HarborOne Bancorp(HONE) - 2025 Q1 - Quarterly Results

Executive Summary & Financial Highlights HarborOne Bancorp reported a significant Q1 2025 net income decrease, despite strong commercial loan growth and improved deposit costs Overall Performance HarborOne Bancorp reported Q1 2025 net income of $5.5 million ($0.14 diluted EPS), a 38.1% decrease from Q4 2024's $8.9 million Net Income and Diluted EPS Overview | Metric | Q1 2025 | Q4 2024 | Change (QoQ) | Change (%) | | :------------------- | :------ | :------ | :----------- | :--------- | | Net Income | $5.5M | $8.9M | -$3.4M | -38.1% | | Diluted EPS | $0.14 | $0.21 | -$0.07 | -33.3% | Key Financial Highlights The company achieved strong commercial and industrial loan growth, reduced commercial real estate balances, lowered loan delinquencies, and improved deposit costs and residential mortgage closings - Commercial and industrial loan growth: $33 million[2] - Cost of deposits (excluding brokered deposits) decreased by 15 basis points[2] - Residential mortgage loan closings increased 11.8% year-over-year[2] Detailed Financial Performance This section analyzes net interest income, noninterest income, and noninterest expense, detailing factors influencing each component's performance Net Interest Income Net interest and dividend income slightly declined to $31.5 million, but net interest margin improved by 3 basis points to 2.39%, driven by lower borrowing costs and average borrowings Net Interest Income and Margin Trend | Metric | Q1 2025 (USD) | Q4 2024 (USD) | Change (QoQ) (USD) | | :-------------------------- | :------ | :------ | :----------- | | Net Interest & Dividend Income | $31.5M | $31.8M | -$0.358M | | Net Interest Margin | 2.39% | 2.36% | +3 bps | - Borrowing costs improved 6 basis points, and average borrowings declined $20.0 million[3] Noninterest Income Total noninterest income decreased by $3.8 million (27.7%) to $9.9 million, primarily due to a $2.9 million decline in mortgage banking income from lower loan sales gains and MSR valuation Noninterest Income Components | Metric | Q1 2025 (USD) | Q4 2024 (USD) | Change (QoQ) (USD) | Change (%) | | :------------------- | :------ | :------ | :----------- | :--------- | | Total Noninterest Income | $9.9M | $13.7M | -$3.8M | -27.7% | | Mortgage Banking Income | $3.452M | $6.364M | -$2.912M | -45.8% | - HarborOne Mortgage realized a $2.7 million gain on loan sales from mortgage closings of $114.1 million in Q1 2025, down from $4.0 million from $179.1 million in Q4 2024[5] - The mortgage servicing rights (MSR) valuation decreased $1.2 million compared to an increase of $2.3 million for Q4 2024, with a Q1 MSR valuation loss of $1.1 million offset by a $561,000 economic hedging gain[5] Noninterest Expense Total noninterest expense remained flat at $32.9 million, with variances driven by decreased deposit account fees and seasonal increases in occupancy and equipment expense Total Noninterest Expense Trend | Metric | Q1 2025 (USD) | Q4 2024 (USD) | Change (QoQ) (USD) | | :------------------ | :------ | :------ | :----------- | | Total Noninterest Expense | $32.9M | $32.9M | Flat | - Deposit account fees decreased $871,000, primarily due to a $493,000 decrease in debit card interchange fees from a Q4 annual VISA volume incentive catch-up adjustment and a $181,000 seasonal decrease[5] - Occupancy and equipment expense increased $150,000 primarily due to seasonal increases for snow removal and heating costs[5] Balance Sheet Overview This section provides an overview of the company's assets, liabilities, and stockholders' equity, detailing key changes and their drivers Assets Total assets decreased by $52.8 million (0.9%) to $5.70 billion, primarily due to a $31.5 million decline in total loans, despite commercial and industrial loan growth Asset Composition and Changes | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | Change (QoQ) (USD) | Change (%) | | :------------------------------------ | :------------------- | :---------------------- | :----------------- | :--------- | | Total Assets | $5.70B | $5.75B | -$52.8M | -0.9% | | Total Loans | $4.82B | $4.85B | -$31.5M | -0.7% | | Commercial Real Estate & Construction Loans | | | -$44.5M | | | Commercial & Industrial Loans | | | +$33.0M | | - Available-for-sale securities increased $1.7 million to $265.6 million, and the unrealized loss on these securities decreased to $58.8 million from $65.2 million[5] Liabilities Total deposits increased by $68.0 million to $4.62 billion, driven by non-certificate accounts, while brokered deposits decreased and borrowed funds significantly declined by $117.0 million Liabilities Composition and Changes | Metric | March 31, 2025 (USD) | December 31, 2024 (USD) | Change (QoQ) (USD) | | :------------------------------------ | :------------------- | :---------------------- | :----------------- | | Total Deposits | $4.62B | $4.55B | +$68.0M | | Non-certificate Accounts | | | +$73.2M | | Brokered Deposits | | | -$11.6M | | Borrowed Funds | $399.5M | $516.6M | -$117.0M | - As of March 31, 2025, FDIC-insured deposits were approximately 74% of total deposits[5] - The Bank had $1.42 billion in available borrowing capacity across multiple relationships[10] Stockholders' Equity Total stockholders' equity increased modestly by 0.2% to $576.0 million, supported by net income and fair value changes, with