HarborOne Bancorp, Inc. Announces 2024 Fourth Quarter Results

HarborOne Bancorp, Inc. (the "Company" or "HarborOne") (NASDAQ:HONE), the holding company for HarborOne Bank (the "Bank"), announced net income of $8.9 million, or $0.21 per diluted share, for the quarter ended December 31, 2024, an increase of $5.0 million, or 126.5%, compared to net income of $3.9 million, or $0.10 per diluted share, for the quarter ended September 30, 2024. The Company reported net income of $27.4 million, or $0.66 per diluted share, for the year ended December 31, 2024, compared to net income of $16.1 million, or $0.37 per diluted share, for the prior year.

Fourth Quarter Financial Highlights:

• Net income of $8.9 million, or $0.21 per diluted share, partially driven by a $546,000 release of tax reserve for uncertain tax positions that were resolved. Excluding the reserve release, net income was $8.3 million or $0.20 per diluted share.
• Net interest margin of 2.36%, flat on a linked-quarter basis.
• Average deposits, excluding brokered deposits, increased $62.9 million, or 6.1% annualized, on a linked-quarter basis.
• The loans-to-deposits ratio improved 94 basis points during the quarter, from 107.57% to 106.63%.
• Credit loss provision of $1.9 million, increasing coverage ratio to 1.16%.
• Bank Term Funding Program ("BTFP") borrowing of $175.0 million paid in full, driving a decline in average borrowings of $95.9 million during the quarter. As a result of the BTFP borrowing payoff and lower short-term interest rates, borrowing costs declined 25 basis points compared to the linked quarter.
• HarborOne Mortgage, LLC ("HarborOne Mortgage") generated net income of $1.1 million, as compared to a $1.1 million loss on a linked-quarter basis.
• Share repurchases of 394,457 at an average cost of $12.64 per share.

Joseph F. Casey, President and CEO commented on the results, "I am proud of our team's efforts in continuing to grow our relationship banking model in 2024. The fourth quarter was our strongest of the year, with continued growth in deposits at reduced interest rates, $1.1 million of net income from our mortgage segment, and insignificant net charge offs. We are looking forward to carrying the positive momentum into 2025."

Net Interest Income

On a linked-quarter basis, net interest and dividend income declined $66,000 from $31.9 million to $31.8 million. The linked-quarter decrease was impacted by:

• Net interest margin on an FTE basis was 2.36%, flat compared to the third quarter.
  
  
  
  
• Yield on loans declined 10 basis points as floating-rate assets repriced during the quarter, partially offset by an $8.3 million increase in the average loan balance. The loan yield was also negatively impacted by a decline in prepayment penalty fees of $249,000.
  
  
  
  
• Cost of deposits, excluding brokered deposits, decreased 6 basis points, and the average balance of deposits, excluding brokered deposits, increased $62.9 million, primarily due to increases in money market accounts and certificates of deposits.
  
  
  
  
• Borrowing costs improved 25 basis points, and average balances declined $95.9 million, primarily a result of the payoff of the BTFP borrowing.

Noninterest Income

On a linked-quarter basis, total noninterest income increased $3.1 million, or 29.5%, to $13.7 million, from $10.6 million. The linked-quarter increase was impacted by:

• HarborOne Mortgage realized a $4.0 million gain on loan sales from mortgage closings of $179.1 million in the fourth quarter, compared to $3.8 million from mortgage loan closings of $209.5 million in the third quarter. The rate-locked pipeline was down $30.7 million on a linked-quarter basis, as an uptick in mortgage rates, seasonal slow-down, and low for-sale inventory constrained loan demand.
  
  
  
  
• The mortgage servicing rights ("MSR") valuation increased $1.9 million compared to a decrease of $2.8 million for the third quarter of 2024, including the impact of principal payments on the underlying mortgages of $588,000 and $690,000 for the quarters ended December 31, 2024 and September 30, 2024, respectively. The fourth quarter MSR valuation gain was offset by a $1.3 million economic hedging loss, whereas the third quarter included a $845,000 hedging gain.
  
  
  
  
• Deposit account fees in the fourth quarter included $690,000 earned from annual VISA volume incentives.
  
  
  
  
• Noninterest income in the third quarter included a $529,000 interest rate swap fee, and there was no such fee in the fourth quarter.

