HarborOne Bancorp, Inc. - Quarter Report: 2023 June (Form 10-Q)

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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, 2023

☐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 August 1, 2023, there were 46,545,478 shares of the Registrant’s common stock, par value $0.01 per share, outstanding

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Index

		PAGE
	Glossary of Acronyms and Terms	1

PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)	2
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)
	Note 1. Summary of Significant Accounting Policies	9
	Note 2. Debt Securities	10
	Note 3. Loans Held for Sale	13
	Note 4. Loans and Allowance for Credit Losses	14
	Note 5. Mortgage Loan Servicing	20
	Note 6. Goodwill and Other Intangible Assets	21
	Note 7. Deposits	22
	Note 8. Borrowings	23
	Note 9. Other Commitments and Contingencies	24
	Note 10. Derivatives	25
	Note 11. Operating Lease ROU Assets and Liabilities	29
	Note 12. Minimum Regulatory Capital Requirements	30
	Note 13. Comprehensive (Loss) Income	32
	Note 14. Fair Value of Assets and Liabilities	33
	Note 15. Earnings Per Share	38
	Note 16. Revenue Recognition	39
	Note 17. Segment Reporting	39

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	64
ITEM 4.	Controls and Procedures	64

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	65
ITEM 1A.	Risk Factors	65
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
ITEM 3.	Defaults Upon Senior Securities	66
ITEM 4.	Mine Safety Disclosures	66
ITEM 5.	Other Information	66
ITEM 6.	Exhibits	67

EXHIBIT INDEX		67

SIGNATURE		68

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Glossary of Acronyms and Terms

The following is a list of common acronyms and terms used regularly in our financial reporting:




ACL	Allowance for Credit Losses
ASU	Accounting Standards Update
BTFP	Bank Term Funding Program
DCF	Discounted cash flow
DIF	Depositors Insurance Fund
EPS	Earnings Per Share
ESOP	Employee Stock Ownership Plan
EVE	Equity at risk
FASB	Federal Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
Federal Reserve	Board of Governors of the Federal Reserve System
FHLB	Federal Home Loan Bank
FRBB	Federal Reserve Bank of Boston
GAAP	Accounting principles generally accepted in the Unites States of America
HarborOne Mortgage	HarborOne Mortgage, LLC
LIBOR	London Interbank Offered Rate
Management	Company's management
MSRs	Mortgage servicing rights
PPP	Paycheck Protection Program
ROU	Right-of-use
SBA	Small Business Administration
SEC	U.S. Securities and Exchange Commission
SOFR	Secured Overnight Financing Rate
TDRs	Troubled debt restructurings
the Bank	HarborOne Bank
the Company	HarborOne Bancorp, Inc.
the Exchange Act	Securities Exchange Act of 1934, as amended
the Notes	$35.0 million in fixed-to-floating rate subordinated notes due 2028
the Treasury	U.S. Department of the Treasury

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HarborOne Bancorp, Inc.

Consolidated Balance Sheets (unaudited)


	June 30,		December 31,
(in thousands, except share data)	2023		2022

Assets
Cash and due from banks	$	43,525	$	39,712
Short-term investments		209,326		58,305
Total cash and cash equivalents		252,851		98,017

Securities available for sale, at fair value		292,012		301,149
Securities held to maturity, at amortized cost (fair value of $19,005 at June 30, 2023 and $19,274 at December 31, 2022)		19,839		19,949
Federal Home Loan Bank stock, at cost		27,123		20,071
Asset held for sale		966		—
Loans held for sale, at fair value		20,949		18,544
Loans		4,698,203		4,549,670
Less: Allowance for credit losses on loans		(47,821)		(45,236)
Net loans		4,650,382		4,504,434
Accrued interest receivable		16,948		15,139
Mortgage servicing rights, at fair value		48,176		48,138
Property and equipment, net		48,773		49,045
Retirement plan annuities		14,877		14,630
Bank-owned life insurance		92,964		91,953
Goodwill		69,802		69,802
Intangible assets		1,893		2,272
Other assets		101,699		106,402
Total assets	$	5,659,254	$	5,359,545

Liabilities and Stockholders' Equity
Deposits:
Demand deposit accounts	$	717,572	$	762,576
NOW accounts		286,956		297,692
Regular savings and club accounts		1,390,906		1,468,172
Money market deposit accounts		834,120		861,704
Term certificate accounts		742,931		497,975
Brokered deposits		315,003		301,380
Total deposits		4,287,488		4,189,499
FHLB borrowings		604,568		400,675
Subordinated debt		34,348		34,285
Mortgagors' escrow accounts		11,073		9,537
Accrued interest payable		4,845		2,325
Other liabilities and accrued expenses		121,400		106,248
Total liabilities		5,063,722		4,742,569

Commitments and contingencies (Notes 7, 12 and 13)

Common stock, $0.01 par value; 150,000,000 shares authorized; 60,203,459 and 60,061,527 shares issued; 46,575,478 and 48,961,452 shares outstanding at June 30, 2023 and December 31, 2022, respectively		597		596
Additional paid-in capital		484,544		483,031
Retained earnings		364,709		356,438
Treasury stock, at cost, 13,627,981 and 11,100,075 shares at June 30, 2023 and December 31, 2022, respectively		(181,324)		(148,384)
Accumulated other comprehensive loss		(46,290)		(47,082)
Unearned compensation - ESOP		(26,704)		(27,623)
Total stockholders' equity		595,532		616,976
Total liabilities and stockholders' equity	$	5,659,254	$	5,359,545

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

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HarborOne Bancorp, Inc.

Consolidated Statements of Income (unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share data)	2023		2022		2023		2022


Interest and dividend income:
Interest and fees on loans	$	55,504	$	37,522	$	108,275	$	71,098
Interest on loans held for sale		326		331		612		595
Interest on taxable securities		2,035		1,873		4,114		3,574
Other interest and dividend income		2,935		131		3,738		192
Total interest and dividend income		60,800		39,857		116,739		75,459

Interest expense:
Interest on deposits		20,062		2,019		35,975		3,640
Interest on FHLB and FRB borrowings		8,114		119		13,219		307
Interest on subordinated debentures		524		524		1,047		1,047
Total interest expense		28,700		2,662		50,241		4,994

Net interest and dividend income		32,100		37,195		66,498		70,465
Provision for credit losses		3,283		2,546		5,149		2,884

Net interest and dividend income, after provision for credit losses		28,817		34,649		61,349		67,581

Noninterest income:
Mortgage banking income:
Gain on sale of mortgage loans		3,300		4,538		5,524		9,860
Changes in mortgage servicing rights fair value		436		862		(1,256)		6,147
Other		2,312		2,612		4,528		5,170
Total mortgage banking income		6,048		8,012		8,796		21,177
Deposit account fees		5,012		4,892		9,745		9,364
Income on retirement plan annuities		128		112		247		219
Bank-owned life insurance income		511		494		1,011		977
Other income		963		593		1,553		1,427
Total noninterest income		12,662		14,103		21,352		33,164

Noninterest expense:
Compensation and benefits		18,220		21,455		36,019		42,178
Occupancy and equipment		4,633		4,575		9,673		10,003
Data processing		2,403		2,259		4,749		4,500
Loan expenses		417		385		730		863
Marketing		925		986		2,106		2,204
Deposit expenses		326		513		860		1,059
Postage and printing		425		412		882		831
Professional fees		1,114		1,680		2,615		3,219
Foreclosed and repossessed assets		5		52		(12)		18
Deposit insurance		1,176		354		1,686		703
Other expenses		2,081		2,283		3,926		4,211
Total noninterest expense		31,725		34,954		63,234		69,789

Income before income taxes		9,754		13,798		19,467		30,956

Income tax provision		2,275		3,811		4,691		8,702

Net income	$	7,479	$	9,987	$	14,776	$	22,254

Earnings per common share:
Basic	$	0.17	$	0.21	$	0.34	$	0.47
Diluted	$	0.17	$	0.21	$	0.33	$	0.46
Weighted average shares outstanding:
Basic		43,063,507		46,980,830		43,955,411		47,406,257
Diluted		43,133,455		47,536,033		44,203,893		48,110,863

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

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HarborOne Bancorp, Inc.

Consolidated Statements of Comprehensive (Loss) Income (unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022


Net income	$	7,479	$	9,987	$	14,776	$	22,254
Other comprehensive income (loss):

Unrealized gain/loss on cashflow hedge:
Unrealized holding gains		1,577		939		1,407		4,728
Reclassification adjustment for net (gains) losses included in net income		(1,134)		(71)		(2,152)		40
Net change in unrealized (losses) gains on derivatives in cashflow hedging instruments		443		868		(745)		4,768
Related tax effect		(124)		(244)		210		(1,340)
Net-of-tax amount		319		624		(535)		3,428

Unrealized gain/loss on securities available for sale:
Unrealized holding gains (losses)		(5,366)		(20,323)		1,723		(46,252)
Related tax effect		1,205		4,479		(358)		10,194
Net-of-tax amount		(4,161)		(15,844)		1,365		(36,058)

Postretirement benefit:
Adjustment of accumulated obligation for postretirement benefits		1		—		1		—
Reclassification adjustment for gains recognized in net periodic benefit cost		(39)		—		(39)		—
Net gains		(38)		—		(38)		—

Total other comprehensive income (loss)		(3,880)		(15,220)		792		(32,630)

Comprehensive income (loss)	$	3,599	$	(5,233)	$	15,568	$	(10,376)

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

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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, 2022	51,257,696	$	591	$	477,302	$	332,734	$	(113,513)	$	(19,047)	$	(29,002)	$	649,065

Comprehensive income (loss)	—		—		—		9,987		—		(15,220)		—		(5,233)
Dividends declared of $0.07 per share	—		—		—		(3,250)		—		—		—		(3,250)
ESOP shares committed to be released (57,681 shares)	—		—		337		—		—		—		460		797
Restricted stock awards forfeited, net of awards	(8,181)		—		—		—		—		—		—		—
Performance stock units vested	14,596
Share-based compensation expense	—		—		1,029		—		—		—		—		1,029
Stock options exercised	83,263		2		851		—		—		—		—		853
Treasury stock purchased	(1,358,367)		—		—		—		(18,783)		—		—		(18,783)

Balance at June 30, 2022	49,989,007	$	593	$	479,519	$	339,471	$	(132,296)	$	(34,267)	$	(28,542)	$	624,478


Balance at March 31, 2023	47,063,087	$	597	$	483,831	$	360,454	$	(175,514)	$	(42,410)	$	(27,164)	$	599,794

Comprehensive income (loss)	—		—		—		7,479		—		(3,880)		—		3,599
Dividends declared of $0.075 per share	—		—		—		(3,224)		—		—		—		(3,224)
ESOP shares committed to be released (57,681 shares)	—		—		91		—		—		—		460		551
Restricted stock awards forfeited	(15,127)		—		—		—		—		—		—		—
Share-based compensation expense	—		—		622		—		—		—		—		622
Treasury stock purchased	(472,482)		—		—		—		(5,810)		—		—		(5,810)

Balance at June 30, 2023	46,575,478	$	597	$	484,544	$	364,709	$	(181,324)	$	(46,290)	$	(26,704)	$	595,532

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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, 2021	52,390,478	$	585	$	469,934	$	325,699	$	(85,859)	$	(1,637)	$	(29,461)	$	679,261

Cumulative effect of change in accounting principle - ASC 326	—		—		—		(1,884)		—		—		—		(1,884)
Comprehensive income (loss)	—		—		—		22,254		—		(32,630)		—		(10,376)
Dividends declared of $0.14 per share	—		—		—		(6,598)		—		—		—		(6,598)
ESOP shares committed to be released (115,362 shares)	—		—		724		—		—		—		919		1,643
Restricted stock awards granted, net of forfeitures	100,816		—		—		—		—		—		—		—
Performance stock units vested	14,596		—		—		—		—		—		—		—
Share-based compensation expense	—		—		2,000		—		—		—		—		2,000
Stock options exercised	722,705		8		6,861		—		—		—		—		6,869
Treasury stock purchased	(3,239,588)		—		—		—		(46,437)		—		—		(46,437)

Balance at June 30, 2022	49,989,007	$	593	$	479,519	$	339,471	$	(132,296)	$	(34,267)	$	(28,542)	$	624,478

Balance at December 31, 2022	48,961,452		596		483,031		356,438		(148,384)		(47,082)		(27,623)		616,976

Comprehensive income	—		—		—		14,776		—		792		—		15,568
Dividends declared of $0.15 per share	—		—		—		(6,505)		—		—		—		(6,505)
ESOP shares committed to be released (115,362 shares)	—		—		403		—		—		—		919		1,322
Restricted stock awards granted, net of forfeitures	141,932		—		—		—		—		—		—		—
Share-based compensation expense	—		1		1,110		—		—		—		—		1,111
Treasury stock purchased	(2,527,906)		—		—		—		(32,940)		—		—		(32,940)

Balance at June 30, 2023	46,575,478	$	597	$	484,544	$	364,709	$	(181,324)	$	(46,290)	$	(26,704)	$	595,532

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

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HarborOne Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022


Cash flows from operating activities:
Net income	$	14,776	$	22,254
Adjustments to reconcile net income to net cash used by operating activities:
Provision for credit losses		5,149		2,884
Net amortization of securities premiums/discounts		223		643
Proceeds from sale of loans		198,615		357,324
Loans originated for sale		(195,460)		(334,293)
Accretion of net deferred loan costs/fees and premiums		(130)		(381)
Depreciation and amortization of premises and equipment		1,925		1,948
Change in mortgage servicing rights fair value		1,256		(6,147)
Mortgage servicing rights capitalized		(1,294)		(2,715)
Accretion of fair value adjustment on loans and deposits, net		(106)		(713)
Amortization of other intangible assets		379		469
Amortization of subordinated debt issuance costs		63		63
Net gains on mortgage loan sales, including fair value adjustments		(5,560)		(9,068)
Bank-owned life insurance income		(1,011)		(977)
Income on retirement plan annuities		(247)		(219)
Write-down of asset held for sale		—		196
Net gain on sale and write-down of other real estate owned and repossessed assets		(13)		(30)
ESOP expense		1,322		1,643
Share-based compensation expense		1,111		2,000
Increase in operating lease ROU assets		840		304
Increase in operating lease liabilities		(833)		(1,266)
Change in other assets		(378)		2,491
Change in other liabilities		20,941		(15,350)
Net cash provided by operating activities		41,568		21,060

Cash flows from investing activities:
Activity in securities available for sale:
Maturities, prepayments and calls		10,634		28,845
Purchases		—		(16,102)
Activity in securities held to maturity:
Maturities, prepayment and calls		113		—
Purchases		—		(10,000)
Net redemption (purchase) of FHLB stock		(7,052)		306
Proceeds on asset held for sale		—		685
Loan pool purchase		—		(58,311)
Participation-in loan purchases		(16,276)		(68,383)
Net loan originations		(135,216)		(178,772)
Proceeds from sale of other real estate owned and repossessed assets		215		220
Additions to property and equipment		(2,619)		(596)
Net cash used by investing activities		(150,201)		(302,108)

(continued)

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

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HarborOne Bancorp, Inc.

Consolidated Statements of Cash Flows (unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022

Cash flows from financing activities:
Net increase in deposits		97,906		165,237
Net change in short-term borrowed funds		29,000		90,000
Proceeds from FHLB borrowings		175,000		—
Repayment of FHLB borrowings		(107)		(40,018)
Net change in mortgagors' escrow accounts		1,536		1,180
Proceeds from exercise of stock options		—		6,869
Treasury stock purchased		(32,940)		(46,437)
Dividends paid		(6,928)		(6,164)
Net cash provided by financing activities		263,467		170,667

Net change in cash and cash equivalents		154,834		(110,381)

Cash and cash equivalents at beginning of period		98,017		194,719

Cash and cash equivalents at end of period	$	252,851	$	84,338

Supplemental cash flow information:
Interest paid on deposits	$	35,142	$	3,355
Interest paid on borrowed funds		13,438		1,397
Income taxes paid, net		5,005		4,621
Transfer of loans to other real estate owned and repossessed assets		173		163
Dividends declared		6,505		6,598

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

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The unaudited interim Consolidated Financial Statements of HarborOne Bancorp, Inc. presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. In the opinion of management, all adjustments and disclosures considered necessary for the fair presentation of the accompanying Consolidated Financial Statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the years ended December 31, 2022 and 2021 and notes thereto included in the Company’s Annual Report on Form 10-K.

The unaudited interim Consolidated Financial Statements include the accounts of the Company; the Company’s subsidiaries, Legion Parkway Company LLC (a security corporation) and HarborOne Bank; and the Bank’s wholly-owned subsidiaries, which consist of HarborOne Mortgage, LLC, HarborOne Security Company, Inc. and a passive investment corporation The passive investment corporation maintains and manages certain assets of the Bank. The security company was established for the purpose of buying, holding and selling securities on its own behalf. All significant intercompany balances and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. These changes and reclassifications did not impact previously reported net income or comprehensive income.

Nature of Operations

The Company provides a variety of financial services to individuals and businesses through its 30 full-service branches in Massachusetts and Rhode Island, and a commercial lending office in each of Boston, Massachusetts and Providence, Rhode Island. HarborOne Mortgage maintains offices in Florida, Maine, Massachusetts, New Hampshire, New Jersey and Rhode Island and originates loans in five additional states.

The Company’s primary deposit products are checking, money market, savings, and term certificate of deposit accounts, while its primary lending products are commercial real estate, commercial, residential mortgages, home equity, and consumer loans. The Company also originates, sells and services residential mortgage loans through HarborOne Mortgage.

Risks and Uncertainties

During the first quarter of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry-wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in the banking system. In response to these events, the Treasury, the Federal Reserve, and the FDIC jointly announced the BTFP on March 12, 2023. This program aims to enhance liquidity by allowing institutions to pledge certain securities at the par value of the securities, and at a borrowing rate of ten basis points over the one-year overnight index swap rate. The BTFP is available to eligible U.S. federally insured depository institutions, with advances having a term of up to one year and no prepayment penalties.

