HarborOne Bancorp(HONE) - 2025 Q2 - Quarterly Report

Glossary of Acronyms and Terms This section defines common acronyms and terms used in financial reporting for clarity and consistency Summary of Acronyms and Terms This section defines common acronyms and terms used in financial reporting for clarity and consistency - The glossary defines key financial and operational terms such as ACL (Allowance for Credit Losses), ASU (Accounting Standards Update), Bank (HarborOne Bank), BOLI (Bank-owned life insurance), Company (HarborOne Bancorp, Inc.), CRE (Commercial real estate), EPS (Earnings Per Share), ESOP (Employee Stock Ownership Plan), FASB (Federal Accounting Standards Board), FDIC (Federal Deposit Insurance Corporation), FHLB (Federal Home Loan Bank), GAAP (Accounting principles generally accepted in the United States of America), MSRs (Mortgage servicing rights), ROU (Right-of-use), SBA (U.S. Small Business Administration), and SEC (U.S. Securities and Exchange Commission)[7] PART I. FINANCIAL INFORMATION This part presents the Company's unaudited interim consolidated financial statements and management's discussion and analysis ITEM 1. Financial Statements This section presents the Company's unaudited interim consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed notes Consolidated Balance Sheets This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | (in thousands, except share data) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Assets | | | | Total cash and cash equivalents | $203,053 | $231,071 | | Securities available for sale | $287,266 | $263,904 | | Net loans | $4,679,268 | $4,796,398 | | Total assets | $5,609,075 | $5,753,133 | | Liabilities | | | | Total deposits | $4,493,671 | $4,550,753 | | Borrowings | $439,652 | $516,555 | | Total liabilities | $5,028,928 | $5,178,122 | | Stockholders' Equity | | | | Total stockholders' equity | $580,147 | $575,011 | Consolidated Statements of Income This section details the Company's revenues, expenses, and net income over specific reporting periods | (in thousands, except share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest and dividend income | $65,600 | $67,951 | $130,039 | $134,855 | | Total interest expense | $32,385 | $36,601 | $65,355 | $72,923 | | Net interest and dividend income | $33,215 | $31,350 | $64,684 | $61,932 | | Provision for credit losses | $739 | $615 | $2,124 | $447 | | Total noninterest income | $12,221 | $11,919 | $22,112 | $22,660 | | Total noninterest expense | $34,070 | $33,144 | $66,920 | $64,894 | | Net income | $8,058 | $7,296 | $13,558 | $14,596 | | Basic EPS | $0.20 | $0.18 | $0.34 | $0.35 | | Diluted EPS | $0.20 | $0.18 | $0.34 | $0.35 | Consolidated Statements of Comprehensive Income (Loss) This section presents the Company's comprehensive income, including net income and other comprehensive income (loss) components | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $8,058 | $7,296 | $13,558 | $14,596 | | Total other comprehensive income (loss) | $1,456 | $581 | $5,687 | $(4,401) | | Comprehensive income | $9,514 | $7,877 | $19,245 | $10,195 | Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in the Company's equity accounts, including common stock, retained earnings, and other comprehensive income | (in thousands, except share data) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :-------------------------------- | :--------------------------- | :----------------------- | | Common Stock Outstanding (Shares) | 43,723,278 | 43,075,333 | | Total Stockholders' Equity | $575,011 | $580,147 | | Comprehensive income | N/A | $19,245 | | Dividends declared ($0.18 per share) | N/A | $(7,283) | | Treasury stock purchased | N/A | $(9,464) | Consolidated Statements of Cash Flows This section reports the cash generated and used by the Company's operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided (used) by operating activities | $18,375 | $(24,569) | | Net cash provided by (used in) investing activities | $103,677 | $(70,853) | | Net cash (used in) provided by financing activities | $(150,070) | $103,134 | | Net change in cash and cash equivalents | $(28,018) | $7,712 | | Cash and cash equivalents at end of period | $203,053 | $235,062 | Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements Note 1. