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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 September 30, 2019

or

 

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

 

Commission File Number 001-38955

 

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 November 1, 2019 there were 58,429,584 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, 2019 and December 31, 2018 (unaudited)

1

 

 

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

2

 

 

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

3

 

 

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

4

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 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

63

 

 

 

 

EXHIBIT INDEX 

 

 

64

 

 

 

 

SIGNATURE 

 

 

67

 

 

 

 

 

 

 

 

Table of Contents

HarborOne Bancorp, Inc.

Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

(in thousands, except share data)

    

2019

 

2018

 

 

 

 

 

 

 

 

 

Assets

 

 

 

    

 

 

 

Cash and due from banks

 

$

27,758

 

$

27,686

 

Short-term investments

 

 

210,873

 

 

77,835

 

Total cash and cash equivalents

 

 

238,631

 

 

105,521

 

 

 

 

 

 

 

 

 

Securities available for sale, at fair value

 

 

204,133

 

 

209,293

 

Securities held to maturity, at amortized cost

 

 

27,099

 

 

44,688

 

Federal Home Loan Bank stock, at cost

 

 

13,466

 

 

24,969

 

Loans held for sale, at fair value

 

 

102,121

 

 

42,107

 

Loans

 

 

3,112,264

 

 

2,985,507

 

Less: Allowance for loan losses

 

 

(23,044)

 

 

(20,655)

 

Net loans

 

 

3,089,220

 

 

2,964,852

 

Accrued interest receivable

 

 

9,835

 

 

9,996

 

Other real estate owned and repossessed assets

 

 

377

 

 

749

 

Mortgage servicing rights, at fair value

 

 

16,067

 

 

22,217

 

Property and equipment, net

 

 

56,997

 

 

57,045

 

Retirement plan annuities

 

 

13,231

 

 

12,931

 

Bank-owned life insurance

 

 

45,391

 

 

44,635

 

Deferred income taxes, net

 

 

5,530

 

 

6,727

 

Goodwill and other intangible assets

 

 

76,117

 

 

78,467

 

Other assets

 

 

50,805

 

 

28,924

 

Total assets

 

$

3,949,020

 

$

3,653,121

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

446,432

 

$

412,906

 

Interest-bearing deposits

 

 

2,411,602

 

 

2,194,647

 

Brokered deposits

 

 

66,474

 

 

77,508

 

Total deposits

 

 

2,924,508

 

 

2,685,061

 

Short-term borrowed funds

 

 

60,000

 

 

290,000

 

Long-term borrowed funds

 

 

211,140

 

 

229,936

 

Subordinated debt

 

 

33,875

 

 

33,799

 

Mortgagors' escrow accounts

 

 

6,251

 

 

4,551

 

Accrued interest payable

 

 

806

 

 

1,611

 

Other liabilities and accrued expenses

 

 

52,886

 

 

50,589

 

Total liabilities

 

 

3,289,466

 

 

3,295,547

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 10 and 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized; 58,500,785 and 58,612,149 shares issued; 58,429,584 and 58,465,505 shares outstanding at September 30, 2019 and December 31, 2018, respectively (1)

 

 

584

 

 

327

 

Additional paid-in capital

 

 

458,599

 

 

152,156

 

Retained earnings

 

 

233,049

 

 

219,088

 

Treasury stock, at cost, 71,201 and 146,644 shares at September 30, 2019 and December 31, 2018, respectively (1)

 

 

(721)

 

 

(1,548)

 

Accumulated other comprehensive income (loss)

 

 

1,881

 

 

(2,358)

 

Unearned compensation - ESOP

 

 

(33,838)

 

 

(10,091)

 

Total stockholders' equity

 

 

659,554

 

 

357,574

 

Total liabilities and stockholders' equity

 

$

3,949,020

 

$

3,653,121

 

 

 

 

 

 

 

 

 

(1) Share amounts related to periods prior to the August 14, 2019 closing of the conversion offering have been restated to give retroactive recognition to the 1.795431 exchange ratio applied in the conversion offering.