Noninterest Expense

On a linked-quarter basis, total noninterest expense increased $605,000 or 1.9%, to $32.9 million, compared to $32.3 million. The linked-quarter increase was impacted by:

• A $302,000 increase in compensation and benefits reflects a third quarter accrual reversal for management incentive based on estimated performance results, and there was no such reversal in the fourth quarter.
  
  
  
  
• Professional fees increased $159,000 primarily for consulting services.
  
  
  
  
• Deposit insurance increased $135,000, reflecting increased deposit balances as of the assessment date.
  
  
  
  
• Other expenses increased $127,000, primarily reflecting an increase in cloud computing expenses.

Balance Sheet

On a linked-quarter basis, total assets decreased $22.8 million, or 0.4%, to $5.75 billion, from $5.78 billion. The linked-quarter decrease was impacted by:

• Available-for-sale securities decreased $12.9 million to $263.9 million from the prior quarter. In the fourth quarter, the unrealized loss on securities available for sale increased to $65.2 million, as compared to $52.2 million in the prior quarter. Securities held to maturity were $19.6 million.
  
  
  
  
• Loans declined $27.0 million, or 0.6%, to $4.85 billion, from $4.88 billion the prior quarter.
  
  
  
  
• Total deposits increased $14.6 million to $4.55 billion from $4.54 billion the prior quarter. Non-certificate accounts decreased $19.4 million and term certificate accounts increased $6.2 million, as a competitive rate environment continued to pressure deposit mix and rates. Brokered deposits increased $27.8 million, primarily to support the payoff of the BTFP borrowing. As of December 31, 2024, FDIC-insured deposits were approximately 74% of total deposits, including Bank subsidiary deposits.
  
  
  
  
• Borrowed funds decreased $22.8 million to $516.6 million compared to $539.4 million at the prior quarter end. During the fourth quarter the Bank repaid the $175.0 million BTFP borrowing in full. As of December 31, 2024, the Bank had $1.29 billion in available borrowing capacity across multiple relationships.
  
  
  
  
• Total stockholders' equity was $575.0 million compared to $584.2 million at the prior quarter end. Stockholders' equity decreased 1.6% when compared to the prior quarter, as net income was offset by an increase in unrealized losses on available-for-sale securities, share repurchases, and dividends.
  
  
  
  
• The tangible-common-equity-to-tangible-assets ratio ⁽¹⁾ was 9.05% at December 31, 2024, compared to 9.17% at September 30, 2024. Book value per share and tangible book value per share⁽¹⁾ declined modestly quarter over quarter from $13.24 to $13.15 and from $11.88 to $11.78, respectively, as a result of the increase in unrealized losses on the investment portfolio due to the increase in interest rates across the yield curve during the quarter.

⁽¹⁾ Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures.

2024 Financial Highlights

• Net income increased $11.3 million, or 70.5%, to $27.4 million, or $0.66 per diluted share, for the year ended December 31, 2024, compared to net income of $16.1 million, or $0.37 per diluted share, for the prior year. The 2023 results included a goodwill impairment charge of $10.8 million.
  
  
  
  
• Return on average assets and return on average equity for the year ended December 31, 2024 were 0.47% and 4.71%, respectively compared to 0.29% and 2.68%, respectively, for the same period last year.
  
  
  
  
• Loan growth of $102.2 million, or 2.2% was funded by client deposit growth of $88.5 million, or 2.2%.
  
  
  
  
• The loans-to-deposits ratio improved to 106.63% at December 31, 2024 from 108.27% at December 31, 2023.
  
  
  
  
• Borrowing costs declined 33 basis points to 4.76% from 5.09% during 2024.
  
  
  
  
• During 2024, the Company continued to implement and execute share repurchase programs, repurchasing 1,895,980 shares at an average price of $11.15, including $0.10 per share of excise tax.

Asset Quality and Allowance for Credit Losses

Total nonperforming assets were $29.5 million at December 31, 2024, compared to $28.4 million at September 30, 2024 and $17.6 million at December 31, 2023. Nonperforming assets as a percentage of total assets were 0.51% at December 31, 2024, 0.49% at September 30, 2024, and 0.31% at December 31, 2023.