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The unaudited interim Consolidated Financial Statements are prepared in accordance with SEC rules for Form 10-Q and GAAP, with all necessary adjustments and disclosures included. Interim results are not necessarily indicative of full-year results[25] - On April 24, 2025, HarborOne Bancorp, Inc. entered into a Merger Agreement with Eastern Bankshares, Inc. (Eastern), with Eastern acquiring HarborOne, and shareholders receiving either 0.765 shares of Eastern common stock or $12.00 in cash per share, subject to allocation procedures (75%-85% stock consideration); the merger is anticipated to close in Q4 2025, but Eastern has the right to defer until February 20, 2026[28][30] - The Company provides financial services through 30 full-service branches in Massachusetts and Rhode Island, and a commercial lending office in Boston and Providence, with HarborOne Mortgage operating in Massachusetts, New Hampshire, New Jersey, and Rhode Island, originating loans in seven additional states[31] Note 2. Debt Securities This note provides details on the Company's debt securities, including available-for-sale and held-to-maturity portfolios | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Securities available for sale, at fair value | | | | Amortized Cost | $344,161 | $329,112 | | Fair Value | $287,266 | $263,904 | | Gross Unrealized Losses | $57,322 | $65,264 | | Securities held to maturity, at amortized cost | | | | Amortized Cost | $19,212 | $19,627 | | Fair Value | $19,146 | $19,285 | | Gross Unrealized Losses | $97 | $342 | - As of June 30, 2025, the Company's security portfolio included 114 debt securities, with 102 in an unrealized loss position, primarily due to changes in interest rates rather than credit quality; management does not believe these represent a credit loss impairment and does not intend to sell them before cost basis recovery, thus no Allowance for Credit Losses (ACL) was recorded[39][41] Note 3. Loans Held for Sale This note details the Company's loans designated as held for sale, including their fair value and related accounting policies | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Loans held for sale, fair value | $29,091 | $36,768 | | Loans held for sale, contractual principal outstanding | $28,318 | $36,205 | | Fair value less unpaid principal balance | $773 | $563 | - The Company uses the fair value option for mortgage loans held for sale to align fair value changes with those of hedging forward sale commitment contracts; changes in fair value increased by $306,000 for the three months and $210,000 for the six months ended June 30, 2025, with no loans held for sale over 90 days past due[43][44] Note 4. Loans and Allowance for Credit Losses This note provides a breakdown of the Company's loan portfolio and the associated allowance for credit losses | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Loans by Type | | | | Commercial real estate | $2,181,554 | $2,280,309 | | Commercial construction | $188,540 | $252,691 | | Commercial and industrial | $643,999 | $594,453 | | One- to four-family | $1,489,598 | $1,506,571 | | Second mortgages and equity lines of credit | $197,918 | $189,598 | | Total loans before basis adjustment | $4,726,509 | $4,852,419 | | Allowance for credit losses on loans | $(47,964) | $(56,101) | | Loans, net | $4,679,268 | $4,796,398 | | (in thousands) | Balance at December 31, 2024 | Charge-offs (6 months) | Recoveries (6 months) | Provision (6 months) | Balance at June 30, 2025 | | :------------- | :--------------------------- | :--------------------- | :-------------------- | :------------------- | :----------------------- | | Commercial real estate | $30,764 | $(9,989) | $5 | $728 | $21,508 | | Commercial construction | $4,257 | — | — | $(1,319) | $2,938 | | Commercial and industrial | $10,700 | $(391) | $35 | $1,144 | $11,488 | | One- to four-family | $8,720 | — | — | $1,510 | $10,230 | | Second mortgages and equity lines of credit | $1,348 | — | $14 | $167 | $1,529 | | Residential construction | $186 | — | — | $(15) | $171 | | Consumer loans | $126 | $(70) | $13 | $31 | $100 | | Total ACL | $56,101 | $(10,450) | $67 | $2,246 | $47,964 | - Individually analyzed loans, including non-accrual and collateral-dependent loans, increased to $136.5 million at June 30, 2025, from $87.2 million at December 31, 2024, while the related allowance for these loans decreased from $7.8 million to $1.0 million[50] | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Past Due Loans | | | | 30-59 Days Past Due | $1,993 | $21,225 | | 60-89 Days Past Due | $6,970 | $8,076 | | 90 Days or More Past Due | $18,701 | $8,126 | | Total Past Due | $27,664 | $37,427 | | Non-accrual Loans | | | | With an ACL | $642 | $17,604 | | Without an ACL | $32,061 | $11,859 | - Loan modifications for borrowers experiencing financial difficulty in Q2 2025 included residential real estate loans with term extensions (weighted average 17.6 years) and interest rate reductions (from 7.6% to 5.0%); no commercial real estate or commercial and industrial loans were modified in Q2 2025, and all modified loans were current as of June 30, 2025[58][61] Note 5. Mortgage Loan Servicing This note provides information on the Company's mortgage servicing rights (MSRs), including their fair value and related assumptions - The Company retains