (HONE) trades on Nasdaq, pays a quarterly dividend, and repurchased 570,527 shares in Q4 2023 under an ongoing program - The company's common stock (HONE) trades on the Nasdaq Global Select Market. It currently pays a quarterly cash dividend of **$0.075 per share**[241](index=241&type=chunk)[242](index=242&type=chunk) Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Oct 2023 | 355,000 | $9.74 | 1,317,966 | | Nov 2023 | 207,000 | $10.82 | 1,110,966 | | Dec 2023 | 8,527 | $11.29 | 1,102,439 | | **Total Q4** | **570,527** | **$10.15** | **1,102,439** | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income significantly decreased to $16.1 million in 2023 due to a goodwill impairment and net interest margin compression, despite asset and deposit growth, while asset quality remained strong Key Performance Indicators (2023 vs 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $16.1 million | $45.6 million | | Diluted EPS | $0.37 | $0.97 | | Net Interest Income | $127.3 million | $149.0 million | | Net Interest Margin | 2.44% | 3.35% | | Return on Average Assets | 0.29% | 0.95% | | Return on Average Equity | 2.68% | 7.14% | - The decrease in profitability was driven by a **$10.8 million goodwill impairment charge** at the HarborOne Mortgage segment and significant net interest margin compression[299](index=299&type=chunk)[323](index=323&type=chunk) [Critical Accounting Policies and Estimates](index=65&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgment, including the Allowance for Credit Losses (ACL), Goodwill impairment (fully impaired for HarborOne Mortgage in 2023), and Deferred Tax Assets - **Allowance for Credit Losses (ACL):** Estimated using the CECL model, which involves significant management judgment on economic forecasts and qualitative factors. A sensitivity analysis on commercial loan qualitative factors showed the ACL could vary by approximately **+/- $13 million**[265](index=265&type=chunk)[266](index=266&type=chunk)[269](index=269&type=chunk) - **Goodwill:** Tested annually for impairment. The determination of fair value for reporting units (Bank and HarborOne Mortgage) requires significant assumptions. In 2023, the goodwill for the HarborOne Mortgage reporting unit was determined to be **fully impaired**[271](index=271&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - **Deferred Tax Assets:** Management assesses the need for a valuation allowance based on historical and forecasted operating results. Realization is dependent on generating future taxable income[276](index=276&type=chunk) [Comparison of Financial Condition](index=67&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew 5.8% to $5.67 billion, driven by loan and deposit growth, while stockholders' equity decreased due to share repurchases Balance Sheet Changes (2023 vs 2022) | Account | Dec 31, 2023 ($B) | Dec 31, 2022 ($B) | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $5.67 | $5.36 | 5.8% | | Net Loans | $4.70 | $4.50 | 4.4% | | Total Deposits | $4.39 | $4.19 | 4.7% | | Total Borrowings | $0.57 | $0.43 | 31.3% | | Stockholders' Equity | $0.58 | $0.62 | -5.4% | - The deposit mix shifted significantly, with noninterest-bearing and regular savings deposits declining by **13.5%** and **13.8%** respectively, while term certificate accounts grew by **73.5%** as customers sought higher yields[291](index=291&type=chunk) - Stockholders' equity decreased primarily due to the repurchase of **3.7 million shares** for **$44.9 million** during 2023[298](index=298&type=chunk) [Comparison of Results of Operations](index=71&type=section&id=Comparison%20of%20Results%20of%20Operations) Consolidated net income decreased to $16.1 million in 2023 due to lower net interest income and a goodwill impairment, with net interest margin compressing to 2.44% Consolidated Income Statement Highlights (2023 vs 2022) | Metric | 2023 ($M) | 2022 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $127.3 | $149.0 | -14.6% | | Provision for Credit Losses | $5.7 | $5.7 | 0.0% | | Noninterest Income | $41.9 | $57.3 | -26.9% | | Noninterest Expense | $138.3 | $138.9 | -0.4% | | Net Income | $16.1 | $45.6 | -64.7% | - Net interest margin on a tax equivalent basis decreased **91 basis points** to **2.44%** in 2023 from **3.35%** in 2022, as the cost of interest-bearing liabilities rose from **0.70%** to **2.83%**[302](index=302&type=chunk)[309](index=309&type=chunk) Segment Net Income (Loss) (2023 vs 2022) | Segment | 2023 Net Income ($M) | 2022 Net Income ($M) | | :--- | :--- | :--- | | HarborOne Bank | $32.0 | $43.0 | | HarborOne Mortgage | $(14.0) | $4.8 | - HarborOne Mortgage's results were significantly impacted by a **$10.8 million goodwill impairment charge** and a **53.7% decrease** in mortgage banking income, driven by a **43.4% decline** in loan closings to **$579.5 million**[323](index=323&type=chunk)[324](index=324&type=chunk) [Asset Quality](index=81&type=section&id=Asset%20Quality) Asset quality remained strong in 2023, with nonperforming assets at 0.31% of total assets, primarily due to a single commercial real estate credit Asset Quality Metrics | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Nonperforming Assets | $17.6 million | $14.8 million | | Nonperforming Assets to Total Assets | 0.31% | 0.28% | | Nonperforming Loans to Total Loans | 0.37% | 0.32% | | ACL to Total Loans | 1.01% | 0.99% | | Net Charge-offs to Average Loans (Annual) | 0.08% | 0.09% | - The increase in non-accrual loans was primarily driven by a single commercial real estate credit in the metro office sector with a carrying value of **$5.7 million**[332](index=332&type=chunk) - The ACL methodology uses a DCF model incorporating a one-year forecast of the national unemployment rate, supplemented by qualitative factors[335](index=335&type=chunk)[337](index=337&type=chunk) [Management of Market Risk](index=84&type=section&id=Management%20of%20Market%20Risk) The company manages interest rate risk using NII simulation and EVE analysis, showing asset sensitivity in falling rates and liability sensitivity in rising rates Net Interest Income Sensitivity (as of Dec 31, 2023) | Rate Shock (basis points) | Year One NII Change | Year Two NII Change | | :--- | :--- | :--- | | +300 | (17.5)% | (14.2)% | | +200 | (11.6)% | (9.2)% | | +100 | (5.6)% | (4.2)% | | -100 | 6.1% | 5.3% | - The company also uses an Economic Value of Equity (EVE) analysis. A **+200 basis point rate shock** was estimated to decrease EVE by **19.0%**[355](index=355&type=chunk) [Liquidity Management and Capital Resources](index=87&type=section&id=Liquidity%20Management%20and%20Capital%20Resources) The company maintains a strong liquidity position with $277.4 million in cash and significant borrowing capacity, exceeding all regulatory capital requirements - Primary liquidity sources are deposits, loan repayments, and borrowings. The company has access to significant secondary liquidity sources[358](index=358&type=chunk) Available Borrowing Capacity (as of Dec 31, 2023) | Source | Capacity (millions) | | :--- | :--- | | FHLB | $727.5 | | FRBB (BTFP) | $360.9 | | FRBB (BIC) | $69.4 | | Correspondent Bank Line | $25.0 | - At December 31, 2023, both the Company and the Bank were considered **"well capitalized"** under regulatory guidelines[363](index=363&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=91&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2023, including balance sheets, income statements, and detailed notes on accounting policies and financial instruments [Report of Independent Registered Public Accounting Firm](index=92&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Crowe LLP issued an unqualified opinion on the financial statements and internal controls, identifying ACL qualitative factors as a critical audit matter - Crowe LLP provided an **unqualified opinion**, stating the financial statements are presented fairly in all material respects and that internal control over financial reporting was effective[375](index=375&type=chunk) - The critical audit matter identified was the determination of qualitative factors for the Allowance for Credit Losses (ACL), which involves significant management judgment and subjectivity[381](index=381&type=chunk)[385](index=385&type=chunk) [Consolidated Financial Statements](index=95&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $5.67 billion and net income of $16.1 million for 2023, a decrease primarily due to lower net interest income and goodwill impairment Consolidated Balance Sheet Highlights (as of Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | **Assets** | | | Net Loans | $4,702,339 | | Securities (AFS & HTM) | $309,947 | | Goodwill | $59,042 | | **Total Assets** | **$5,667,896** | | **Liabilities & Equity** | | | Total Deposits | $4,387,409 | | Total Borrowings | $568,462 | | **Total Liabilities** | **$5,084,137** | | **Total Stockholders' Equity** | **$583,759** | Consolidated Income Statement Highlights (Year Ended Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $127,271 | | Provision for Credit Losses | $5,680 | | Noninterest Income | $41,854 | | Noninterest Expense | $138,320 | | **Net Income** | **$16,077** | [Notes to Consolidated Financial Statements](index=102&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial data, including CECL, loan and securities portfolios, goodwill impairment, deposit structures, and regulatory capital compliance, confirming "well capitalized" status - Note 4 (Loans and ACL): Details the loan portfolio composition, with commercial loans at **$3.02 billion** and residential at **$1.71 billion**. The ACL on loans was **$48.0 million** at year-end 2023[512](index=512&type=chunk)[515](index=515&type=chunk) - Note 8 (Goodwill): A goodwill impairment charge of **$10.8 million** was recorded for the HarborOne Mortgage reporting unit in 2023, representing **100%** of its goodwill balance[543](index=543&type=chunk) Regulatory Capital Ratios (as of Dec 31, 2023) | Ratio | HarborOne Bancorp, Inc. | HarborOne Bank | Minimum to be Well Capitalized (Bank) | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 12.0% | 10.8% | 6.5% | | Tier 1 Capital | 12.0% | 10.8% | 8.0% | | Total Capital | 13.1% | 11.9% | 10.0% | | Tier 1 Leverage | 10.0% | 9.0% | 5.0% | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=119&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[701](index=701&type=chunk) [Item 9A. Controls and Procedures](index=119&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes in Q4 - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[702](index=702&type=chunk) - Management's assessment, based on the COSO framework, concluded that the company maintained effective internal control over financial reporting as of December 31, 2023[704](index=704&type=chunk) [Item 9B. Other Information](index=119&type=section&id=Item%209B.%20Other%20Information) The company reports no other required information and no Rule 10b5-1 trading plan changes by directors or executive officers in Q4 2023 - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan or any non-Rule 10b5-1 trading arrangement during the fourth quarter of 2023[707](index=707&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=120&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the company's proxy statement[710](index=710&type=chunk) [Item 11. Executive Compensation](index=120&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive and director compensation is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference from the company's proxy statement[711](index=711&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=120&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of December 31, 2023, equity compensation plans had 1,049,075 securities for outstanding options and 3,564,628 available for future issuance Equity Compensation Plan Information (as of Dec 31, 2023) | Description | Value | | :--- | :--- | | Securities to be issued upon exercise of outstanding options | 1,049,075 | | Weighted-average exercise price | $10.00 | | Securities remaining available for future issuance | 3,564,628 | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=120&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference from the company's proxy statement[714](index=714&type=chunk) [Item 14. Principal Accounting Fees and Services](index=121&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the company's Definitive Proxy Statement - Information is incorporated by reference from the company's proxy statement[715](index=715&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=122&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including organizational documents, compensation plans, and certifications - Lists all exhibits filed with or incorporated by reference into the Annual Report on Form 10-K[718](index=718&type=chunk) [Item 16. Form 10-K Summary](index=124&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[722](index=722&type=chunk)

PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements and related notes for HarborOne Bancorp, Inc [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20September%2030%2C%202023%20and%20December%2031%2C%202022) **Consolidated Balance Sheet Highlights (in thousands USD):** | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $5,664,387 | $5,359,545 | | Total Liabilities | $5,079,753 | $4,742,569 | | Total Stockholders' Equity | $584,634 | $616,976 | | Net Loans | $4,674,542 | $4,504,434 | | Total Deposits | $4,409,958 | $4,189,499 | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **Consolidated Statements of Income Highlights (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total interest and dividend income | $63,164 | $44,556 | $179,903 | $120,015 | | Total interest expense | $32,084 | $5,224 | $82,325 | $10,218 | | Net interest and dividend income | $31,080 | $39,332 | $97,578 | $109,797 | | Total noninterest income | $11,598 | $14,245 | $32,950 | $47,409 | | Total noninterest expense | $31,872 | $34,473 | $95,106 | $104,262 | | Net income | $8,412 | $13,758 | $23,188 | $36,012 | | Basic EPS | $0.20 | $0.30 | $0.53 | $0.77 | | Diluted EPS | $0.20 | $0.30 | $0.53 | $0.76 | [Consolidated Statements of Comprehensive (Loss) Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **Consolidated Statements of Comprehensive (Loss) Income Highlights (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $8,412 | $13,758 | $23,188 | $36,012 | | Total other comprehensive loss | $(10,699) | $(14,414) | $(9,907) | $(47,044) | | Comprehensive income (loss) | $(2,287) | $(656) | $13,281 | $(11,032) | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands USD):** | Item | Balance at Sep 30, 2023 | Balance at Dec 31, 2022 | Balance at Sep 30, 2022 | | :-------------------------------- | :---------------------- | :---------------------- | :---------------------- | | Total Stockholders' Equity | $584,634 | $616,976 | $611,370 | | Retained Earnings | $369,930 | $356,438 | $350,049 | | Treasury Stock, at cost | $(187,803) | $(148,384) | $(143,125) | | Accumulated other comprehensive loss | $(56,989) | $(47,082) | $(48,681) | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **Consolidated Statements of Cash Flows Highlights (in thousands USD):** | Item | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $69,584 | $53,286 | | Net cash used by investing activities | $(166,767) | $(593,734) | | Net cash provided by financing activities | $245,950 | $431,683 | | Net change in cash and cash equivalents | $148,767 | $(108,765) | | Cash and cash equivalents at end of period | $246,784 | $85,954 | [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1. Summary of Significant Accounting Policies](index=14&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the basis of financial statement presentation, company operations, and the adoption of ASU 2022-02 - The Company adopted ASU 2022-02 effective January 1, 2023, which eliminated TDR accounting guidance and enhanced disclosures for loan refinancings and restructurings. The adoption did not materially impact the financial statements[39](index=39&type=chunk) - The banking industry experienced significant volatility in Q1 2023, leading to concerns about liquidity and deposit outflows. The Bank Term Funding Program (BTFP) was introduced to enhance liquidity[33](index=33&type=chunk) - The Company provides financial services through **30** full-service branches in Massachusetts and Rhode Island, and a commercial lending office in Boston and Providence. HarborOne Mortgage operates in multiple states[31](index=31&type=chunk) [Note 2. Debt Securities](index=16&type=section&id=Note%202.%20Debt%20Securities) This note summarizes debt securities, highlighting unrealized losses due to interest rate changes, not credit quality **Debt Securities Summary (in thousands USD):** | Category | Amortized Cost (Sep 30, 2023) | Fair Value (Sep 30, 2023) | Gross Unrealized Losses (Sep 30, 2023) | | :------------------------------------------------ | :---------------------------- | :------------------------ | :------------------------------------- | | Securities available for sale | $352,328 | $271,078 | $81,250 | | Securities held to maturity | $19,795 | $18,683 | $1,112 | | Total | $372,123 | $289,761 | $82,362 | - As of September 30, 2023, all **132** debt securities in the Company's portfolio were in an unrealized loss position, primarily due to changes in interest rates, not credit quality. No Allowance for Credit Losses (ACL) was recorded[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) - At September 30, 2023, available-for-sale debt securities with a fair value of **$268.6 million** and held-to-maturity securities with an amortized cost of **$15.0 million** were pledged as collateral for BTFP borrowing capacity, which was **$361.0 million** based on par value[41](index=41&type=chunk) [Note 3. Loans Held for Sale](index=21&type=section&id=Note%203.%20Loans%20Held%20for%20Sale) This note details loans held for sale, accounted at fair value, which decreased due to hedging strategies **Loans Held for Sale (in thousands USD):** | Item | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Loans held for sale, fair value | $17,796 | $18,544 | | Loans held for sale, contractual principal outstanding | $17,590 | $18,208 | | Fair value less unpaid principal balance | $206 | $336 | - The Company uses the fair value option for mortgage loans held for sale to match changes in fair value with forward sale commitment contracts used for hedging. Fair value decreased by **$165,000** (three months) and **$130,000** (nine months) ended September 30, 2023[49](index=49&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=23&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note details the loan portfolio, ACL, credit quality, and methodology for estimating credit losses **Summary of Loan Balances (in thousands USD):** | Loan Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Residential real estate | $1,708,412 | $1,634,319 | | Commercial loans | $2,991,657 | $2,873,930 | | Consumer loans | $24,247 | $41,421 | | Total loans before basis adjustment | $4,724,316 | $4,549,670 | | Allowance for credit losses on loans | $(48,312) | $(45,236) | | Net loans | $4,674,542 | $4,504,434 | **Allowance for Credit Losses (ACL) Activity (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $47,821 | $45,236 | | Charge-offs | $(37) | $(3,039) | | Recoveries | $55 | $398 | | Provision | $473 | $5,717 | | Balance at end of period | $48,312 | $48,312 | - The Company uses a **ten-grade** internal loan rating system for commercial loans, ranging from 'pass' (**1-6**) to 'uncollectible' (**10**), with annual or more frequent reviews[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk) [Note 5. Mortgage Loan Servicing](index=30&type=section&id=Note%205.%20Mortgage%20Loan%20Servicing) This note details Mortgage Servicing Rights (MSRs), their fair value, and key valuation assumptions - The Company serviced **$3.59 billion** in mortgage loans for others as of September 30, 2023, with MSRs valued at **$49.2 million**[71](index=71&type=chunk) **Key Assumptions for MSR Fair Value Calculation:** | Assumption | Sep 30, 2023 | Dec 31, 2022 | | :---------------- | :----------- | :----------- | | Prepayment speed | **7.20%** | **7.10%** | | Discount rate | **10.03%** | **9.81%** | | Default rate | **1.68%** | **1.63%** | **Changes in MSRs (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Balance, beginning of period | $48,176 | $48,138 | | Additions | $900 | $2,194 | | Reductions from loans paid off | $(644) | $(1,494) | | Changes in valuation inputs or assumptions | $769 | $363 | | Balance, end of period | $49,201 | $49,201 | [Note 6. Goodwill and Other Intangible Assets](index=31&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) This note confirms no changes in goodwill carrying value or impairment for the reporting periods - Goodwill carrying values remained unchanged at **$59.0 million** for HarborOne Bank and **$10.8 million** for HarborOne Mortgage as of September 30, 2023, and December 31, 2022[73](index=73&type=chunk) - No interim goodwill impairment assessment was performed as of September 30, 2023, as management determined no triggering events or changes in circumstances indicated impairment[74](index=74&type=chunk) [Note 7. Deposits](index=33&type=section&id=Note%207.%20Deposits) This note summarizes deposit balances by type and maturity, highlighting growth in term certificates and municipal deposits **Summary of Deposit Balances (in thousands USD):** | Deposit Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | NOW and demand deposit accounts | $997,988 | $1,060,268 | | Regular savings and club accounts | $1,324,635 | $1,468,172 | | Money market deposit accounts | $951,128 | $861,704 | | Total non-certificate accounts | $3,273,751 | $3,390,144 | | Term certificate accounts | $859,266 | $497,975 | | Brokered deposits | $276,941 | $301,380 | | Total deposits | $4,409,958 | $4,189,499 | - Total municipal deposits increased to **$493.4 million** at September 30, 2023, from **$413.5 million** at December 31, 2022. Reciprocal deposits significantly increased to **$177.3 million** from **$28.6 million**[78](index=78&type=chunk) **Certificate Accounts by Maturity (Sep 30, 2023, in thousands USD):** | Maturity | Amount | Weighted Average Rate | | :-------------------- | :----------- | :-------------------- | | Within 1 year | $1,079,547 | **4.19%** | | Over 1 year to 2 years | $27,003 | **2.01%** | | Over 2 years to 3 years | $26,809 | **3.06%** | | Over 3 years to 4 years | $2,467 | **0.73%** | | Over 4 years to 5 years | $381 | **2.58%** | | Total | $1,136,207 | **4.10%** | [Note 8. Borrowings](index=35&type=section&id=Note%208.%20Borrowings) This note details borrowed funds, available borrowing capacities, and the redemption of subordinated notes **Borrowed Funds (in thousands USD):** | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | FHLB borrowings | $475,470 | $400,675 | | Subordinated debt | $34,380 | $34,285 | - FHLB short-term advances were **$250.0 million** at September 30, 2023, with a weighted average rate of **5.52%**[80](index=80&type=chunk) - The Company had significant available borrowing capacity: **$830.7 million** with FHLB, a secured line with FRBB, and **$360.9 million** under the BTFP, with no amounts outstanding under BTFP at September 30, 2023[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - The Company exercised its option to redeem **$35.0 million** in fixed-to-floating-rate subordinated notes due 2028, effective December 1, 2023[87](index=87&type=chunk) [Note 9. Other Commitments and Contingencies](index=37&type=section&id=Note%209.%20Other%20Commitments%20and%20Contingencies) This note outlines off-balance sheet commitments and contingencies, including ACL on unfunded commitments **ACL on Unfunded Commitments (in thousands USD):** | Item | Sep 30, 2023 | Sep 30, 2022 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | :----------- | | Balance at period end | $4,245 | $5,502 | $4,927 | **Off-Balance Sheet Financial Instruments (in thousands USD):** | Commitment Type | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Commitments to grant residential real estate loans | $52,370 | $57,916 | | Commitments to grant other loans | $63,777 | $43,700 | | Unadvanced funds on home equity lines of credit | $255,391 | $251,759 | | Unadvanced funds on revolving lines of credit | $318,427 | $351,382 | | Unadvanced funds on construction loans | $226,626 | $262,945 | [Note 10. Derivatives](index=38&type=section&id=Note%2010.