HarborOne Bancorp, Inc. Announces 2017 Second Quarter Earnings 

Contact: Joseph F. Casey, EVP, COO, CFO

Brockton, Massachusetts (July  21, 2017): HarborOne Bancorp, Inc. (the “Company”) (NASDAQ: HONE), the holding company for HarborOne Bank (the “Bank”), announced second quarter 2017 net income of $3.2 million or $0.10 per share as compared to $2.7 million, or $0.09 per share in the prior quarter and net loss of $681,000 in the same quarter last year.    

The Company reported net income of $5.9 million or $0.19 per share for the six months ended June 30, 2017 compared to a net loss of $557,000 for the same period in 2016. 

The Company’s results for the quarter ended June 30, 2016 included a one-time contribution of $4.8 million to The HarborOne Foundation (the “Foundation”). Excluding this non-recurring expense, net income would have been $2.2 million for the second quarter of 2016 and $2.3 million for the first six months of 2016.

James W. Blake, President and CEO stated, “We are pleased with the Company’s overall performance again this quarter. We had solid net income growth of 17% from the previous quarter driven by commercial loan  growth, a rebound in mortgage banking activity and continued improvement in asset quality.”

Net Interest Income

The Company’s net interest and dividend income was $18.2 million for the quarter ended June 30, 2017,  up $783,000, or 4.5%, from $17.4 million for the quarter ended March 31, 2017 and up $3.6 million,  or 24.3%, from $14.7 million for the quarter ended June 30, 2016. The interest rate spread and net interest margin on a tax-equivalent basis were 2.87% and 3.03%, respectively, for the quarter ended June 30, 2017 compared to 2.83% and 2.99%, respectively, for the quarter ended March 31, 2017 and 2.68% and 2.81%, respectively, for the quarter ended June 30, 2016.    

The increase in net interest income from the previous quarter reflects a $763,000, or 3.6%, increase in total interest and dividend income and a decrease of $20,000, or 0.5% in total interest expense.  The increase in interest and dividend income is primarily due to the commercial loan growth that provided an increase in average outstanding loans of $17.5 million combined with a 4 basis point increase in yield on loans. Interest expense was essentially flat as average interest-bearing deposits increased $68.1 million with no change in the cost of those funds and average FHLB advances decreased $37.1 million coupled with a 1 basis point decrease in total cost of borrowed funds.

The increase in net interest income over the prior year quarter is primarily due to growth in the Company’s average loan balances to $2.13 billion from $1.88 billion and an increase in the yield on loans to 3.82% from 3.61%, again primarily driven by commercial loan growth as well as higher rates on variable rate loans.  Total interest and dividend income increased  $3.8 million, or 21.0%, and total interest expense increased $243,000, or 7.0%.    

Noninterest Income

Noninterest income increased to $14.3 million for the quarter ended June 30, 2017,  up  $2.9 million, or 24.8%, from the quarter ended March 31, 2017.  This increase is primarily due to a  54.4% increase in mortgage loan originations at Merrimack Mortgage Company, LLC (“Merrimack”) as a result of seasonal fluctuations resulting in a $2.7 million, or 37.1%  increase in mortgage banking income. Mortgage banking income was also impacted by servicing rights fair value adjustments amounting to  a $1.1 million decrease in the second quarter of 2017 compared to a $442,000 decrease in the first quarter of 2017 and a $2.2 million decrease in the second quarter of 2016. Servicing rights fair value adjustments largely reflect fluctuations in the 10-year Constant Maturity Treasury rate and residential real estate mortgage loan rates.  Noninterest income decreased  $1.6 million, or 10.0%  primarily driven by a decrease of $1.5 million, or 13.1%, in mortgage banking income as compared to the quarter ended June 30, 2016. Compared to the same quarter prior year, Merrimack’s mortgage originations decreased 19.1% in 2017 primarily as a result of higher residential mortgage interest rates and reduced refinance volume in 2017.

Noninterest Expense

Noninterest expenses were $26.9 million for the quarter ended June 30, 2017, an increase of $2.5 million, or 10.1%, from the quarter ended March 31, 2017.  The increase was primarily due to the increase in mortgage loan originations which contributed to an increase of $1.4 million, or 9.3%, in compensation and benefits and an increase of $519,000, or 38.1%, in loan expense primarily from an increase in loan closing expense on loans held for sale.    Noninterest expense decreased  $4.3 million,  or 13.8%, from the quarter ended June 30, 2016 primarily due to the $4.8 million charitable contribution made in 2016. 