servicing rights for residential mortgages sold to government-sponsored enterprises; the unpaid principal balance of mortgage loans serviced for others decreased to $3.24 billion at June 30, 2025, from $3.36 billion at December 31, 2024[70] | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | MSRs, at fair value | $41,172 | $44,500 | | Weighted Average Assumptions for MSR Fair Value | | | | Prepayment speed | 7.90% | 7.67% | | Discount rate | 9.84% | 9.97% | | Default rate | 1.60% | 1.83% | - Changes in MSRs for the six months ended June 30, 2025, included additions of $77,000, reductions from loan payoffs of $1.7 million, and a negative fair value change of $1.7 million[71] Note 6. Goodwill and Other Intangible Assets This note details the Company's goodwill and other intangible assets, including impairment assessments - Goodwill remained at $59.0 million at June 30, 2025, and December 31, 2024; the Merger Agreement on April 24, 2025, was considered a triggering event for an interim qualitative impairment assessment as of March 31, 2025, which indicated no impairment, and no further impairment assessment was performed as of June 30, 2025[72][73] - Other intangible assets were $378,000 at June 30, 2025, with no triggering event warranted an interim impairment test for these assets[75] Note 7. Deposits This note provides a breakdown of the Company's deposit accounts by type and maturity | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | NOW and demand deposit accounts | $1,043,553 | $988,984 | | Regular savings and club accounts | $867,164 | $895,232 | | Money market deposit accounts | $1,175,499 | $1,195,209 | | Total non-certificate accounts | $3,086,216 | $3,079,425 | | Term certificate accounts | $1,068,693 | $1,069,844 | | Brokered deposits | $338,762 | $401,484 | | Total deposits | $4,493,671 | $4,550,753 | - Total municipal deposits decreased to $460.9 million at June 30, 2025, from $519.5 million at December 31, 2024; reciprocal deposits, part of a program providing FDIC-insured deposit products, were $358.7 million at June 30, 2025, down from $376.3 million at December 31, 2024[76] | (dollars in thousands) | Amount | Weighted Average Rate | | :--------------------- | :---------- | :-------------------- | | Certificate Accounts by Maturity at June 30, 2025 | | | | Within 1 year | $1,214,738 | 4.08% | | Over 1 year to 2 years | $187,146 | 4.19% | | Over 2 years to 3 years | $2,268 | 3.37% | | Over 3 years to 4 years | $1,709 | 3.04% | | Over 4 years to 5 years | $1,594 | 3.40% | | Total certificate deposits | $1,407,455 | 4.09% | Note 8. Borrowings This note outlines the Company's borrowed funds, primarily FHLB advances, and available borrowing capacity - Borrowed funds primarily consist of FHLB advances; short-term advances were $196.0 million at June 30, 2025 (weighted average rate 4.48%), down from $212.0 million at December 31, 2024 (weighted average rate 4.50%); long-term borrowings were $243.7 million at June 30, 2025 (weighted average rate 4.18%), down from $304.6 million at December 31, 2024 (weighted average rate 4.21%)[78][79] - FHLB advances are secured by a blanket security agreement, with $2.02 billion in loans pledged as collateral at June 30, 2025; the Company had $693.7 million of available borrowing capacity with the FHLB and $563.8 million with the Federal Reserve Discount Window at June 30, 2025[81][82] Note 9. Other Commitments and Contingencies This note details the Company's off-balance sheet commitments and potential contingent liabilities | (in thousands) | Balance at December 31, 2024 | Provision (6 months) | Balance at June 30, 2025 | | :------------- | :--------------------------- | :------------------- | :----------------------- | | Commercial real estate | $947 | $(165) | $782 | | Commercial construction | $1,398 | $(352) | $1,046 | | Commercial and industrial | $793 | $326 | $1,119 | | Residential real estate | $359 | $69 | $428 | | Consumer | $9 | — | $9 | | Total ACL on unfunded commitments | $3,506 | $(122) | $3,384 | | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Commitments to grant residential real estate loans | $57,481 | $38,929 | | Commitments to grant other loans | $56,907 | $25,191 | | Unadvanced funds on home equity lines of credit | $282,916 | $281,890 | | Unadvanced funds on revolving lines of credit | $233,290 | $270,735 | | Unadvanced funds on construction loans | $128,441 | $166,726 | Note 10. Derivatives This note describes the Company's use of derivative financial instruments for risk management and customer needs - The Company uses derivative financial instruments, primarily interest rate swaps, to manage interest-rate risk and accommodate customer needs, with derivatives recognized at fair value on the balance sheet[89] - As of June 30, 2025, the Company had two interest rate swap