Macroeconomic trends are mixed as uncertainty remains about the economy and banking industry. Market conditions and external factors may unpredictably impact the competitive landscape for deposits in the banking industry. Additionally, the rising interest rate environment has increased competition for liquidity and the premium at which liquidity is available to meet funding needs. An unexpected increase of withdrawals of deposits could adversely impact the Company’s ability to fund its operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal demands or to fund continuing operations. These sources may include proceeds from FHLB advances, proceeds from the BTFP program, sales of investment securities and loans, federal funds lines of credit from correspondent banks, and brokered deposits.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Reliance on secondary funding sources could increase the Company’s overall cost of funds and thereby reduce net income. While the Company believes its current sources of liquidity are adequate to fund operations, there is no guarantee they will suffice to meet future liquidity demands. This may necessitate slowing or discontinuing loan growth, capital expenditures, or other investments, or liquidating assets.

Additionally, the Company could experience adverse effects on its business, financial condition, results of operations and cash flows if there is severe or prolonged inflation, a recession, further escalation of the current geopolitical situation, or sustained supply chain disruptions. While asset quality continues to point to economic recovery, the Company’s customers could experience similar adverse effects from these uncertainties that would impair their ability to fulfill their financial obligations to the Company resulting in deteriorating credit quality and loan charge-offs.

Summary of Significant Accounting Policies and Recently Adopted Accounting Standards Updates

Significant accounting policies in effect and disclosed within the Company’s most recent audited Consolidated Financial Statements as of December 31, 2022 remain substantially unchanged.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures” which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. ASU 2022-02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments—Credit Losses—Measured at Amortized Cost.” The Company adopted ASU 2022-02 effective January 1, 2023 on a modified retrospective basis. The adoption of ASU 2022-02 did not have a material impact on the Company’s Consolidated Financial Statements.

2.	DEBT SECURITIES

The following is a summary of securities available for sale and held to maturity:


			Gross		Gross		Allowance
	Amortized		Unrealized		Unrealized		for Credit		Fair
	Cost		Gains		Losses		Losses		Value

	(in thousands)

June 30, 2023:
Securities available for sale
U.S. government and government-sponsored enterprise obligations	$	47,143	$	—	$	7,958	$	—	$	39,185
U.S. government agency and government-sponsored residential mortgage-backed securities		305,959		—		58,092		—		247,867
U.S. government-sponsored collateralized mortgage obligations		2,238		—		112		—		2,126
SBA asset-backed securities		2,204		—		172		—		2,032
Corporate bonds		1,000		—		198		—		802
Total securities available for sale	$	358,544	$	—	$	66,532	$	—	$	292,012


Securities held to maturity
U.S. government and government-sponsored enterprise obligations	$	15,000	$	—	$	680	$	—	$	14,320
SBA asset-backed securities		4,839		—		154		—		4,685
Total securities held to maturity	$	19,839	$	—	$	834	$	—	$	19,005

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)


			Gross		Gross		Allowance
	Amortized		Unrealized		Unrealized		for Credit		Fair
	Cost		Gains		Losses		Losses		Value

	(in thousands)

December 31, 2022:
Securities available for sale
U.S. government and government-sponsored enterprise obligations	$	47,143	$	—	$	8,649	$	—	$	38,494
U.S. government agency and government-sponsored residential mortgage-backed securities		315,964		—		59,149		—		256,815
U.S. government-sponsored collateralized mortgage obligations		2,612		—		113		—		2,499
SBA asset-backed securities		2,685		—		190		—		2,495
Corporate bonds		1,000		—		154		—		846
Total securities available for sale	$	369,404	$	—	$	68,255	$	—	$	301,149


Securities held to maturity
U.S. government and government-sponsored enterprise obligations	$	15,000	$	—	$	597	$	—	$	14,403
SBA asset-backed securities		4,949		—		78		—		4,871
Total securities held to maturity	$	19,949	$	—	$	675	$	—	$	19,274

Accrued interest receivable is excluded from the amortized cost basis of debt securities. Accrued interest receivable totaled $944,000 and $957,000 as of June 30, 2023 and December 31, 2022, respectively. At June 30, 2023, available-for-sale debt securities with a fair value of $289.2 million and held-to-maturity securities with an amortized cost of $15.0 million were pledged as collateral to provide BTFP borrowing capacity.

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2023 is as follows:



	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

	(in thousands)

After 1 year through 5 years	$	5,000	$	4,736	$	15,000	$	14,320
After 5 years through 10 years		43,143		35,251		—		—
Over 10 years		—		—		—		—
		48,143		39,987		15,000		14,320

U.S. government agency and government-sponsored residential mortgage-backed securities		305,959		247,867		—		—
U.S. government-sponsored collateralized mortgage obligations		2,238		2,126		—		—
SBA asset-backed securities		2,204		2,032		4,839		4,685

Total	$	358,544	$	292,012	$	19,839	$	19,005

U.S. government-sponsored residential mortgage-backed securities, collateralized mortgage obligations, and securities whose underlying assets are loans from the SBA have stated maturities of two to 28 years; however, it is expected that such securities will have shorter actual lives due to prepayments. U.S. government and government-sponsored enterprise obligations and corporate bonds are callable at the discretion of the issuer. U.S. government and government-sponsored enterprise obligations and corporate bonds with a total fair value of $54.3 million have a final maturity of four to nine years and a call feature of one month to four years. At June 30, 2023, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholder equity.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

There were no sales or calls of securities in the three and six months ended June 30, 2023 and 2022, respectively.

Information pertaining to securities with gross unrealized losses at June 30, 2023 and December 31, 2022 aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:


	Less Than Twelve Months				Twelve Months and Over
	Gross				Gross
	Unrealized		Fair		Unrealized		Fair
	Losses		Value		Losses		Value

	(in thousands)

June 30, 2023:
Securities available for sale

U.S. government and government-sponsored enterprise obligations	$	—	$	—	$	7,958	$	39,185
U.S. government agency and government-sponsored residential mortgage-backed securities		67		1,547		58,025		246,286
U.S. government-sponsored collateralized mortgage obligations		—		—		112		2,126
SBA asset-backed securities		—		—		172		2,032
Corporate bonds		—		—		198		802
	$	67	$	1,547	$	66,465	$	290,431

Securities held to maturity

U.S. government and government-sponsored enterprise obligations	$	175	$	4,825		505		9,495
SBA asset-backed securities		154		4,685		—		—
	$	329	$	9,510	$	505	$	9,495

December 31, 2022:
Securities available for sale

U.S. government and government-sponsored enterprise obligations	$	249	$	4,751	$	8,400	$	33,743
U.S. government agency and government-sponsored residential mortgage-backed securities		3,620		35,214		55,529		221,566
U.S. government-sponsored collateralized mortgage obligations		113		2,499		—		—
SBA asset-backed securities		190		2,495		—		—
Corporate bonds		154		846		—		—
	$	4,326	$	45,805	$	63,929	$	255,309

Securities held to maturity

U.S. government and government-sponsored enterprise obligations	$	597	$	14,403	$	—	$	—
SBA asset-backed securities		78		4,871		—		—
	$	675	$	19,274	$	—	$	—

Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists.

As of June 30, 2023, the Company’s security portfolio consisted of 132 debt securities, 131 of which were in an unrealized loss position. The unrealized losses are primarily related to the Company’s debt securities that were issued by U.S. government-sponsored entities and agencies. The Company does not believe that the debt securities that were in an unrealized loss position as of June 30, 2023 represent a credit loss impairment. As of June 30, 2023, and

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

December 31, 2022, the gross unrealized loss positions were primarily related to mortgage-backed securities and other obligations issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Total gross unrealized losses were primarily attributable to changes in interest rates relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

Management reviewed the collectability of the corporate bonds taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date as well as credit rating changes between the reporting period date and the filing date of this report, and other information. Management believes the unrealized losses on the corporate bonds are primarily attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers of the corporate bonds.

Management expects to recover the entire amortized cost basis of the available-for-sale debt securities with an unrealized loss. Furthermore, the Company does not intend to sell these securities, and it is likely that the Company will not be required to sell these securities, before recovery of their cost basis, which may be at maturity. Therefore, no ACL was recorded at June 30, 2023.

As of June 30, 2023, the held-to-maturity securities were U.S. government sponsored agency obligations. These securities are guaranteed by the government sponsored agency with a long history of no credit losses and Management has determined these securities to have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities.

3.	LOANS HELD FOR SALE

The following table provides the fair value and contractual principal balance outstanding of loans held for sale accounted for under the fair value option:


	June 30,		December 31,
	2023		2022

	(in thousands)

Loans held for sale, fair value	$	20,949	$	18,544
Loans held for sale, contractual principal outstanding		20,578		18,208
Fair value less unpaid principal balance	$	371	$	336

The Company has elected the fair value option for mortgage loans held for sale to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them. Changes in fair value of mortgage loans held for sale accounted for under the fair value option election amounted to an increase of $28,000 and $35,000 in the three and six months ended June 30, 2023, respectively, to $371,000, compared to an increase of $522,000 in the three months ended June 30, 2022 and a decrease of $791,000 in the six months ended June 30, 2022. These amounts are offset in earnings by the changes in fair value of forward sale commitments. The changes in fair value are reported as a component of gain on sale of mortgage loans in the Unaudited Consolidated Statements of Income.

At June 30, 2023 and December 31, 2022, there were no loans held for sale that were greater than 90 days past due.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

4.	LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of the balances of loans follows:


	June 30,		December 31,
	2023		2022

	(in thousands)

Residential real estate:
One- to four-family	$	1,504,142	$	1,432,263
Second mortgages and equity lines of credit		171,073		166,219
Residential real estate construction		26,995		35,837
Total residential real estate loans		1,702,210		1,634,319

Commercial:
Commercial real estate		2,286,688		2,250,344
Commercial construction		228,902		199,311
Commercial and industrial		453,422		424,275
Total commercial loans		2,969,012		2,873,930

Consumer loans:
Auto		19,107		33,625
Personal		8,318		7,796
Total consumer loans		27,425		41,421

Total loans before basis adjustment		4,698,647		4,549,670
Basis adjustment associated with fair value hedge ⁽¹⁾		(444)		—
Total loans		4,698,203		4,549,670
Allowance for credit losses on loans		(47,821)		(45,236)
Loans, net	$	4,650,382	$	4,504,434

⁽¹⁾ Represents the basis adjustment associated with the application of hedge accounting on certain loans. Refer to Note 10 - Derivatives.

The net unamortized deferred loan origination costs included in total loans and leases were $8.0 million and $7.4 million as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, the commercial and industrial loans includes $389,000 and $2.1 million, respectively, of SBA PPP loans and $52,000 and $65,000, respectively, of deferred fees on the PPP loans. PPP loans are fully guaranteed by the U.S. government.

The Company has transferred a portion of its originated commercial loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying unaudited interim Consolidated Balance Sheets. The Company and participating lenders share ratably in cash flows and any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders, and disburses required escrow funds to relevant parties. At June 30, 2023 and December 31, 2022, the Company was servicing commercial loans for participants in the aggregate amount of $386.5 million and $366.4 million, respectively.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents the activity in the ACL on loans for the three and six months ended June 30, 2023 and 2022:


			Second Mortgages		Residential
	One- to Four-		and Equity		Real Estate		Commercial		Commercial		Commercial
	Family		Lines of Credit		Construction		Real Estate		Construction		and Industrial		Consumer		Total

	(in thousands)

Balance at March 31, 2023	$	11,508	$	967	$	755	$	20,942	$	5,057	$	7,484	$	281	$	46,994

Charge-offs		—		—		—		(2,918)		—		(28)		(42)		(2,988)
Recoveries		1		36		—		1		—		275		4		317
Provision		676		9		(125)		2,574		316		19		29		3,498
Balance at June 30, 2023	$	12,185	$	1,012	$	630	$	20,599	$	5,373	$	7,750	$	272	$	47,821


			Second Mortgages		Residential
	One- to Four-		and Equity		Real Estate		Commercial		Commercial		Commercial
	Family		Lines of Credit		Construction		Real Estate		Construction		and Industrial		Consumer		Total

	(in thousands)

Balance at December 31, 2022	$	11,532	$	924	$	280	$	20,357	$	4,645	$	7,236	$	262	$	45,236

Charge-offs		—		—		—		(2,918)		—		(35)		(49)		(3,002)
Recoveries		2		43		—		2		—		275		20		342
Provision		651		45		350		3,158		728		274		39		5,245
Balance at June 30, 2023	$	12,185	$	1,012	$	630	$	20,599	$	5,373	$	7,750	$	272	$	47,821


			Second Mortgages		Residential
	One- to Four-		and Equity		Real Estate		Commercial		Commercial		Commercial
	Family		Lines of Credit		Construction		Real Estate		Construction		and Industrial		Consumer		Total

	(in thousands)

Balance at March 31, 2022	$	8,884	$	833	$	314	$	20,131	$	4,210	$	6,949	$	444	$	41,765

Charge-offs		—		—		—		—		—		—		(11)		(11)
Recoveries		—		81		—		6		—		406		23		516
Provision		1,198		(65)		13		294		160		(181)		(129)		1,290
Balance at June 30, 2022	$	10,082	$	849	$	327	$	20,431	$	4,370	$	7,174	$	327	$	43,560

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)


			Second Mortgages		Residential
	One- to Four-		and Equity		Real Estate		Commercial		Commercial		Commercial
	Family		Lines of Credit		Construction		Real Estate		Construction		and Industrial		Consumer		Unallocated		Total

	(in thousands)

Balance at December 31, 2021	$	3,631	$	420	$	69	$	33,242	$	2,010	$	4,638	$	367	$	1,000	$	45,377

Adoption of Topic 326		5,198		391		185		(10,194)		1,698		2,288		123		(1,000)		(1,311)
Charge-offs		—		—		—		(2,786)		—		(40)		(31)		—		(2,857)
Recoveries		—		93		—		6		—		473		60		—		632
Provision		1,253		(55)		73		163		662		(185)		(192)		—		1,719
Balance at June 30, 2022	$	10,082	$	849	$	327	$	20,431	$	4,370	$	7,174	$	327	$	—	$	43,560

As of June 30, 2023, the carrying value of individually analyzed loans amounted to $20.2 million, with a related allowance of $80,000, and $20.0 million of individually analyzed loans were considered collateral-dependent. As of December 31, 2022, the carrying value of individually analyzed loans amounted to $23.8 million, with a related allowance of $203,000, and $15.9 million were considered collateral-dependent.

For collateral-dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

The following table presents the carrying value of collateral-dependent individually analyzed loans as of June 30, 2023 and December 31, 2022:


	June 30, 2023				December 31, 2022
			Related				Related
	Carrying Value		Allowance		Carrying Value		Allowance

	(in thousands)

Commercial:
Commercial real estate	$	8,959	$	54	$	2,039	$	—
Commercial and industrial		2,196		21		3,329		7
Commercial construction		—		—		—		—
Total Commercial		11,155		75		5,368		7
Residential real estate		8,842		2		10,494		1
Total	$	19,997	$	77	$	15,862	$	8

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following is a summary of past due and non-accrual loans at June 30, 2023 and December 31, 2022:


					90 Days
	30-59 Days		60-89 Days		or More		Total		Loans on
	Past Due		Past Due		Past Due		Past Due		Non-accrual

	(in thousands)

June 30, 2023
Residential real estate:
One- to four-family	$	526	$	709	$	2,866	$	4,101	$	8,723
Second mortgages and equity lines of credit		181		132		47		360		332
Commercial real estate		6,999		—		79		7,078		8,960
Commercial construction		—		—		—		—		—
Commercial and industrial		10		104		1,298		1,412		2,183
Consumer:
Auto		235		61		6		302		8
Personal		61		24		4		89		4
Total	$	8,012	$	1,030	$	4,300	$	13,342	$	20,210

December 31, 2022
Residential real estate:
One- to four-family	$	3,711	$	524	$	6,526	$	10,761	$	8,927
Second mortgages and equity lines of credit		407		5		189		601		421
Commercial real estate		—		—		120		120		2,039
Commercial construction		—		—		—		—		—
Commercial and industrial		26		492		2,901		3,419		3,329
Consumer:
Auto		348		101		51		500		64
Personal		18		—		6		24		6
Total	$	4,510	$	1,122	$	9,793	$	15,425	$	14,786

At June 30, 2023 and December 31, 2022, there were no loans past due 90 days or more and still accruing.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, ASU 2022-02 Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures was adopted. The Bank will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss and comply with regulations regarding bankruptcy and discharge situations. Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

There were no material loan modifications based on borrower financial difficulty during the three and six months ended June 30, 2023 and 2022. There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2023 and 2022 and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance for credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off, and the allowance for credit losses is adjusted accordingly.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Credit Quality Indicators

Commercial

The Company uses a ten-grade internal loan rating system for commercial real estate, commercial construction and commercial loans, as follows:

Loans rated 1 – 6 are considered “pass”-rated loans with low to average risk.

Loans rated 7 are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 8 are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 9 are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 10 are considered “uncollectible” (loss), and of such little value that their continuance as loans is not warranted.

Loans not rated consist primarily of certain smaller balance commercial real estate and commercial loans that are managed by exception.

On an annual basis, or more often if needed, the Company formally reviews on a risk-adjusted basis, the ratings on all commercial real estate, construction and commercial loans. Semi-annually, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.