%20Derivatives) This note details derivative financial instruments used for interest-rate risk management and customer financing needs - The Company uses interest rate swaps as fair value hedges for fixed-rate residential mortgages (notional **$100.0 million**) and as cashflow hedges for brokered deposits (notional **$100.0 million**)[94](index=94&type=chunk)[95](index=95&type=chunk)[98](index=98&type=chunk) **Outstanding Notional Balances and Fair Values of Derivatives (Sep 30, 2023, in thousands USD):** | Derivative Type | Notional Amount | Fair Value (Assets) | Fair Value (Liabilities) | | :-------------------------------- | :-------------- | :------------------ | :----------------------- | | Fair value hedge - interest rate swaps | $100,000 | $1,463 | $0 | | Cashflow hedge - interest rate swaps | $100,000 | $6,946 | $0 | | Derivative loan commitments | $40,445 | $420 | $111 | | Forward loan sale commitments | $31,000 | $304 | $0 | | Interest rate swaps (not designated) | $859,275 | $33,889 | $33,889 | | Risk participation agreements | $182,347 | $0 | $0 | | Total derivatives | - | $43,022 | $34,000 | - Derivative loan commitments and forward loan sale commitments are used to mitigate interest rate risk on residential mortgage loans intended for sale in the secondary market[99](index=99&type=chunk)[101](index=101&type=chunk) [Note 11. Operating Lease ROU Assets and Liabilities](index=44&type=section&id=Note%2011.%20Operating%20Lease%20ROU%20Assets%20and%20Liabilities) This note provides information on operating lease ROU assets and liabilities, including weighted-average terms and discount rates **Operating Lease ROU Assets and Liabilities (in thousands USD):** | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Operating lease ROU assets | $23,500 | $26,900 | | Operating lease liabilities | $25,200 | $28,600 | **Weighted-Average Lease Terms and Discount Rates:** | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Weighted-average discount rate | **2.08%** | 2.02% | | Weighted-average remaining lease term (years) | **16.25** | 17.33 | **Total Lease Expense (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Operating lease expense | $766 | $2,365 | | Short-term lease expense | $40 | $105 | | Variable lease expense | $5 | $10 | | Sublease income | $(3) | $(12) | | Total lease expense | $808 | $2,468 | [Note 12. Minimum Regulatory Capital Requirements](index=46&type=section&id=Note%2012.%20Minimum%20Regulatory%20Capital%20Requirements) This note confirms the Company and Bank exceeded all regulatory capital requirements and are 'well capitalized' - Both the Company and the Bank exceeded all regulatory capital requirements and were considered "well capitalized" at September 30, 2023[122](index=122&type=chunk) **HarborOne Bancorp, Inc. Regulatory Capital Ratios (Sep 30, 2023):** | Capital Ratio | Actual Ratio | Minimum Required for Capital Adequacy | | :-------------------------------- | :----------- | :------------------------------------ | | Common equity Tier 1 capital to risk-weighted assets | **12.0%** | **4.5%** | | Tier 1 capital to risk-weighted assets | **12.0%** | **6.0%** | | Total capital to risk-weighted assets | **13.7%** | **8.0%** | | Tier 1 capital to average assets | **10.1%** | **4.0%** | **HarborOne Bank Regulatory Capital Ratios (Sep 30, 2023):** | Capital Ratio | Actual Ratio | Minimum Required for Capital Adequacy | Minimum Required to be "Well Capitalized" | | :-------------------------------- | :----------- | :------------------------------------ | :---------------------------------------- | | Common equity Tier 1 capital to risk-weighted assets | **11.5%** | **4.5%** | **6.5%** | | Tier 1 capital to risk-weighted assets | **11.5%** | **6.0%** | **8.0%** | | Total capital to risk-weighted assets | **12.6%** | **8.0%** | **10.0%** | | Tier 1 capital to average assets | **9.7%** | **4.0%** | **5.0%** | [Note 13. Comprehensive (Loss) Income](index=49&type=section&id=Note%2013.%20Comprehensive%20(Loss)%20Income) This note presents changes in accumulated other comprehensive (loss) income by component **Changes in Accumulated Other Comprehensive (Loss) Income (in thousands USD):** | Component | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net current period other comprehensive (loss) income | $(15,361) | $(14,421) | | Related tax effect | $4,662 | $4,514 | | Balance at end of period | $(56,989) | $(56,989) | [Note 14. Fair Value of Assets and Liabilities](index=50&type=section&id=Note%2014.%20Fair%20Value%20of%20Assets%20and%20Liabilities) This note describes fair value measurements for assets and liabilities, categorized by Level 1, 2, and 3 inputs - Fair value measurements are categorized into Level **1** (quoted prices in active markets), Level **2** (observable inputs other than Level **1** prices), and Level **3** (significant unobservable inputs)[127](index=127&type=chunk)[128](index=128&type=chunk) **Assets and Liabilities Measured at Fair Value on a Recurring Basis (Sep 30, 2023, in thousands USD):** | Item | Level 1 | Level 2 | Level 3 | Total Fair Value | | :-------------------------------- | :------ | :-------- | :-------- | :--------------- | | **Assets:** | | | | | | Securities available for sale | $0 | $271,078 | $0 | $271,078 | | Loans held for sale | $0 | $17,796 | $0 | $17,796 | | Mortgage servicing rights | $0 | $49,201 | $0 | $49,201 | | Derivatives | $0 | $42,298 | $724 | $43,022 | | **Liabilities:** | | | | | | Derivatives | $0 | $33,889 | $111 | $34,000 | **Assets Measured at Fair Value on a Non-recurring Basis (in thousands USD):** | Item | Sep 30, 2023 (Level 3) | Dec 31, 2022 (Level 3) | | :-------------------------------- | :--------------------- | :--------------------- | | Collateral-dependent impaired loans | $7,340 | $349 | [Note 15. Earnings Per Share](index=57&type=section&id=Note%2015.%20Earnings%20Per%20Share) This note provides the calculation for basic and diluted Earnings Per Share (EPS) for the reporting periods **Earnings Per Common Share:** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income available to common stockholders (in thousands) | $8,412 | $13,758 | $23,188 | $36,012 | | Basic EPS | $0.20 | $0.30 | $0.53 | $0.77 | | Diluted EPS | $0.20 | $0.30 | $0.53 | $0.76 | | Weighted average shares outstanding (Basic) | **42,876,893** | 45,830,737 | **43,591,954** | 46,875,312 | | Weighted average shares outstanding (Diluted) | **42,983,477** | 46,420,527 | **43,793,137** | 47,541,647 | [Note 16. Revenue Recognition](index=58&type=section&id=Note%2016.%20Revenue%20Recognition) This note describes the Company's revenue recognition policies, including principal/agent roles and transactional sources - Revenue is recognized when performance obligations are satisfied, either at a point in time (e.g., card interchange fees, ATM fees, loan fees) or over time[157](index=157&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk) - The Company reports revenue based on gross consideration if acting as a principal, and net fee or commission if acting as an agent[159](index=159&type=chunk) [Note 17. Segment Reporting](index=58&type=section&id=Note%2017.%20Segment%20Reporting) This note identifies HarborOne Bank and HarborOne Mortgage as reportable segments, detailing their revenue sources and net income - The Company operates with two reportable segments: HarborOne Bank and HarborOne Mortgage[161](index=161&type=chunk) - HarborOne Bank's revenue is mainly from interest on loans and investment securities, and deposit account service charges. HarborOne Mortgage's revenue is from interest on loans and fees from residential mortgage origination, sale, and servicing[161](index=161&type=chunk) **Segment Net Income (Loss) (in thousands USD):** | Segment | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | HarborOne Bank | $9,104 | $12,490 | $25,455 | $30,650 | | HarborOne Mortgage | $(138) | $1,521 | $(1,122) | $7,147 | | Consolidated Net Income | $8,412 | $13,758 | $23,188 | $36,012 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition, operating results, asset quality, market risk, liquidity, and capital resources [Forward-Looking Statements](index=61&type=section&id=Forward-Looking%20Statements) - This section contains forward-looking statements subject to risks and uncertainties, including economic conditions, interest rate changes, loan defaults, market turbulence, and regulatory changes[169](index=169&type=chunk) [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management's critical accounting policies include Allowance for Credit Losses, Goodwill, and Deferred Tax Assets, which involve significant judgment and estimates susceptible to changes in interest rates, economic performance, and borrower financial condition[173](index=173&type=chunk)[174](index=174&type=chunk) [Recent Developments](index=63&type=section&id=Recent%20Developments) - The Company enacted cost-savings measures and operational efficiencies in 2023, resulting in approximately **$4.6 million** in pre-tax annual savings[176](index=176&type=chunk) - Cash and available-for-sale securities represented **9.1%** of assets at September 30, 2023. The Company maintains access to **$1.3 billion** in contingent liquidity at FHLB and FRBB[177](index=177&type=chunk) - Macroeconomic trends remain mixed, with ongoing uncertainty in the economy and banking industry, potentially impacting the Company's competitive landscape and funding costs[178](index=178&type=chunk) [Comparison of Financial Condition](index=63&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030%2C%202023%20and%20December%2031%2C%202022) Total assets increased to **$5.66 billion**, driven by investments and loans, while equity decreased due to repurchases [Total Assets](index=63&type=section&id=Total%20Assets) - Total assets increased **$304.8 million**, or **5.7%**, to **$5.66 billion** at September 30, 2023, from **$5.36 billion** at December 31, 2022[179](index=179&type=chunk) - The increase was primarily due to a **$149.9 million** increase in short-term investments and a **$173.2 million** increase in loans[179](index=179&type=chunk) [Cash and Cash Equivalents](index=63&type=section&id=Cash%20and%20Cash%20Equivalents) - Cash and cash equivalents increased **$148.8 million** to **$246.8 million** at September 30, 2023, from **$98.0 million** at December 31, 2022, mainly due to increased short-term investments[180](index=180&type=chunk) [Loans Held for Sale](index=64&type=section&id=Loans%20Held%20for%20Sale) - Loans held for sale decreased by **$748,000** to **$17.8 million** at September 30, 2023, from **$18.5 million** at December 31, 2022[181](index=181&type=chunk) [Loans, net](index=65&type=section&id=Loans%2C%20net) - Net loans increased **$170.1 million**, or **3.8%**, to **$4.67 billion** at September 30, 2023, from **$4.50 billion** at December 31, 2022[183](index=183&type=chunk) **Composition of Loans (in thousands USD):** | Loan Type | Sep 30, 2023 | Dec 31, 2022 | Increase (Decrease) | | :-------------------------------- | :----------- | :----------- | :------------------ | | Residential real estate | $1,708,412 | $1,634,319 | $74,093 (4.5%) | | Commercial loans | $2,991,657 | $2,873,930 | $117,727 (4.1%) | | Consumer loans | $24,247 | $41,421 | $(17,174) (-41.5%) | | Total loans before basis adjustment | $4,724,316 | $4,549,670 | $174,646 (3.8%) | | Allowance for credit losses on loans | $(48,312) | $(45,236) | $(3,076) (6.8%) | | Loans, net | $4,674,542 | $4,504,434 | $170,108 (3.8%) | - The increase in net loans was primarily driven by commercial real estate and residential real estate loan growth[184](index=184&type=chunk) [Securities](index=65&type=section&id=Securities) - Investment securities available for sale decreased **$30.0 million** (**10.0%**) to **$271.1 million** at September 30, 2023, from **$301.1 million** at December 31, 2022, primarily due to unrealized losses from interest rate changes[185](index=185&type=chunk) - Securities held to maturity were **$19.8 million** at September 30, 2023, with a fair value of **$18.7 million**[186](index=186&type=chunk) [Mortgage servicing rights](index=65&type=section&id=Mortgage%20servicing%20rights) - Total Mortgage Servicing Rights (MSRs) were **$49.2 million** at September 30, 2023, up from **$48.1 million** at December 31, 2022[187](index=187&type=chunk) - The change in MSRs for the nine months ended September 30, 2023, included **$2.2 million** in additions, **$1.5 million** in amortization from loan repayment, and a positive fair value mark of **$363,000**[187](index=187&type=chunk) - MSR fair value is significantly impacted by residential mortgage benchmark indices; increasing interest rates generally increase MSR fair value by reducing prepayment speeds[192](index=192&type=chunk) [Deposits](index=67&type=section&id=Deposits) - Deposits increased **$220.5 million**, or **5.3%**, to **$4.41 billion** at September 30, 2023, from **$4.19 billion** at December 31, 2022[193](index=193&type=chunk) **Composition of Deposits (in thousands USD):** | Deposit Type | Sep 30, 2023 | Dec 31, 2022 | Increase (Decrease) | | :-------------------------------- | :----------- | :----------- | :------------------ | | Noninterest-bearing deposits | $708,847 | $762,576 | $(53,729) (**-7.0%**) | | NOW accounts | $289,085 | $297,625 | $(8,540) (**-2.9%**) | | Regular savings | $1,324,635 | $1,468,172 | $(143,537) (**-9.8%**) | | Money market accounts | $470,499 | $451,663 | $18,836 (**4.2%**) | | Term certificate accounts | $846,568 | $494,599 | $351,969 (**71.2%**) | | Consumer and business deposits | $3,639,634 | $3,474,635 | $164,999 (**4.7%**) | | Municipal deposits | $493,383 | $413,484 | $79,899 (**19.3%**) | | Brokered deposits | $276,941 | $301,380 | $(24,439) (**-8.1%**) | | Total deposits | $4,409,958 | $4,189,499 | $220,459 (**5.3%**) | | Reciprocal deposits | $177,271 | $28,560 | $148,711 (**520.7%**) | - Uninsured deposits, after excluding subsidiary and collateralized deposits, represented **26%** of total deposits at September 30, 2023[196](index=196&type=chunk) [Borrowed Funds](index=68&type=section&id=Borrowed%20Funds) - FHLB borrowings increased **$74.8 million** to **$475.5 million** at September 30, 2023, from **$400.7 million** at December 31, 2022[197](index=197&type=chunk) - At September 30, 2023, the Bank had **$1.28 billion** in available borrowing capacity across multiple relationships[197](index=197&type=chunk) [Stockholders' equity](index=68&type=section&id=Stockholders'%20equity) - Total stockholders' equity was **$584.6 million** at September 30, 2023, a **5.2%** decrease from **$617.0 million** at December 31, 2022, primarily due to share repurchases[198](index=198&type=chunk) - The tangible-common-equity-to-tangible-assets ratio was **9.17%** at September 30, 2023, down from **10.31%** at December 31, 2022[199](index=199&type=chunk) - Regulatory capital ratios for both the Company and the Bank exceeded all requirements, including the capital conservation buffer, and were not impacted by unrealized losses on available-for-sale investment securities[199](index=199&type=chunk) [Comparison of Results of Operations](index=68&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) Consolidated net income decreased due to higher interest expense, impacting net interest income and segment performance [Overview](index=68&type=section&id=Overview) **Consolidated Net Income (in thousands USD):** | Period | 2023 | 2022 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | $8,412 | $13,758 | | Nine months ended September 30 | $23,188 | $36,012 | [Average Balances and Yields](index=68&type=section&id=Average%20Balances%20and%20Yields) **Average Balances and Yields (3 Months Ended Sep 30, in thousands USD):** | Item | 2023 Average Balance | 2023 Yield/Cost | 2022 Average Balance | 2022 Yield/Cost | | :-------------------------------- | :------------------- | :-------------- | :------------------- | :-------------- | | Total interest-earning assets | $5,310,258 | **4.74%** | $4,502,230 | **3.93%** | | Total interest-bearing liabilities | $4,193,726 | **3.04%** | $3,312,898 | **0.63%** | | Net interest margin (fully tax equivalent) | - | **2.34%** | - | **3.47%** | | Cost of total deposits | - | **2.28%** | - | **0.36%** | **Average Balances and Yields (9 Months Ended Sep 30, in thousands USD):** | Item | 2023 Average Balance | 2023 Yield/Cost | 2022 Average Balance | 2022 Yield/Cost | | :-------------------------------- | :------------------- | :-------------- | :------------------- | :-------------- | | Total interest-earning assets | $5,219,080 | **4.63%** | $4,333,172 | **3.70%** | | Total interest-bearing liabilities | $4,105,631 | **2.68%** | $3,156,892 | **0.43%** | | Net interest margin (fully tax equivalent) | - | **2.52%** | - | **3.39%** | | Cost of total deposits | - | **1.92%** | - | **0.25%** | [Rate/Volume Analysis](index=74&type=section&id=Rate%2FVolume%20Analysis) **Change in Net Interest Income (3 Months Ended Sep 30, 2023 vs. 2022, in thousands USD):** | Item | Due to Volume | Due to Rate | Total Increase (Decrease) | | :-------------------------------- | :------------ | :---------- | :------------------------ | | Total interest-earning assets | $9,129 | $9,730 | $18,859 | | Total interest-bearing liabilities | $4,405 | $22,455 | $26,860 | | Change in net interest income | $4,724 | $(12,725) | $(8,001) | **Change in Net Interest Income (9 Months Ended Sep 30, 2023 vs. 2022, in thousands USD):** | Item | Due to Volume | Due to Rate | Total Increase (Decrease) | | :-------------------------------- | :------------ | :---------- | :------------------------ | | Total interest-earning assets | $26,149 | $34,404 | $60,553 | | Total interest-bearing liabilities | $17,114 | $54,993 | $72,107 | | Change in net interest income | $9,035 | $(20,589) | $(11,554) | [Interest and Dividend Income](index=74&type=section&id=Interest%20and%20Dividend%20Income) - Interest and dividend income (tax equivalent) increased **$18.9 million** (**42.3%**) to **$63.4 million** for the three months ended September 30, 2023, driven by loan growth and higher yields[214](index=214&type=chunk)[215](index=215&type=chunk) - For the nine months ended September 30, 2023, interest and dividend income increased **$60.6 million** (**50.5%**), reflecting similar trends of increased volume and rates on interest-bearing assets[217](index=217&type=chunk) [Interest Expense](index=75&type=section&id=Interest%20Expense) - Interest expense increased **$26.9 million** (**514.1%**) to **$32.1 million** for the three months ended September 30, 2023, primarily due to deposit growth and a **227 basis-point** increase in deposit rates, as well as higher FHLB borrowing costs[217](index=217&type=chunk)[222](index=222&type=chunk) - For the nine months ended September 30, 2023, interest expense increased **$72.1 million** (**705.7%**), reflecting similar trends of increased volume and rates on interest-bearing liabilities[218](index=218&type=chunk) [Net Interest and Dividend Income](index=75&type=section&id=Net%20Interest%20and%20Dividend%20Income) - Net interest and dividend income (tax equivalent) decreased **$8.0 million** (**20.3%**) to **$31.3 million** for the three months ended September 30, 2023, as rate increases on interest-bearing liabilities outpaced asset yields[219](index=219&type=chunk) - The net interest spread was **1.70%** for the three months ended September 30, 2023, down from **3.30%** in the prior year, and net interest margin decreased to **2.34%** from **3.47%**[219](index=219&type=chunk) - For the nine months ended September 30, 2023, net interest and dividend income decreased **$11.6 million** (**10.5%**) to **$98.2 million**, with net interest margin decreasing to **2.52%** from **3.39%**[220](index=220&type=chunk) [Income Tax Provision](index=75&type=section&id=Income%20Tax%20Provision) **Income Tax Provision and Effective Tax Rate:** | Period | Provision (in thousands USD) | Effective Tax Rate | | :-------------------------------- | :----------------------- | :----------------- | | Three months ended September 30, 2023 | $2,507 | **23.0%** | | Three months ended September 30, 2022 | $4,678 | **25.4%** | | Nine months ended September 30, 2023 | $7,198 | **23.7%** | | Nine months ended September 30, 2022 | $13,380 | **27.1%** | [Segments](index=75&type=section&id=Segments) [HarborOne Bank Segment](index=78&type=section&id=HarborOne%20Bank%20Segment) HarborOne Bank's net income decreased due to lower net interest income, despite improved noninterest income and expense [Results of Operations](index=78&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **HarborOne Bank Net Income (in thousands USD):** | Period | 2023 | 2022 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | $9,104 | $12,490 | | Nine months ended September 30 | $25,455 | $30,650 | [Provision for Credit Losses](index=78&type=section&id=Provision%20for%20Credit%20Losses) - The Bank recorded a reversal of provision for credit losses of **$113,000** for the three months ended September 30, 2023, driven by a **$586,000** reversal for unfunded commitments, partially offset by a **$472,000** provision for loan credit losses[228](index=228&type=chunk) - For the nine months ended September 30, 2023, provision for credit losses was **$5.0 million**, reflecting a **$5.7 million** provision for loan credit losses, partially offset by a **$682,000** reversal for unfunded commitments[228](index=228&type=chunk) - Nonperforming assets to total assets were **0.33%** at September 30, 2023, down from **0.47%** at September 30, 2022[229](index=229&type=chunk) [Noninterest Income](index=78&type=section&id=Noninterest%20Income) **HarborOne Bank Noninterest Income (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total mortgage banking income (loss) | $8 | $(522) | $(409) | $(1,056) | | Interchange fees | $2,685 | $2,574 | $7,877 | $7,754 | | Other deposit account fees | $2,447 | $2,296 | $7,001 | $6,480 | | Swap fee income | $233 | $70 | $688 | $112 | | Total noninterest income | $6,511 | $5,658 | $18,650 | $17,095 | - The Bank's intersegment loss on loans purchased from HarborOne Mortgage decreased, reflecting lower residential mortgage loan purchases[234](index=234&type=chunk) - Other deposit account fees increased due to higher overdraft protection fees and fees on business accounts[234](index=234&type=chunk) [Noninterest Expense](index=81&type=section&id=Noninterest%20Expense) **HarborOne Bank Noninterest Expense (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Compensation and benefits | $15,238 | $16,455 | $45,069 | $47,942 | | Occupancy and equipment | $3,828 | $4,096 | $12,033 | $12,598 | | Data processing expenses | $2,527 | $2,219 | $7,187 | $6,552 | | Deposit insurance | $1,004 | $357 | $2,690 | $1,060 | | Total noninterest expense | $26,272 | $27,707 | $78,655 | $81,663 | - Compensation expense decreased due to lower incentive and benefit expenses and headcount reductions, despite including one-time severance costs[237](index=237&type=chunk) - Deposit insurance expense increased significantly due to a **two-basis-point** increase in the insurance rate[237](index=237&type=chunk) [HarborOne Mortgage Segment](index=82&type=section&id=HarborOne%20Mortgage%20Segment) HarborOne Mortgage reported net losses due to weak mortgage demand and decreased banking income from higher interest rates [Results of Operations](index=82&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) **HarborOne Mortgage Net Income (Loss) (in thousands USD):** | Period | 2023 | 2022 | | :-------------------------------- | :----- | :----- | | Three months ended September 30 | $(138) | $1,521 | | Nine months ended September 30 | $(1,122) | $7,147 | [Noninterest Income](index=84&type=section&id=Noninterest%20Income) **HarborOne Mortgage Noninterest Income (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gain on sale of mortgage loans | $2,704 | $3,809 | $8,228 | $13,669 | | Changes in mortgage servicing rights fair value | $107 | $1,652 | $(1,042) | $7,082 | | Total mortgage banking income | $5,142 | $8,394 | $14,193 | $30,336 | - Gain on sale of mortgages and processing, underwriting, and closing fees decreased due to weak mortgage demand from higher interest rates[243](index=243&type=chunk) - The change in MSR fair value for the three and nine months ended September 30, 2023, reflected increased benchmark residential rates, muted by MSR price caps and amortization[240](index=240&type=chunk)[242](index=242&type=chunk) [Noninterest