tangible common equity to tangible assets ratio improving to 9.15% Stockholders' Equity and Per Share Metrics | Metric | March 31, 2025 (Value) | December 31, 2024 (Value) | Change (QoQ) (Value) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :----------- | :--------- | | Total Stockholders' Equity | $576.0M | $575.0M | +$1.0M | +0.2% | | Tangible Common Equity to Tangible Assets Ratio | 9.15% | 9.05% | +10 bps | | | Book Value Per Share | $13.27 | $13.15 | +$0.12 | | | Tangible Book Value Per Share | $11.90 | $11.78 | +$0.12 | | Asset Quality and Allowance for Credit Losses The Company recorded a $1.4 million provision for credit losses in Q1 2025, resulting in $8.7 million in net charge-offs, with ACL on loans decreasing to $49.3 million (1.02% of total loans) and nonperforming assets increasing to $30.9 million (0.54% of total assets) Asset Quality Metrics | Metric | Q1 2025 (Value) | Q4 2024 (Value) | Change (QoQ) (Value) | | :------------------------------------ | :------ | :------ | :----------- | | Provision for Credit Losses | $1.4M | $1.9M | -$0.5M | | Net Charge-offs | $8.7M | $0.058M | +$8.642M | | Net Charge-offs (% of avg. loans) | 0.72% | 0.00% | +0.72% | | ACL on Loans | $49.3M | $56.1M | -$6.8M | | ACL on Loans (% of total loans) | 1.02% | 1.16% | -14 bps | | Total Nonperforming Assets | $30.9M | $29.5M | +$1.4M | | Total Nonperforming Assets (% of total assets) | 0.54% | 0.51% | +3 bps | - Total criticized and classified commercial loans increased to $187.1 million from $178.6 million, reflecting the addition of three new credits in the special mention category due to pressure on commercial real estate values[8] - Non-performing commercial real estate loans decreased $7.8 million due to the charge-off, while non-performing commercial and industrial loans increased $8.3 million, primarily from a single healthcare credit[8] Company Information HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, a Massachusetts-chartered trust company, providing comprehensive financial services across Eastern Massachusetts and Rhode Island through 30 banking centers and its mortgage subsidiary - HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, a Massachusetts-chartered trust company[9] - Serves Eastern Massachusetts and Rhode Island through 30 full-service banking centers and commercial lending offices[9] - Provides educational resources via "HarborOne U" and mortgage lending services through HarborOne Mortgage, LLC[9] Legal & Non-GAAP Disclosures This section outlines the company's forward-looking statement disclaimer and explains the use and limitations of non-GAAP financial measures in its reporting Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing that actual results may differ materially from expectations due to various risks and uncertainties, with no obligation to update - Statements are based on current beliefs and expectations, subject to significant risks and uncertainties[11] - Factors causing differences include changes in general business and economic conditions, interest rates, customer behavior, market turbulence, loan default rates, real estate values, cybersecurity incidents, and regulatory changes[11] - The Company disclaims any obligation to publicly update or revise any forward-looking statements, except as required by law[11] Use of Non-GAAP Measures The report utilizes non-GAAP financial measures like "core net income" and "tangible common equity" for performance evaluation by management and analysts, but these are not substitutes for GAAP results - Non-GAAP measures like "core net income," "core earnings per common share," and "tangible common equity" are used by management, regulators, and market analysts[12] - Core net income and other core measures exclude items management does not consider indicative of ongoing financial performance, such as gain or loss on asset sales and release of uncertain tax position reserves[14] - These disclosures should not be viewed as a substitute for GAAP results and may not be comparable to non-GAAP measures presented by other companies[15] Financial Tables This section provides a comprehensive collection of detailed financial tables, including selected highlights, balance sheet trends, income statements, asset quality, average balances, and segment-specific data Selected Financial Highlights This table provides a comprehensive overview of key financial metrics for HarborOne Bancorp across five quarters, covering earnings, per-share data, profitability, balance sheet, asset quality, and capital adequacy Selected Financial Highlights Overview | Metric | March 31, 2025 (Value) | | :------------------------------------ | :------------- | | Net interest and dividend income | $31,469 | | Noninterest income | $9,891 | | Net income (loss) | $5,500 | | Earnings per share, diluted | $0.14 | | Return on average assets | 0.39 % | | Net interest margin on a fully tax equivalent basis | 2.39 % | | Total assets | $5,700,330 | | Total loans | $4,821,033 | | Total deposits | $4,618,721 | | Nonperforming assets | $30,908 | | Tangible common equity / tangible assets | 9.15 % | Consolidated Balance Sheet Trend This table presents a detailed trend of the consolidated balance sheet, showing assets, liabilities, and stockholders' equity over five quarters, highlighting changes in loan categories, deposit types, and capital