agreements with a notional amount of $100.0 million designated as a fair value hedge of fixed-rate residential mortgages, which were effective; there were no cashflow hedge agreements outstanding as of June 30, 2025, as a $100.0 million swap matured during the quarter[91][94] | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Derivatives designated as hedging instruments | | | | Fair value hedge - interest rate swaps (Notional) | $100,000 | $100,000 | | Fair value hedge - interest rate swaps (Assets) | $0 | $112 | | Fair value hedge - interest rate swaps (Liabilities) | $600 | $84 | | Cashflow hedge - interest rate swaps (Notional) | $0 | $100,000 | | Cashflow hedge - interest rate swaps (Assets) | $0 | $1,040 | | Cashflow hedge - interest rate swaps (Liabilities) | $0 | $0 | | Derivatives not designated as hedging instruments | | | | Derivative loan commitments (Notional) | $36,443 | $38,929 | | Forward loan sale commitments (Notional) | $37,000 | $50,500 | | Interest rate swaps (Notional) | $1,005,744 | $1,015,448 | | Interest Rate Futures (Notional) | $50,400 | $35,400 | | Total derivatives (Assets) | $18,484 | $24,929 | | Total derivatives (Liabilities) | $18,212 | $23,546 | Note 11. Operating Lease ROU Assets and Liabilities This note provides information on the Company's operating lease right-of-use (ROU) assets and liabilities | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Operating lease ROU assets | $19,800 | $20,900 | | Operating lease liabilities | $21,500 | $22,700 | - At June 30, 2025, lease expiration dates ranged from six months to 33.1 years, with a weighted average remaining lease term of 15.8 years; the weighted-average discount rate for operating leases was 2.17% at June 30, 2025[110][111] | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease expense | $715 | $748 | $1,442 | $1,526 | Note 12. Minimum Regulatory Capital Requirements This note details the Company's and the Bank's compliance with regulatory capital requirements - The Company and the Bank are subject to various regulatory capital requirements, including minimum common equity Tier 1 capital ratio of 4.5%, Tier 1 capital ratio of 6.0%, total capital ratio of 8.0%, and a Tier 1 leverage ratio of 4.0%, with a capital conservation buffer of 2.5% common equity Tier 1 capital also required[114] - At June 30, 2025, both the Company and the Bank exceeded all regulatory capital requirements and were considered 'well capitalized,' including the applicable capital conservation buffer of 2.5%[117] | (dollars in thousands) | June 30, 2025 Actual Ratio | December 31, 2024 Actual Ratio | Minimum Required for Capital Adequacy | Minimum Required to be Considered "Well Capitalized" | | :--------------------- | :------------------------- | :----------------------------- | :------------------------------------ | :--------------------------------------------------- | | HarborOne Bancorp, Inc. | | | | | | Common equity Tier 1 capital to risk-weighted assets | 12.2% | 11.8% | 4.5% | N/A | | Tier 1 capital to risk-weighted assets | 12.2% | 11.8% | 6.0% | N/A | | Total capital to risk-weighted assets | 13.3% | 13.0% | 8.0% | N/A | | Tier 1 capital to average assets | 10.0% | 9.8% | 4.0% | N/A | | HarborOne Bank | | | | | | Common equity Tier 1 capital to risk-weighted assets | 11.3% | 11.0% | 4.5% | 6.5% | | Tier 1 capital to risk-weighted assets | 11.3% | 11.0% | 6.0% | 8.0% | | Total capital to risk-weighted assets | 12.4% | 12.3% | 8.0% | 10.0% | | Tier 1 capital to average assets | 9.3% | 9.2% | 4.0% | 5.0% | Note 13. Comprehensive (Loss) Income This note provides a reconciliation of net income to comprehensive income (loss) and changes in accumulated other comprehensive income | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $(49,895) | $(43,622) | | Other comprehensive (loss) income before reclassifications | $8,342 | $(3,304) | | Amounts reclassified from accumulated other comprehensive (loss) income | $(1,070) | $(1,500) | | Net current period other comprehensive (loss) income | $7,272 | $(4,804) | | Related tax effect | $(1,585) | $403 | | Balance at end of period | $(44,208) | $(48,023) | Note 14. Fair Value of Assets and Liabilities This note describes the methodologies and hierarchy used to measure the fair value of the Company's assets and liabilities - Fair value is measured using a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (significant unobservable inputs)[131] - Securities available for sale and loans held for sale are primarily classified as Level 2; collateral-dependent impaired loans are classified as Level 3, with fair value determined by underlying collateral appraisals, adjusted for estimated selling costs or market declines[125][127][128] | (in thousands) | June 30, 2025 Total Fair Value | December 31, 2024 Total Fair Value | | :------------- | :----------------------------- | :--------------------------------- | | Assets Measured at Fair Value on a Recurring Basis | | | | Securities available for sale | $287,266 | $263,904 | | Loans held for sale | $29,091 | $36,768 | | Mortgage servicing rights | $41,172 | $44,500 | | Derivatives | $18,484 | $24,929 | | Liabilities Measured at Fair Value on a Recurring Basis | | | | Derivatives | $18,212 | $23,546 | | Assets Measured at Fair Value on a Non-recurring Basis | | | | Collateral-dependent individually analyzed loans | $21,031 | $47,463 | Note 15. Earnings Per Share This note provides the calculation of basic and diluted earnings per share for the Company | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders (in thousands) | $8,058 | $7,296 | $13,558 | $14,596 | | Weighted average number of common shares outstanding (Basic) | 39,924,977 | 41,293,787 | 40,133,790 | 41,603,104 | | Weighted average number of common shares outstanding (Diluted) | 40,117,837 | 41,370,289 | 40,360,658 | 41,748,663 | | Basic EPS | $0.20 | $0.18 | $0.34 | $0.35 | | Diluted EPS | $0.20 | $0.18 | $0.34 | $0.35 | - Basic EPS is calculated by dividing net income by weighted-average common shares outstanding, including non-vested restricted shares; diluted EPS includes the effect of potential dilutive common stock equivalents, with no shares considered anti-dilutive at June 30, 2025, compared to 130,225 shares at June 30, 2024[149] Note 16. Revenue Recognition This note describes the Company's policies for recognizing revenue from contracts with customers - Revenue from customer contracts is measured based on consideration specified in the contract, excluding amounts collected for third parties; performance obligations are generally satisfied as services are rendered, either at a point in time or over time, with unsatisfied performance obligations not material[151][152] - Transactional revenue, recognized at a point in time, includes card interchange fees, ATM fees, wire transfer fees, overdraft charges, stop-payment fees, returned check fees, and loan fees (e.g., letters of credit, line renewal fees, application fees)[154] Note 17. Segment Reporting This note provides financial information about the Company's operating segments, HarborOne Bank and HarborOne Mortgage - The Company has two reportable segments: HarborOne Bank and HarborOne Mortgage; the Chief Financial Officer, as the CODM, assesses performance by evaluating revenue streams, significant expenses, and comparing actual results to budgeted amounts[155][156] - HarborOne Bank's revenue primarily comes 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[156] | (in thousands) | HarborOne Bank Net Income (Loss) | HarborOne Mortgage Net Income (Loss) | | :------------- | :------------------------------- | :----------------------------------- | | Three Months Ended June 30, 2025 | $8,558 | $469 | | Three Months Ended June 30, 2024 | $7,538 | $(191) | | Six Months Ended June 30, 2025 | $14,793 | $(22) | | Six Months Ended June 30, 2024 | $14,703 | $32 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides Management's perspective on the Company's financial performance and condition, discussing key trends, changes in assets, liabilities, equity, and results of operations Critical Accounting Policies and Estimates This section discusses the significant accounting policies and estimates that require management's judgment and can materially affect financial results - The preparation of consolidated financial statements requires Management to make estimates and assumptions that affect reported amounts; critical accounting policies identified include Allowance for Credit Losses, Goodwill, and Deferred Tax Assets, which are susceptible to material changes based on factors like interest rates, economic performance, and borrower financial condition[165][166][171] Recent Events This section highlights significant events impacting the Company, including legislative changes and the pending merger agreement - On July 4, 2025, President Trump signed the 'One Big Beautiful Bill,' the income tax implications of which are being evaluated but are not expected to materially impact the Company's financial statements[168] - On April 24, 2025, the Company entered into a Merger Agreement with Eastern Bankshares, Inc., where Eastern will acquire HarborOne; the merger is subject to regulatory and shareholder approvals and is expected to close in Q4 2025, with a potential deferral option for Eastern until February 20, 2026[169][170] Comparison of Financial Condition at June 30, 2025, and December 31, 2024 This section analyzes changes in the Company's balance sheet items between June 30, 2025, and December 31, 2024 | (dollars in thousands) | June 30, 2025 | December 31, 2024 | Increase (Decrease) Dollars | Increase (Decrease) Percent | | :--------------------- | :------------ | :---------------- | :-------------------------- | :-------------------------- | | Total Assets | $5,609,075 | $5,753,133 | $(144,058) | (2.5)% | | Cash and Cash Equivalents | $203,053 | $231,071 | $(28,018) | (12.1)% | | Loans Held for Sale | $29,091 | $36,768 | $(7,677) | (20.9)% | | Net Loans | $4,679,268 | $4,796,398 | $(117,130) | (2.4)% | | Investment Securities Available for Sale | $287,266 | $263,904 | $23,362 | 8.9% | | Total Deposits | $4,493,671 | $4,550,753 | $(57,082) | (1.3)% | | Borrowed Funds | $439,652 | $516,555 | $(76,903) | (14.9)% | | Total Stockholders' Equity | $580,147 | $575,011 | $5,136 | 0.9% | - The decrease in total assets was primarily driven by a $117.1 million decrease in net loans and a $31.3 million decrease in short-term investments; commercial real estate and construction loans decreased by $162.9 million, while commercial and industrial loans increased by $49.5 million[174][177] - Total deposits decreased by $57.1 million, mainly due to decreases in municipal deposits ($58.5 million) and brokered deposits ($62.7 million), partially offset by an increase in consumer and business deposits ($64.2 million); uninsured deposits, after exclusions, were $754.2 million, representing 17% of total deposits[187][189] - Stockholders' equity increased by 0.9% to $580.1 million, reflecting earnings and a decrease in unrealized losses on available-for-sale securities, partially offset by share repurchases and dividends; the tangible-common-equity-to-tangible-assets ratio was 9.38% at June 30, 2025[193][194] Comparison of Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024 This section analyzes the Company's financial performance, including net interest income, noninterest income, and expenses, for the reported periods | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $8,058 | $7,296 | $13,558 | $14,596 | | Tax equivalent net interest income | $33,732 | $31,606 | $65,662 | $62,437 | | Net interest margin (fully tax equivalent) | 2.52% | 2.31% | 2.46% | 2.28% | | Provision for credit losses | $739 | $615 | $2,124 | $447 | | Total noninterest income | $12,221 | $11,919 | $22,112 | $22,660 | | Total noninterest expense | $34,070 | $33,144 | $66,920 | $64,894 | | Merger expenses | $1,704 | $0 | $1,704 | $0 | - Net interest and dividend income on a tax equivalent basis increased by $2.1 million (6.7%) for the three months and $3.2 million (5.2%) for the six months ended June 30, 2025, compared to the prior year periods, driven by rate decreases on interest-bearing liabilities outpacing the decrease in yield on interest-earning assets[213][214] - Interest expense decreased by $4.2 million (11.5%) for the three months and $7.6 million (10.4%) for the six months ended June 30, 2025, primarily due to a decrease in average balance and cost of borrowings, partially offset by an increase in average balance of interest-bearing deposits[212][218] - Merger expenses of $1.7 million were recorded in noninterest expense for both the three and six months ended June 30, 2025, primarily for legal and investment advisory services[215] | (in thousands) | HarborOne Bank Net Income (Loss) | HarborOne Mortgage Net Income (Loss) | | :------------- | :------------------------------- | :----------------------------------- | | Three Months Ended June 30, 2025 | $8,558 | $469 | | Three Months Ended June 30, 2024 | $7,538 | $(191) | | Six Months Ended June 30, 2025 | $14,793 | $(22) | | Six Months Ended June 30, 2024 | $14,703 | $32 | - HarborOne Bank's net income increased by $1.0 million (13.5%) for the three months and $90,000 (0.6%) for the six months ended June 30, 2025; the provision for credit losses increased significantly to $2.1 million for the six months ended June 30, 2025, primarily due to specific reserve allocations for commercial credits and qualitative factor adjustments[222][223][224] - HarborOne Mortgage recorded net income of $469,000 for the three months ended June 30, 2025, compared to a net loss of $191,000 in the prior year; for the six months, it recorded a net loss of $22,000 compared to net income of $32,000 in the prior year; loan production and gain on sale of mortgages increased for the three and six months ended June 30, 2025, but MSR fair value decreased due to changes in benchmark mortgage rates[234][239] Asset Quality This section evaluates the quality of the Company's loan portfolio, including nonperforming assets and allowance for credit losses | (dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Total non-accrual loans | $32,703 | $29,463 | | Total nonperforming assets | $32,703 | $29,473 | | Allowance for credit losses to total loans | 1.01% | 1.16% | | Allowance for credit losses to non-accrual loans | 146.67% | 190.41% | | Total nonperforming loans to total loans | 0.69% | 