Residential and Consumer

On a monthly basis, the Company reviews the residential construction, residential real estate and consumer installment portfolios for credit quality primarily through the use of delinquency reports.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table summarizes the Company’s loan portfolio by credit quality indicator and loan portfolio segment as of June 30, 2023:


															Revolving
													Revolving		Loans
													Loans		Converted
	Term Loans at Amortized Cost by Origination Year												Amortized		to Term
	2023		2022		2021		2020		2019		Prior		Cost		Loans		Total

	(in thousands)

As of June 30, 2023

Commercial real estate
Pass	$	88,521	$	825,188	$	433,039	$	240,382	$	240,486	$	423,597	$	—	$	—	$	2,251,213
Special mention		—		4,961		—		—		9,159		12,395		—		—		26,515
Substandard		—		—		—		—		—		1,961		—		—		1,961
Doubtful		—		—		—		—		—		6,999		—		—		6,999
Total commercial real estate		88,521		830,149		433,039		240,382		249,645		444,952		—		—		2,286,688
YTD gross charge-offs		—		—		—		—		—		2,918		—		—		2,918

Commercial and industrial
Pass		41,897		50,645		96,814		76,539		24,227		80,482		79,902		—		450,506
Special mention		—		17		—		—		2		714		—		—		733
Substandard		—		249		83		3		4		427		50		—		816
Doubtful		—		—		—		—		—		1,317		50		—		1,367
Total commercial and industrial		41,897		50,911		96,897		76,542		24,233		82,940		80,002		—		453,422
YTD gross charge-offs		—		18		10		2		4		1		—		—		35

Commercial construction
Pass		9,760		108,579		96,653		—		6,826		1,785		978		—		224,581
Special mention		—		—		—		4,321		—		—		—		—		4,321
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction		9,760		108,579		96,653		4,321		6,826		1,785		978		—		228,902
YTD gross charge-offs		—		—		—		—		—		—		—		—		—

Residential real estate
Accrual		97,353		439,448		494,062		208,132		40,800		251,396		160,421		1,543		1,693,155
Non-accrual		—		—		—		132		427		8,421		75		—		9,055
Total residential real estate		97,353		439,448		494,062		208,264		41,227		259,817		160,496		1,543		1,702,210
YTD gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer
Accrual		5,931		6,678		2,847		1,436		6,679		2,846		996		—		27,413
Non-accrual		—		—		4		—		—		8		—		—		12
Total Consumer		5,931		6,678		2,851		1,436		6,679		2,854		996		—		27,425
YTD gross charge-offs		—		4		—		12		13		20		—		—		49

Total loans before basis adjustment	$	243,462	$	1,435,765	$	1,123,502	$	530,945	$	328,610	$	792,348	$	242,472	$	1,543	$	4,698,647
Total YTD gross charge-offs	$	—	$	22	$	10	$	14	$	17	$	2,939	$	—	$	—	$	3,002

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table summarizes the Company’s loan portfolio by credit quality indicator and loan portfolio segment as of December 31, 2022:


															Revolving
													Revolving		Loans
													Loans		Converted
	Term Loans at Amortized Cost by Origination Year												Amortized		to Term
	2022		2021		2020		2019		2018		Prior		Cost		Loans		Total

	(in thousands)

As of December 31, 2022

Commercial real estate
Pass	$	817,320	$	441,277	$	241,700	$	254,221	$	121,351	$	340,634	$	—	$	—	$	2,216,503
Special mention		—		—		—		9,328		22,474		—		—		—		31,802
Substandard		—		—		—		—		—		2,039		—		—		2,039
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial real estate		817,320		441,277		241,700		263,549		143,825		342,673		—		—		2,250,344

Commercial and industrial
Pass		53,078		95,600		82,170		26,568		37,358		50,500		76,647		—		421,921
Special mention		—		—		—		—		49		92		492		—		633
Substandard		—		4		3		—		1		323		—		—		331
Doubtful		—		—		—		—		—		1,340		50		—		1,390
Total commercial and industrial		53,078		95,604		82,173		26,568		37,408		52,255		77,189		—		424,275

Commercial construction
Pass		88,173		87,569		11,769		9,174		318		1,487		821		—		199,311
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction		88,173		87,569		11,769		9,174		318		1,487		821		—		199,311

Residential real estate
Accrual		443,034		507,679		211,429		42,314		25,232		239,677		154,038		1,568		1,624,971
Non-accrual		—		203		140		201		1,258		7,411		96		39		9,348
Total residential real estate		443,034		507,882		211,569		42,515		26,490		247,088		154,134		1,607		1,634,319

Consumer
Accrual		9,948		3,588		1,971		16,955		6,122		1,733		1,034		—		41,351
Non-accrual		1		—		—		28		20		17		4		—		70
Total Consumer		9,949		3,588		1,971		16,983		6,142		1,750		1,038		—		41,421

Total loans	$	1,411,554	$	1,135,920	$	549,182	$	358,789	$	214,183	$	645,253	$	233,182	$	1,607	$	4,549,670

5.	MORTGAGE LOAN SERVICING

The Company sells residential mortgages to government-sponsored entities and other parties. The Company retains no beneficial interests in these loans, but it may retain the servicing rights of the loans sold. Mortgage loans serviced for others are not included in the accompanying unaudited interim Consolidated Balance Sheets. The risks inherent in MSRs relate primarily to changes in prepayments that generally result from shifts in mortgage interest rates. The unpaid principal balance of mortgage loans serviced for others was $3.60 billion and $3.62 billion as of June 30, 2023 and December 31, 2022.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The Company accounts for MSRs at fair value. The Company obtains and reviews valuations from an independent third party to determine the fair value of MSRs. Key assumptions used in the estimation of fair value include prepayment speeds, discount rates, and default rates. At June 30, 2023 and December 31, 2022, the following weighted average assumptions were used in the calculation of fair value of MSRs:


	June 30,		December 31,
	2023		2022
Prepayment speed	7.20	%	7.10	%
Discount rate	9.90		9.81
Default rate	1.41		1.63

The following summarizes changes to MSRs for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)

Balance, beginning of period	$	47,080	$	45,043	$	48,138	$	38,268
Additions		660		1,225		1,294		2,715
Changes in fair value due to:
Reductions from loans paid off during the period		(479)		(771)		(850)		(1,604)
Changes in valuation inputs or assumptions		915		1,633		(406)		7,751
Balance, end of period	$	48,176	$	47,130	$	48,176	$	47,130

Contractually specified servicing fees, net of subservicing expense, included in other mortgage banking income amounted to $1.9 million and $3.9 million for the three and six months ended June 30, 2023 and $2.1 million and $4.0 million for the three and six months ended June 30, 2022.

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

There were no changes in the carrying value of goodwill for the periods ended June 30, 2023 and December 31, 2022. The Bank and HarborOne Mortgage are identified as reporting units for purposes of goodwill impairment testing. At June 30, 2023 and December 31, 2022, the carrying value of the Bank’s goodwill was $59.0 million as of both dates, and the carrying value of HarborOne Mortgage’s goodwill was $10.8 million as of both dates.

Goodwill is tested for impairment annually on October 31 or on an interim basis if an event triggering impairment may have occurred. As of June 30, 2023, the Company assessed whether there were additional events or changes in circumstances since its annual goodwill impairment test that would indicate that it was more likely than not that the fair value of the reporting unit was less than the reporting unit’s carrying amounts that would require an interim impairment assessment after October 31, 2022. The Company determined there had been no such indicators, therefore, no interim goodwill impairment assessment as of June 30, 2023 was performed.

The process of evaluating fair value is highly subjective and requires significant judgment and estimates. The goodwill at the Bank and HarborOne Mortgage is at risk of future impairment if projected operating results are not met or other inputs into the fair value measurement model change. If concerns persist in the banking sector as a result of the recent bank failures, management may determine a triggering event has occurred, which would cause us to perform an interim

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

impairment test. Interim impairment tests at the Bank or HarborOne Mortgage may result in an impairment charge being recorded in the period.

Other intangible assets were $1.9 million and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company determined that there was no triggering event that warranted an interim impairment test at June 30, 2023.

7.	DEPOSITS

A summary of deposit balances, by type, is as follows:


	June 30,		December 31,
	2023		2022

	(in thousands)

NOW and demand deposit accounts	$	1,004,528	$	1,060,268
Regular savings and club accounts		1,390,906		1,468,172
Money market deposit accounts		834,120		861,704
Total non-certificate accounts		3,229,554		3,390,144

Term certificate accounts greater than $250,000		224,737		110,360
Term certificate accounts less than or equal to $250,000		518,194		387,615
Brokered deposits		315,003		301,380
Total certificate accounts		1,057,934		799,355
Total deposits	$	4,287,488	$	4,189,499

Total municipal deposits included in the table amounted to $497.9 million at June 30, 2023 and $413.5 million at December 31, 2022. Municipal deposits are generally required to be fully insured. The Company provided supplemental insurance for municipal deposits through DIF, a reciprocal deposit program or letters of credit offered by the FHLB. DIF was exited February 24, 2023 and will generally provide coverage until February 24, 2024 on deposits that existed at the exit date. The Company has established a relationship to participate in a reciprocal deposit program with other financial institutions. The reciprocal deposit program provides access to FDIC-insured deposit products in aggregate amounts exceeding the current limits for depositors. At June 30, 2023 and December 31, 2022, total reciprocal deposits were $149.2 million and $28.6 million, respectively, consisting of non-certificate accounts.

A summary of certificate accounts by maturity at June 30, 2023 is as follows:


			Weighted
			Average
	Amount		Rate

	(dollars in thousands)

Within 1 year	$	896,526	3.87	%
Over 1 year to 2 years		129,403	3.29
Over 2 years to 3 years		28,334	2.87
Over 3 years to 4 years		2,996	0.70
Over 4 years to 5 years		696	1.74
Total certificate deposits		1,057,955	3.76	%
Less unaccreted acquisition discount		(21)
Total certificate deposits, net	$	1,057,934

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

8.BORROWINGS

Borrowed funds at June 30, 2023 and December 31, 2022 consisted of FHLB advances. Short-term advances were $414.0 million and $385.0 million with a weighted average rate of 5.31% and 4.32%, at June 30, 2023 and December 31, 2022, respectively. Long-term advances are summarized by maturity date below.


	June 30, 2023						December 31, 2022
	Amount by				Weighted		Amount by		Weighted
	Scheduled		Amount by		Average		Scheduled		Average
	Maturity*		Call Date ⁽¹⁾		Rate ⁽²⁾		Maturity*		Rate ⁽²⁾

	(dollars in thousands)

Year ending December 31:
2023	$	90	$	75,090	2.71	%	$	180	1.40	%
2024		13,400		13,400	1.39			13,400	1.39
2025		85,987		60,987	4.19			987	—
2026		80,000		40,000	4.28			—	—
2027		—		—	—			—	—
2028 and thereafter		11,091		1,091	3.67			1,108	2.00
	$	190,568	$	190,568	4.00	%	$	15,675	1.35	%

* Includes an amortizing advance requiring monthly principal and interest payments.

⁽¹⁾ Callable FHLB advances are shown in the respective periods assuming that the callable debt is redeemed at the call date, while all other advances are shown in the periods corresponding to their scheduled maturity date. There were four callable advances at June 30, 2023.

⁽²⁾Weighted average rates are based on scheduled maturity dates.

The FHLB advances are secured by a blanket security agreement which requires the Bank to maintain certain qualifying assets as collateral, principally residential mortgage loans and commercial real estate loans held in the Bank’s portfolio. The carrying value of the loans pledged as collateral for these borrowings totaled $1.83 billion at June 30, 2023 and $1.71 billion at December 31, 2022. As of June 30, 2023, the Company had $583.7 million of available borrowing capacity with the FHLB.

The Company also has additional borrowing capacity under a $25.0 million unsecured federal funds line with a correspondent bank and a secured line of credit with the FRBB, secured by 69% of the carrying value of commercial loans with principal balances amounting to $99.7 million and $100.2 million at June 30, 2023 and December 31, 2022, respectively. No amounts were outstanding under either line at June 30, 2023 or December 31, 2022.

On March 12, 2023, the Federal Reserve announced the creation of the BTFP. The BTFP offers loans of up to one year to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasury securities, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets are valued at par for purposes of the collateral pledge under the BTFP. The Company has $366.8 million in borrowing capacity under this program, and no amounts were outstanding at June 30, 2023.

On August 30, 2018, the Company issued $35.0 million in fixed-to-floating rate subordinated notes due 2028 in a private placement to institutional accredited investors. The Notes bear interest at annual fixed rate of 5.625% until September 1, 2023, at which time the interest rate resets quarterly to an interest rate per annum equal to the three–month CME Term SOFR plus applicable spread adjustment plus 278 basis points. Interest is payable semi-annually on March 1 and September 1 each year through September 1, 2023 and quarterly thereafter. The Notes can be redeemed partially or in whole, prior to the maturity date beginning September 1, 2023 and on any scheduled interest payment date thereafter, at par. The Notes are carried on the Consolidated Balance Sheets net of unamortized issuance costs of $652,000 and $715,000 at June 30, 2023 and December 31, 2022, respectively.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

9.	OTHER COMMITMENTS AND CONTINGENCIES

ACL on Unfunded Commitments

The ACL on unfunded commitments amounted to $4.8 million and $5.1 million at June 30, 2023 and 2022, respectively. The activity in the ACL on unfunded commitments for the three and six months ended June 30, 2023 and 2022 is presented below:


	Residential		Commercial		Commercial		Commercial
	Real Estate		Real Estate		Construction		and Industrial		Consumer		Total

	(in thousands)

Balance at March 31, 2023	$	262	$	548	$	3,277	$	940	$	19	$	5,046
Provision		10		(58)		(97)		(70)		—		(215)
Balance at June 30, 2023	$	272	$	490	$	3,180	$	870	$	19	$	4,831


Balance at March 31, 2022	$	339	$	538	$	2,345	$	604	$	14	$	3,840
Provision		(2)		(56)		1,293		20		1		1,256
Balance at June 30, 2022	$	337	$	482	$	3,638	$	624	$	15	$	5,096


	Residential		Commercial		Commercial		Commercial
	Real Estate		Real Estate		Construction		and Industrial		Consumer		Total

	(in thousands)

Balance at December 31, 2022	$	336	$	628	$	3,079	$	870	$	14	$	4,927
Provision		(64)		(138)		101		—		5		(96)
Balance at June 30, 2023	$	272	$	490	$	3,180	$	870	$	19	$	4,831


Balance at December 31, 2021	$	—	$	—	$	—	$	—	$	—	$	—
Adoption of Topic 326		318		380		2,561		658		14		3,931
Provision		19		102		1,077		(34)		1		1,165
Balance at June 30, 2022	$	337	$	482	$	3,638	$	624	$	15	$	5,096

Loan Commitments

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and advance funds on various lines of credit. Those commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the accompanying unaudited interim Consolidated Financial Statements.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following off-balance sheet financial instruments were outstanding at June 30, 2023 and December 31, 2022. The contract amounts represent credit risk.


	June 30,		December 31,
	2023		2022

	(in thousands)

Commitments to grant residential real estate loans-HarborOne Mortgage	$	67,347	$	57,916
Commitments to grant other loans		84,676		43,700
Unadvanced funds on home equity lines of credit		256,957		251,759
Unadvanced funds on revolving lines of credit		314,496		351,382
Unadvanced funds on construction loans		287,523		262,945

Commitments to extend credit and unadvanced portion of construction loans are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Commitments to grant loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for unadvanced funds on construction loans and home equity and revolving lines of credit may expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. Commitments to grant loans, and unadvanced construction loans and home equity lines of credit are collateralized by real estate, while revolving lines of credit are unsecured.

10.

DERIVATIVES

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally to manage the Company’s interest rate risk. Additionally, the Company enters into interest rate derivatives to accommodate the business requirements of its customers. All derivatives are recognized as either assets or liabilities on the balance sheet and are measured at fair value. The accounting for changes in the fair value of a derivative instrument depends upon whether or not it qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

Derivatives Designated as Hedging Instruments

Fair Value Hedge- The Company is exposed to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates. In June 2023, to manage its exposure to changes in the fair value of a closed asset pool of fixed rate, residential mortgages, the Company entered into interest rate swaps with a total notional amount of $100.0 million, designated as fair value portfolio layer hedges. The Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income in the Company’s Consolidated Statements of Income.

As of June 30, 2023, the Company had two interest rate swap agreements with a notional amount of $100.0 million that were designated as a fair value hedge of fixed rate residential mortgages. The hedges were determined to be effective during the three months ended June 30, 2023, and the Company expects the hedges to remain effective during the remaining terms of the swaps.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following amounts were recorded on the Consolidated Balance Sheets related to cumulative basis adjustment for fair value hedges as of the dates indicated:


					Cumulative Amount of Fair Value
					Hedging Adjustment Included in the
Line Item in the Consolidated Balance Sheets	Carrying Amount of the Hedged				Carrying Amount of the Hedged
in Which the Hedged Item is Included	Assets				Assets
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022

	(in thousands)

Loans held for investment ⁽¹⁾	$	99,556	$	—	$	(444)	$	—
Total	$	99,556	$	—	$	(444)	$	—

⁽¹⁾These amounts were included in the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At June 30, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $1.25 billion; the cumulative basis adjustments associated with these hedging relationships was $(444,000) and the amount of the designated hedged items were $100.0 million.

Cashflow Hedge- As part of its interest rate risk management strategy, the Company utilizes interest rate swap agreements to help manage its interest rate risk positions. The notional amount of the interest rate swaps does not represent the amount exchanged by the parties. The exchange of cash flows is determined by reference to the notional amounts and the other terms of the interest rate swap agreements. The changes in fair value of derivatives designated as cashflow hedges are recorded in other comprehensive income and subsequently reclassified to earnings when gains or losses are realized.

As of June 30, 2023, the Company had one interest rate swap agreement with a notional amount of $100.0 million that was designated as a cashflow hedge of brokered deposits. The interest rate swap agreement has an average maturity of 1.78 years, the current weighted average fixed rate paid is 0.671%, the weighted average 3-month LIBOR swap receive rate is 5.157%, and the fair value is $7.6 million. The Company expects approximately $4.7 million related to the cashflow hedge to be reclassified to interest expense, from other comprehensive income, in the next twelve months.