Asset Quality

The Company recorded a  $470,000 provision for loan losses for the quarter ended June 30, 2017, $265,000 for the quarter ended March 31, 2017 and $801,000 for the quarter ended June 30, 2016.  The provisions in the second quarter of 2017 and 2016 were primarily due to commercial loan growth. In the first quarter of 2017, the Company adjusted general reserve allocations for commercial real estate

and commercial loans based on updated peer data. The updated peer data resulted in lower general reserve rates and reserves on these loan types; however, the decrease was partially offset by commercial loan growth.    Changes in the provision for loan losses are also based on management’s assessment of loan portfolio growth and composition changes, historical charge-off trends, and ongoing evaluation of credit quality and current economic conditions. The allowance for loan losses was $17.2 million, or 0.82%, of total loans at June 30, 2017, compared to $16.9 million, or 0.82%, of total loans, at March 31, 2017 and $14.4 million, or 0.79%, of total loans, at June 30, 2016. Net charge-offs totaled $173,000 for the quarter ended June 30, 2017, or 0.03%, of average loans outstanding on an annualized basis, compared to $349,000 and 0.07% for the quarter ended March 31, 2017 and $58,000 and 0.01% for the quarter ended June 30, 2016.

Nonperforming assets were $22.5 million at June 30, 2017 compared to $23.5 million at March 31, 2017 and $27.8 million at June 30, 2016. Nonperforming assets as a percentage of total assets were 0.86% at June 30, 2017,  0.91% at March 31, 2017 and 1.23% at June 30, 2016. The steady decline reflects the Company’s continued efforts to minimize nonperforming assets through diligent collection efforts, prudent workout arrangements and strong underwriting.

Balance Sheet

Total assets increased $65.9 million, or 2.6%, to $2.63 billion at June 30, 2017 from $2.57 billion at March 31, 2017. Net loans increased $32.2 million, or 1.6%, to $2.08 billion at June 30, 2017 from $2.05 billion at March 31, 2017.  The net increase in loans for the three months ended June 30, 2017 was primarily due to increases of $35.2 million in commercial real estate loans, $5.8 million in residential real estate loans and  $2.4 million in commercial and industrial loans, partially offset by a  decrease of $2.2 million in construction loans and $8.2 million in consumer loans.  Loans held for sale increased $39.9 million, or 76.9%, to $91.9 million at June 30, 2017 from $51.9 million at March 31,  2017 due to the seasonal increase in residential mortgage originations.  

Total deposits increased $69.1 million, or 3.6%, to $1.99 billion at June 30, 2017 from $1.93 billion at March 31, 2017.  Compared to the prior quarter non-certificate accounts increased $59.3 million,  brokered deposits increased $15.0 million and term certificate accounts decreased $5.3 million.  The increase in non-certificate accounts was primarily due to HarborOne Bancorp Inc.’s participation in the Bank’s reciprocal deposit program that was established in June with respect to the Company’s $64.8 million deposit at the Bank, which effectively converts the Company’s deposit at the Bank to multiple deposits at other financial institutions which are not eliminated in consolidation. The reciprocal deposit program provides access to FDIC insured deposit products in aggregate amounts exceeding current insurance limits for depositors. Borrowings were  $265.1 million at June 30, 2017 and $275.1 million at March 31, 2017.

Total stockholders’ equity was $336.6 million at June 30, 2017 compared to $332.7 million at March 31, 2017 and $324.3 million at June 30, 2016.   The tangible common equity to tangible assets ratio was 12.34% at June 30, 2017, 12.50% at March 31, 2017 and 13.79% at June 30, 2016.  At June 30, 2017, the Company and the Bank exceed all regulatory capital requirements.

About HarborOne Bancorp, Inc.

HarborOne Bancorp, Inc. is the holding company for HarborOne Bank, the largest co-operative bank in New England. HarborOne Bank serves the financial needs of consumers, businesses, and municipalities throughout Southeastern Massachusetts through a network of 14 full-service branches, two limited service branches, a commercial loan office in Providence, Rhode Island, a residential lending office in Westford, Massachusetts, and 13 free-standing ATMs. The Bank also provides a range of educational services through “HarborOne U,” with classes on small business, financial literacy and personal enrichment at two campuses located adjacent to our Brockton and Mansfield locations. Merrimack Mortgage Company, LLC, a subsidiary of HarborOne Bank, is a full-service mortgage lender with 33 offices in Massachusetts, New Hampshire and Maine, and also does business in seven additional states.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s business activities; changes in interest rates; competitive pressures from other financial institutions; the effects of general economic conditions on a national basis or 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 the value of securities in the Company’s investment portfolio; changes in loan default and charge-off rates; fluctuations in real estate values; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; changes in government 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 Securities and Exchange Commission (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 Bancorp, Inc.’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.

Use of Non-GAAP Measures

In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures.  The Company’s management believes that the supplemental non-GAAP information, which consists of tangible common equity to tangible assets ratio and tangible book value per share 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.