 

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 September 30, 

 

Nine Months Ended September 30, 

 

(in thousands, except share data)

  

2019

  

2018

  

2019

  

2018

 

 

 

 

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

36,230

 

$

25,115

 

$

106,033

 

$

71,485

 

Interest on loans held for sale

 

 

747

 

 

625

 

 

1,647

 

 

1,557

 

Interest on taxable securities

 

 

1,450

 

 

1,412

 

 

4,816

 

 

4,042

 

Interest on non-taxable securities

 

 

92

 

 

217

 

 

423

 

 

650

 

Other interest and dividend income

 

 

1,211

 

 

480

 

 

2,142

 

 

1,051

 

Total interest and dividend income

 

 

39,730

 

 

27,849

 

 

115,061

 

 

78,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

9,972

 

 

5,409

 

 

27,577

 

 

13,382

 

Interest on FHLB borrowings

 

 

1,249

 

 

1,130

 

 

5,203

 

 

3,074

 

Interest on subordinated debentures

 

 

524

 

 

189

 

 

1,553

 

 

189

 

Total interest expense

 

 

11,745

 

 

6,728

 

 

34,333

 

 

16,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income

 

 

27,985

 

 

21,121

 

 

80,728

 

 

62,140

 

Provision for loan losses

 

 

889

 

 

632

 

 

3,496

 

 

2,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest and dividend income, after provision for loan losses

 

 

27,096

 

 

20,489

 

 

77,232

 

 

59,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in mortgage servicing rights fair value

 

 

(2,474)

 

 

(378)

 

 

(6,866)

 

 

338

 

Other

 

 

13,979

 

 

9,249

 

 

31,528

 

 

24,275

 

Total mortgage banking income

 

 

11,505

 

 

8,871

 

 

24,662

 

 

24,613

 

Deposit account fees

 

 

4,186

 

 

3,302

 

 

12,020

 

 

9,493

 

Income on retirement plan annuities

 

 

104

 

 

100

 

 

300

 

 

332

 

Gain on sale and call of securities, net

 

 

77

 

 

 —

 

 

1,344

 

 

 —

 

Bank-owned life insurance income

 

 

256

 

 

243

 

 

762

 

 

725

 

Other income

 

 

1,145

 

 

1,124

 

 

3,745

 

 

2,383

 

Total noninterest income

 

 

17,273

 

 

13,640

 

 

42,833

 

 

37,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

23,238

 

 

16,809

 

 

63,068

 

 

50,506

 

Occupancy and equipment

 

 

4,171

 

 

3,027

 

 

13,030

 

 

9,263

 

Data processing

 

 

2,196

 

 

1,702

 

 

6,441

 

 

4,824

 

Loan expenses

 

 

1,704

 

 

1,503

 

 

4,309

 

 

4,155

 

Marketing

 

 

799

 

 

639

 

 

2,934

 

 

2,722

 

Deposit expenses

 

 

405

 

 

308

 

 

1,189

 

 

965

 

Postage and printing

 

 

435

 

 

344

 

 

1,345

 

 

1,064

 

Professional fees

 

 

889

 

 

712

 

 

3,219

 

 

2,595

 

Foreclosed and repossessed assets

 

 

42

 

 

(45)

 

 

(34)

 

 

63

 

Deposit insurance

 

 

(225)

 

 

540

 

 

1,030

 

 

1,525

 

Merger expenses

 

 

 —

 

 

274

 

 

 —

 

 

1,284

 

Other expenses

 

 

2,549

 

 

1,570

 

 

7,345

 

 

4,534

 

Total noninterest expense

 

 

36,203

 

 

27,383

 

 

103,876

 

 

83,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

8,166

 

 

6,746

 

 

16,189

 

 

13,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

1,053

 

 

818

 

 

2,228

 

 

2,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

7,113

 

$

5,928

 

$

13,961

 

$

11,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

$

0.10

 

$

0.25

 

$

0.20

 

Diluted

 

$

0.13

 

$

0.10

 

$

0.25

 

$

0.20

 

Weighted average shares outstanding (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

55,638,734

 

 

56,691,125

 

 

56,855,930

 

 

56,690,174

 

Diluted

 

 

55,638,734

 

 

56,692,204

 

 

56,855,930

 

 

56,690,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Share amounts related to periods prior to the August 14, 2019 closing of the conversion offering have been restated to give retroactive recognition to the 1.795431 exchange ratio applied in the conversion offering .