Derivatives Not Designated as Hedging Instruments

Derivative Loan Commitments- Mortgage loan commitments qualify as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock.

Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of a rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases.

Forward Loan Sale Commitments-The Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments.

With a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the number of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor to compensate the investor for the shortfall.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower).

The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments.

Interest Rate Swaps-The Company enters into interest rate swap agreements that are transacted to meet the financing needs of its commercial customers. Offsetting interest rate swap agreements are simultaneously transacted with a third-party financial institution to effectively eliminate the Company’s interest rate risk associated with the customer swaps. The primary risks associated with these transactions arise from exposure to the ability of the counterparties to meet the terms of the contract. The interest rate swap notional amount is the aggregate notional amount of the customer swap and the offsetting third-party swap. The Company also assesses the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determines whether the credit valuation adjustments are significant to the overall valuation of its derivatives.

Risk Participation Agreements-The Company has entered into risk participation agreements with correspondent institutions and shares in any interest rate swap losses incurred as a result of the commercial loan customers’ termination of a loan-level interest rate swap agreement prior to maturity. The Company records these risk participation agreements at fair value. The Company’s maximum credit exposure is based on its proportionate share of the settlement amount of the referenced interest rate swap. Settlement amounts are generally calculated based on the fair value of the swap plus outstanding accrued interest receivables from the customer.

The following table presents the outstanding notional balances and fair values of outstanding derivative instruments:


			Assets		Liabilities
	Notional		Fair		Fair
	Amount		Value		Value

	(in thousands)

June 30, 2023:
Derivatives designated as hedging instruments
Fair value hedge - interest rate swaps	$	100,000	$	437	$	—
Cashflow hedge - interest rate swaps		100,000		7,569		—
Total derivatives designated as hedging instruments			$	8,006	$	—
Derivatives not designated as hedging instruments
Derivative loan commitments	$	55,986	$	521	$	82
Forward loan sale commitments		51,000		262		3
Interest rate swaps		827,176		28,127		28,127
Risk participation agreements		182,304		—		—
Total derivatives not designated as hedging instruments			$	28,910	$	28,212
Total derivatives			$	36,916	$	28,212

December 31, 2022:
Derivatives designated as hedging instruments
Cashflow hedge - interest rate swaps	$	100,000	$	8,314	$	—
Total derivatives designated as hedging instruments			$	8,314	$	—
Derivatives not designated as hedging instruments
Derivative loan commitments	$	27,935	$	238	$	65
Forward loan sale commitments		29,000		249		39
Interest rate swaps		772,588		28,525		28,525
Risk participation agreements		164,528		—		—
Total derivatives not designated as hedging instruments			$	29,012	$	28,629
Total derivatives			$	37,326	$	28,629

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The following table presents the recorded net gains and losses pertaining to the Company’s derivative instruments:


	Location of gain (loss)
	recognized in	Three Months Ended June 30,				Six Months Ended June 30,
	Income	2023		2022		2023		2022

		(in thousands)


Derivatives designated as fair value hedge
Hedged items - loans	Interest income	$	(444)	$	—	$	(444)	$	—
Interest rate swap contracts	Interest income		437		—		437		—
Total		$	(7)	$	—	$	(7)	$	—
Derivatives not designated as hedging instruments
Derivative loan commitments	Mortgage banking income	$	(293)	$	369	$	266	$	(268)
Forward loan sale commitments	Mortgage banking income		527		(1,676)		49		(21)
Interest rate swaps	Other income		—		—		—		330
Total		$	234	$	(1,307)	$	315	$	41

The effect of cashflow hedge accounting on accumulated other comprehensive income is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)

Derivatives designated as hedging instruments
(Loss) gain in OCI on derivatives (effective portion), net of tax	$	319	$	624	$	(535)	$	3,428
Gain (loss) reclassified from OCI into interest expense (effective portion)	$	1,134	$	71	$	2,152	$	(40)

Master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral or cash funds, in the event of default on, or termination of, any one contract. Collateral is provided by cash or securities received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.

The following table presents the offsetting of derivatives and amounts subject to an enforceable master netting arrangement, not offset in the Consolidated Balance Sheets at June 30, 2023:


							Gross Amounts Not Offset in the Consolidated Balance Sheets
					Net Amounts
	Gross Amounts		Gross Amounts		Assets (Liabilities)				Cash
	of Recognized		Offset in the		presented in the				Collateral
	Assets		Consolidated		Consolidated		Financial		(Received)		Net
	(Liabilities)		Balance Sheets		Balance Sheets		Instruments		Posted		Amount

	(in thousands)
Derivatives designated as hedging instruments
Interest rate swap on deposits	$	7,569	$	—	$	7,569	$	—	$	(7,569)	$	—
Interest rate swap on residential real estate loans	$	437	$	—	$	437	$	—	$	—	$	437
Derivatives not designated as hedging instruments
Customer interest rate swaps	$	26,543	$	—	$	26,543	$	—	$	(22,431)	$	4,112

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

11.

OPERATING LEASE ROU ASSETS AND LIABILITIES

Operating lease ROU assets, included in other assets, were $24.1 million and $26.9 million at June 30, 2023 and December 31, 2022, respectively.

Operating lease liabilities, included in other liabilities and accrued expenses, were $25.8 million and $28.6 million at June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, there were no leases that had not yet commenced. At June 30, 2023, lease expiration dates ranged from two months to 35.2 years and have a weighted average remaining lease term of 16.3 years. At December 31, 2022, lease expiration dates ranged from three months to 35.7 years and had a weighted average remaining lease term of 17.3 years.

Future minimum lease payments under non-cancellable leases and a reconciliation to the amount recorded as operating lease liabilities as of June 30, 2023 were as follows:


	June 30,
	2023
	(in thousands)

2023	$	1,529
2024		2,827
2025		2,552
2026		2,505
2027		2,445
Thereafter		19,421
Total lease payments		31,279
Imputed interest		(5,476)
Total present value of operating lease liabilities	$	25,803

The weighted-average discount rate and remaining lease term for operating leases were as follows:



	June 30, 2023		December 31, 2022
Weighted-average discount rate	2.07	%	2.02	%
Weighted-average remaining lease term (years)	16.27		17.33

Rental expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease components, such as fair-market value adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

The following table presents the components of total lease expense:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

	(in thousands)

Lease Expense:
Operating lease expense	$	792	$	822	$	1,599	$	1,636
Short-term lease expense		35		37		65		68
Variable lease expense		3		—		5		—
Sublease income		(4)		(5)		(9)		(5)
Total lease expense	$	826	$	854	$	1,660	$	1,699
Other Information
Cash paid for amounts included in the measurement of lease liabilities-
operating cash flows for operating leases		779		802		1,614		1,601
Operating Lease - Operating cash flows (Liability reduction)		655		672		1,335		1,340
ROU assets obtained in exchange for new operating lease liabilities		596		778		596		1,083

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

12.MINIMUM REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC. Failure to meet minimum capital requirements can result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements.

Under the capital rules, risk-based capital ratios are calculated by dividing Tier 1, common equity Tier 1, and total risk-based capital, respectively, by risk-weighted assets. Assets and off-balance sheet credit equivalents are assigned to one of several risk-weight categories, based primarily on relative risk. The rules require banks and bank holding companies to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a minimum Tier 1 capital ratio of 6.0% and a total capital ratio of 8.0%. In addition, a Tier 1 leverage ratio of 4.0% is required. Additionally, the capital rules require a bank holding company to maintain a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements equal to 2.5% of total risk weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases.

Under the FDIC’s prompt corrective action rules, an insured state nonmember bank is considered “well capitalized” if its capital ratios meet or exceed the ratios as set forth in the following table and is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. The Bank must meet well capitalized requirements under prompt corrective action provisions. Prompt corrective action provisions are not applicable to bank holding companies.

A bank holding company is considered “well capitalized” if the bank holding company (i) has a total risk-based capital ratio of at least 10.0%, (ii) has a Tier 1 risk-based capital ratio of at least 6.0%, and (iii) is not subject to any written agreement order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

At June 30, 2023, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both the Company and the Bank at June 30, 2023 also exceeded the minimum capital requirements, including the currently applicable capital conservation buffer of 2.5%.

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

The Company’s and the Bank’s actual regulatory capital ratios as of June 30, 2023 and December 31, 2022 are presented in the table below.


									Minimum Required to be
									Considered "Well Capitalized"
					Minimum Required for				Under Prompt Corrective
	Actual				Capital Adequacy Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(dollars in thousands)

HarborOne Bancorp, Inc.
June 30, 2023
Common equity Tier 1 capital to risk-weighted assets	$	570,648	12.0	%	$	213,486	4.5	%		N/A	N/A
Tier 1 capital to risk-weighted assets		570,648	12.0			284,648	6.0			N/A	N/A
Total capital to risk-weighted assets		658,301	13.9			379,531	8.0			N/A	N/A
Tier 1 capital to average assets		570,648	10.2			223,471	4.0			N/A	N/A

December 31, 2022
Common equity Tier 1 capital to risk-weighted assets	$	592,610	12.8	%	$	208,541	4.5	%		N/A	N/A
Tier 1 capital to risk-weighted assets		592,610	12.8			278,054	6.0			N/A	N/A
Total capital to risk-weighted assets		677,774	14.6			370,739	8.0			N/A	N/A
Tier 1 capital to average assets		592,610	11.5			205,897	4.0			N/A	N/A

HarborOne Bank
June 30, 2023
Common equity Tier 1 capital to risk-weighted assets	$	536,539	11.3	%	$	213,396	4.5	%	$	308,239	6.5	%
Tier 1 capital to risk-weighted assets		536,539	11.3			284,529	6.0			379,371	8.0
Total capital to risk-weighted assets		589,191	12.4			379,371	8.0			474,214	10.0
Tier 1 capital to average assets		536,539	9.6			223,432	4.0			279,291	5.0

December 31, 2022
Common equity Tier 1 capital to risk-weighted assets	$	525,522	11.3	%	$	208,447	4.5	%	$	301,090	6.5	%
Tier 1 capital to risk-weighted assets		525,522	11.3			277,929	6.0			370,572	8.0
Total capital to risk-weighted assets		575,686	12.4			370,572	8.0			463,215	10.0
Tier 1 capital to average assets		525,522	10.2			205,874	4.0			257,342	5.0

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

13.COMPREHENSIVE (LOSS) INCOME

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the stockholders’ equity section of the Consolidated Balance Sheets, such items, along with net income, are components of comprehensive income (loss).

The following table presents changes in accumulated other comprehensive (loss) income by component for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,
	2023								2022

			Available		Cash				Available		Cash
	Postretirement		for Sale		Flow				for Sale		Flow
	Benefit		Securities		Hedge		Total		Securities		Hedge		Total

	(in thousands)

Balance at beginning of period	$	150	$	(47,686)	$	5,126	$	(42,410)	$	(23,048)	$	4,001	$	(19,047)

Other comprehensive income (loss) before reclassifications		1		(5,366)		1,577		(3,788)		(20,323)		939		(19,384)
Amounts reclassified from accumulated other comprehensive (loss) income		(39)		—		(1,134)		(1,173)		—		(71)		(71)
Net current period other comprehensive (loss) income		(38)		(5,366)		443		(4,961)		(20,323)		868		(19,455)
Related tax effect		—		1,205		(124)		1,081		4,479		(244)		4,235
Balance at end of period	$	112	$	(51,847)	$	5,445	$	(46,290)	$	(38,892)	$	4,625	$	(34,267)


	Six Months Ended June 30,
	2023								2022

			Available		Cash				Available		Cash
	Postretirement		for Sale		Flow				for Sale		Flow
	Benefit		Securities		Hedge		Total		Securities		Hedge		Total

	(in thousands)

Balance at beginning of period	$	150	$	(53,212)	$	5,980	$	(47,082)	$	(2,834)	$	1,197	$	(1,637)

Other comprehensive (loss) income before reclassifications		1		1,723		1,407		3,131		(46,252)		4,728		(41,524)
Amounts reclassified from accumulated other comprehensive income (loss)		(39)		—		(2,152)		(2,191)		—		40		40
Net current period other comprehensive (loss) income		(38)		1,723		(745)		940		(46,252)		4,768		(41,484)
Related tax effect		—		(358)		210		(148)		10,194		(1,340)		8,854
Balance at end of period	$	112	$	(51,847)	$	5,445	$	(46,290)	$	(38,892)	$	4,625	$	(34,267)

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

14.

FAIR VALUE OF ASSETS AND LIABILITIES

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

•Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

•Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Debt Securities – Available-for-sale debt securities are recorded at fair value on a recurring basis. When available, the Company uses quoted market prices to determine the fair value of debt securities; such items are classified as Level 1. There were no Level 1 securities held at June 30, 2023 and December 31, 2022.

Level 2 debt securities are traded less frequently than exchange-traded instruments. The fair value of these securities is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category includes obligations of U.S. government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities and corporate bonds.

Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3. There were no Level 3 securities held at June 30, 2023 and December 31, 2022.

Loans held for sale - The fair value of mortgage loans held for sale is estimated based on current market prices for similar loans in the secondary market and therefore are classified as Level 2 assets. There were no mortgage loans held for sale 90 days or more past due as of June 30, 2023 and December 31, 2022.

Collateral-Dependent Impaired Loans - The fair value of collateral-dependent loans that are deemed to be impaired is determined based upon the fair value of the underlying collateral. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. For collateral-dependent loans for which repayment is dependent on the sale of the collateral, management adjusts the fair value for estimated costs to sell. For collateral-dependent loans for which repayment is dependent on the operation of the collateral, estimated costs to sell are not incorporated into the measurement. Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values resulting from its knowledge of the property. Internal valuations are utilized to determine the fair value of other business assets. Collateral-dependent impaired loans are categorized as Level 3.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, the Company reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Retirement plan annuities - The carrying value of the annuities are based on their contract values which approximate fair value.

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

MSRs - Fair value is based on a third-party valuation model that calculates the present value of estimated future net servicing income and includes observable market data such as prepayment speeds and default and loss rates.

Deposits and mortgagors’ escrow accounts - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) and mortgagors’ escrow accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a DCF calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Borrowed funds - The fair values of borrowed funds are estimated using DCF analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Accrued interest - The carrying amounts of accrued interest approximate fair value.

Derivatives

Derivatives designated as hedging instrument - The Company works directly with a third-party vendor to provide periodic valuations for its interest rate risk management agreements to determine fair value of its interest rate swaps executed for interest rate risk management. The vendor utilizes standard valuation methodologies applicable to interest rate derivatives based on readily observable market data and are therefore considered Level 2 valuations.

Forward loan sale commitments and derivative loan commitments - Forward loan sale commitments and derivative loan commitments are based on fair values of the underlying mortgage loans and the probability of such commitments being exercised. The assumptions for pull-through rates are derived from internal data and adjusted using management judgment. Derivative loan commitments include the value of servicing rights and non-refundable costs of originating the loan based on the Company’s internal cost analysis that is not observable. The weighted average pull-through rate for derivative loan commitments was approximately 91% at June 30, 2023 and December 31, 2022, respectively.

Interest rate swaps and risk participation agreements - The Company’s interest rate swaps are traded in over-the-counter markets where quoted market prices are not readily available. For these interest rate derivatives, fair value is determined by a third party utilizing models that use primarily market observable inputs, such as swap rates and yield curves. The pricing models used to value interest rate swaps calculate the sum of each instrument’s fixed and variable cash flows, which are then discounted using an appropriate yield curve to arrive at the fair value of each swap. The pricing models do not contain a high level of subjectivity as the methodologies used do not require significant judgment.

Although the Company has determined that the majority of the inputs used to value its interest rate swaps and risk participation agreements fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with interest rate contracts and risk participation agreements utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. As of June 30, 2023 and December 31, 2022, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company classified its derivative valuations in their entirety as Level 2.

Off-balance sheet credit-related instruments - Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of off-balance sheet instruments is immaterial.

Transfers between levels are recognized at the end of the reporting period, if applicable. There were no transfers during the periods presented.

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:


							Total
	Level 1		Level 2		Level 3		Fair Value

	(in thousands)

June 30, 2023
Assets

Securities available for sale	$	—	$	292,012	$	—	$	292,012
Loans held for sale		—		20,949		—		20,949
Mortgage servicing rights		—		48,176		—		48,176
Derivatives		—		36,133		783		36,916
	$	—	$	397,270	$	783	$	398,053
Liabilities

Derivatives	$	—	$	28,127	$	85	$	28,212

December 31, 2022
Assets

Securities available for sale	$	—	$	301,149	$	—	$	301,149
Loans held for sale		—		18,544		—		18,544
Mortgage servicing rights		—		48,138		—		48,138
Derivatives		—		36,839		487		37,326
	$	—	$	404,670	$	487	$	405,157
Liabilities

Derivatives	$	—	$	28,525	$	104	$	28,629

The table below presents, for the three and six months ended June 30, 2023 and 2022, the changes in Level 3 assets and liabilities that are measured at fair value on a recurring basis.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)

Assets: Derivative and Forward Loan Sale Commitments:

Balance at beginning of period	$	766	$	2,864	$	487	$	1,583

Total gains (losses) included in net income ⁽¹⁾		17		(1,520)		296		(239)
Balance at end of period	$	783	$	1,344	$	783	$	1,344

Changes in unrealized gains relating to instruments at period end	$	783	$	1,344	$	783	$	1,344


Liabilities: Derivative and Forward Loan Sale Commitments:

Balance at beginning of period	$	(302)	$	(452)	$	(104)	$	(189)

Total gains (losses) included in net income ⁽¹⁾		217		213		19		(50)
Balance at end of period	$	(85)	$	(239)	$	(85)	$	(239)

Changes in unrealized losses relating to instruments at period end	$	(85)	$	(239)	$	(85)	$	(239)

⁽¹⁾ Included in mortgage banking income on the Consolidated Statements of Income.

