Financial Performance - Net income for Q3 2024 was $3.9 million, or $0.10 per diluted share, down from $7.3 million, or $0.18 per diluted share in Q2 2024, and $8.4 million, or $0.20 per diluted share in Q3 2023[1]. - Net income for the nine months ended September 30, 2024, was $18,520,000, a decrease of 20.1% compared to $23,188,000 in the same period of 2023[11]. - Earnings per common share (basic) for the nine months ended September 30, 2024, was $0.45, down from $0.53 in the previous year[11]. - Net income, excluding goodwill impairment charge, for September 30, 2024, was $3,924,000, a decrease from $7,296,000 in June 30, 2024[15]. - Total revenue for September 30, 2024, was $42,461,000, compared to $43,269,000 in June 30, 2024, reflecting a decline of 1.87%[15]. Loan and Deposit Growth - Loan growth was $40.3 million, or 3.3% annualized, while client deposit growth was $89.5 million, or 8.8% annualized[2]. - Total loans increased to $4,860,168 thousand, up from $4,805,284 thousand, reflecting a growth of 1.14%[12]. - Total deposits increased to $4,536,177 thousand from $4,458,297 thousand in the previous quarter, reflecting a growth of approximately 1.75%[9]. - Total deposits, including demand deposits, rose to $4,451,242 thousand, an increase from $4,329,347 thousand, representing a growth of 2.82%[12]. - Commercial loans totaled $3,141,445 thousand, up from $3,113,850 thousand in June 2024, indicating an increase of about 0.89%[9]. Income and Expenses - Total noninterest income decreased by $1.4 million, or 11.3%, to $10.6 million in Q3 2024, primarily due to a decline in mortgage banking income[3]. - Total noninterest expenses increased to $97,162,000, reflecting a 2.2% rise from $95,106,000 in the prior year[11]. - Total noninterest expense decreased by $876,000, or 2.6%, to $32.3 million in Q3 2024, driven by a reduction in marketing expenses[5]. - Total adjusted noninterest expense, excluding goodwill impairment, was $32,078,000 for September 30, 2024, compared to $32,955,000 in June 30, 2024[15]. Asset and Equity Position - Total assets decreased by $11.1 million, or 0.2%, to $5.78 billion at September 30, 2024, reflecting a decrease in cash and cash equivalents[6]. - Total stockholders' equity increased by 1.2% to $584.2 million at September 30, 2024, as unrealized losses on available-for-sale securities decreased[6]. - Total stockholders' equity increased to $584,202 thousand from $577,329 thousand in the previous quarter, reflecting a growth of approximately 1.5%[9]. - The tangible-common-equity-to-tangible-assets ratio was 9.17% at September 30, 2024, indicating a strong capital position exceeding regulatory requirements[6]. Credit Quality - Total nonperforming assets rose to $28.4 million at September 30, 2024, compared to $9.8 million at June 30, 2024, primarily due to a single $17.2 million credit[6]. - The provision for credit losses was $5.9 million in Q3 2024, with a specific reserve allocation of $4.7 million for the aforementioned credit[6]. - The allowance for credit losses on loans was $54,004 thousand, resulting in net loans of $4,825,499 thousand[9]. - Provision for credit losses rose to $6,350,000, an increase of 26.1% compared to $5,036,000 in the previous year[11]. - The allowance for credit losses on loans to total loans was 1.11% as of September 30, 2024, compared to 1.02% in June 30, 2024[16]. Efficiency and Ratios - The efficiency ratio improved to 75.55% for September 30, 2024, down from 76.16% in June 30, 2024[15]. - The efficiency ratio excluding goodwill impairment charge was not specified but is considered useful for evaluating financial condition[8]. - The ratio of interest-earning assets to interest-bearing liabilities was 124.89%, slightly up from 124.16%[12]. - Tangible common equity to tangible assets ratio was 9.17% as of September 30, 2024, compared to 9.03% in June 30, 2024[17]. Segment Performance - Net interest and dividend income for HarborOne Bank segment increased to $31,780 thousand in September 2024, up from $31,098 thousand in June 2024, representing a growth of 2.2%[18]. - Total noninterest income for HarborOne Bank segment was $6,665 thousand in September 2024, a decrease from $7,156 thousand in June 2024, reflecting a decline of 6.9%[18]. - Income before income taxes for HarborOne Bank segment was $5,790 thousand in September 2024, down from $9,848 thousand in June 2024, a decline of 41.5%[18]. - Net income for HarborOne Mortgage segment was a loss of $1,137 thousand in September 2024, compared to a loss of $191 thousand in June 2024[19]. - Closed loan volume for HarborOne Mortgage segment increased to $209,525 thousand in September 2024 from $172,994 thousand in June 2024, a growth of 21.1%[19].

