Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

hone_Current Folio_10Q

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

 

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

 

For the quarterly period ended September 30, 2018

or

 

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

 

Commission File Number 001-37778

 

HarborOne Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Massachusetts

 

81-1607465

(State or other jurisdiction of
incorporation or organization)

 

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

 

 

770 Oak Street, Brockton, Massachusetts

02301

(Address of principal executive offices)

(Zip Code)

 

(508) 895-1000

(Registrant’s telephone number, including area code)

 

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

☒ Yes ☐ No

 

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

☒ Yes ☐ No

 

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

 

Large accelerated filer  ☐

Accelerated filer  ☒

Non-accelerated filer  ☐

 

Smaller reporting company  ☐

 Emerging growth company  ☒

 

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

 

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

 

As of November 1, 2018 there were 32,585,519 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

 

 

 


 

Table of Contents

Index

 

 

 

PAGE

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

 

Financial Statements

 

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)

1

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)

2

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)

3

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2018 and 2017 (unaudited)

4

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (unaudited)

5

 

 

Notes to Consolidated Financial Statements (unaudited)

7

 

 

 

ITEM 2. 

 

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

42

ITEM 3. 

 

Quantitative and Qualitative Disclosures about Market Risk

66

ITEM 4. 

 

Controls and Procedures

66

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

ITEM 1. 

 

Legal Proceedings

67

ITEM 1A. 

 

Risk Factors

67

ITEM 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

67

ITEM 3. 

 

Defaults Upon Senior Securities

67

ITEM 4. 

 

Mine Safety Disclosures

67

ITEM 5. 

 

Other Information

67

ITEM 6. 

 

Exhibits

67

 

 

 

 

EXHIBIT INDEX 

 

 

68

 

 

 

 

SIGNATURE 

 

 

69

 

 

 

 

 

 

 

 

 


 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31,

 

(in thousands, except share data)

    

2018

 

2017

 

 

 

 

 

 

 

 

 

Assets

 

 

 

    

 

 

 

Cash and due from banks

 

$

18,478

 

$

16,348

 

Short-term investments

 

 

76,619

 

 

64,443

 

Total cash and cash equivalents

 

 

95,097

 

 

80,791

 

 

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

 

191,847

 

 

170,853

 

Securities held to maturity, at amortized cost

 

 

47,371

 

 

46,869

 

Federal Home Loan Bank stock, at cost

 

 

13,263

 

 

15,532

 

Loans held for sale, at fair value

 

 

155,268

 

 

59,460

 

Loans

 

 

2,223,822

 

 

2,194,967

 

Less: Allowance for loan losses

 

 

(19,440)

 

 

(18,489)

 

Net loans

 

 

2,204,382

 

 

2,176,478

 

Accrued interest receivable

 

 

7,452

 

 

6,545

 

Other real estate owned and repossessed assets

 

 

672

 

 

762

 

Mortgage servicing rights, at fair value

 

 

23,748

 

 

21,092

 

Property and equipment, net

 

 

25,177

 

 

24,487

 

Retirement plan annuities

 

 

12,830

 

 

12,498

 

Bank-owned life insurance

 

 

41,171

 

 

40,446

 

Deferred income taxes, net

 

 

2,047

 

 

843

 

Goodwill and other intangible assets

 

 

13,726

 

 

13,497

 

Other assets

 

 

18,749

 

 

14,767

 

Total assets

 

$

2,852,800

 

$

2,684,920

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

302,190

 

$

264,453

 

Interest-bearing deposits

 

 

1,816,620

 

 

1,675,795

 

Brokered deposits

 

 

66,831

 

 

73,490

 

Total deposits

 

 

2,185,641

 

 

2,013,738

 

Short-term borrowed funds

 

 

25,000

 

 

44,000

 

Long-term borrowed funds

 

 

206,187

 

 

246,365

 

Subordinated debt

 

 

33,855

 

 

 —

 

Mortgagors' escrow accounts

 

 

4,655

 

 

5,221

 

Accrued interest payable

 

 

622

 

 

518

 

Other liabilities and accrued expenses

 

 

43,495

 

 

31,594

 

Total liabilities

 

 

2,499,455

 

 

2,341,436

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 2, 10 and 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 90,000,000 shares authorized; 32,585,519 and 32,647,395 shares issued at September 30, 2018 and December 31, 2017, respectively