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Assets Measured at Fair Value on a Non-recurring Basis

The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.


	June 30,						December 31,
	2023						2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

	(in thousands)


Collateral-dependent impaired loans	$	—	$	—	$	7,108	$	—	$	—	$	349

Losses in the following table represent the amount of the fair value adjustments recorded during the period on the carrying value of the assets held at June 30, 2023 and December 31, 2022, respectively. Losses on fully charged off loans are not included in the table.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands)


Collateral-dependent impaired loans	$	2,977	$	9	$	2,982	$	819

The table below presents quantitative information about significant unobservable inputs (Level 3) for assets measured at fair value on a nonrecurring basis at the dates indicated.

Fair Value

June 30,

December 31,

Valuation Technique

2023

2022

(in thousands)

Collateral-dependent impaired loans

7,108

349

Sales Comparison Approach ⁽¹⁾

⁽¹⁾ Fair value is generally determined through independent appraisals of the underlying collateral which includes unobservable inputs such as adjustments for differences between the comparable sales. The Company may also use another source of collateral assessment to determine a reasonable estimate of the fair value of the collateral. Appraisals may be adjusted by Management for qualitative factors and estimated liquidation expenses. Generally, appraisals for residential real estate and commercial real estate loan are discounted 20%. Commercial and industrial appraisals are generally discounted 25%-50%. Management may take larger discounts to reflect market liquidity for certain types of assets not addressed in the appraisals.

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Summary of Fair Values of Financial Instruments

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company.


	June 30, 2023
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total

	(in thousands)

Financial assets:
Cash and cash equivalents	$	252,851	$	252,851	$	—	$	—	$	252,851
Securities available for sale		292,012		—		292,012		—		292,012
Securities held to maturity		19,839		—		19,005		—		19,005
Federal Home Loan Bank stock		27,123		N/A		N/A		N/A		N/A
Loans held for sale		20,949		—		20,949		—		20,949
Loans, net		4,650,382		—		—		4,464,164		4,464,164
Retirement plan annuities		14,877		—		—		14,877		14,877
Accrued interest receivable		16,948		—		16,948		—		16,948
Derivatives		36,916		—		36,133		783		36,916

Financial liabilities:
Deposits		4,287,488		—		—		4,262,936		4,262,936
Borrowed funds		604,568		—		602,341		—		602,341
Subordinated debt		34,348		—		—		33,892		33,892
Mortgagors' escrow accounts		11,073		—		—		11,073		11,073
Accrued interest payable		4,845		—		4,845		—		4,845
Derivatives		28,212		—		28,127		85		28,212


	December 31, 2022
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total

	(in thousands)

Financial assets:
Cash and cash equivalents	$	98,017	$	98,017	$	—	$	—	$	98,017
Securities available for sale		301,149		—		301,149		—		301,149
Securities held to maturity		19,949		—		19,274		—		19,274
Federal Home Loan Bank stock		20,071		N/A		N/A		N/A		N/A
Loans held for sale		18,544		—		18,544		—		18,544
Loans, net		4,504,434		—		—		4,383,613		4,383,613
Retirement plan annuities		14,630		—		—		14,630		14,630
Accrued interest receivable		15,139		—		15,139		—		15,139
Derivatives		37,326		—		36,839		487		37,326

Financial liabilities:
Deposits		4,189,499		—		—		4,166,796		4,166,796
Borrowed funds		400,675		—		399,655		—		399,655
Subordinated debt		34,285		—		—		28,221		28,221
Mortgagors' escrow accounts		9,537		—		—		9,537		9,537
Accrued interest payable		2,325		—		2,325		—		2,325
Derivatives		28,629		—		28,525		104		28,629

Table of Contents

HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

15.

EARNINGS PER SHARE

Basic EPS represents net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the period. Non-vested restricted shares that are participating securities are included in the computation of basic EPS. Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding, plus the effect of potential dilutive common stock equivalents outstanding during the period. At June 30, 2023, potential common shares of 1,308,266 were considered to be anti-dilutive and excluded from EPS. There were no potential shares considered to be anti-dilutive at June 30, 2022.

The following table presents earnings per common share.


	Three Months Ended June 30,
	2023		2022

Net income available to common stockholders (in thousands)	$	7,479	$	9,987

Average number of common shares outstanding		46,620,893		50,487,259
Less: Average unallocated ESOP shares and non-vested restricted shares		(3,557,386)		(3,506,429)
Weighted average number of common shares outstanding used to calculate basic earnings per common share		43,063,507		46,980,830
Dilutive effect of share-based compensation		69,948		555,203
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		43,133,455		47,536,033

Earnings per common share:
Basic	$	0.17	$	0.21
Diluted	$	0.17	$	0.21


	Six Months Ended June 30,
	2023		2022

Net income available to common stockholders (in thousands)	$	14,776	$	22,254

Average number of common shares outstanding		47,522,623		50,941,367
Less: Average unallocated ESOP shares and non-vested restricted shares		(3,567,212)		(3,535,110)
Weighted average number of common shares outstanding used to calculate basic earnings per common share		43,955,411		47,406,257
Dilutive effect of share-based compensation		248,482		704,606
Weighted average number of common shares outstanding used to calculate diluted earnings per common share		44,203,893		48,110,863

Earnings per common share:
Basic	$	0.34	$	0.47
Diluted	$	0.33	$	0.46

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

16.

REVENUE RECOGNITION

Revenue from contracts with customers in the scope of ASC Topic 606 is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.

The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. Unsatisfied performance obligations at the report date are not material to our Consolidated Financial Statements.

In certain cases, other parties are involved with providing services to our customers. If the Company is a principal in the transaction (providing services itself or through a third party on its behalf), revenues are reported based on the gross consideration received from the customer and any related expenses are reported gross in noninterest expense. If the Company is an agent in the transaction (referring to another party to provide services), the Company reports its net fee or commission retained as revenue.

The Company recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Additionally, revenue is collected from loan fees, such as letters of credit, line renewal fees and application fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

17.

SEGMENT REPORTING

The Company has two reportable segments: HarborOne Bank and HarborOne Mortgage. Revenue from HarborOne Bank consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Revenue from HarborOne Mortgage comprises interest earned on loans and fees received as a result of the residential mortgage origination, sale and servicing process.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Segment profit and loss is measured by net income on a legal entity basis. Intercompany transactions are eliminated in consolidation.

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)

Information about the reportable segments and reconciliation to the unaudited interim Consolidated Financial Statements at June 30, 2023 and 2022 and for the three and six months ended June 30, 2023 and 2022 is presented in the tables below.


	Three Months Ended June 30, 2023
	HarborOne		HarborOne
	Bank		Mortgage		Consolidated

	(in thousands)


Net interest and dividend income	$	32,490	$	120	$	32,100
Provision for credit losses		3,283		—		3,283
Net interest and dividend income, after provision for credit losses		29,207		120		28,817
Mortgage banking income:
Gain on sale of mortgage loans		—		3,300		3,300
Intersegment gain (loss)		(358)		90		—
Changes in mortgage servicing rights fair value		29		407		436
Other		195		2,117		2,312
Total mortgage banking income (loss)		(134)		5,914		6,048
Other noninterest income		6,614		—		6,614
Total noninterest income		6,480		5,914		12,662
Noninterest expense		26,193		5,493		31,725
Income before income taxes		9,494		541		9,754
Provision for income taxes		2,193		232		2,275
Net income	$	7,301	$	309	$	7,479


	Six Months Ended June 30, 2023
	HarborOne		HarborOne
	Bank		Mortgage		Consolidated

	(in thousands)


Net interest and dividend income	$	67,052	$	447	$	66,498
Provision for credit losses		5,149		—		5,149
Net interest and dividend income, after provision for credit losses		61,903		447		61,349
Mortgage banking income:
Gain on sale of mortgage loans		—		5,524		5,524
Intersegment gain (loss)		(706)		544		—
Changes in mortgage servicing rights fair value		(107)		(1,149)		(1,256)
Other		396		4,132		4,528
Total mortgage banking income (loss)		(417)		9,051		8,796
Other noninterest income		12,556		—		12,556
Total noninterest income		12,139		9,051		21,352
Noninterest expense		52,383		10,815		63,234
Income (loss) before income taxes		21,659		(1,317)		19,467
Provision (benefit) for income taxes		5,308		(333)		4,691
Net income (loss)	$	16,351	$	(984)	$	14,776

Total assets at period end	$	5,668,582	$	115,782	$	5,659,254
Goodwill at period end	$	59,042	$	10,760	$	69,802

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HarborOne Bancorp, Inc.

Notes to Consolidated Financial Statements (unaudited)


	Three Months Ended June 30, 2022

	HarborOne		HarborOne
	Bank		Mortgage		Consolidated

	(in thousands)


Net interest and dividend income	$	37,246	$	411	$	37,195
Provision for credit losses		2,546		—		2,546
Net interest and dividend income, after provision for credit losses		34,700		411		34,649
Mortgage banking income:
Gain on sale of mortgage loans		—		4,538		4,538
Intersegment gain (loss)		(1,095)		1,097		—
Changes in mortgage servicing rights fair value		127		735		862
Other		219		2,393		2,612
Total mortgage banking income (loss)		(749)		8,763		8,012
Other noninterest income		6,084		7		6,091
Total noninterest income		5,335		8,770		14,103
Noninterest expense		27,131		7,242		34,954
Income before income taxes		12,904		1,939		13,798
Provision for income taxes		3,550		549		3,811
Net income	$	9,354	$	1,390	$	9,987


	Six Months Ended June 30, 2022

	HarborOne		HarborOne
	Bank		Mortgage		Consolidated

	(in thousands)

Net interest and dividend income	$	70,670	$	761	$	70,465
Provision for credit losses		2,884		—		2,884
Net interest and dividend income, after provision for credit losses		67,786		761		67,581
Mortgage banking income:
Gain on sale of mortgage loans		—		9,860		9,860
Intersegment gain (loss)		(1,703)		1,934		—
Changes in mortgage servicing rights fair value		717		5,430		6,147
Other		452		4,718		5,170
Total mortgage banking income (loss)		(534)		21,942		21,177
Other noninterest income		11,971		16		11,987
Total noninterest income		11,437		21,958		33,164
Noninterest expense		53,956		15,003		69,789
Income before income taxes		25,267		7,716		30,956
Provision for income taxes		7,107		2,090		8,702
Net income	$	18,160	$	5,626	$	22,254

Total assets at period end	$	4,718,584	$	149,186	$	4,704,044
Goodwill at period end	$	59,042	$	10,760	$	69,802

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section is intended to assist in the understanding of the financial performance of the Company and its subsidiaries through a discussion of our financial condition at June 30, 2023, and our results of operations for the three and six months ended June 30, 2023 and 2022. This section should be read in conjunction with the unaudited interim Consolidated Financial Statements and Notes thereto of the Company appearing in Part I, Item 1 of this Form 10-Q.

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 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 liquidity) 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 customer behavior; ongoing turbulence in the capital and debt markets and the impact of such conditions on the Company’s business activities; changes in interest rates; 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; acquisitions may not produce results at levels or within time frames originally anticipated; 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.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements included in its most recent Annual Report on Form 10-K. Modifications to significant accounting policies made during the year are described in Note 1 to the Consolidated Financial Statements included in Item 1 of this report. The preparation of the Consolidated Financial Statements in accordance with GAAP and practices generally applicable to the financial services industry requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.

Certain of our accounting policies, which are important to the portrayal of our financial condition, require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers.

Management has identified the Company’s most critical accounting policies as related to:

•Allowance for Credit Losses

•Goodwill

•Deferred Tax Assets

The accounting policies and estimates, including the nature of the estimates and types of assumptions used, are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s most recent Form 10-K and pertain to discussion in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.

Recent Developments

In light of recent events in the banking sector, including recent bank failures, increasing interest rates and recessionary concerns, the Company continues to proactively assess the operations of the Bank and HarborOne Mortgage to mitigate the risks impacting the banking industry and ensure that the Company continues to serve its clients and communities in a cost-effective way.

The Company enacted cost-savings measures and operational efficiencies during the first and second quarter of 2023 that will result in approximately $4.1 million in annual savings.

The Company has cash and available-for-sale securities representing 9.6% of assets at June 30, 2023 and 7.5% of assets at December 31, 2022. The Company maintains the ability to access contingent liquidity at the FHLB and the FRBB totaling $1.0 billion and $861.1 million at June 30, 2023 and December 31, 2022, respectively. Management considers the Company’s current liquidity position to be adequate to meet both short-term and long-term liquidity needs. Refer to the section “Liquidity Management and Capital Resources” for additional information. Additionally, the Company and Bank are above the standards to be considered well-capitalized under regulatory requirements. Refer to “Note 12. Minimum Regulatory Capital Requirements,” included in this report.

Macroeconomic trends continue to be mixed as uncertainty remains about the economy and banking industry. Market conditions and external factors may unpredictably impact the Company. For additional factors that could adversely impact the Company’s future results of operations and financial condition, see the section labeled “Risk Factors” in Part II Item 1A below and Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

Comparison of Financial Condition at June 30, 2023 and December 31, 2022

Total Assets. Total assets increased $299.7 million, or 5.6%, to $5.66 billion at June 30, 2023 from $5.36 billion at December 31, 2022. The increase primarily reflects an increase of $151.0 million in short-term investments and a $148.5 million increase in loans. The increase in short-term investments reflects management’s proactive liquidity-enhancing measures in response to financial industry concerns.

Cash and Cash Equivalents. Cash and cash equivalents increased $154.8 million to $252.9 million at June 30, 2023 from $98.0 million at December 31, 2022, primarily due to an increase in short-term investments.

Loans Held for Sale. Loans held for sale at June 30, 2023 were $20.9 million, an increase of $2.4 million from $18.5 million at December 31, 2022.

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Loans, net. Net loans increased $145.9 million, or 3.2%, to $4.65 billion at June 30, 2023 from $4.50 billion at December 31, 2022. The following table sets forth information concerning the composition of loans:


	June 30,		December 31,		Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Residential real estate:
One- to four-family	$	1,504,142	$	1,432,263	$	71,879		5.0	%
Second mortgage and equity lines of credit		171,073		166,219		4,854		2.9
Residential construction		26,995		35,837		(8,842)		(24.7)
Total residential real estate loans		1,702,210		1,634,319		67,891		4.2
Commercial:
Commercial real estate		2,286,688		2,250,344		36,344		1.6
Commercial construction		228,902		199,311		29,591		14.8
Commercial and industrial		453,422		424,275		29,147		6.9
Total commercial loans		2,969,012		2,873,930		95,082		3.3

Consumer loans		27,425		41,421		(13,996)		(33.8)
Total loans before basis adjustment		4,698,647		4,549,670		148,977		3.3	`
Basis adjustment associated with fair value hedge ⁽¹⁾		(444)		—		(444)		(100.0)
Total loans		4,698,203		4,549,670		148,533		3.3
Allowance for credit losses on loans		(47,821)		(45,236)		(2,585)		(5.7)
Loans, net	$	4,650,382	$	4,504,434	$	145,948		3.2	%


⁽¹⁾ Represents the basis adjustment associated with the application of hedge accounting on certain residential real estate loans. Refer to Note 10 - Derivatives.

The increase in net loans is primarily due to commercial real estate and residential real estate loan growth. Management continues to seek prudent commercial lending opportunities to deepen relationships with existing customers and develop new relationships with strong borrowers. The ACL was $47.8 million at June 30, 2023 and $45.2 million at December 31, 2022. See additional disclosure in the Asset Quality section below.

Securities. Investment securities available for sale at June 30, 2023 were $292.0 million, a decrease of $9.1 million, or 3.0%, from $301.1 million at December 31, 2022. Securities available for sale were negatively impacted by unrealized losses of $66.5 million and $68.3 million as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, the gross unrealized loss positions were primarily related to mortgage-backed securities and other obligations issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Total gross unrealized losses were primarily attributable to changes in interest rates relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

Securities held to maturity amounted to $19.8 million at June 30, 2023 and $19.9 million at December 31, 2022, with a fair value of $19.0 million and $19.3 million, respectively.

Mortgage servicing rights. MSRs are created as a result of our mortgage banking origination activities and accounted for at fair value. At June 30, 2023, we serviced mortgage loans for others with an aggregate outstanding principal balance of $3.60 billion. Total MSRs were $48.2 million at June 30, 2023 and $48.1 million at December 31, 2022. The change in total MSRs for the six months ended June 30, 2023 reflects additions of $1.3 million, amortization from loan repayment of $850,000 and a negative fair value mark of $406,000.

Quarterly, we utilize a third-party provider to assist in the determination of the fair value of our MSRs. They provide the appropriate prepayment speed, and discount and default rate assumptions based on our portfolio and key benchmark mortgage rates. Management reviews the assumptions and calculation. Any measurement of fair value is

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

limited by the conditions existing and assumptions made at a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

The assumptions used in the MSR fair value calculation are significantly impacted by the residential mortgage benchmark indices. Decreasing mortgage rates normally encourages increased mortgage refinancing activity, which reduces the life of the loans underlying the MSRs, thereby reducing the value of MSRs, whereas increasing interest rates would result in increases in fair value, and a corresponding increase in earnings. MSRs recorded during periods of historically low interest rates may be less sensitive to falling rates in the future as they were originated in a low mortgage rate environment.