Financial Position - Total assets increased by $119.1 million, or 2.1%, to $5.79 billion at June 30, 2024, from $5.67 billion at December 31, 2023[151] - Total deposits increased by $70.9 million, or 1.6%, to $4.46 billion at June 30, 2024, from $4.39 billion at December 31, 2023[158] - Total stockholders' equity decreased by 1.1% to $577.3 million at June 30, 2024, compared to $583.8 million at December 31, 2023[161] - Total assets increased to $5,806,368 thousand as of June 30, 2024, compared to $5,481,934 thousand as of June 30, 2023[168] - Total equity decreased to $579,863 thousand as of June 30, 2024, from $609,245 thousand as of June 30, 2023[168] Loan and Deposit Activity - Net loans increased by $87.8 million, or 1.9%, to $4.79 billion at June 30, 2024, from $4.70 billion at December 31, 2023[153] - Loans held for sale increased by $22.1 million to $41.8 million at June 30, 2024, reflecting increased loan production[152] - Noninterest-bearing deposits increased by $29.8 million, or 4.5%, to $689.8 million at June 30, 2024[158] - Brokered deposits increased by $58.6 million, or 17.9%, to $385.3 million at June 30, 2024[158] - The total loan balance as of June 30, 2024, was $4.84 billion, up from $4.75 billion at December 31, 2023, indicating growth in the loan portfolio[201] Income and Expenses - Consolidated net income for the three months ended June 30, 2024, was $7.3 million, slightly down from $7.5 million for the same period in 2023[163] - Interest and dividend income on a tax equivalent basis increased by $7.2 million, or 11.8%, to $68.2 million for the three months ended June 30, 2024, compared to $61.0 million for the same period in 2023[171] - Interest expense increased by $7.9 million, or 27.5%, to $36.6 million for the three months ended June 30, 2024, from $28.7 million for the same period in 2023[172] - Net interest and dividend income decreased by $707,000, or 2.2%, to $31.6 million for the three months ended June 30, 2024, compared to $32.3 million for the same period in 2023[174] - Noninterest expense increased by $1.6 million, or 6.1%, for the three months ended June 30, 2024, compared to the same period in 2023[181] Credit Quality - The allowance for credit losses on loans increased by $1.2 million, or 2.4%, to $49.1 million at June 30, 2024[153] - The provision for credit losses was $615,000 for the three months ended June 30, 2024, a decrease of $2.7 million, or 81.3%, compared to $3.3 million for the same period in 2023[181] - Net charge-offs totaled $195,000, or 0.02%, of average loans outstanding for the quarter ended June 30, 2024, compared to $2.7 million, or 0.23%, for the same period in 2023[183] - Nonperforming assets totaled $9.8 million at June 30, 2024, a significant decrease from $17.6 million at December 31, 2023, reflecting improved asset quality[202] - The allowance for credit losses to total loans was 1.02% as of June 30, 2024, compared to 1.01% at the end of 2023, indicating stable credit quality management[201] Interest Rate Risk and Liquidity - The Company’s primary market risk is interest-rate risk, managed through an Asset/Liability Committee that establishes exposure limits[210] - The Company’s liquidity sources include deposit inflows, loan repayments, and borrowings from the FHLB[217] - As of June 30, 2024, the company has immediate liquid resources in cash and cash equivalents totaling $235.1 million, primarily on deposit with FRBB[219] - The company had $385.3 million in brokered deposits as of June 30, 2024, to supplement core deposit fluctuations and loan growth[221] - The company believes it can meet its contractual obligations through adequate cash levels and liquidity management[222] Market and Economic Conditions - The estimated Economic Value of Equity (EVE) decreased by $182,118, or 32.2%, under a +300 basis points interest rate scenario as of June 30, 2024[215] - The Company’s net interest income simulation results indicate a potential decrease of 12.0% in Year One and 14.7% in Year Two under a +300 basis points interest rate scenario as of June 30, 2024[212] - Management continues to monitor the loan portfolio closely for signs of deterioration, particularly in the commercial real estate sector, amid rising vacancies and interest rates[203] - Management identified business-oriented hotels, non-anchored retail space, and metro office space as sectors potentially more susceptible to weakness, with total outstanding balances of $119.7 million, $48.6 million, and $6.2 million respectively[204] - The commercial real estate portfolio is primarily located in New England, with 75% secured by properties in Massachusetts and Rhode Island, highlighting regional concentration[203]

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)