 

 

327

 

 

327

 

Additional paid-in capital

 

 

150,732

 

 

147,060

 

Retained earnings

 

 

218,977

 

 

207,590

 

Treasury stock, at cost, 81,676 and 14,900 shares at September 30, 2018 and December 31, 2017, respectively

 

 

(1,548)

 

 

(280)

 

Accumulated other comprehensive loss

 

 

(4,904)

 

 

(528)

 

Unearned compensation - ESOP

 

 

(10,239)

 

 

(10,685)

 

Total stockholders' equity

 

 

353,345

 

 

343,484

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

2,852,800

 

$

2,684,920

 

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

 

1


 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

(in thousands, except share data)

 

2018

    

2017

 

2018

    

2017

 

 

 

 

 

 

 

 

 

Interest and dividend income:

 

 

 

 

 

 

    

 

 

 

 

 

Interest and fees on loans

 

$

25,115

 

$

20,990

 

$

71,485

 

$

59,765

Interest on loans held for sale

 

 

625

 

 

796

 

 

1,557

 

 

1,962

Interest on taxable securities

 

 

1,412

 

 

1,118

 

 

4,042

 

 

3,232

Interest on non-taxable securities

 

 

217

 

 

216

 

 

650

 

 

650

Other interest and dividend income

 

 

480

 

 

294

 

 

1,051

 

 

866

Total interest and dividend income

 

 

27,849

 

 

23,414

 

 

78,785

 

 

66,475

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

5,409

 

 

2,812

 

 

13,382

 

 

7,811

Interest on FHLB borrowings

 

 

1,130

 

 

1,333

 

 

3,074

 

 

3,748

Interest on subordinated debentures

 

 

189

 

 

 —

 

 

189

 

 

 —

Total interest expense

 

 

6,728

 

 

4,145

 

 

16,645

 

 

11,559

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income

 

 

21,121

 

 

19,269

 

 

62,140

 

 

54,916

Provision for loan losses

 

 

632

 

 

921

 

 

2,326

 

 

1,656

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income, after provision for loan losses

 

 

20,489

 

 

18,348

 

 

59,814

 

 

53,260

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking income:

 

 

 

 

 

 

 

 

 

 

 

 

Changes in mortgage servicing rights fair value

 

 

(378)

 

 

(488)

 

 

338

 

 

(1,982)

Other

 

 

9,249

 

 

11,071

 

 

24,275

 

 

30,117

Total mortgage banking income

 

 

8,871

 

 

10,583

 

 

24,613

 

 

28,135

Deposit account fees

 

 

3,302

 

 

3,172

 

 

9,493

 

 

9,088

Income on retirement plan annuities

 

 

100

 

 

114

 

 

332

 

 

337

Gain on sale of consumer loans

 

 

 —

 

 

 —

 

 

 —

 

 

78

Bank-owned life insurance income

 

 

243

 

 

260

 

 

725

 

 

778

Other income

 

 

1,124

 

 

498

 

 

2,383

 

 

1,964

Total noninterest income

 

 

13,640

 

 

14,627

 

 

37,546

 

 

40,380

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

16,809

 

 

17,325

 

 

50,506

 

 

48,568

Occupancy and equipment

 

 

3,027

 

 

2,954

 

 

9,263

 

 

8,668

Data processing

 

 

1,702

 

 

1,547

 

 

4,824

 

 

4,597

Loan expenses

 

 

1,503

 

 

1,884

 

 

4,155

 

 

5,129

Marketing

 

 

639

 

 

1,136

 

 

2,722

 

 

2,659

Deposit expenses

 

 

308

 

 

311

 

 

965

 

 

1,019

Postage and printing

 

 

344

 

 

380

 

 

1,064

 

 

1,017

Professional fees

 

 

712

 

 

1,126

 

 

2,595

 

 

3,136

Foreclosed and repossessed assets

 

 

(45)

 

 

 8

 

 

63

 

 

60

Deposit insurance

 

 

540

 

 

397

 

 

1,525

 

 

1,305

Other expenses

 

 

1,844

 

 

1,370

 

 

5,818

 

 

3,563

Total noninterest expense

 

 

27,383

 

 

28,438

 

 

83,500

 

 

79,721

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

6,746

 

 

4,537

 

 

13,860

 

 

13,919

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

818

 

 

1,699

 

 

2,577

 