Deposits. Deposits increased $98.0 million, or 2.3%, to $4.29 billion at June 30, 2023 from $4.19 billion at December 31, 2022. The following table sets forth information concerning the composition of deposits:


	June 30,		December 31,		Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Noninterest-bearing deposits	$	717,572	$	762,576	$	(45,004)		(5.9)	%
NOW accounts		286,953		297,625		(10,672)		(3.6)
Regular savings		1,390,906		1,468,172		(77,266)		(5.3)
Money market accounts		345,509		451,663		(106,154)		(23.5)
Term certificate accounts		733,644		494,599		239,045		48.3
Consumer and business deposits		3,474,584		3,474,635		(51)		(0.0)
Municipal deposits		497,901		413,484		84,417		20.4
Brokered deposits		315,003		301,380		13,623		4.5
Total deposits	$	4,287,488	$	4,189,499	$	97,989		2.3	%

Reciprocal deposits	$	149,234	$	28,560	$	120,674		422.5	%

The growth in deposits was driven by an increase of $84.4 million in municipal deposits and $13.6 million in brokered deposits. We participate in a reciprocal deposit program that provides access to FDIC-insured deposit products in aggregate amounts exceeding the current limits for depositors. Total deposits included $149.2 million in reciprocal deposits. The brokered deposits provide a channel for the Company to seek additional funding outside the Company’s core market.

The total of estimated deposits in excess of the FDIC insurance limits amounted to $1.5 billion and $1.3 billion as of June 30, 2023 and December 31, 2022, respectively. In 2022, insurance for deposits in excess of FDIC limits was provided through the Depositors Insurance Fund. On February 24, 2023, at 5 p.m. local time, the Bank exited DIF. All customer non-certificate deposits as of that date and time will remain covered by DIF insurance for one year until February 24, 2024. Certificates of deposit as of that date and time will remain covered by DIF insurance until their maturity date. Including DIF excess insurance coverage, insured deposits are approximately 88% of total deposits, including Bank subsidiary deposits.

Borrowed Funds. FHLB borrowings increased $203.9 million to $604.6 million at June 30, 2023 from $400.7 million at December 31, 2022. At June 30, 2023, FHLB borrowings were primarily short-term borrowings as the Bank utilized available credit to enhance liquidity. As of June 30, 2023, the Bank had $1.0 billion in available borrowing capacity across multiple relationships.

Stockholders’ equity. Total stockholders’ equity was $595.5 million at June 30, 2023, compared to $617.0 million at December 31, 2022 and $624.5 million at June 30, 2022. Stockholders’ equity decreased 3.5% when compared to the year end, as earnings were offset by share repurchases. The Company completed its fifth share repurchase on April 13, 2023 of 2,450,208 shares at an average price of $13.01, including $0.13 per share of excise tax. A sixth share repurchase program was approved and commenced in the third quarter of 2023.

The tangible-common equity-to-tangible-assets ratio was 9.38% at June 30, 2023, 10.31% at December 31, 2022 and 11.92% at June 30, 2022. At June 30, 2023, the capital levels of both the Company and the Bank exceeded all

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both the Company and the Bank at June 30, 2023, also exceeded the minimum capital requirements, including the currently applicable capital conservation buffer of 2.5%. Regulatory capital ratios are not impacted by the decline in other comprehensive income as a result of the unrealized losses on available-for-sale investment securities.

Comparison of Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

HarborOne Bancorp, Inc. Consolidated

Overview. Consolidated net income for the three and six months ended June 30, 2023 was $7.5 million and $14.8 million, respectively, compared to net income of $10.0 million and $22.3 million for the three and six months ended June 30, 2022.

Average Balances and Yields. The following tables set forth average balance sheets, annualized average yields and costs, and certain other information for the periods indicated, on a consolidated basis. Interest income on tax-exempt loans and securities has been adjusted to a fully taxable-equivalent basis using a federal tax rate of 21%. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis


	Three Months Ended June 30,
	2023							2022
	Average							Average
	Outstanding					Yield/		Outstanding					Yield/
	Balance			Interest		Cost ⁽⁸⁾		Balance			Interest		Cost ⁽⁸⁾

	(dollars in thousands)

Interest-earning assets:
Investment securities ⁽¹⁾	$	381,762		$	2,035	2.14	%	$	391,448		$	1,873	1.92	%
Other interest-earning assets		238,891			2,935	4.93			64,678			131	0.81
Loans held for sale		19,614			326	6.67			29,474			331	4.51
Loans
Commercial loans ⁽²⁾⁽³⁾		2,938,292			38,842	5.30			2,384,630			25,295	4.25
Residential real estate loans⁽³⁾⁽⁴⁾		1,682,860			16,456	3.92			1,330,772			11,182	3.37
Consumer loans ⁽³⁾		29,025			419	5.79			88,943			1,045	4.71
Total loans		4,650,177			55,717	4.81			3,804,345			37,522	3.96
Total interest-earning assets		5,290,444			61,013	4.63			4,289,945			39,857	3.73
Noninterest-earning assets		305,132							311,998
Total assets	$	5,595,576						$	4,601,943
Interest-bearing liabilities:
Savings accounts	$	1,421,622			6,165	1.74		$	1,266,912			626	0.20
NOW accounts		280,501			59	0.08			311,241			38	0.05
Money market accounts		802,373			6,256	3.13			885,305			635	0.30
Certificates of deposit		708,087			5,273	2.99			484,484			670	0.55
Brokered deposits		281,614			2,309	3.29			100,000			50	0.20
Total interest-bearing deposits		3,494,197			20,062	2.30			3,047,942			2,019	0.27
FHLB and FRB borrowings		666,345			8,114	4.88			34,763			119	1.36
Subordinated debentures		34,331			524	6.12			34,207			524	6.14
Total borrowings		700,676			8,638	4.94			68,970			643	3.74
Total interest-bearing liabilities		4,194,873			28,700	2.74			3,116,912			2,662	0.34
Noninterest-bearing liabilities:
Noninterest-bearing deposits		712,081							768,088
Other noninterest-bearing liabilities		88,363							75,186
Total liabilities		4,995,317							3,960,186
Total equity		600,259							641,757
Total liabilities and equity	$	5,595,576						$	4,601,943
Tax equivalent net interest income					32,313							37,195
Tax equivalent interest rate spread ⁽⁵⁾						1.89	%						3.39	%
Less: tax equivalent adjustment					213							—
Net interest income as reported				$	32,100						$	37,195
Net interest-earning assets ⁽⁶⁾	$	1,095,571						$	1,173,033
Net interest margin ⁽⁷⁾						2.43	%						3.48	%
Tax equivalent effect						0.02							—
Net interest margin on a fully tax equivalent basis						2.45	%						3.48	%
Ratio of interest-earning assets to interest-bearing liabilities		126.12	%						137.63	%

Supplemental information:
Total deposits, including demand deposits	$	4,206,278		$	20,062			$	3,816,030		$	2,019
Cost of total deposits						1.91	%						0.21	%
Total funding liabilities, including demand deposits	$	4,906,954		$	28,700			$	3,885,000		$	2,662
Cost of total funding liabilities						2.35	%						0.27	%

⁽¹⁾ Includes securities available for sale and securities held to maturity.
⁽²⁾ Includes industrial revenue bonds for the quarter ended June 30, 2023. Interest income from tax exempt loans is computed on a taxable equivalent basis using a rate of 21% for the quarters presented. The yield on commercial loans before tax equivalent adjustment at June 30, 2023 was 5.27%.
⁽³⁾ Includes nonaccruing loan balances and interest received on such loans.
⁽⁴⁾ Includes the basis adjustments of certain loans included in fair value hedging relationships.
⁽⁵⁾ Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
⁽⁶⁾ Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
⁽⁷⁾Net interest margin represents net interest income divided by average total interest-earning assets.
⁽⁸⁾ Annualized.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis


	Six Months Ended June 30,
	2023							2022
	Average							Average
	Outstanding					Yield/		Outstanding					Yield/
	Balance			Interest		Cost ⁽⁸⁾		Balance			Interest		Cost ⁽⁸⁾

	(dollars in thousands)

Interest-earning assets:
Investment securities ⁽¹⁾	$	384,517		$	4,114	2.16	%	$	392,401		$	3,574	1.84	%
Other interest-earning assets		151,644			3,738	4.97			107,386			192	0.36
Loans held for sale		18,865			612	6.54			29,657			595	4.05
Loans
Commercial loans ⁽²⁾⁽³⁾		2,919,980			75,679	5.23			2,338,245			47,390	4.09
Residential real estate loans⁽³⁾⁽⁴⁾		1,665,083			32,072	3.88			1,276,041			21,324	3.37
Consumer loans ⁽³⁾		32,647			938	5.79			103,512			2,384	4.64
Total loans		4,617,710			108,689	4.75			3,717,798			71,098	3.86
Total interest-earning assets		5,172,736			117,153	4.57			4,247,242			75,459	3.58
Noninterest-earning assets		309,198							319,362
Total assets	$	5,481,934						$	4,566,604
Interest-bearing liabilities:
Savings accounts	$	1,440,403			11,610	1.63		$	1,216,578			992	0.16
NOW accounts		278,164			95	0.07			306,287			74	0.05
Money market accounts		813,472			11,494	2.85			872,122			938	0.22
Certificates of deposit		630,791			7,958	2.54			503,243			1,399	0.56
Brokered deposits		305,885			4,818	3.18			100,000			237	0.48
Total interest-bearing deposits		3,468,715			35,975	2.09			2,998,230			3,640	0.24
FHLB and FRB borrowings		557,823			13,219	4.78			45,176			307	1.37
Subordinated debentures		34,315			1,047	6.15			34,190			1,047	6.18
Total borrowings		592,138			14,266	4.86			79,366			1,354	3.44
Total interest-bearing liabilities		4,060,853			50,241	2.49			3,077,596			4,994	0.33
Noninterest-bearing liabilities:
Noninterest-bearing deposits		716,782							753,414
Other noninterest-bearing liabilities		95,054							80,943
Total liabilities		4,872,689							3,911,953
Total equity		609,245							654,651
Total liabilities and equity	$	5,481,934						$	4,566,604
Tax equivalent net interest income					66,912							70,465
Tax equivalent interest rate spread ⁽⁵⁾						2.08	%						3.25	%
Less: tax equivalent adjustment					414							—
Net interest income as reported				$	66,498						$	70,465
Net interest-earning assets ⁽⁶⁾	$	1,111,883						$	1,169,646
Net interest margin ⁽⁷⁾						2.59	%						3.35	%
Tax equivalent effect						0.02							—
Net interest margin on a fully tax equivalent basis						2.61	%						3.35	%
Ratio of interest-earning assets to interest-bearing liabilities		127.38	%						138.01	%

Supplemental information:
Total deposits, including demand deposits	$	4,185,497		$	35,975			$	3,751,644		$	3,640
Cost of total deposits						1.73	%						0.20	%
Total funding liabilities, including demand deposits	$	4,777,635		$	50,241			$	3,831,010		$	4,994
Cost of total funding liabilities						2.12	%						0.26	%

⁽¹⁾ Includes securities available for sale and securities held to maturity.
⁽²⁾ Includes industrial revenue bonds for the six months ended June 30, 2023. Interest income from tax exempt loans is computed on a taxable equivalent basis using a rate of 21%. The yield on commercial loans before tax equivalent adjustment at June 30, 2023 was 5.20%.
⁽³⁾ Includes nonaccruing loan balances and interest received on such loans.
⁽⁴⁾ Includes the basis adjustments of certain loans included in fair value hedging relationships.
⁽⁵⁾ Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
⁽⁶⁾ Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
⁽⁷⁾ Net interest margin represents net interest income divided by average total interest-earning assets.
⁽⁸⁾ Annualized.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated, on a consolidated basis. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023 v. 2022						2023 v. 2022
	Increase (Decrease)				Total		Increase (Decrease)				Total
	Due to Changes in				Increase		Due to Changes in				Increase
	Volume		Rate		(Decrease)		Volume		Rate		(Decrease)

	(in thousands)

Interest-earning assets:
Investment securities	$	(47)	$	209	$	162	$	(74)	$	614	$	540
Other interest-earning assets		973		1,831		2,804		111		3,435		3,546
Loans held for sale		(132)		127		(5)		(268)		285		17
Loans
Commercial loans		6,574		6,973		13,547		13,340		14,949		28,289
Residential real estate loans		3,257		2,017		5,274		7,162		3,586		10,748
Consumer loans		(825)		199		(626)		(1,936)		490		(1,446)
Total loans		9,006		9,189		18,195		18,566		19,025		37,591
Total interest-earning assets		9,800		11,356		21,156		18,335		23,359		41,694
Interest-bearing liabilities:
Savings accounts		86		5,453		5,539		215		10,403		10,618
NOW accounts		(4)		25		21		(7)		28		21
Money market accounts		(66)		5,687		5,621		(69)		10,625		10,556
Certificates of deposit		438		4,165		4,603		438		6,121		6,559
Brokered deposit		238		2,021		2,259		1,224		3,357		4,581
Total interest-bearing deposits		692		17,351		18,043		1,801		30,534		32,335
FHLB and FRB advances		7,009		986		7,995		10,587		2,325		12,912
Subordinated debentures		2		(2)		—		4		(4)		—
Total borrowings		7,011		984		7,995		10,591		2,321		12,912
Total interest-bearing liabilities		7,703		18,335		26,038		12,392		32,855		45,247
Change in net interest income	$	2,097	$	(6,979)	$	(4,882)	$	5,943	$	(9,496)	$	(3,553)

Interest and Dividend Income. Interest and dividend income on a tax equivalent basis increased $21.2 million, or 53.1%, to $61.0 million for the three months ended June 30, 2023, compared to $39.9 million for the three months ended June 30, 2022. The significant components of the increase were:

●

Interest and fees on loans on a tax equivalent basis increased $18.2 million, or 48.5%, reflecting loan growth, and an 85 basis point increase in the yield.

●

Interest income on other earning assets increased $2.8 million, or 2,140.5%, reflecting an increase in the average balance and interest rates of federal funds.

●

Interest income on securities increased $162,000, or 8.6%, primarily reflecting the increase in rate.

●

Interest on loans held for sale decreased $5,000, or 1.5%, reflecting the decrease in mortgage volume partially offset by the increase in rate.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Compared to the first six months of 2022, interest and dividend income on a tax equivalent basis increased $41.7 million, or 55.3%, reflecting similar trends to the quarter-over-quarter results, increased volume and rates on interest-bearing assets.

Interest Expense. Interest expense increased $26.0 million, or 978.1%, to $28.7 million for the three months ended June 30, 2023 from $2.7 million for the three months ended June 30, 2022. The significant components of the increase were:

●

Interest expense on deposits increased $18.0 million, or 893.7%, reflecting deposit growth, and a 203 basis point increase.

●

Interest expense on FHLB and FRBB borrowings increased $8.0 million, or 6,718.5%, reflecting an increase in the average balance and a 352 basis point increase in the cost of FHLB borrowings.

Compared to the first six months of 2022, interest expense increased $45.2 million, or 906.0%, reflecting similar trends to the quarter-over-quarter results, increased volume and rates on interest-bearing liabilities.

Net Interest and Dividend Income. Net interest and dividend income on a tax equivalent basis decreased $4.9 million, or 13.1%, to $32.3 million for the three months ended June 30, 2023 from $37.2 million for the three months ended June 30, 2022. Although the average balance of interest bearing assets and liabilities increased $1.0 billion and $1.1 billion, respectively, rate increases on interest-bearing liabilities outpaced the increase in the yield on interest-earning assets by 150 basis points. The net interest spread was 1.89% for the three months ended June 30, 2023 compared to 3.39% for the three months ended June 30, 2022 and net interest margin on a full tax equivalent basis decreased 103 basis points to 2.45% for the three months ended June 30, 2023 from 3.48% for three months ended June 30, 2023.

Compared to the first six months of 2022, net interest and dividend income on a tax equivalent basis decreased $3.6 million, or 5.0%, to $66.9 million from $70.5 million. The tax equivalent net interest spread decreased 117 basis points to 2.08% for the six months ended June 30, 2023 from 3.25% for the six months ended June 30, 2022, and net interest margin on a tax equivalent basis decreased by 74 basis points to 2.61% for the six months ended June 30, 2023 from 3.35% for the six months ended June 30, 2022.

Income Tax Provision. The provision for income taxes and effective tax rate for the three months ended June 30, 2023 was $2.3 million and 23.3%, respectively, compared to $3.8 million and 27.6%, respectively, for the three months ended June 30, 2022.

The provision for income taxes and effective tax rate for the six months ended June 30, 2023 was $4.7 million and 24.1%, respectively, compared to $8.7 million and 28.1%, respectively, for the six months ended June 30, 2022.