components Consolidated Balance Sheet Trend Data | Item | March 31, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :------------------------------------ | :---------------------------- | :----------------------------- | | Total assets | $5,700,330 | $5,753,133 | | Total loans | $4,821,033 | $4,852,499 | | Total deposits | $4,618,721 | $4,550,753 | | Borrowings | $399,547 | $516,555 | | Total stockholders' equity | $575,967 | $575,011 | Consolidated Statements of Net Income - Trend This table details the consolidated statements of net income over five quarters, breaking down interest and dividend income, interest expense, noninterest income, noninterest expenses, net income, and earnings per share Consolidated Statements of Net Income Trend Data | Item | March 31, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :------------------------------------ | :---------------------------- | :----------------------------- | | Total interest and dividend income | $64,439 | $67,519 | | Total interest expense | $32,970 | $35,692 | | Net interest and dividend income | $31,469 | $31,827 | | Total noninterest income | $9,891 | $13,689 | | Total noninterest expenses | $32,850 | $32,873 | | Net income | $5,500 | $8,887 | | Diluted earnings per common share | $0.14 | $0.21 | Asset Quality This table provides a detailed breakdown of asset quality metrics, including non-performing assets, allowance for credit losses, net charge-offs, and delinquency rates across loan categories for five quarters Asset Quality Metrics Trend | Item | March 31, 2025 (Value) | December 31, 2024 (Value) | | :------------------------------------ | :------------- | :---------------- | | Total nonperforming assets | $30,908 | $29,473 | | Total nonperforming loans to total loans | 0.64 % | 0.61 % | | Allowance for credit losses on loans | $49,323 | $56,101 | | Net charge-offs | $(8,669) | $(58) | | Annualized net charge-offs/average loans | 0.72 % | 0.00 % | | Total delinquent loans | $29,821 | $37,427 | Average Balances and Yield Trend This table presents average balances, interest income/expense, and corresponding yields/costs for interest-earning assets and interest-bearing liabilities, along with key profitability ratios like net interest margin Average Balances and Yield Trend Data | Item | March 31, 2025 (Value) | December 31, 2024 (Value) | | :------------------------------------ | :------------- | :---------------- | | Total interest-earning assets (Avg. Bal.) | $5,415,953 | $5,453,514 | | Total interest and dividend income | $64,900 | $67,977 | | Yield on total interest-earning assets | 4.86 % | 4.96 % | | Total interest-bearing liabilities (Avg. Bal.) | $4,343,777 | $4,365,402 | | Total interest expense | $32,970 | $35,692 | | Cost of total interest-bearing liabilities | 3.08 % | 3.25 % | | Net interest margin on a fully tax equivalent basis | 2.39 % | 2.36 % | | Cost of total deposits | 2.48 % | 2.62 % | Segments Key Financial Data - HarborOne Bank This table provides key financial data for the HarborOne Bank segment, including net interest and dividend income, provision for credit losses, noninterest income and expenses, net income, and efficiency ratios over five quarters HarborOne Bank Segment Financial Data | Item | March 31, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :------------------------------------ | :---------------------------- | :----------------------------- | | Net interest and dividend income | $31,315 | $31,681 | | Provision (benefit) for credit losses | $1,385 | $1,927 | | Total noninterest income | $6,392 | $7,385 | | Total noninterest expenses | $28,185 | $27,400 | | Net income | $6,234 | $7,724 | | Tax equivalent efficiency ratio (non-GAAP) | 73.35 % | 68.84 % | Segments Key Financial Data - HarborOne Mortgage This table details the financial performance of the HarborOne Mortgage segment, including net interest and dividend income, mortgage banking income, noninterest expenses, net income/loss, closed loan volume, and gain on sale margin for five quarters HarborOne Mortgage Segment Financial Data | Item | March 31, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :------------------------------------ | :---------------------------- | :----------------------------- | | Net interest and dividend income | $149 | $140 | | Total mortgage banking income | $3,628 | $6,163 | | Total noninterest expenses | $4,504 | $5,490 | | Net income (loss) | $(491) | $1,133 | | Closed loan volume | $114,136 | $179,077 | | Gain on sale margin | 2.38 % | 2.21 % | Non-GAAP Reconciliation This section reconciles GAAP financial measures to non-GAAP counterparts like core net income and tangible common equity, providing adjusted views of financial performance and position by excluding specific items Non-GAAP Financial Measures Reconciliation | Item | March 31, 2025 (Value) | December 31, 2024 (Value) | | :------------------------------------ | :------------- | :---------------- | | Net income, as presented (GAAP) | $5,500 | $8,887 | | Core Net Income (non-GAAP) | $5,500 | $8,341 | | Diluted EPS (GAAP) | $0.14 | $0.21 | | Core Diluted EPS (non-GAAP) | $0.14 | $0.20 | | Efficiency ratio (non-GAAP) | 78.97 % | 71.81 % | | Tangible common equity (non-GAAP) | $516,357 | $515,212 | | Tangible book value per share (non-GAAP) | $11.90 | $11.78 | | Tangible common equity/tangible assets (non-GAAP) | 9.15 % | 9.05 % |