 

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)

    

2019

 

2018

 

2019

 

2018

 

 

 

     

 

Net income

 

$

7,113

 

$

5,928

 

$

13,961

 

$

11,283

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses)

 

 

609

 

 

(1,501)

 

 

6,780

 

 

(5,476)

Reclassification adjustment for net realized gains

 

 

(77)

 

 

 —

 

 

(1,344)

 

 

 —

Net unrealized gains (losses)

 

 

532

 

 

(1,501)

 

 

5,436

 

 

(5,476)

Related tax effect

 

 

(117)

 

 

330

 

 

(1,197)

 

 

1,204

Net-of-tax amount

 

 

415

 

 

(1,171)

 

 

4,239

 

 

(4,272)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

7,528

 

$

4,757

 

$

18,200

 

$

7,011

 

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 nine months ended September 30, 2019 was $22,000 and $377,000, respectively.  There were no realized gains on sales of available for sale securities for the three and nine months ended September 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 (1)

 

Amount

 

Capital

 

Earnings

 

at Cost

 

Income (Loss)

 

- ESOP

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

58,571,813

 

$

327

 

$

150,063

 

$

213,049

 

$

(742)

 

$

(3,733)

 

$

(10,388)

 

$

348,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 —

 

 

 —

 

 

 —

 

 

5,928

 

 

 —

 

 

(1,171)

 

 

 —

 

 

4,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 —

 

 

 —

 

 

134

 

 

 —

 

 

 —

 

 

 —

 

 

149

 

 

283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards granted

 

8,797

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

535

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchased

 

(75,544)

 

 

 —

 

 

 —

 

 

 —

 

 

(806)

 

 

 —

 

 

 —

 

 

(806)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2018

 

58,505,066

 

$

327

 

$

150,732

 

$

218,977

 

$

(1,548)

 

$

(4,904)

 

$

(10,239)

 

$

353,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

 

58,483,025

 

$

327

 

$

154,730

 

$

225,936

 

$

(1,548)

 

$

1,466

 

$

(9,793)

 

$

371,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Reorganization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of HarborOne Bancorp, Inc. (net of costs of $6.3 million)

 

8,760

 

 

257

 

 

303,854

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

304,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of 2,482,945 shares by the ESOP

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(24,830)

 

 

(24,830)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock retired

 

 —

 

 

 —

 

 

(1,548)

 

 

 —

 

 

1,548

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution of HarborOne Bancorp Mutual Bancshares

 

 —

 

 

 —

 

 

99

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 —

 

 

 —

 

 

 —

 

 

7,113

 

 

 —

 

 

415

 

 

 —

 

 

7,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESOP shares committed to be released (78,588 shares)

 

 —

 

 

 —

 

 

158

 

 

 —

 

 

 —

 

 

 —

 

 

785

 

 

943

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock awards granted, net of awards forfeited

 

9,000

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 —

 

 

 —

 

 

1,306

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock purchased

 

(71,201)

 

 

 —

 

 

 —

 

 

 —

 

 

(721)

 

 

 —

 

 

 —

 

 

(721)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

58,429,584

 

$

584

 

$

458,599

 

$

233,049

 

$

(721)

 

$

1,881

 

$

(33,838)

 

$

659,554

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Share amounts related to periods prior to the August 14, 2019 closing of the conversion offering have been restated to give retroactive recognition to the 1.795431 exchange ratio applied in the conversion offering.

 

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 (1)

 

Amount

 

Capital

 

Earnings

 

at Cost