 

5,133

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,928

 

$

2,838

 

$

11,283

 

$

8,786

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

$

0.09

 

$

0.36

 

$

0.28

Diluted

 

$

0.19

 

$

0.09

 

$

0.36

 

$

0.28

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,575,210

 

 

31,303,281

 

 

31,574,681

 

 

31,109,104

Diluted

 

 

31,575,811

 

 

31,303,281

 

 

31,574,881

 

 

31,109,104

 

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

 

2


 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

 

Nine Months Ended September 30, 

(in thousands)

    

2018

    

2017

 

 

2018

 

2017

 

 

 

 

 

Net income

 

$

5,928

 

$

2,838

 

 

$

11,283

 

$

8,786

Other comprehensive income:

 

 

 

 

 

 

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

 

 

(1,501)

 

 

180

 

 

 

(5,476)

 

 

1,155

Related tax effect

 

 

330

 

 

(63)

 

 

 

1,204

 

 

(403)

Net-of-tax amount

 

 

(1,171)

 

 

117

 

 

 

(4,272)

 

 

752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental director retirement plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of prior service cost

 

 

 —

 

 

60

 

 

 

 —

 

 

181

Related tax effect

 

 

 —

 

 

(24)

 

 

 

 —

 

 

(58)

Net-of-tax amount

 

 

 —

 

 

36

 

 

 

 —

 

 

123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(1,171)

 

 

153

 

 

 

(4,272)

 

 

875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

4,757

 

$

2,991

 

 

$

7,011

 

$

9,661

Amortization of prior service cost is included in compensation and benefits in the unaudited interim Consolidated Statements of Operations. 

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

 

 

 

3


 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Treasury

 

Other

 

Unearned

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

Retained

 

Stock,

 

Comprehensive

 

Compensation

 

Stockholders'

 

(in thousands, except share data)

    

Shares

    

 

Amount

    

 

Capital

    

Earnings

    

at Cost

    

Loss

    

- ESOP

    

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2016

 

32,120,880

 

$

321

 

$

144,420

 

$

197,211

 

$

 —

 

$

(1,290)

 

$

(11,278)

 

$

329,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

8,786

 

 

 —

 

 

875

 

 

 —

 

 

9,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released (44,520 shares)

 

 —

 

 

 —

 

 

412

 

 

 —

 

 

 —

 

 

 —

 

 

445

 

 

857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards granted

 

541,415

 

 

 6

 

 

(6)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

699

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

699

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2017

 

32,662,295

 

$

327

 

$

145,525

 

$

205,997

 

$

 —

 

$

(415)

 

$

(10,833)

 

$

340,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

32,647,395

 

$

327

 

$

147,060

 

$

207,590

 

$

(280)

 

$

(528)

 

$

(10,685)

 

$

343,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 —

 

 

 —

 

 

 —

 

 

11,283

 

 

 —

 

 

(4,272)

 

 

 —

 

 

7,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stranded effect of tax rate change (Note 1)

 

 —

 

 

 —

 

 

 —

 

 

104

 

 

 —

 

 

(104)

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released (44,520 shares)

 

 —

 

 

 —

 

 

390

 

 

 —

 

 

 —

 

 

 —

 

 

446

 

 

836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards granted

 

4,900

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

3,282

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchased

 

(66,776)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,268)

 

 

 —

 

 

 —

 

 

(1,268)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2018

 

32,585,519

 

$

327

 

$

150,732

 

$

218,977

 

$

(1,548)

 

$

(4,904)

 

$

(10,239)

 

$

353,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

4


 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

    

Nine Months Ended September 30, 

(in thousands)

    

2018

    

2017

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

11,283

 

$

8,786

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

 

 

 

 

 

 

Provision for loan losses

 

 

2,326

 

 

1,656

Net amortization of securities premiums/discounts

 

 

432

 

 

523

Net amortization of net deferred loan costs/fees and premiums

 

 

2,604

 

 

3,672

Depreciation and amortization of premises and equipment

 

 

2,174

 

 

2,122

Change in mortgage servicing rights fair value

 

 

(338)

 

 

1,982

Mortgage and consumer servicing rights capitalized

 

 

(1,268)

 

 

(2,054)

Amortization of consumer servicing rights

 

 

35

 

 

42

Accretion of fair value adjustment on loans and deposits, net

 

 

(247)