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Section 1: 10-Q (10-Q)

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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 June 30, 2019

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)

 

Securities registered pursuant to Section 12(b) of the Act

 

 

 

 

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

HONE

The NASDAQ Stock Market, LLC

 

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 August 1, 2019 there were 32,573,244 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 June 30, 2019 and December 31, 2018 (unaudited)

1

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)

2

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)

3

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)

4

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)

6

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

 

ITEM 2. 

 

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

40

ITEM 3. 

 

Quantitative and Qualitative Disclosures about Market Risk

61

ITEM 4. 

 

Controls and Procedures

61

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

ITEM 1. 

 

Legal Proceedings

62

ITEM 1A. 

 

Risk Factors

62

ITEM 2. 

 

Unregistered Sales of Equity Securities and Use of Proceeds

62

ITEM 3. 

 

Defaults Upon Senior Securities

62

ITEM 4. 

 

Mine Safety Disclosures

62

ITEM 5. 

 

Other Information

62

ITEM 6. 

 

Exhibits

62

 

 

 

 

EXHIBIT INDEX 

 

 

63

 

 

 

 

SIGNATURE 

 

 

64

 

 

 

 

 

 

 

 

 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

(in thousands, except share data)

    

2019

 

2018

 

 

 

 

 

 

 

 

 

Assets

 

 

 

    

 

 

 

Cash and due from banks

 

$

27,205

 

$

27,686

 

Short-term investments

 

 

51,502

 

 

77,835

 

Total cash and cash equivalents

 

 

78,707

 

 

105,521

 

 

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

 

202,457

 

 

209,293

 

Securities held to maturity, at amortized cost

 

 

34,752

 

 

44,688

 

Federal Home Loan Bank stock, at cost

 

 

14,876

 

 

24,969

 

Loans held for sale, at fair value

 

 

84,651

 

 

42,107

 

Loans

 

 

3,065,941

 

 

2,985,507

 

Less: Allowance for loan losses

 

 

(22,261)

 

 

(20,655)

 

Net loans

 

 

3,043,680

 

 

2,964,852

 

Accrued interest receivable

 

 

10,325

 

 

9,996

 

Other real estate owned and repossessed assets

 

 

504

 

 

749

 

Mortgage servicing rights, at fair value

 

 

18,156

 

 

22,217

 

Property and equipment, net

 

 

57,543

 

 

57,045

 

Retirement plan annuities

 

 

13,127

 

 

12,931

 

Bank-owned life insurance

 

 

45,136

 

 

44,635

 

Deferred income taxes, net

 

 

5,646

 

 

6,727

 

Goodwill and other intangible assets

 

 

76,735

 

 

78,467

 

Other assets

 

 

51,129

 

 

28,924

 

Total assets

 

$

3,737,424

 

$

3,653,121

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

447,449

 

$

412,906

 

Interest-bearing deposits

 

 

2,390,220

 

 

2,194,647

 

Brokered deposits

 

 

131,936

 

 

77,508

 

Total deposits

 

 

2,969,605

 

 

2,685,061

 

Short-term borrowed funds

 

 

98,000

 

 

290,000

 

Long-term borrowed funds

 

 

211,149

 

 

229,936

 

Subordinated debt

 

 

33,843

 

 

33,799

 

Mortgagors' escrow accounts

 

 

5,214

 

 

4,551

 

Accrued interest payable

 

 

1,409

 

 

1,611

 

Other liabilities and accrued expenses

 

 

47,086

 

 

50,589

 

Total liabilities

 

 

3,366,306

 

 

3,295,547

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 10 and 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 90,000,000 shares authorized; 32,654,920 and 32,645,161 shares issued; 32,573,244 and 32,563,485 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

327

 

 

327

 

Additional paid-in capital

 

 

154,730

 

 

152,156

 

Retained earnings

 

 

225,936

 

 

219,088

 

Treasury stock, at cost, 81,676 shares at June 30, 2019 and December 31, 2018, respectively

 

 

(1,548)

 

 

(1,548)

 

Accumulated other comprehensive income (loss)

 

 

1,466

 

 

(2,358)

 

Unearned compensation - ESOP

 

 

(9,793)

 

 

(10,091)

 