0.61% | | Total nonperforming assets to total assets | 0.58% | 0.51% | - Credit quality remained strong, but total nonperforming assets increased to $32.7 million at June 30, 2025, from $29.5 million at December 31, 2024; this increase was primarily driven by specific commercial credits, including a $29.0 million substandard loan in healthcare, a $13.6 million substandard loan in office conversion, and an $8.8 million nonaccrual doubtful loan in the office sector[247] - The ACL was $48.0 million (1.01% of total loans) at June 30, 2025, down from $56.1 million (1.16% of total loans) at December 31, 2024; net charge-offs totaled $1.7 million for the three months and $10.4 million for the six months ended June 30, 2025, primarily related to two commercial credits[225][256][259] | (dollars in thousands) | Balance | Percent to Total | | :--------------------- | :------ | :--------------- | | CRE and CRE Construction Portfolio Composition (June 30, 2025) | | | | Flex/Industrial | $533,156 | 22.5% | | Multifamily | $444,154 | 18.7% | | Hotels | $247,474 | 10.4% | | Retail | $287,731 | 12.1% | | Healthcare | $212,576 | 9.0% | | Office | $212,125 | 9.0% | | All Other | $432,878 | 18.3% | | Total CRE and CRE construction | $2,370,094 | 100.0% | Management of Market Risk This section describes how the Company identifies, measures, and manages its exposure to market risks, primarily interest-rate risk - The Company's primary market risk is interest-rate risk, managed by the Asset/Liability Committee through exposure limits and an income simulation model and economic value of equity (EVE) analysis[261] | Changes in Interest Rates (basis points) | June 30, 2025 Year One | June 30, 2025 Year Two | June 30, 2024 Year One | June 30, 2024 Year Two | | :--------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | +300 | (10.2)% | (8.2)% | (12.0)% | (14.7)% | | +200 | (6.7)% | (5.2)% | (7.9)% | (9.5)% | | +100 | (3.3)% | (2.3)% | (3.8)% | (4.4)% | | -100 | 2.3% | 1.9% | 4.3% | 5.4% | | -200 | 3.3% | 1.0% | 5.4% | 5.5% | | -300 | 3.9% | (0.8)% | 5.9% | 4.3% | | -400 | 4.0% | (3.7)% | 6.2% | 2.0% | | Changes in Interest Rates (basis points) | Estimated EVE (dollars in thousands) | Estimated Increase (Decrease) in EVE Percent | | :--------------------------------------- | :----------------------------------- | :------------------------------------------- | | +400 | $497,792 | (31.1)% | | +300 | $565,538 | (21.7)% | | +200 | $625,733 | (13.4)% | | +100 | $682,036 | (5.6)% | | 0 | $722,221 | — | | -100 | $746,662 | 3.4% | | -200 | $713,332 | (1.2)% | | -300 | $664,465 | (8.0)% | | -400 | $589,456 | (18.4)% | Liquidity Management and Capital Resources This section discusses the Company's strategies for managing liquidity and maintaining adequate capital levels - The Company manages liquidity to meet current and future financial obligations through deposit inflows, loan repayments, securities maturities, and FHLB borrowings; liquid resources include $203.1 million in cash and cash equivalents at June 30, 2025[270][272] - Additional borrowing capacity includes $693.7 million from the FHLB, $563.8 million from the FRBB, and a $25.0 million unsecured federal funds line; unpledged available-for-sale securities total $27.8 million[272][273] - At June 30, 2025, outstanding commitments to originate loans were $114.4 million, and unadvanced funds on loans were $644.6 million; certificates of deposit maturing within one year totaled $1.21 billion[276] - The Company and the Bank exceeded all regulatory capital requirements and were considered 'well capitalized' at June 30, 2025[278] Non-GAAP Financial Measures and Reconciliation to GAAP This section presents non-GAAP financial measures used by management and provides their reconciliation to the most directly comparable GAAP measures - The Company uses non-GAAP financial measures, specifically the tangible-common-equity-to-tangible-assets ratio, which is utilized by regulators and market analysts to evaluate financial condition; these measures are supplemental and not a substitute for GAAP results[279] | (dollars on thousands) | June 30, 2025 | June 30, 2024 | | :--------------------- | :------------ | :------------ | | Total stockholders' equity | $580,147 | $577,329 | | Less: Goodwill | $59,042 | $59,042 | | Less: Other intangible assets | $378 | $1,136 | | Tangible common equity | $520,727 | $517,151 | | Total assets | $5,609,075 | $5,787,035 | | Less: Goodwill | $59,042 | $59,042 | | Less: Other intangible assets | $378 | $1,136 | | Tangible assets | $5,549,655 | $5,726,857 | | Tangible common equity / tangible assets | 9.38% | 9.03% | ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to the 'Management of Market Risk' discussion in Item 2, detailing the Company's interest-rate risk exposure and management methodologies Summary