Expense](index=85&type=section&id=Noninterest%20Expense) **HarborOne Mortgage Noninterest Expense (in thousands USD):** | Item | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Compensation and benefits | $4,014 | $4,788 | $11,289 | $15,974 | | Total noninterest expense | $5,490 | $6,610 | $16,305 | $21,613 | - Compensation and benefits decreased primarily due to lower commission expense, consistent with reduced mortgage origination volumes, and decreased staffing levels, including severance costs[246](index=246&type=chunk) [Asset Quality](index=86&type=section&id=Asset%20Quality) Asset quality remains strong with nonperforming assets at **0.33%** of total assets, though commercial real estate is monitored **Nonperforming Assets (in thousands USD):** | Item | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Total non-accrual loans | $18,783 | $14,786 | | Other real estate owned and repossessed assets | $12 | $54 | | Total nonperforming assets | $18,795 | $14,840 | | Allowance for credit losses to total loans | **1.02%** | 0.99% | | Allowance for credit losses to non-accrual loans | **257.21%** | 305.94% | | Total nonperforming assets to total assets | **0.33%** | 0.28% | - Management monitors commercial real estate sectors (business-oriented hotels, non-anchored retail, metro office space) for increased credit risk due to pandemic trends and current economic conditions[251](index=251&type=chunk) - The ACL on loans was **$48.3 million** (**1.02%** of total loans) at September 30, 2023, with a sensitivity analysis indicating potential changes between a **$12.8 million** reduction and **$12.2 million** increase based on qualitative risk factors[257](index=257&type=chunk)[258](index=258&type=chunk) [Management of Market Risk](index=91&type=section&id=Management%20of%20Market%20Risk) Market risk, primarily interest-rate risk, is managed via income simulation and Economic Value of Equity (EVE) analysis [Net Interest Income Analysis](index=91&type=section&id=Net%20Interest%20Income%20Analysis) - The Company uses income simulation to measure interest-rate risk by estimating the effect of instantaneous parallel shifts in market rates on net interest income over specified time frames[265](index=265&type=chunk) **Net Interest Income Simulation Results (Change from Year One Base):** | Changes in Interest Rates (basis points) | Sep 30, 2023 (Year One) | Sep 30, 2023 (Year Two) | Sep 30, 2022 (Year One) | Sep 30, 2022 (Year Two) | | :--------------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | +300 | (**-13.1%**) | (**-11.8%**) | (**-6.9%**) | (**-4.4%**) | | +200 | (**-8.6%**) | (**-7.7%**) | (**-4.4%**) | (**-2.5%**) | | +100 | (**-4.2%**) | (**-3.5%**) | (**-2.2%**) | (**-1.2%**) | | -100 | **4.6%** | **4.7%** | **0.8%** | (**-1.1%**) | [Economic Value of Equity Analysis](index=91&type=section&id=Economic%20Value%20of%20Equity%20Analysis) - The EVE methodology calculates the difference between the present value of expected cash flows from assets and liabilities, assuming immediate parallel shifts in the yield curve[267](index=267&type=chunk) **Estimated Changes in EVE (Sep 30, 2023, in thousands USD):** | Changes in Interest Rates (basis points) | Estimated EVE | Estimated Increase (Decrease) in EVE (Amount) | Estimated Increase (Decrease) in EVE (Percent) | EVE as a Percentage of Economic Value of Assets | | :--------------------------------------- | :------------ | :-------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | +300 | $412,808 | $(192,950) | (**-31.9%**) | **8.6%** | | +200 | $482,037 | $(123,721) | (**-20.4%**) | **9.7%** | | +100 | $552,023 | $(53,735) | (**-8.9%**) | **10.8%** | | 0 | $605,758 | $0 | **0%** | **11.6%** | | -100 | $650,654 | $44,896 | **7.4%** | **12.0%** | [Liquidity Management and Capital Resources](index=92&type=section&id=Liquidity%20Management%20and%20Capital%20Resources) The Company maintains strong liquidity and capital resources, exceeding all regulatory requirements and considered 'well capitalized' - The Company's primary sources of funds include deposit inflows, loan repayments, maturities and sales of securities, and FHLB borrowings[273](index=273&type=chunk) - At September 30, 2023, the Company had **$246.8 million** in cash and cash equivalents, and additional borrowing capacity of **$830.7 million** from FHLB, **$68.0 million** from FRBB, and **$360.9 million** from the BTFP[275](index=275&type=chunk) - The Company and the Bank exceeded all regulatory capital requirements at September 30, 2023, and were considered "well capitalized"[281](index=281&type=chunk) [Non-GAAP Financial Measures and Reconciliation to GAAP](index=94&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation%20to%20GAAP) - The tangible-common-equity-to-tangible-assets ratio is presented as a non-GAAP financial measure, used by regulators and analysts to evaluate financial condition[282](index=282&type=chunk) **Tangible Common Equity to Tangible Assets Ratio (in thousands USD):** | Item | Sep 30, 2023 | Sep 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Total stockholders' equity | $584,634 | $611,370 | | Less: Goodwill | $69,802 | $69,802 | | Less: Other intangible assets | $1,704 | $2,461 | | Tangible common equity | $513,128 | $539,107 | | Total assets | $5,664,387 | $4,987,643 | | Less: Goodwill | $69,802 | $69,802 | | Less: Other intangible assets | $1,704 | $2,461 | | Tangible assets | $5,592,881 | $4,915,380 | | Tangible common equity / tangible assets | **9.17%** | **10.97%** | [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=96&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item refers to the 'Management of Market Risk' section for disclosures on interest-rate risk management - Information on quantitative and qualitative disclosures about market risk is included in the "Management of Market Risk" section of Item **2**[286](index=286&type=chunk) [ITEM 4. Controls and Procedures](index=96&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes in internal control over financial reporting [Disclosure Controls and Procedures](index=96&type=section&id=Disclosure%20Controls%20and%20Procedures) - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023, ensuring timely and accurate reporting of information[286](index=286&type=chunk) [Internal Control Over Financial Reporting](index=96&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) - No material changes in the Company's internal controls over financial reporting occurred during the quarter ended September 30, 2023[287](index=287&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=97&type=section&id=ITEM%201.%20Legal%20Proceedings) No material changes to legal proceedings have occurred, and no current proceedings are deemed material - No material changes in legal proceedings have occurred since previous filings, and no current proceedings are deemed material to the Company's financial condition or results of operations[290](index=290&type=chunk) [ITEM 1A. Risk Factors](index=97&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors in the Annual Report or prior Quarterly Report - No material changes to the risk factors previously disclosed in the Annual Report on Form **10-K** for **2022** and the Quarterly Report on Form **10-Q** for Q1 **2023**[291](index=291&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=98&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred; details of the share repurchase program are provided - No unregistered sales of equity securities occurred[292](index=292&type=chunk) **Repurchase of Equity Securities (Q3 2023):** | Period | Total shares purchased | Average price paid per share | Maximum shares yet to be purchased | | :-------------------------- | :--------------------- | :--------------------------- | :--------------------------------- | | July 1 to July 31, 2023 | 30,000 | $10.65 | 2,295,489 | | August 1 to August 31, 2023 | 300,000 | $10.12 | 1,995,489 | | September 1 to September 30, 2023 | 322,523 | $9.69 | 1,672,966 | | Total (Q3 2023) | 652,523 | $9.93 | 1,672,966 | - The Company commenced a sixth share repurchase program in Q3 2023, repurchasing **652,523 shares** at an average price of **$9.93**, with the program expiring on June 30, 2024[292](index=292&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=98&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[293](index=293&type=chunk) [ITEM 4. Mine Safety Disclosures](index=98&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable[294](index=294&type=chunk) [ITEM 5. Other Information](index=98&type=section&id=ITEM%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading plans were adopted, modified, or terminated by officers/directors - No directors or executive officers had, adopted, modified, or terminated Rule **10b5-1** trading plans or non-Rule **10b5-1** trading arrangements during the quarter[295](index=295&type=chunk) [ITEM 6. Exhibits](index=99&type=section&id=ITEM%206.%20Exhibits) This item lists exhibits included or incorporated by reference into this Quarterly Report on Form 10-Q - The report includes certifications (**31.1**, **31.2**, **32.1**) and interactive data files (**101**, **104**) as exhibits[298](index=298&type=chunk)

[Table of Contents](index=1&type=section&id=Table%20of%20Contents) [Glossary of Acronyms and Terms](index=5&type=section&id=Glossary%20of%20Acronyms%20and%20Terms) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements](index=6&type=section&id=ITEM%201.%20Financial%20Statements) This section presents HarborOne Bancorp, Inc.'s unaudited consolidated financial statements and notes, detailing key financial positions and policies [Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022](index=6&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20and%20December%2031%2C%202022) Consolidated Balance Sheets ($ thousands) | Metric ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | **Assets** | | | | Cash and bank deposits | 43,525 | 39,712 | | Short-term investments | 209,326 | 58,305 | | Total cash and cash equivalents | 252,851 | 98,017 | | Available-for-sale securities (at fair value) | 292,012 | 301,149 | | Held-to-maturity securities (at amortized cost) | 19,839 | 19,949 | | Net loans | 4,650,382 | 4,504,434 | | Mortgage servicing rights (at fair value) | 48,176 | 48,138 | | Goodwill | 69,802 | 69,802 | | Total assets | 5,659,254 | 5,359,545 | | **Liabilities and Stockholders' Equity** | | | | Total deposits | 4,287,488 | 4,189,499 | | FHLB borrowings | 604,568 | 400,675 | | Total liabilities | 5,063,722 | 4,742,569 | | Total stockholders' equity | 595,532 | 616,976 | | Total liabilities and stockholders' equity | 5,659,254 | 5,359,545 | - As of June 30, 2023, total assets increased to **$5.66 billion**, a **5.6% increase** from $5.36 billion on December 31, 2022, primarily driven by increases in short-term investments and loans[11](index=11&type=chunk)[176](index=176&type=chunk) - Cash and cash equivalents significantly increased by **$154.8 million**, from $98.0 million on December 31, 2022, to **$252.9 million** on June 30, 2023, mainly reflecting an increase in short-term investments[11](index=11&type=chunk)[177](index=177&type=chunk) [Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022](index=8&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Consolidated Statements of Income ($ thousands) | Metric ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total interest and dividend income | 60,800 | 39,857 | 116,739 | 75,459 | | Total interest expense | 28,700 | 2,662 | 50,241 | 4,994 | | Net interest and dividend income | 32,100 | 37,195 | 66,498 | 70,465 | | Provision for credit losses | 3,283 | 2,546 | 5,149 | 2,884 | | Total non-interest income | 12,662 | 14,103 | 21,352 | 33,164 | | Total non-interest expense | 31,725 | 34,954 | 63,234 | 69,789 | | Net income | 7,479 | 9,987 | 14,776 | 22,254 | | Basic earnings per share | 0.17 | 0.21 | 0.34 | 0.47 | | Diluted earnings per share | 0.17 | 0.21 | 0.33 | 0.46 | - For the three months ended June 30, 2023, net income was **$7.5 million**, a **25.1% decrease** year-over-year (compared to $10.0 million in the prior year period)[14](index=14&type=chunk)[197](index=197&type=chunk) - For the six months ended June 30, 2023, net income was **$14.8 million**, a **33.5% decrease** year-over-year (compared to $22.3 million in the prior year period)[14](index=14&type=chunk)[197](index=197&type=chunk) - Net interest and dividend income decreased by **13.1% to $32.3 million** for the three months ended June 30, 2023, primarily due to the growth in interest rates on interest-bearing liabilities exceeding the growth in yields on interest-earning assets[14](index=14&type=chunk)[217](index=217&type=chunk) [Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2023 and 2022](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Consolidated Statements of Comprehensive (Loss) Income ($ thousands) | Metric ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | 7,479 | 9,987 | 14,776 | 22,254 | | Total other comprehensive (loss) income | (3,880) | (15,220) | 792 | (32,630) | | Comprehensive (loss) income | 3,599 | (5,233) | 15,568 | (10,376) | - For the three months ended June 30, 2023, comprehensive income was **$3.6 million**, compared to a comprehensive loss of $5.2 million in the prior year period, primarily influenced by changes in unrealized gains and losses on available-for-sale securities[15](index=15&type=chunk) - For the six months ended June 30, 2023, comprehensive income was **$15.6 million**, compared to a comprehensive loss of $10.4 million in the prior year period[15](index=15&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2023 and 2022](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Consolidated Statements of Changes in Stockholders' Equity ($ thousands) | Metric ($ thousands) | June 30, 2023 | June 30, 2022 | | :----------------------- | :------------- | :------------- | | Total stockholders' equity (beginning balance) | 599,794 | 649,065 | | Comprehensive (loss) income | 3,599 | (5,233) | | Dividends declared | (3,224) | (3,250) | | Treasury stock repurchases | (5,810) | (18,783) | | Total stockholders' equity (ending balance) | 595,532 | 624,478 | - As of June 30, 2023, total stockholders' equity was **$595.5 million**, a **3.5% decrease** from $617.0 million on December 31, 2022, primarily due to earnings being offset by stock repurchases[17](index=17&type=chunk)[192](index=192&type=chunk) - The company completed its fifth stock repurchase program on April 13, 2023, repurchasing **2,450,208 shares** at an average price of **$13.01 per share**[17](index=17&type=chunk)[192](index=192&type=chunk) [Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Consolidated Statements of Cash Flows ($ thousands) | Metric ($ thousands) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :----------------------- | :--------------------- | :--------------------- | | Net cash provided by operating activities | 41,568 | 21,060 | | Net cash used in investing activities | (150,201) | (302,108) | | Net cash provided by financing activities | 263,467 | 170,667 | | Net change in cash and cash equivalents | 154,834 | (110,381) | | Cash and cash equivalents (ending balance) | 252,851 | 84,338 | - For the six months ended June 30, 2023, net cash provided by operating activities increased to **$41.6 million**, a **97.4% increase** from $21.1 million in the prior year period[19](index=19&type=chunk) - Net cash provided by financing activities significantly increased to **$263.5 million**, compared to $170.7 million in the prior year period, primarily due to a net increase in deposits and FHLB borrowings[22](index=22&type=chunk) [Notes to Consolidated Financial Statements (unaudited)](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28unaudited%29) [Note 1. Summary of Significant Accounting Policies](index=14&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) - The company offers various financial services, including checking, money market, savings, and certificate of deposit accounts, with primary loan products covering commercial real estate, commercial, residential mortgage, home equity, and consumer loans[28](index=28&type=chunk) - In the first quarter of 2023, the banking industry experienced significant volatility, and the company assessed its liquidity sources, including FHLB advances, the BTFP program, investment securities, and loan sales, to address potential deposit outflows and funding needs[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The company adopted ASU 2022-02 on January 1, 2023, which eliminated accounting guidance for troubled debt restructurings (TDRs) and enhanced disclosure requirements for certain loan refinancings and restructurings, with no material impact on its financial statements[35](index=35&type=chunk) [Note 2. Debt Securities](index=16&type=section&id=Note%202.%20Debt%20Securities) Debt Securities ($ thousands) | Security Type ($ thousands) | June 30, 2023 (Amortized Cost) | June 30, 2023 (Fair Value) | December 31, 2022 (Amortized Cost) | December 31, 2022 (Fair Value) | | :------------------------------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Total available-for-sale securities | 358,544 | 292,012 | 369,404 | 301,149 | | Total held-to-maturity securities | 19,839 | 19,005 | 19,949 | 19,274 | - As of June 30, 2023, the fair value of available-for-sale debt securities was **$292.0 million**, a **$9.1 million decrease** from $301.1 million on December 31, 2022, primarily due to unrealized losses[36](index=36&type=chunk)[37](index=37&type=chunk)[182](index=182&type=chunk) - As of June 30, 2023, **131** of the **132** debt securities in the company's portfolio were in an unrealized loss position, mainly related to mortgage-backed securities and other obligations issued by U.S. government-sponsored entities and agencies, with these losses primarily attributable to interest rate changes rather than credit quality deterioration[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3. Loans Held for Sale](index=21&type=section&id=Note%203.%20Loans%20Held%20for%20Sale) Loans Held for Sale ($ thousands) | Metric ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | Loans held for sale (fair value) | 20,949 | 18,544 | | Loans held for sale (contractual principal balance) | 20,578 | 18,208 | | Fair value less outstanding principal balance | 371 | 336 | - As of June 30, 2023, the fair value of loans held for sale was **$20.9 million**, a **$2.4 million increase** from $18.5 million on December 31, 2022[45](index=45&type=chunk)[177](index=177&type=chunk) - The company elected the fair value option for mortgage loans to better match changes in the fair value of loans with changes in the fair value of forward sale commitment contracts used for economic hedging[45](index=45&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=23&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Loans ($ thousands) | Loan Type ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | Total residential real estate loans | 1,702,210 | 1,634,319 | | Total commercial loans | 2,969,012 | 2,873,930 | | Total consumer loans | 27,425 | 41,421 | | Total loans (before adjustments) | 4,698,647 | 4,549,670 | | Allowance for credit losses | (47,821) | (45,236) | | Net loans | 4,650,382 | 4,504,434 | - As of June 30, 2023, net loans increased to **$4.65 billion**, a **3.2% increase** from $4.50 billion on December 31, 2022, primarily driven by growth in commercial real estate and residential real estate loans[47](index=47&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) Allowance for Credit Losses Activity ($ thousands) | Allowance for Credit Losses Activity ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Beginning balance | 46,994 | 41,765 | 45,236 | 45,377 | | Charge-offs | (2,988) | (11) | (3,002) | (2,857) | | Recoveries | 317 | 516 | 342 | 632 | | Provision | 3,498 | 1,290 | 5,245 | 1,719 | | Ending balance | 47,821 | 43,560 | 47,821 | 43,560 | - As of June 30, 2023, the allowance for credit losses was **$47.8 million**, representing **1.02% of total loans**, an increase from $45.2 million (0.99% of total loans) on December 31, 2022[47](index=47&type=chunk)[181](index=181&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) Delinquent and Nonaccrual Loans ($ thousands) | Delinquent and Nonaccrual Loans ($ thousands) | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :--------------- | | 30-59 days delinquent | 8,012 | 4,510 | | 60-89 days delinquent | 1,030 | 1,122 | | 90 days or more delinquent | 4,300 | 9,793 | | Total delinquent | 13,342 | 15,425 | | Nonaccrual loans | 20,210 | 14,786 | - As of June 30, 2023, total nonaccrual loans were **$20.2 million**, an increase from $14.8 million on December 31, 2022[54](index=54&type=chunk)[247](index=247&type=chunk) [Note 5. Mortgage Loan Servicing](index=30&type=section&id=Note%205.%20Mortgage%20Loan%20Servicing) - As of June 30, 2023, the total unpaid principal balance of mortgage loans serviced for others was **$3.60 billion**, slightly lower than $3.62 billion on December 31, 2022[66](index=66&type=chunk) Mortgage Servicing Rights (MSRs) Key Assumptions | Mortgage Servicing Rights (MSRs) Key Assumptions | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :--------------- | | Prepayment speed | 7.20 % | 7.10 % | | Discount rate | 9.90 % | 9.81 % | | Default rate | 1.41 % | 1.63 % | - As of June 30, 2023, total Mortgage Servicing Rights (MSRs) were **$48.2 million**, largely consistent with $48.1 million on December 31, 2022, reflecting the combined impact of new MSRs, loan repayment amortization, and negative fair value adjustments[67](index=67&type=chunk)[184](index=184&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=31&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) - As of June 30, 2023, and December 31, 2022, the goodwill carrying value was **$69.8 million**, with $59.0 million attributed to HarborOne Bank and $10.8 million to HarborOne Mortgage[68](index=68&type=chunk) - The company performs its annual goodwill impairment test on October 31 or when a triggering event occurs, and no triggering events requiring an interim impairment assessment were identified as of June 30, 2023[69](index=69&type=chunk) [Note 7. Deposits](index=33&type=section&id=Note%207.%20Deposits) Deposits ($ thousands) | Deposit Type ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | Demand and checking accounts | 1,004,528 | 1,060,268 | | Regular savings and club accounts | 1,390,906 | 1,468,172 | | Money market deposit accounts | 834,120 | 861,704 | | Total non-certificate accounts | 3,229,554 | 3,390,144 | | Total certificate of deposit accounts | 1,057,934 | 799,355 | | Brokered deposits | 315,003 | 301,380 | | Total deposits | 4,287,488 | 4,189,499 | - As of June 30, 2023, total deposits increased to **$4.29 billion**, a **2.3% increase** from $4.19 billion on December 31, 2022, primarily driven by increases in municipal and brokered deposits[73](index=73&type=chunk)[189](index=189&type=chunk) - As of June 30, 2023, municipal deposits were **$497.9 million**, a **20.4% increase** from $413.5 million on December 31, 2022[73](index=73&type=chunk)[189](index=189&type=chunk) - The company participates in reciprocal deposit programs, with total reciprocal deposits of **$149.2 million** as of June 30, 2023, a significant increase from $28.6 million on December 31, 2022[73](index=73&type=chunk)[189](index=189&type=chunk) [Note 8. Borrowings](index=35&type=section&id=Note%208.%20Borrowings) Borrowings ($ thousands) | Borrowing Type ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | FHLB short-term advances | 414,000 | 385,000 | | FHLB long-term advances | 190,568 | 15,675 | | Total FHLB borrowings | 604,568 | 400,675 | | Subordinated debt | 34,348 | 34,285 | - As of June 30, 2023, FHLB borrowings increased to **$604.6 million**, a **$203.9 million increase** from $400.7 million on December 31, 2022, primarily to enhance liquidity[75](index=75&type=chunk)[191](index=191&type=chunk) - The company has an additional borrowing capacity of **$583.7 million** from FHLB, **$68.8 million** from FRBB, and **$366.8 million** through the FRB BTFP program[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[272](index=272&type=chunk) - The company issued **$35.0 million** in fixed-to-floating rate subordinated notes on August 30, 2018, with the interest rate resetting on September 1, 2023[82](index=82&type=chunk) [Note 9. Other Commitments and Contingencies](index=37&type=section&id=Note%209.