Total stockholders' equity

 

 

371,118

 

 

357,574

 

Total liabilities and stockholders' equity

 

$

3,737,424

 

$

3,653,121

 

 

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

 

 

1

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

(in thousands, except share data)

 

2019

 

2018

 

2019

    

2018

 

 

 

 

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

35,438

 

$

23,866

 

$

69,803

 

$

46,370

 

Interest on loans held for sale

 

 

542

 

 

521

 

 

900

 

 

932

 

Interest on taxable securities

 

 

1,703

 

 

1,351

 

 

3,366

 

 

2,630

 

Interest on non-taxable securities

 

 

147

 

 

216

 

 

331

 

 

433

 

Other interest and dividend income

 

 

448

 

 

297

 

 

931

 

 

571

 

Total interest and dividend income

 

 

38,278

 

 

26,251

 

 

75,331

 

 

50,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

9,362

 

 

4,450

 

 

17,605

 

 

7,973

 

Interest on FHLB borrowings

 

 

1,679

 

 

906

 

 

3,954

 

 

1,944

 

Interest on subordinated debentures

 

 

524

 

 

 —

 

 

1,029

 

 

 —

 

Total interest expense

 

 

11,565

 

 

5,356

 

 

22,588

 

 

9,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income

 

 

26,713

 

 

20,895

 

 

52,743

 

 

41,019

 

Provision for loan losses

 

 

1,750

 

 

886

 

 

2,607

 

 

1,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income, after provision for loan losses

 

 

24,963

 

 

20,009

 

 

50,136

 

 

39,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in mortgage servicing rights fair value

 

 

(2,241)

 

 

(306)

 

 

(4,392)

 

 

716

 

Other

 

 

10,896

 

 

8,765

 

 

17,549

 

 

15,026

 

Total mortgage banking income

 

 

8,655

 

 

8,459

 

 

13,157

 

 

15,742

 

Deposit account fees

 

 

4,056

 

 

3,224

 

 

7,834

 

 

6,191

 

Income on retirement plan annuities

 

 

100

 

 

119

 

 

196

 

 

232

 

Gain on sale and call of securities, net

 

 

1,267

 

 

 —

 

 

1,267

 

 

 —

 

Bank-owned life insurance income

 

 

253

 

 

243

 

 

506

 

 

482

 

Other income

 

 

1,387

 

 

512

 

 

2,600

 

 

1,259

 

Total noninterest income

 

 

15,718

 

 

12,557

 

 

25,560

 

 

23,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

20,585

 

 

17,345

 

 

39,830

 

 

33,697

 

Occupancy and equipment

 

 

4,411

 

 

2,961

 

 

8,859

 

 

6,236

 

Data processing

 

 

2,199

 

 

1,569

 

 

4,245

 

 

3,122

 

Loan expenses

 

 

1,334

 

 

1,390

 

 

2,605

 

 

2,652

 

Marketing

 

 

1,177

 

 

1,084

 

 

2,135

 

 

2,083

 

Deposit expenses

 

 

434

 

 

327

 

 

784

 

 

657

 

Postage and printing

 

 

422

 

 

354

 

 

910

 

 

720

 

Professional fees

 

 

1,384

 

 

915

 

 

2,330

 

 

1,883

 

Foreclosed and repossessed assets

 

 

(5)

 

 

45

 

 

(76)

 

 

108

 

Deposit insurance

 

 

589

 

 

491

 

 

1,255

 

 

985

 

Merger expenses

 

 

 —

 

 

524

 

 

 —

 

 

1,010

 

Other expenses

 

 

2,551

 

 

1,513

 

 

4,796

 

 

2,964

 

Total noninterest expense

 

 

35,081

 

 

28,518

 

 

67,673

 

 

56,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

5,600

 

 

4,048

 

 

8,023

 

 

7,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

819

 

 

945

 

 

1,175

 

 

1,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

4,781

 

$

3,103

 

$

6,848

 

$

5,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

$

0.10

 

$

0.22

 

$

0.17

 

Diluted

 

$

0.15

 

$

0.10

 

$

0.22

 

$

0.17

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,582,546

 

 

31,578,961

 

 

31,572,211

 

 

31,574,411

 

Diluted

 

 