Segments. The Company has two reportable segments: HarborOne Bank and HarborOne Mortgage. Revenue from HarborOne Bank consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Revenue from HarborOne Mortgage is comprised of interest earned on loans and fees received as a result of the residential mortgage origination, sale and servicing process. Residential real estate portfolio loans are originated by HarborOne Mortgage and purchased by the Bank.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

The tables below show the results of operations for the Company’s segments, HarborOne Bank and HarborOne Mortgage, for the three and six months ended June 30, 2023 and 2022, and the increase or decrease in those results:


	HarborOne Bank								HarborOne Mortgage
	Three Months Ended								Three Months Ended
	June 30,				Increase (Decrease)				June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent		2023		2022		Dollars		Percent

	(dollars in thousands)

Net interest and dividend income	$	32,490	$	37,246	$	(4,756)	(12.8)	%	$	120	$	411	$	(291)	(70.8)	%
Provision for credit losses		3,283		2,546		737	28.9			—		—		—	—
Net interest and dividend income, after provision for credit losses		29,207		34,700		(5,493)	(15.8)			120		411		(291)	(70.8)
Mortgage banking income:
Gain on sale of mortgage loans		—		—		—	—			3,300		4,538		(1,238)	(27.3)
Intersegment gain (loss)		(358)		(1,095)		737	67.3			90		1,097		(1,007)	(91.8)
Changes in mortgage servicing rights fair value		29		127		(98)	(77.2)			407		735		(328)	(44.6)
Other		195		219		(24)	(11.0)			2,117		2,393		(276)	(11.5)
Total mortgage banking income (loss)		(134)		(749)		615	82.1			5,914		8,763		(2,849)	(32.5)
Other noninterest income		6,614		6,084		530	8.7			—		7		(7)	(100.0)
Total noninterest income		6,480		5,335		1,145	21.5			5,914		8,770		(2,856)	(32.6)
Noninterest expense		26,193		27,131		(938)	(3.5)			5,493		7,242		(1,749)	(24.2)
Income before income taxes		9,494		12,904		(3,410)	(26.4)			541		1,939		(1,398)	(72.1)
Provision for income taxes		2,193		3,550		(1,357)	(38.2)			232		549		(317)	(57.7)
Net income	$	7,301	$	9,354	$	(2,053)	(21.9)	%	$	309	$	1,390	$	(1,081)	(77.8)	%


	HarborOne Bank								HarborOne Mortgage
	Six Months Ended								Six Months Ended
	June 30,				Increase (Decrease)				June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent		2023		2022		Dollars		Percent

	(dollars in thousands)


Net interest and dividend income	$	67,052	$	70,670	$	(3,618)	(5.1)	%	$	447	$	761	$	(314)	(41.3)	%
Provision for credit losses		5,149		2,884		2,265	78.5			—		—		—	—
Net interest and dividend income, after provision for credit losses		61,903		67,786		(5,883)	(8.7)			447		761		(314)	(41.3)
Mortgage banking income:
Gain on sale of mortgage loans		—		—		—	—			5,524		9,860		(4,336)	(44.0)
Intersegment gain (loss)		(706)		(1,703)		997	58.5			544		1,934		(1,390)	(71.9)
Changes in mortgage servicing rights fair value		(107)		717		(824)	(114.9)			(1,149)		5,430		(6,579)	(121.2)
Other		396		452		(56)	(12.4)			4,132		4,718		(586)	(12.4)
Total mortgage banking income (loss)		(417)		(534)		117	21.9			9,051		21,942		(12,891)	(58.8)
Other noninterest income		12,556		11,971		585	4.9			—		16		(16)	(100.0)
Total noninterest income		12,139		11,437		702	6.1			9,051		21,958		(12,907)	(58.8)
Noninterest expense		52,383		53,956		(1,573)	(2.9)			10,815		15,003		(4,188)	(27.9)
Income (loss) before income taxes		21,659		25,267		(3,608)	(14.3)			(1,317)		7,716		(9,033)	(117.1)
Provision (benefit) for income taxes		5,308		7,107		(1,799)	(25.3)			(333)		2,090		(2,423)	(115.9)
Net income (loss)	$	16,351	$	18,160	$	(1,809)	(10.0)	%	$	(984)	$	5,626	$	(6,610)	(117.5)	%

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

HarborOne Bank Segment

Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

Net Income. The Bank’s net income decreased $2.1 to $7.3 million for the three months ended June 30, 2023 compared to $9.4 million for the three months ended June 30, 2022. The decrease in net income reflects a decrease of $4.8 million, or 12.8%, in net interest and dividend income and an increase in provision for credit losses of $737,000, or 28.9%, partially offset by a $1.1 million, or 21.5% increase in noninterest income and a $938,000, or 3.5%, decrease in noninterest expense.

Compared to the first six months of 2022, the Bank’s net income for the six months ended June 30, 2023 decreased $1.8 million to $16.4 million from $18.2 million. The decrease in net income reflects a decrease of $3.6 million, or 5.1%, in net interest and dividend income and an increase in provision for credit losses of $2.3 million, or 78.5%, partially offset by a $702,000, or 6.1%, increase in noninterest income and a $1.6 million, or 2.9%, decrease in noninterest expense.

Provision for Credit Losses. The Bank recorded provision for credit losses of $3.3 million and $5.1 million for the three and six months ended June 30, 2023. For the three months ended June 30, 2023, the provision for credit losses on loans was $3.5 million offset by a $215,000 negative provision on unfunded commitments. The $3.5 million provisioning primarily reflects replenishment as a result of a $2.9 million charge-off and loan growth. The Bank recorded provision for credit losses of $2.5 million and $2.8 million for the three and six months ended June 30, 2022. For the three months ended June 30, 2022, the provision for credit losses included a $1.2 million ACL on loans and a $1.3 million ACL on unfunded commitments.

Net charge-offs totaled $2.7 million, or 0.23% of average loans outstanding on an annualized basis, for the quarter ended June 30, 2023, compared to net recoveries of $505,000, or 0.05% of average loans outstanding on an annualized basis, for the quarter ended June 30, 2022. Net charge-offs totaled $2.7 million, or 0.12% of average loans outstanding on an annualized basis for the six months ended June 30, 2023, as compared to the net charge-offs of $2.2 million for the same period in 2022. During the quarter ended June 30, 2023, a $2.9 million charge-off was recorded on a metro office space commercial real estate credit with a June 30, 2023 carrying value of $7.0 million. The 2022 six-month period included a $2.8 million charge-off upon the resolution of one credit, previously included in the office at-risk sector, in the amount of $8.8 million. At June 30, 2023, nonperforming assets were $20.2 million, and nonperforming assets to total assets were 0.36% as compared to $24.4 million and 0.52%, respectively, at June 30, 2022.

Noninterest Income. Total noninterest income was $6.5 million and $12.1 million for the three and six months ended June 30, 2023 compared to $5.3 million and $11.4 million for the respective prior year period. The following table sets forth the components of noninterest income:


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Intersegment loss	$	(358)	$	(1,095)	$	737		67.3	%
Secondary market loan servicing fees, net of guarantee fees		195		219		(24)		(11.0)
Changes in mortgage servicing rights fair value		29		127		(98)		(77.2)
Total mortgage banking loss		(134)		(749)		615		82.1	%
Interchange fees		2,690		2,719		(29)		(1.1)
Other deposit account fees		2,323		2,173		150		6.9
Income on retirement plan annuities		128		112		16		14.3
Bank-owned life insurance income		511		494		17		3.4
Swap fee income		277		42		235		559.5
Other		685		544		141		25.9
Total noninterest income	$	6,480	$	5,335	$	1,145		21.5	%

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis


	Six Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Intersegment loss	$	(706)	$	(1,703)	$	997		58.5	%
Secondary market loan servicing fees, net of guarantee fees		396		452		(56)		(12.4)
Changes in mortgage servicing rights fair value		(107)		717		(824)		(114.9)
Total mortgage banking loss		(417)		(534)		117		21.9	%
Interchange fees		5,192		5,180		12		0.2
Other deposit account fees		4,554		4,184		370		8.8
Income on retirement plan annuities		247		219		28		12.8
Bank-owned life insurance income		1,011		977		34		3.5
Swap fee income		455		42		413		983.3
Other		1,097		1,369		(272)		(19.9)
Total noninterest income	$	12,139	$	11,437	$	702		6.1	%

The primary reasons for the variances within the noninterest income categories shown in the preceding tables are noted below:

●

The Bank records an intersegment loss on loans purchased from HarborOne Mortgage that is offset in consolidation. The Bank purchased $102.1 million of residential mortgage loans from HarborOne Mortgage during the six months ended June 30, 2023 as compared to $217.1 million for the prior year period.

●

●	The increase in other deposit account fees reflects an increase in overdraft protection fees of $66,000 and $198,000 for the three and six months ended June 30, 2023.

●	Swap fee income is collected and recorded at the time the swap contract is entered into, and therefore income fluctuates as a function of the swap agreements entered into in a period.

●	The year-to-date decrease in other noninterest income primarily reflects a positive credit valuation adjustment of $239,000 on the termination of an interest rate swap that was included in other noninterest income for the six months ended June 30, 2022 and no such income in 2023.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Noninterest Expense. Total noninterest expense was $26.2 million and $52.4 million for the three and six months ended June 30, 2023 compared to $27.1 million and $54.0 for the respective prior year period. The following table sets forth the components of noninterest expense:


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Compensation and benefits	$	15,067	$	16,269	$	(1,202)		(7.4)	%
Occupancy and equipment		3,910		3,820		90		2.4
Data processing expenses		2,355		2,162		193		8.9
Loan expenses		96		136		(40)		(29.4)
Marketing		787		914		(127)		(13.9)
Deposit expenses		326		513		(187)		(36.5)
Postage and printing		398		385		13		3.4
Professional fees		699		1,032		(333)		(32.3)
Foreclosed and repossessed assets		5		52		(47)		(90.4)
Deposit insurance		1,176		354		822		232.2
Other expenses		1,374		1,494		(120)		(8.0)
Total noninterest expense	$	26,193	$	27,131	$	(938)		(3.5)	%


	Six Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Compensation and benefits	$	29,831	$	31,487	$	(1,656)		(5.3)	%
Occupancy and equipment		8,205		8,502		(297)		(3.5)
Data processing expenses		4,660		4,333		327		7.5
Loan expenses		183		230		(47)		(20.4)
Marketing		1,850		2,048		(198)		(9.7)
Deposit expenses		860		1,059		(199)		(18.8)
Postage and printing		840		770		70		9.1
Professional fees		1,695		2,161		(466)		(21.6)
Foreclosed and repossessed assets		(12)		18		(30)		(166.7)
Deposit insurance		1,686		703		983		139.8
Other expenses		2,585		2,645		(60)		(2.3)
Total noninterest expense	$	52,383	$	53,956	$	(1,573)		(2.9)	%

The primary reasons for the significant variances within the noninterest expense categories shown in the preceding table are noted below:

●	The decrease in compensation expense primarily reflects decreased expense related to incentive and benefit accruals.

●	The year to date decrease in occupancy expense reflects a decrease in building maintenance and landscaping.

●	Data processing expenses increased due to an increase in core system processing fees.

●	The decrease in professional fees reflects a decrease in consulting services.

●	The increase in deposit insurance reflects a two-basis-point increase in the insurance rate.

Table of Contents

HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

HarborOne Mortgage Segment

Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

Net Income. HarborOne Mortgage recorded a net income of $309,000 and net loss of $984,000 the three and six months ended June 30, 2023, compared to net income of $1.4 million and $5.6 million for the prior year respective periods. The HarborOne Mortgage segment’s results are heavily impacted by prevailing rates, refinancing activity, and home sales.

Noninterest Income. Total noninterest income was $5.9 million and $9.1 million for the three and six months ended June 30, 2023 as compared to $8.8 million and $22.0 million for the respective prior year periods. Noninterest income is primarily from mortgage banking income, for which the following table provides further detail:


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Gain on sale of mortgage loans	$	3,300	$	4,538	$	(1,238)		(27.3)	%
Intersegment gain		90		1,097		(1,007)		(91.8)
Processing, underwriting and closing fees		426		571		(145)		(25.4)
Secondary market loan servicing fees net of guarantee fees		1,691		1,822		(131)		(7.2)
Changes in mortgage servicing rights fair value		407		735		(328)		(44.6)
Total mortgage banking income	$	5,914	$	8,763	$	(2,849)		(32.5)	%

Originated mortgage servicing rights included in gain on sale of mortgage loans	$	660	$	1,225	$	(565)		(46.1)	%
Change in 10-year Treasury Constant Maturity rate in basis points		33		66


	Six Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Gain on sale of mortgage loans	$	5,524	$	9,860	$	(4,336)		(44.0)	%
Intersegment gain		544		1,934		(1,390)		(71.9)
Processing, underwriting and closing fees		702		1,257		(555)		(44.2)
Secondary market loan servicing fees net of guarantee fees		3,430		3,461		(31)		(0.9)
Changes in mortgage servicing rights fair value		(1,149)		5,430		(6,579)		(121.2)
Total mortgage banking income	$	9,051	$	21,942	$	(12,891)		(58.8)	%

Originated mortgage servicing rights included in gain on sale of mortgage loans	$	1,293	$	2,715	$	(1,422)		(52.4)	%
Change in 10-year Treasury Constant Maturity rate in basis points		(7)		146

The primary reasons for the significant variances in the noninterest income category shown in the preceding table are noted below:

●

The change in the MSR fair value is generally consistent with the change in key benchmark residential mortgage rates. As interest rates rise and prepayment speeds decrease, MSR fair value tends to increase. Conversely, when interest rates fall and prepayment speeds increase, MSR fair value tends to decrease. The change in the MSR fair value for the three months ended June 30, 2023, reflects the increase of benchmark residential rates at June 30, 2023 compared to

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

March 31, 2023, positively impacting the fair value of the MSRs, offset with amortization related to principal payments whereas the benchmark residential rates decreased compared to December 31, 2022 negatively impacting the fair value of MSRs for the six months ended June 30, 2023.

●	Gain on sale of mortgages and processing, underwriting and closing fees decreased as mortgage demand remains weak on higher interest rates compared to the respective prior year period.

●	The decrease in the secondary market loan servicing fee net of guarantee fees reflects the decrease in the average serviced mortgage loans for the three and six months ended June 30, 2023, as compared to the respective prior year periods.

The following tables provide additional loan production detail:


	Three Months Ended June 30,
	2023				2022
	Loan					Loan
	Amount		% of Total			Amount		% of Total

	(dollars in thousands)

Product Type
Conventional	$	91,760	53.3	%		$	142,263	47.8	%
Government		14,015	8.1				15,338	5.2
State Housing Agency		10,969	6.4				10,013	3.4
Jumbo		55,388	32.2				129,888	43.6
Seconds		21	0.0				45	—
Total	$	172,153	100.0	%		$	297,547	100.0	%

Purpose
Purchase	$	159,448	92.6	%		$	237,274	79.8	%
Refinance		9,203	5.4				50,077	16.8
Construction		3,502	2.0				10,196	3.4
Total	$	172,153	100.0	%		$	297,547	100.0	%


	Six Months Ended June 30,
	2023				2022
	Loan				Loan
	Amount		% of Total		Amount		% of Total

	(dollars in thousands)

Product Type
Conventional	$	154,181	51.8	%	$	303,900	55.1	%
Government		23,926	8.0			29,764	5.4
State Housing Agency		17,899	6.0			18,075	3.3
Jumbo		101,693	34.2			199,515	36.2
Seconds		51	0.0			100	—
Total	$	297,750	100.0	%	$	551,354	100.0	%

Purpose
Purchase	$	275,496	92.5	%	$	374,355	67.9	%
Refinance		18,312	6.1			154,355	28.0
Construction		3,942	1.3			22,644	4.1
Total	$	297,750	100.0	%	$	551,354	100.0	%

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Noninterest Expense. Total noninterest expense was $5.5 million and $10.8 million for the three and six months ended June 30, 2023 compared to $7.2 million and $15.0 million for the respective prior year periods. The following table sets forth the components of noninterest expense:


	Three Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Compensation and benefits	$	3,700	$	5,435	$	(1,735)		(31.9)	%
Occupancy and equipment		688		694		(6)		(0.9)
Data processing expenses		48		97		(49)		(50.5)
Loan expenses		321		249		72		28.9
Marketing		138		72		66		91.7
Postage and printing		13		10		3		30.0
Professional fees		180		166		14		8.4
Other expenses		405		519		(114)		(22.0)
Total noninterest expense	$	5,493	$	7,242	$	(1,749)		(24.2)	%


	Six Months Ended June 30,				Increase (Decrease)
	2023		2022		Dollars		Percent

	(dollars in thousands)

Compensation and benefits	$	7,275	$	11,186	$	(3,911)		(35.0)	%
Occupancy and equipment		1,389		1,403		(14)		(1.0)
Data processing expenses		89		167		(78)		(46.7)
Loan expenses		547		633		(86)		(13.6)
Marketing		256		156		100		64.1
Postage and printing		23		36		(13)		(36.1)
Professional fees		437		376		61		16.2
Other expenses		799		1,046		(247)		(23.6)
Total noninterest expense	$	10,815	$	15,003	$	(4,188)		(27.9)	%

The primary reasons for the significant variances within the noninterest expense categories shown in the preceding table are noted below:

●	The decrease in compensation and benefits primarily reflects decreased commission expense consistent with the changes in mortgage origination volumes and decreased staffing levels;

●	Loan expense primarily is for expenses to originate loans and is generally consistent with mortgage origination volumes. The quarter-over-quarter increase reflects a decrease in the deferred loan expenses on loans sold to the Bank;

●	The increase in marketing reflects increased advertising; and

●	The decrease in other expenses reflects decreased employment agency fees.

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Asset Quality

The following table provides information with respect to our nonperforming assets at the dates indicated. We did not have any accruing loans past due 90 days or more at the dates presented.


	June 30,			December 31,
	2023			2022

	(dollars in thousands)

Non-accrual loans:
Residential real estate:
One- to four-family	$	8,723		$	8,927
Second mortgages and equity lines of credit		332			421
Commercial real estate		8,960			2,039
Commercial construction		—			—
Commercial and industrial		2,183			3,329
Consumer		12			70
Total non-accrual loans		20,210			14,786
Other real estate owned and repossessed assets:
One- to four-family residential real estate owned		—			—
Other repossessed assets		24			54
Total nonperforming assets	$	20,234		$	14,840

Period end allowance for credit losses balance		47,821			45,236
Period end total loan balance		4,698,203			4,549,670
Allowance for credit losses to total loans		1.02	%		0.99	%
Allowance for credit losses to non-accrual loans		236.62	%		305.94	%
Total nonperforming loans to total loans ⁽¹⁾		0.43	%		0.32	%
Total nonperforming assets to total assets		0.36	%		0.28	%

⁽¹⁾ Total loans are presented before allowance for credit losses, but include deferred loan origination costs (fees), net, and the basis adjustment associated with the application of hedge accounting on certain residential real estate loans. Refer to Note 10 - Derivatives.

Credit quality performance has remained strong, with total nonperforming assets of $20.2 million at June 30, 2023, compared to $14.8 million at December 31, 2022 and $24.4 million at June 30, 2022. Nonperforming assets as a percentage of total assets were 0.36% at June 30, 2023, 0.28% at December 31, 2022, and 0.52% at June 30, 2022.