%20Other%20Commitments%20and%20Contingencies) Allowance for Credit Losses (Unfunded Commitments) ($ thousands) | Allowance for Credit Losses (Unfunded Commitments) ($ thousands) | June 30, 2023 | June 30, 2022 | | :-------------------------------------- | :------------- | :------------- | | Beginning balance | 5,046 | 3,840 | | Provision | (215) | 1,256 | | Ending balance | 4,831 | 5,096 | - As of June 30, 2023, the allowance for credit losses on unfunded commitments was **$4.8 million**, slightly lower than $5.1 million in the prior year period[84](index=84&type=chunk)[256](index=256&type=chunk) Off-Balance Sheet Financial Instruments ($ thousands) | Off-Balance Sheet Financial Instruments ($ thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------- | :--------------- | | Commitments to originate residential real estate loans | 67,347 | 57,916 | | Commitments to originate other loans | 84,676 | 43,700 | | Unfunded home equity lines of credit | 256,957 | 251,759 | | Unfunded revolving lines of credit | 314,496 | 351,382 | | Unfunded construction loans | 287,523 | 262,945 | - As of June 30, 2023, the company had **$152.0 million** in loan origination commitments and **$859.0 million** in unfunded loan commitments[88](index=88&type=chunk)[276](index=276&type=chunk) [Note 10. Derivatives](index=38&type=section&id=Note%2010.%20Derivatives) - The company uses derivative financial instruments to manage interest rate risk, including interest rate swap agreements designated as fair value and cash flow hedges, as well as derivative loan commitments and forward loan sale commitments not designated as hedging instruments[89](index=89&type=chunk)[90](index=90&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) Derivative Instruments ($ thousands) | Derivative Instruments ($ thousands) | June 30, 2023 (Notional Amount) | June 30, 2023 (Fair Value of Assets) | June 30, 2023 (Fair Value of Liabilities) | | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Total designated as hedging instruments | 200,000 | 8,006 | — | | Total not designated as hedging instruments | 1,016,466 | 28,910 | 28,212 | | Total derivative instruments | — | 36,916 | 28,212 | - As of June 30, 2023, the company had two interest rate swap agreements with a notional amount of **$100.0 million** each, designated as fair value hedges of fixed-rate residential mortgage loans[91](index=91&type=chunk) - As of June 30, 2023, the company had one interest rate swap agreement with a notional amount of **$100.0 million**, designated as a cash flow hedge of brokered deposits, with a fair value of **$7.6 million**[94](index=94&type=chunk) [Note 11. Operating Lease ROU Assets and Liabilities](index=45&type=section&id=Note%2011.%20Operating%20Lease%20ROU%20Assets%20and%20Liabilities) Operating Lease ROU Assets and Liabilities ($ thousands) | Metric ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | Operating lease right-of-use assets | 24,100 | 26,900 | | Operating lease liabilities | 25,800 | 28,600 | - As of June 30, 2023, operating lease right-of-use assets were **$24.1 million** and operating lease liabilities were **$25.8 million**, both decreasing from December 31, 2022[108](index=108&type=chunk)[109](index=109&type=chunk) - As of June 30, 2023, lease maturities ranged from **2 months to 35.2 years**, with a weighted-average remaining lease term of **16.3 years**[109](index=109&type=chunk) [Note 12. Minimum Regulatory Capital Requirements](index=47&type=section&id=Note%2012.%20Minimum%20Regulatory%20Capital%20Requirements) - As of June 30, 2023, the capital levels for both the company and the bank exceeded all regulatory capital requirements and were above the minimum levels to be considered "well capitalized," including the **2.5% capital conservation buffer**[116](index=116&type=chunk)[196](index=196&type=chunk) Regulatory Capital Ratios | Regulatory Capital Ratios | HarborOne Bancorp, Inc. (June 30, 2023) | HarborOne Bank (June 30, 2023) | | :--------------------------------- | :------------------------------------- | :----------------------------- | | Common Equity Tier 1 Capital Ratio to Risk-Weighted Assets | 12.0 % | 11.3 % | | Tier 1 Capital Ratio to Risk-Weighted Assets | 12.0 % | 11.3 % | | Total Capital Ratio to Risk-Weighted Assets | 13.9 % | 12.4 % | | Tier 1 Capital Ratio to Average Assets | 10.2 % | 9.6 % | [Note 13. Comprehensive (Loss) Income](index=49&type=section&id=Note%2013.%20Comprehensive%20%28Loss%29%20Income) Components of Comprehensive (Loss) Income ($ thousands) | Components of Comprehensive (Loss) Income ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :---------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Beginning balance | (42,410) | (19,047) | (47,082) | (1,637) | | Net other comprehensive (loss) income | (4,961) | (19,455) | 940 | (41,484) | | Related tax impact | 1,081 | 4,235 | (148) | 8,854 | | Ending balance | (46,290) | (34,267) | (46,290) | (34,267) | - As of June 30, 2023, accumulated other comprehensive loss was **$46.3 million**, an improvement from $47.1 million on December 31, 2022, primarily reflecting changes in unrealized gains and losses on available-for-sale securities[121](index=121&type=chunk) [Note 14. Fair Value of Assets and Liabilities](index=50&type=section&id=Note%2014.%20Fair%20Value%20of%20Assets%20and%20Liabilities) - The company uses a three-level input hierarchy to measure fair value: Level 1 for quoted prices in active markets for identical assets or liabilities; Level 2 for observable quoted prices for similar assets or liabilities; and Level 3 for unobservable inputs reflecting the company's own assumptions[122](index=122&type=chunk)[123](index=123&type=chunk) Fair Value of Assets and Liabilities ($ thousands) | Assets and Liabilities ($ thousands) | June 30, 2023 (Total Fair Value) | December 31, 2022 (Total Fair Value) | | :----------------------- | :----------------------- | :----------------------- | | **Assets** | | | | Available-for-sale securities | 292,012 | 301,149 | | Loans held for sale | 20,949 | 18,544 | | Mortgage servicing rights | 48,176 | 48,138 | | Derivative instruments | 36,916 | 37,326 | | **Liabilities** | | | | Derivative instruments | 28,212 | 28,629 | - As of June 30, 2023, the company assessed that credit valuation adjustments for its interest rate swaps and risk participation agreements were not significant to the overall valuation, thus categorizing its derivative valuations generally as Level 2[139](index=139&type=chunk) [Note 15. Earnings Per Share](index=57&type=section&id=Note%2015.%20Earnings%20Per%20Share) Earnings Per Share ($) | Earnings Per Share ($) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Basic earnings per share | 0.17 | 0.21 | 0.34 | 0.47 | | Diluted earnings per share | 0.17 | 0.21 | 0.33 | 0.46 | - For the three months ended June 30, 2023, basic and diluted earnings per share were both **$0.17**, lower than $0.21 in the prior year period[153](index=153&type=chunk) - For the six months ended June 30, 2023, basic earnings per share were **$0.34** and diluted earnings per share were **$0.33**, both lower than $0.47 and $0.46, respectively, in the prior year period[153](index=153&type=chunk) [Note 16. Revenue Recognition](index=58&type=section&id=Note%2016.%20Revenue%20Recognition) - The company recognizes revenue based on the consideration specified in contracts with customers, and revenue is recognized when performance obligations are satisfied, typically at the time services are provided or transactions occur[154](index=154&type=chunk)[155](index=155&type=chunk) - Transactional revenue includes bank card interchange fees, ATM fees, wire transfer fees, overdraft fees, and stop payment and returned item fees, as well as loan fees such as letter of credit, line renewal, and application fees[157](index=157&type=chunk) [Note 17. Segment Reporting](index=58&type=section&id=Note%2017.%20Segment%20Reporting) - The company has two reportable segments: HarborOne Bank and HarborOne Mortgage, with HarborOne Bank's revenue primarily from interest on loans and investment securities and service charges on deposit accounts, while HarborOne Mortgage's revenue is mainly from loan interest and fees from residential mortgage origination, sale, and servicing[158](index=158&type=chunk) Segment Net Income ($ thousands) | Segment Net Income ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | HarborOne Bank | 7,301 | 9,354 | 16,351 | 18,160 | | HarborOne Mortgage | 309 | 1,390 | (984) | 5,626 | | Consolidated Net Income | 7,479 | 9,987 | 14,776 | 22,254 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition as of June 30, 2023, and operating results for the three and six months ended June 30, 2023 and 2022 [Forward-Looking Statements](index=61&type=section&id=Forward-Looking%20Statements) - The company states that this report contains forward-looking statements subject to various risks and uncertainties, including changes in economic conditions, customer behavior, market volatility, interest rate fluctuations, rising loan defaults, declining security values, real estate value volatility, allowance for credit losses adequacy, deposit level changes, competitive pressures, cybersecurity incidents, regulatory changes, and goodwill impairment risks[166](index=166&type=chunk) [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The company's critical accounting policies include the allowance for credit losses, goodwill, and deferred tax assets, which involve complex judgments and estimates by management regarding changes in interest rates, economic performance, and borrower financial condition[171](index=171&type=chunk) [Recent Developments](index=63&type=section&id=Recent%20Developments) - Given recent banking industry events, the company has implemented cost-saving measures and operational efficiencies, expecting annual savings of approximately **$4.1 million**[173](index=173&type=chunk) - As of June 30, 2023, cash and available-for-sale securities represented **9.6% of assets**, and the company had **$1.0 billion** in additional borrowing capacity from FHLB and FRBB, with management deeming current liquidity sufficient[174](index=174&type=chunk) [Comparison of Financial Condition at June 30, 2023 and December 31, 2022](index=63&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030%2C%202023%20and%20December%2031%2C%202022) - Total assets increased by **$299.7 million**, or **5.6%**, to **$5.66 billion**, primarily reflecting increases in short-term investments and loans[176](index=176&type=chunk) - Cash and cash equivalents increased by **$154.8 million** to **$252.9 million**, mainly due to an increase in short-term investments[177](index=177&type=chunk) - Net loans increased by **$145.9 million**, or **3.2%**, to **$4.65 billion**, primarily driven by growth in commercial real estate and residential real estate loans[180](index=180&type=chunk)[181](index=181&type=chunk) - Deposits increased by **$98.0 million**, or **2.3%**, to **$4.29 billion**, primarily driven by growth in municipal and brokered deposits[189](index=189&type=chunk) - FHLB borrowings increased by **$203.9 million** to **$604.6 million**, primarily utilized to enhance liquidity[191](index=191&type=chunk) - Total stockholders' equity was **$595.5 million**, a **3.5% decrease** from December 31, 2022, primarily due to earnings being offset by stock repurchases[192](index=192&type=chunk) [Comparison of Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022](index=69&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) - For the three and six months ended June 30, 2023, consolidated net income was **$7.5 million** and **$14.8 million**, respectively, lower than $10.0 million and $22.3 million in the prior year periods[197](index=197&type=chunk) - Net interest and dividend income decreased by **13.1% to $32.3 million** for the three months ended June 30, 2023, primarily due to the growth in interest rates on interest-bearing liabilities exceeding the growth in yields on interest-earning assets[217](index=217&type=chunk) - For the three months ended June 30, 2023, interest expense increased by **$26.0 million**, or **978.1%**, to **$28.7 million**, primarily due to increases in the average balance and rates of deposits and FHLB