31,582,546

 

 

31,578,961

 

 

31,572,211

 

 

31,574,411

 

 

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 June 30, 

 

Six Months Ended June 30, 

(in thousands)

    

2019

 

2018

 

2019

 

2018

 

 

 

     

 

Net income

 

$

4,781

 

$

3,103

 

$

6,848

 

$

5,355

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

 

 

2,980

 

 

(1,328)

 

 

6,171

 

 

(3,975)

Reclassification adjustment for net realized gains

 

 

(1,267)

 

 

 —

 

 

(1,267)

 

 

 —

Net unrealized gains (losses)

 

 

1,713

 

 

(1,328)

 

 

4,904

 

 

(3,975)

Related tax effect

 

 

(377)

 

 

292

 

 

(1,080)

 

 

874

Net-of-tax amount

 

 

1,336

 

 

(1,036)

 

 

3,824

 

 

(3,101)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

6,117

 

$

2,067

 

$

10,672

 

$

2,254

 

Realized gains on securities available for sale are included in gain on sale and call of securities, net, in the Consolidated Statements of Income.  The related income tax expense for the three and six months ended June 30, 2019 was $365,000.  There were no realized gains on sales of available for sale securities for the three and six months ended June 30, 2018.

 

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

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

Treasury

 

Other

 

Unearned

 

Total

 

 

Outstanding

 

 

 

Paid-in

 

Retained

 

Stock,

 

Comprehensive

 

Compensation

 

Stockholders'

(in thousands, except share data)

 

Shares

 

Amount

 

Capital

 

Earnings

 

at Cost

 

Income (Loss)

 

- ESOP

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

32,622,695

 

$

327

 

$

148,559

 

$

209,946

 

$

(742)

 

$

(2,697)

 

$

(10,536)

 

$

344,857

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 —

 

 

 —

 

 

 —

 

 

3,103

 

 

 —

 

 

(1,036)

 

 

 —

 

 

2,067

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released  (14,840 shares)

 

 —

 

 

 —

 

 

123

 

 

 —

 

 

 —

 

 

 —

 

 

148

 

 

271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

1,381

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

32,622,695

 

$

327

 

$

150,063

 

$

213,049

 

$

(742)

 

$

(3,733)

 

$

(10,388)

 

$

348,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

32,560,136

 

$

327

 

$

153,326

 

$

221,155

 

$

(1,548)

 

$

130

 

$

(9,942)

 

$

363,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

4,781

 

 

 —

 

 

1,336

 

 

 —

 

 

6,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released  (14,840 shares)

 

 —

 

 

 —

 

 

122

 

 

 —

 

 

 —

 

 

 —

 

 

149

 

 

271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards forfeited, net of awards issued

 

13,108

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

1,282

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

32,573,244

 

$

327

 

$

154,730

 

$

225,936

 

$

(1,548)

 

$

1,466

 

$

(9,793)

 

$

371,118

 

4

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

Treasury

 

Other

 

Unearned

 

Total

 

 

Outstanding

 

 

 

Paid-in

 

Retained

 

Stock,

 

Comprehensive

 

Compensation

 

Stockholders'

(in thousands, except share data)

 

Shares

 

Amount

 

Capital

 

Earnings

 

at Cost

 

Income (Loss)

 

- ESOP

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

32,647,395

 

$

327

 

$

147,060

 

$

207,590

 

$

(280)

 

$

(528)

 

$

(10,685)

 

$

343,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 —

 

 

 —

 

 

 —

 

 

5,355

 

 

 —

 

 

(3,101)

 

 

 —

 

 

2,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of stranded effect of tax rate change

 

 —

 

 

 —

 

 

 —

 

 

104

 

 

 —

 

 

(104)

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released  (29,680 shares)

 

 —

 

 

 —

 

 

256

 

 

 —

 

 

 —

 

 

 —

 

 

297

 

 

553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

2,747

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchased

 

(24,700)

 

 

 —

 

 

 —

 

 

 —

 

 

(462)

 

 

 —

 

 

 —

 

 

(462)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

32,622,695

 

$

327

 

$

150,063

 

$

213,049

 

$

(742)

 

$

(3,733)

 

$

(10,388)

 

$

348,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018