The Company recorded a $1.9 million provision for credit losses for the quarter ended December 31, 2024. The provision for loan credit losses was $2.2 million and the provision for unfunded commitments was a negative $228,000. The provision for loan credit losses was primarily due to a further specific reserve allocation for a previously identified classified commercial real estate loan, qualitative factor adjustments, and a decrease in loan balances. The specific reserve allocation was recorded in anticipation of a loan workout that includes the assumption of a modified loan by a new borrower. For the quarter ended September 30, 2024, the Company had recorded a provision for credit losses of $5.9 million, primarily related to one credit.

The ACL on loans was $56.1 million, or 1.16% of total loans, at December 31, 2024, compared to $54.0 million, or 1.11% of total loans, at September 30, 2024. The ACL on unfunded commitments, included in other liabilities on the unaudited Consolidated Balance Sheets, amounted to $3.5 million at December 31, 2024, compared to $3.7 million at September 30, 2024.

Net charge-offs totaled $58,000 for the quarter ended December 31, 2024 and $182,000, or 0.02% of average loans outstanding on an annualized basis, for the quarter ended September 30, 2024.

As of December 31, 2024 and September 30, 2024, total criticized and classified commercial loans amounted to $178.6 million and $134.3 million, respectively. The quarterly increases in total criticized and classified commercial loans primarily reflects continued pressure on commercial real estate values. During the second half 2024, management performed comprehensive reviews of loans and borrower relationships to identify potential weaknesses and to ensure heightened vigilance to further weakness with the continued market uncertainty.

About HarborOne Bancorp, Inc.

HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, a Massachusetts-chartered trust company. HarborOne Bank serves the financial needs of consumers, businesses, and municipalities throughout Eastern Massachusetts and Rhode Island through a network of 30 full-service banking centers located in Massachusetts and Rhode Island, and commercial lending offices in Boston, Massachusetts and Providence, Rhode Island. HarborOne Bank also provides a range of educational resources through "HarborOne U," with free digital content, webinars, and recordings for small business and personal financial education. HarborOne Mortgage, LLC, a subsidiary of HarborOne Bank, provides mortgage lending services throughout New England and other states.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in other documents we file with the Securities and Exchange Commission ("SEC"), in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. Such statements may be identified by words such as "believes," "will," "would," "expects," "project," "may," "could," "developments," "strategic," "launching," "opportunities," "anticipates," "estimates," "intends," "plans," "targets" and similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, changes in general business and economic conditions (including inflation and concerns about inflation) on a national basis and in the local markets in which the Company operates, including changes that adversely affect borrowers' ability to service and repay the Company's loans; changes in interest rates; changes in customer behavior; ongoing turbulence in the capital and debt markets and the impact of such conditions on the Company's business activities; increases in loan default and charge-off rates; decreases in the value of securities in the Company's investment portfolio; fluctuations in real estate values; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; competitive pressures from other financial institutions; cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest, and future pandemics; changes in regulation; changes in accounting standards and practices; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; demand for loans in the Company's market area; the Company's ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that the Company may not be successful in the implementation of its business strategy; changes in assumptions used in making such forward-looking statements and the risk factors described in the Annual Report on Form 10‑K and Quarterly Reports on Form 10‑Q as filed with the SEC, which are available at the SEC's website, www.sec.gov. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, HarborOne's actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.

Use of Non-GAAP Measures

In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures including: "core net income," "core earnings per common share," "core return on average earning assets," "core return on average earning equity," "efficiency ratio," "core efficiency ratio," "tax equivalent efficiency ratio," "tax equivalent core efficiency ratio," "total adjusted noninterest expense", "core noninterest expense," "tax equivalent net interest and dividend income," "total core noninterest income," "tax equivalent total core revenue," "tangible common equity," "average tangible common equity," "tangible assets," "tangible book value per share," "tangible common equity to tangible assets," "return on average tangible common equity," "core return on average tangible common equity" and certain ratios derived from these measures. Non-GAAP measures are utilized by management, regulators and market analysts to evaluate the Company's financial position and therefore such information is useful to investors.

The tax equivalent basis adjusts for the tax-favored status from certain loans held by the Bank that are not taxable for federal income tax purposes.

Core net income, core noninterest income and core noninterest expense exclude certain items that management does not consider indicative of ongoing financial performance or enhances comparability of results with prior periods. These adjustments include goodwill impairment charges, gain or loss on the sale of certain assets and release of reserve for uncertain tax position.

These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.