of Quantitative and Qualitative Disclosures about Market Risk This section refers to the 'Management of Market Risk' discussion in Item 2, detailing the Company's interest-rate risk exposure and management methodologies - The information required by Item 3 is included in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading 'Management of Market Risk'[283] ITEM 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2025 Summary of Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter ended June 30, 2025 - The Company's principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate information disclosure[283] - There were no material changes in the Company's internal controls over financial reporting during the quarter ended June 30, 2025[284] PART II. OTHER INFORMATION This part includes legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits ITEM 1. Legal Proceedings This section discloses legal proceedings related to the Company's merger, specifically two shareholder complaints alleging materially incomplete and misleading proxy statements - Two shareholder complaints (William Johnson v. HarborOne Bancorp, Inc., et al., and Paul Parshall v. HarborOne Bancorp, Inc., et al.) were filed in New York state court on July 28 and July 29, 2025, respectively, alleging that the proxy statement issued on Schedule 14A on June 27, 2025, is materially incomplete and misleading[287] - The Merger Litigations seek an injunction enjoining consummation of the Merger, rescission of the Merger, and costs including attorneys' and experts' fees; the Company believes the litigations are without merit and does not expect them to have a material adverse effect on its business, operating results, cash flows, or financial condition[287][288] ITEM 1A. Risk Factors This section supplements and updates the risk factors from the Company's Annual Report on Form 10-K, focusing on risks specifically related to the pending merger with Eastern Bankshares, Inc. - The pendency of the Merger could adversely affect the Company's business, results of operations, and financial condition by causing disruptions, creating uncertainty, impacting relationships with customers, suppliers, and employees, and diverting Management resources[292] - The Company is subject to restrictions on business conduct under the Merger Agreement, which could limit its ability to respond to competitive pressures or pursue opportunities[293] - The value of the stock consideration for shareholders is uncertain due to Eastern common stock price fluctuations; the Merger is also subject to regulatory approvals and shareholder approval, and failure to complete it could negatively impact the Company's stock price and future financial results[294][295][296][297] - Eastern may face difficulties integrating the Company's operations and may not realize the anticipated benefits and cost savings from the Merger; a termination fee of $18.9 million payable to Eastern in specified circumstances could discourage other acquisition proposals[300][303][304] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's share repurchase program, noting the suspension of repurchases following the Merger Agreement. During Q2 2025, the Company repurchased 317,500 shares before suspending the program | Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | | :---------------------- | :------------------------------------------ | :------------------------------------- | | April 1 to April 30, 2025 | 317,500 | $9.68 | | May 1 to May 31, 2025 | — | — | | June 1, to June 30, 2025 | — | — | | Total | 317,500 | $9.68 | - The Company suspended its share repurchase program on April 24, 2025, following its entry into the Merger Agreement; prior to suspension, 317,500 shares were repurchased in Q2 2025 at an average cost of $9.68 per share[307] ITEM 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reported period - None[308] ITEM 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Not applicable[309] ITEM 5. Other Information This section confirms that there were no unregistered sales of equity securities or use of proceeds, and no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during the quarter - No unregistered sales of equity securities or use of proceeds occurred during the quarter[311] - None of the Company's directors or executive officers had in place, or adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements during the quarter ended June 30, 2025[310] ITEM 6. Exhibits This section lists the exhibits included in or incorporated by reference into the Quarterly Report on Form 10-Q, such as certifications of the CEO and CFO, and interactive data files - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1) and Interactive Data Files (101, 104) formatted in Inline XBRL, covering the consolidated financial statements and notes[314]