8-K: HarborOne Bancorp Announces First Quarter 2025 Results: Net Income Declines Amid Mortgage Banking Slowdown

HarborOne Bancorp reports a decrease in net income for Q1 2025, primarily due to a decline in mortgage banking income, while deposits increase and the net interest margin improves slightly.

Summary

• HarborOne Bancorp, Inc. announced its financial results for the quarter ended March 31, 2025.
• Net income was $5.5 million, or $0.14 per diluted share, a decrease of $3.4 million, or 38.1%, compared to the previous quarter.
• The decrease is primarily attributed to a $2.9 million decrease in mortgage banking income.
• Net interest margin increased by 3 basis points quarter-over-quarter to 2.39%.
• Deposits, excluding brokered deposits, increased by $79.6 million, or 1.9%, quarter-over-quarter.
• The loans-to-deposits ratio improved from 106.63% to 104.38% during the quarter.
• The company executed $5.9 million in share repurchases.
• The quarterly dividend increased 12.5% to $0.09 per share.
• Total assets decreased $52.8 million, or 0.9%, to $5.70 billion.
• Loans declined $31.5 million, or 0.7%, to $4.82 billion.
• The ACL on loans was $49.3 million, or 1.02% of total loans.
• Net charge-offs totaled $8.7 million, or 0.72% of average loans outstanding on an annualized basis.
• Total nonperforming assets were $30.9 million and 0.54% of total assets.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While net income decreased, there were positive developments in deposit growth, net interest margin, and loan portfolio diversification. The management's comments are cautiously optimistic.

Positives

• Net interest margin improved by 3 basis points to 2.39%.
• Deposits, excluding brokered deposits, increased by $79.6 million, or 1.9%.
• Loans-to-deposits ratio improved to 104.38%.
• The quarterly dividend increased by 12.5% to $0.09 per share.
• Commercial and industrial loans experienced growth of $33 million.
• Cost of deposits, excluding brokered deposits, decreased 15 basis points.
• Borrowing costs improved 6 basis points, and average borrowings declined $20.0 million.

Negatives

• Net income decreased by $3.4 million, or 38.1%, to $5.5 million.
• Mortgage banking income decreased by $2.9 million.
• Total assets decreased by $52.8 million, or 0.9%.
• Loans declined by $31.5 million, or 0.7%.
• Net charge-offs totaled $8.7 million, or 0.72% of average loans outstanding on an annualized basis.
• Deposit account fees decreased $871,000, primarily as a result of a decrease in debit card interchange fees of $493,000.

Risks

• Changes in general business and economic conditions could adversely affect borrowers' ability to repay loans.
• Fluctuations in real estate values could impact the value of the company's investment portfolio.
• Cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest, and pandemics could disrupt business activities.
• Changes in regulation and accounting standards could impact financial performance.
• The company may not be successful in the implementation of its business strategy.
• The decrease in the ACL in Q1 25 is due to a $8.3 MM charge-off.

Future Outlook

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.

Management Comments

• The first quarter represents a solid start to the year, commented Joseph F. Casey, President & CEO.
• Our Bank team achieved continued strong commercial and industrial loan growth of $33 million, decreased commercial real estate balances, lower loan delinquencies, and a reduction of 15 basis points in the cost of deposits, excluding brokered deposits.
• Our residential mortgage team delivered an 11.8% increase in year-over-year loan closings during the slowest quarter seasonally for that business, against a backdrop of elevated mortgage rates.

Industry Context

The decrease in mortgage banking income reflects broader industry trends of rising mortgage rates and low for-sale inventory constraining loan demand. The company's focus on commercial and industrial lending aligns with strategies to diversify income streams amid a challenging mortgage market.

Comparison to Industry Standards

• HarborOne's net interest margin of 2.39% is comparable to regional banks of similar size, but the decrease in net income is a concern.
• The efficiency ratio of 78.97% is higher than some of its peers, indicating potential areas for cost improvement.
• The tangible common equity to tangible assets ratio of 9.15% is within a healthy range for community banks.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income, but the increased dividend and share repurchases could provide some reassurance.
• Employees in the mortgage division may face uncertainty due to the decline in mortgage banking income.
• Customers may benefit from the increased deposit options and improved loan-to-deposit ratio.

Key Dates

Keywords

HarborOne Bancorp, financial results, net income, mortgage banking, deposits, net interest margin, loans, asset quality, share repurchases, dividends, HONE