We continue to closely monitor our loan portfolio for signs of deterioration. Management is focused on commercial real estate in light of speculation that commercial real estate values may deteriorate as the market adjusts to higher vacancies and rates. We have also identified certain sectors within the commercial real estate segment that may be particularly susceptible to increased credit risk as a result of trends that were precipitated by the COVID-19 pandemic and may be exacerbated by current economic conditions. This includes business-oriented hotels, non-anchored retail space and metro office space. As of June 30, 2023, business-oriented hotels loans included 13 loans with a total outstanding balance of $114.8 million, non-anchored retail space loans included 28 loans with a total outstanding balance of $41.5 million, and metro office space loans included two loans with a total outstanding balance of $11.9 million. As of June 30, 2023, there was one metro office space loan with a carrying value of $7.0 million, that was rated doubtful and on nonaccrual and one business-oriented hotel credit with a carrying value of $1.8 million that was rated substandard and on nonaccrual. The other loans in these groups were performing in accordance with their terms.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors consists of two basic components. The first component involves pooling loans into portfolio segments for loans that share similar risk characteristics. A DCF methodology is used to estimate credit losses for each pooled portfolio segment. The methodology incorporates the probability of default and loss given default. Management utilizes the national unemployment rate as an econometric factor with a one-year forecast period and one-year straight-line reversion period to its historical mean in order to estimate the probability of default for each loan portfolio segment. Utilizing a third-party regression model, the forecasted national unemployment rate is correlated with the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, maturity date and prepayment speeds to estimate a reserve for

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

each loan. The sum of all the loan level reserves is aggregated for each portfolio segment and a loss rate factor is derived. Quantitative loss factors for pooled loans are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

The second component involves individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments. For loans that are individually analyzed, the ACL is measured using a DCF methodology based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan is collateral-dependent, at the fair value of the collateral.

In estimating the ACL on loans, management considers the sensitivity of the model and significant judgments and assumptions that could result in an amount that is materially different from management’s estimate. Management performed a sensitivity analysis to understand the impact of hypothetical changes in qualitative loss factors on the ACL. The sensitivity analysis evaluated the impact of changes to commercial loan segments due to the concentration of the Bank’s ACL allocation in the total commercial portfolio. At June 30, 2023, the potential impact of changes to management’s judgments on total commercial qualitative risk factors ranged between a $12.2 million reduction and $13.1 million increase in the ACL. This sensitivity analysis does not represent a change to management’s judgment, but rather provides a hypothetical result to assess the sensitivity of the ACL to a key input.

The ACL was $47.8 million, or 1.02% of total loans, at June 30, 2023, compared to $45.2 million, or 0.99% of total loans, at December 31, 2022. The ACL on individually analyzed loans amounted to $80,000, 0.38% of the carrying value of individually analyzed loans. The ACL on unfunded commitments, included in other liabilities on the unaudited Consolidated Balance Sheets, amounted to $4.8 million and $4.9 million at June 30, 2023 and December 31, 2022, respectively.

The following table sets forth the breakdown of the ACL by loan category at the dates indicated:



	June 30, 2023						December 31, 2022
			% of						% of
			Allowance						Allowance
			Amount to		% of Loans				Amount to		% of Loans
			Total		in Category				Total		in Category
	Amount		Allowance		to Total Loans			Amount	Allowance		to Total Loans

	(dollars in thousands)

Residential real estate:
One- to four-family	$	12,185	25.48	%	32.02	%	$	11,532	25.49	%	31.48	%
Second mortgages and equity lines of credit		1,012	2.12		3.64			924	2.04		3.65
Residential construction		630	1.32		0.57			280	0.62		0.79
Commercial real estate		20,599	43.07		48.67			20,357	45.00		49.46
Commercial construction		5,373	11.24		4.87			4,645	10.27		4.38
Commercial and industrial		7,750	16.21		9.65			7,236	16.00		9.33
Consumer		272	0.57		0.58			262	0.58		0.91
Total allowance for credit losses on loans	$	47,821	100.00	%	100.00	%	$	45,236	100.00		100.00	%

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

The following table sets forth net charge-offs (recoveries) and the ratio of annualized net charge-offs (recoveries) to average loans for the periods indicated:


	Three Months Ended June 30,
	2023						2022
			Net		Net Charge-				Net		Net Charge-
	Average		Charge-offs		off (Recovery)		Average		Charge-offs		off (Recovery)
	Balance		(Recoveries)		Rate		Balance		(Recoveries)		Rate

	(dollars in thousands)

Residential real estate:
One- to four-family	$	1,485,914	$	(1)	(0.00)	%	$	1,145,620	$	—	—	%
Second mortgages and equity lines of credit		168,100		(36)	(0.09)	%		145,610		(81)	(0.22)	%
Residential real estate construction		28,846		—	—	%		39,542		—	—	%
Total residential real estate loans	$	1,682,860	$	(37)	(0.01)	%	$	1,330,772	$	(81)	(0.02)	%

Commercial:
Commercial real estate	$	2,384,603	$	2,917	0.49	%	$	1,827,100	$	(6)	(0.00)	%
Commercial construction		223,324		—	—	%		146,014		—	—	%
Commercial and industrial		330,365		(247)	(0.30)	%		411,516		(406)	(0.39)	%
Total commercial loans	$	2,938,292	$	2,670	0.36	%	$	2,384,630	$	(412)	(0.07)	%

Total Consumer loans	$	29,025	$	38	0.52	%	$	88,943	$	(12)	(0.05)	%

Total loans	$	4,650,177	$	2,671	0.23	%	$	3,804,345	$	(505)	(0.05)	%


	Six Months Ended June 30,
	2023						2022
			Net		Net Charge-				Net		Net Charge-
	Average		Charge-offs		off (Recovery)		Average		Charge-offs		off (Recovery)
	Balance		(Recoveries)		Rate		Balance		(Recoveries)		Rate

	(dollars in thousands)

Residential real estate:
One- to four-family	$	1,466,533	$	(2)	(0.00)	%	$	1,096,550	$	—	—	%
Second mortgages and equity lines of credit		166,987		(43)	(0.05)	%		141,576		(93)	(0.13)	%
Residential real estate construction		31,563		—	—	%		37,915		—	—	%
Total residential real estate loans	$	1,665,083	$	(45)	(0.01)	%	$	1,276,041	$	(93)	(0.01)	%

Commercial:
Commercial real estate	$	2,378,137	$	2,916	0.25	%	$	1,781,269	$	2,780	0.31	%
Commercial construction		215,713		—	—	%		145,887		—	—	%
Commercial and industrial		326,130		(240)	(0.15)	%		411,089		(433)	(0.21)	%
Total commercial loans	$	2,919,980	$	2,676	0.18	%	$	2,338,245	$	2,347	0.20	%

Total Consumer loans	$	32,647	$	29	0.18	%	$	103,512	$	(29)	(0.06)	%

Total loans	$	4,617,710	$	2,660	0.12	%	$	3,717,798	$	2,225	0.12	%

Net charge-offs were $2.7 million for the three and six months ended June 30, 2023. Net recoveries were $505,000 for the three months ended June 30, 2022 and net charge-offs were $2.2 million or 0.12% of average loans outstanding on an annualized basis for the six months ended June 30, 2022. During the quarter ended June 30, 2023, a $2.9 million charge-off was recorded on a metro office space commercial real estate credit, and it was placed on nonaccrual. As of June 30, 2023, the carrying value of the credit is $7.0 million. The commercial real estate charge-off in 2022 was primarily due to the resolution of one credit in the amount of $8.8 million for which the Company also recorded a $2.8 million charge-off.

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

Management of Market Risk

The principal market risk facing the Company is interest-rate risk. The Company’s Asset/Liability Committee establishes exposure limits that govern the Company’s tolerance for interest-rate risk. The policy limits and guidelines serve as benchmarks for measuring interest-rate risk and for providing a framework for evaluation and interest-rate risk-management decision making. The Company’s primary measure of its interest-rate risk is an income simulation model and an economic value of equity analysis.

Net Interest Income Analysis. The Company uses income simulation as the primary tool for measuring interest-rate risk inherent in our balance sheet at a given point in time by showing the effect on net interest income, over specified time frames, of instantaneous parallel shifts in market rates. For simulation purposes, the Company’s balance sheet is assumed to remain static over the simulation horizon. The model results are dependent on material assumptions. These assumptions include, but are not limited to, management’s best assessment of the effect of changing interest rates on the prepayment speeds of certain assets and liabilities, projections for account balances in each of the product lines offered and the historical behavior of deposit rates and balances in relation to changes in interest rates (deposit betas). These assumptions are inherently changeable, and as a result, the model is not expected to precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from the simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in the balance sheet composition and market conditions. Assumptions are supported with quarterly back-testing of the model to actual market rate shifts.

The table below sets forth, as of June 30, 2023 and 2022, the net interest income simulation results that estimate the impact of interest rate changes on the Company’s estimated net interest income over two years:



	Change in Net Interest Income
	(% change from year one base)
Changes in Interest Rates	June 30, 2023				June 30, 2022
(basis points) ⁽¹⁾	Year One		Year Two		Year One		Year Two
+300	(11.4)	%	(10.9)	%	(0.7)	%	3.7	%
+200	(7.3)	%	(6.5)	%	(0.3)	%	3.0	%
+100	(3.5)	%	(2.9)	%	(0.2)	%	1.6	%
-100	3.6	%	3.6	%	(2.1)	%	(5.3)	%

⁽¹⁾ The calculated change in net interest income assumes an instantaneous parallel shift of the yield curve.

Economic Value of Equity Analysis. The Company also uses the net present value of EVE methodology. This methodology calculates the difference between the present value of expected cash flows from assets and liabilities. The comparative scenarios assume an immediate parallel shift in the yield curve up 100, 200, and 300 basis points and down 100 basis points.

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

The table below sets forth, as of June 30, 2023 the estimated changes in the EVE that would result from an instantaneous parallel shift in interest rates. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.


At June 30, 2023
							EVE as a Percentage of Economic
			Estimated Increase (Decrease)				Value of Assets
Changes in Interest Rates		Estimated	in EVE						Changes in
(basis points) ⁽¹⁾		EVE	Amount		Percent		EVE Ratio ⁽²⁾		Percent
(dollars in thousands)

+ 300	$	472,635	$	(187,586)	(28.4)	%	9.7	%	(2.7)	%
+ 200		551,271		(108,950)	(16.5)		11.0		(1.4)
+ 100		614,813		(45,408)	(6.9)		11.9		(0.5)
0		660,221		—	—		12.4		—
- 100		682,127		21,906	3.3		12.5		0.1

⁽¹⁾ Assumes instantaneous parallel changes in interest rates.
⁽²⁾ EVE Ratio represents EVE divided by the economic value of assets.

The board of directors and management review the methodology’s measurements for both net interest income and EVE on a quarterly basis to determine whether the exposure resulting from the changes in interest rates remains within established tolerance levels and develop appropriate strategies to manage this exposure.

Liquidity Management and Capital Resources

Liquidity measures the Company’s ability to meet both current and future financial obligations of a short- and long-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the FHLB. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investment securities and borrowed funds, and prepayments on loans are greatly influenced by general interest rates, economic conditions, and competition.

The objective of our liquidity risk management process is to manage cash flow and liquidity in an effort to provide continuous access to sufficient, reasonably priced funds. Funding requirements are impacted by loan originations and refinancings, deposit balance changes, liability issuances and settlements, and off-balance sheet funding commitments. We consider and comply with various regulatory guidelines regarding required liquidity levels and periodically monitor our liquidity position in light of the changing economic environment and customer activity. Based on periodic liquidity assessments, we may alter our asset, liability, and off-balance sheet positions. Management regularly adjusts our investments in liquid assets based upon an assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities, and (iv) the objectives of our interest rate risk and investment policies.

We continue to focus on maintaining a strong liquidity position. We have access to immediate liquid resources in cash and cash equivalents of $252.9 million at June 30, 2023, which is primarily on deposit with FRBB. Maturities and payments on outstanding loans and investment securities also provide a steady flow of funds. Liquidity is further enhanced by our ability to pledge loans to access secured borrowings from the FHLB and FRBB. As of June 30, 2023, we had additional borrowing capacity of $583.7 million from the FHLB, $68.8 million from the FRBB line based on the amount of collateral pledged, and $366.8 million available based on the par value of securities pledged under our facility through the FRB BTFP. We also have additional borrowing capacity under a $25.0 million unsecured federal funds line with a correspondent bank. Potential sources of liquidity also include unpledged investment securities in our available-for-sale securities portfolio with a carrying value of $2.8 million and our ability to sell loans in the secondary market.

Our non-certificate deposits have historically provided us with a long-term source of stable and relatively lower cost source of funding. However, we may be negatively impacted by unexpected deposit withdrawals from weakness in

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HarborOne Bancorp, Inc.

Management’s Discussion and Analysis

the financial markets and industry-wide reductions in liquidity. Additional funding is available through the issuance of long-term debt or equity.

In the ordinary course of the Company’s operations, the Company has entered into certain contractual obligations and has made other commitments to make future payments. At June 30, 2023, we had outstanding commitments to originate loans of $152.0 million and unadvanced funds on loans of $859.0 million. Certificates of deposit that are scheduled to mature within one year from June 30, 2023 totaled $896.5 million. Management expects, based on historical experience, that a substantial portion of the maturing certificates of deposit will be renewed.

The Company believes that it will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels and liquidity. Other than normal changes in the ordinary course of business, there have been no significant changes in the types of contractual obligations or amounts due since December 31, 2022.

Our ability to maintain adequate levels of liquidity is dependent on our ability to continue to maintain a strong risk profile and capital base. The Company and the Bank are subject to various regulatory capital requirements. At June 30, 2023, the Company and the Bank exceeded all regulatory capital requirements and were considered “well capitalized” under regulatory guidelines. See Note 12 of the Notes to Consolidated Financial Statements.

Non-GAAP Financial Measures and Reconciliation to GAAP

In addition to results presented in accordance with generally accepted accounting principles, this Form 10-Q contains certain non-GAAP financial measures. The Company’s management believes that the supplemental non-GAAP information, which consists of the tangible-common-equity-to-tangible-assets ratio, is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. 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.

The following table reconciles the Company’s tangible-common-equity-to-tangible-assets ratio for the periods indicated:



	June 30,
	2023			2022
(dollars on thousands)

Tangible common equity:
Total stockholders' equity	$	595,532		$	624,478
Less: Goodwill		69,802			69,802
Less: Other intangible assets⁽¹⁾		1,893			2,695
Tangible common equity	$	523,837		$	551,981

Tangible assets:
Total assets	$	5,659,254		$	4,704,044
Less: Goodwill		69,802			69,802
Less: Other intangible assets⁽¹⁾		1,893			2,695
Tangible assets	$	5,587,559		$	4,631,547

Tangible common equity / tangible assets ⁽²⁾		9.38	%		11.92	%

⁽¹⁾ Other intangible assets are core deposit intangibles.
⁽²⁾ This non-GAAP ratio is total stockholders' equity less goodwill and intangible assets to total assets less goodwill and intangible assets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is included in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading “Management of Market Risk.”

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures as of the period ended June 30, 2023. Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures. The Company will continue to review and document its disclosure controls and procedures and consider such changes in future evaluations of the effectiveness of such controls and procedures, as it deems appropriate.

Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than the legal proceedings disclosed in Item 3. Legal Proceedings in our December 31, 2022 Form 10-K, we are not involved in any material pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. We are not involved in any legal proceedings the outcome of which we believe would be material to our financial condition or results of operations.

In the Rita Meaden v. HarborOne Bank action, the federal court preliminarily approved the proposed class action settlement on May 18, 2023, and notice has been provided to members of the proposed class. A final approval hearing has been scheduled in the federal court for October 11, 2023. For additional information on this matter, please see Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023 and Part II. Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 9, 2023.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a)	Unregistered Sales of Equity Securities. None

b)	Use of Proceeds. None

c)	Repurchase of Equity Securities.


					Total number of		Maximum number (or
					shares (or units)		approximate dollar
					purchased as part		value) of shares (or
	Total number of				of publicly		units) that may yet be
	shares (or units)		Average price paid		announced plans or		purchased under the
Period	purchased		per share (or unit)		programs		plans or programs
April 1 to April 30, 2023		472,308	$	12.30		472,308		—
May 1 to May 31, 2023		—		—		—		—
June 1 to June 30, 2023		—		—		—		—
		472,308	$	12.30		472,308		2,450,208

During the second quarter of 2023, the Company completed its previously announced fifth share repurchase program of 2,450,208 shares at an average price of $13.01, including $0.13 per share of excise tax. The fifth share repurchase program was announced on September 21, 2022 with an expiration date of September 21, 2023.

On July 5, 2023, the Company announced a sixth share repurchase program to repurchase up to 2,325,489 shares of its common stock, or approximately 5% of its outstanding shares. The sixth share repurchase program will expire on June 30, 2024.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended June 30, 2023, none of the Company’s directors or executive officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) had in place, or adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” (as such term is defined in the Item 408 of Regulation S-K).

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ITEM 6. EXHIBITS

The exhibits listed in the Exhibit Index are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.		Description


31.1*		Certification of Chief Executive Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act
31.2*		Certification of Chief Financial Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act
32.1**		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, (ii) the Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (iii) the Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2023 and 2022, (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022, (v) the Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022, and (vi) the Notes to the unaudited Consolidated Financial Statements.
104		Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101)

*Filed herewith

**Furnished herewith

† Management contract or compensation plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	HarborOne Bancorp, Inc.

Date: August 8, 2023	By:	/s/ Joseph F. Casey
		Joseph F. Casey
		President and Chief Executive Officer (Principal Executive Officer)

Date: August 8, 2023	By:	/s/ Linda H. Simmons
		Linda H. Simmons
		Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)