borrowings[215](index=215&type=chunk)[220](index=220&type=chunk) [HarborOne Bank Segment](index=77&type=section&id=HarborOne%20Bank%20Segment) - For the three months ended June 30, 2023, HarborOne Bank's net income decreased by **$2.1 million** to **$7.3 million**, primarily impacted by a decrease in net interest and dividend income and an increase in the provision for credit losses[224](index=224&type=chunk) - For the three months ended June 30, 2023, the provision for credit losses was **$3.3 million**, primarily reflecting **$2.9 million** in charge-offs and loan growth[226](index=226&type=chunk) - As of June 30, 2023, nonaccrual assets were **$20.2 million**, representing **0.36% of total assets**, lower than $24.4 million and 0.52% on June 30, 2022[227](index=227&type=chunk)[248](index=248&type=chunk) - For the three months ended June 30, 2023, total non-interest expense was **$26.2 million**, a **3.5% decrease** from the prior year period, primarily due to reduced compensation and benefits expense[234](index=234&type=chunk)[235](index=235&type=chunk) [HarborOne Mortgage Segment](index=81&type=section&id=HarborOne%20Mortgage%20Segment) - For the three months ended June 30, 2023, HarborOne Mortgage recorded net income of **$309 thousand**, compared to $1.4 million in the prior year period, primarily impacted by rising interest rates, reduced refinancing activity, and slower home sales[237](index=237&type=chunk) - For the three months ended June 30, 2023, total non-interest income was **$5.9 million**, a **32.5% decrease** from $8.8 million in the prior year period, primarily due to reduced gains on mortgage loan sales and processing fees[238](index=238&type=chunk)[241](index=241&type=chunk) - For the three months ended June 30, 2023, total non-interest expense was **$5.5 million**, a **24.2% decrease** from the prior year period, primarily due to reduced compensation and benefits expense resulting from lower mortgage origination volume[243](index=243&type=chunk)[244](index=244&type=chunk) [Asset Quality](index=85&type=section&id=Asset%20Quality) Asset Quality Metrics ($ thousands) | Asset Quality Metrics ($ thousands) | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------- | :--------------- | | Total nonaccrual loans | 20,210 | 14,786 | | Total nonaccrual assets | 20,234 | 14,840 | | Allowance for credit losses balance | 47,821 | 45,236 | | Allowance for credit losses to total loans | 1.02 % | 0.99 % | | Allowance for credit losses to nonaccrual loans | 236.62 % | 305.94 % | | Nonaccrual loans to total loans | 0.43 % | 0.32 % | | Nonaccrual assets to total assets | 0.36 % | 0.28 % | - As of June 30, 2023, total nonaccrual assets were **$20.2 million**, an increase from $14.8 million on December 31, 2022, yet credit quality performance remained strong[247](index=247&type=chunk)[248](index=248&type=chunk) - Management closely monitors its commercial real estate loan portfolio, particularly sectors such as hospitality, unanchored retail space, and urban office space, which may be susceptible to economic conditions[249](index=249&type=chunk) - As of June 30, 2023, the allowance for credit losses was **$47.8 million**, representing **1.02% of total loans**, an increase from $45.2 million on December 31, 2022[256](index=256&type=chunk)[257](index=257&type=chunk) Net Charge-offs (Recoveries) ($ thousands) | Net Charge-offs (Recoveries) ($ thousands) | June 30, 2023 (3 months) | June 30, 2022 (3 months) | June 30, 2023 (6 months) | June 30, 2022 (6 months) | | :------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Residential real estate loans | (37) | (81) | (45) | (93) | | Commercial loans | 2,670 | (412) | 2,676 | 2,347 | | Consumer loans | 38 | (12) | 29 | (29) | | Total loans | 2,671 | (505) | 2,660 | 2,225 | - For the three and six months ended June 30, 2023, net charge-offs were **$2.7 million**, primarily including a **$2.9 million** charge-off on an urban office space commercial real estate loan[259](index=259&type=chunk) [Management of Market Risk](index=90&type=section&id=Management%20of%20Market%20Risk) - The company's primary market risk is interest rate risk, managed through exposure limits set by the Asset/Liability Committee, utilizing income simulation models and economic value of equity analysis as key measurement tools[262](index=262&type=chunk) Net Interest Income Sensitivity to Interest Rate Changes | Interest Rate Changes (Basis Points) | Net Interest Income Change (% change from Year 1 Baseline) | | :---------------- | :--------------------------------------------- | | | June 30, 2023 | June 30, 2022 | | | Year 1 | Year 2 | Year 1 | Year 2 | | +300 | (11.4)% | (10.9)% | (0.7)% | 3.7 % | | +200 | (7.3)% | (6.5)% | (0.3)% | 3.0 % | | +100 | (3.5)% | (2.9)% | (0.2)% | 1.6 % | | -100 | 3.6 % | 3.6 % | (2.1)% | (5.3)% | - As of June 30, 2023, a **300 basis point** increase in interest rates would result in an **11.4% decrease** in net interest income for the first year and a **10.9% decrease** for the second year, indicating increased sensitivity to rising rates[264](index=264&type=chunk) Economic Value of Equity (EVE) Sensitivity to Interest Rate Changes | Interest Rate Changes (Basis Points) | Economic Value of Equity (EVE) ($ thousands) | EVE Change ($ thousands) | EVE Change (%) | | :---------------- | :-------------------------- | :--------------- | :---------- | | +300 | 472,635 | (187,586) | (28.4)% | | +200 | 551,271 | (108,950) | (16.5)% | | +100 | 614,813 | (45,408) | (6.9)% | | 0 | 660,221 | — | — | | -100 | 682,127 | 21,906 | 3.3 % | - As of June 30, 2023, a **300 basis point** increase in interest rates would result in a **28.4% decrease** in Economic Value of Equity (EVE), indicating the company's exposure to significant interest rate increases[268](index=268&type=chunk) [Liquidity Management and Capital Resources](index=91&type=section&id=Liquidity%20Management%20and%20Capital%20Resources) - The company meets its short-term and long-term financial obligations through deposit inflows, loan repayments, securities maturities and sales, and FHLB borrowings[270](index=270&type=chunk) - As of June 30, 2023, the company had **$252.9 million** in cash and cash equivalents, along with a total of **$1.0 billion** in additional borrowing capacity from FHLB, FRBB, and the FRB BTFP program[272](index=272&type=chunk) - As of June 30, 2023, the company had **$152.0 million** in loan origination commitments and **$859.0 million** in unfunded loan commitments[276](index=276&type=chunk) - Both the company and the bank's capital levels exceeded all regulatory capital requirements and were considered "well capitalized"[278](index=278&type=chunk) [Non-GAAP Financial Measures and Reconciliation to GAAP](index=93&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation%20to%20GAAP) - The company uses the tangible common equity to tangible assets ratio as a non-GAAP financial measure to assess its financial condition, believing it provides useful information to investors[279](index=279&type=chunk) Tangible Common Equity to Tangible Assets Reconciliation ($ thousands) | Metric ($ thousands) | June 30, 2023 | June 30, 2022 | | :----------------------- | :------------- | :------------- | | Tangible common equity | 523,837 | 551,981 | | Tangible assets | 5,587,559 | 4,631,547 | | Tangible common equity/tangible assets | 9.38 % | 11.92 % | - As of June 30, 2023, the tangible common equity to tangible assets ratio was **9.38%**, lower than **11.92%** on June 30, 2022[280](index=280&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=64&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details the company's interest rate risk and management strategies, referencing the "Management of Market Risk" discussion [ITEM 4. Controls and Procedures](index=64&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management assessed disclosure controls and procedures as effective for timely information reporting, with no significant changes in internal controls this quarter - As of June 30, 2023, the company's disclosure controls and procedures were effective, ensuring timely recording, processing, summarization, and reporting of information[283](index=283&type=chunk) - There were no significant changes in the company's internal control over financial reporting during the quarter ended June 30, 2023[284](index=284&type=chunk) [PART II. OTHER INFORMATION](index=65&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=65&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is not involved in any other material pending legal proceedings beyond those disclosed in its Form 10-K, with a class action lawsuit settlement preliminarily approved - The company is not involved in any other material pending legal proceedings, aside from routine legal matters disclosed in its Form 10-K as of December 31, 2022[287](index=287&type=chunk) - The class action lawsuit of Rita Meaden v. HarborOne Bank received preliminary settlement approval on May 18, 2023, with a final approval hearing scheduled for October 11, 2023[288](index=288&type=chunk) [ITEM 1A. Risk Factors](index=65&type=section&id=ITEM%201A.%20Risk%20Factors) The risk factors disclosed in this quarterly report remain consistent with those described in the company's previous annual and quarterly reports - There are no material changes to the risk factors described in the company's previously filed annual report on Form 10-K as of December 31, 2022, and quarterly report on Form 10-Q as of March 31, 2023[289](index=289&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company completed its fifth stock repurchase program in Q2 2023, repurchasing 2,450,208 shares, and announced a sixth program to repurchase up to 2,325,489 common shares Stock Repurchase Program Summary | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs | | :------------------- | :--------------------------- | :--------------------------- | :----------------------------------------------------------- | :--------------------------------------------------------------------- | | April 1 to April 30, 2023 | 472,308 | $12.30 | 472,308 | — | | May 1 to May 31, 2023 | — | — | — | — | | June 1 to June 30, 2023 | — | — | — | — | | Total | 472,308 | $12.30 | 472,308 | 2,450,208 | - The company completed its fifth stock repurchase program in the second quarter of 2023, repurchasing **2,450,208 shares** at an average price of **$13.01 per share**[291](index=291&type=chunk) - The company announced its sixth stock repurchase program on July 5, 2023, authorizing the repurchase of up to **2,325,489 shares** of common stock, representing approximately **5%** of its outstanding shares, with the program expiring on June 30, 2024[292](index=292&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=66&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during this quarter - There were no defaults upon senior securities during this quarter[293](index=293&type=chunk) [ITEM 4. Mine Safety Disclosures](index=66&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[294](index=294&type=chunk) [ITEM 5. Other Information](index=66&type=section&id=ITEM%205.%20Other%20Information) No directors or senior officers adopted, modified, or terminated any Rule 10b5-1(c) compliant securities trading plans during the quarter ended June 30, 2023 - During the quarter ended June 30, 2023, no contracts, instructions, or written plans for buying or selling securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) were adopted, modified, or terminated by any director or officer[295](index=295&type=chunk) [ITEM 6. Exhibits](index=67&type=section&id=ITEM%206.%20Exhibits) This quarterly report includes or incorporates by reference the exhibits listed in the Exhibit Index, such as CEO and CFO certifications and interactive data files - This quarterly report includes or incorporates by reference the exhibits listed in the Exhibit Index, including certifications from the Chief Executive Officer and Chief Financial Officer, and interactive data files[296](index=296&type=chunk)[298](index=298&type=chunk) [SIGNATURE](index=68&type=section&id=SIGNATURE)

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) Table of Contents 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, 2023 Massachusetts 81-1607465 (State or other jurisdiction of in ...