HarborOne Bancorp, Inc. Announces Third Quarter 2016 Earnings 

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

Brockton, Massachusetts (October 21, 2016): HarborOne Bancorp, Inc. (the “Company”) (NASDAQ: HONE), the holding company for HarborOne Bank (the “Bank”), announced third quarter earnings for 2016. Net income for the quarter ended September 30, 2016 was $3.6 million or $0.11 per share as compared to $2.2 million for the third quarter of 2015.

Net income for the nine months ended September 30, 2016 was $3.0 million as compared to $4.2 million for the same period last year. The 2016 year to date results include a pre-tax contribution of $4.8 million to fund the HarborOne Foundation (the “Foundation”). Excluding this contribution expense, net income would have been $5.9 million.  Merrimack Mortgage Company, LLC (“Merrimack”), the Banks’ mortgage company subsidiary, was acquired on July 1, 2015.

James Blake, President and CEO stated, “Our third quarter results reflect our ability to effectively deploy new capital and execute our business strategy since our successful minority stock offering, completed at the end of June. Commercial real estate loans are up 20% from the second quarter and 70% from year end as we focus on prudent commercial loan growth.  We continue to assess other growth and innovation opportunities to provide our customers with a dynamic banking experience.” 

Net Interest Income

The Company’s net interest income was $15.9 million for the quarter ended September 30, 2016, up $1.3 million, or 8.5%, from $14.7 million for the quarter ended June 30, 2016 and up $2.0 million, or 14.5%, from $13.9 million for the quarter ended September 30, 2015. The interest rate spread and net interest margin on a tax-equivalent basis were 2.78% and 2.93%, respectively, for the quarter ended September 30, 2016 compared to 2.68% and 2.81%, respectively, for the quarter ended June 30, 2016 and 2.56% and 2.67%, respectively, for the quarter ended September 30, 2015.  The increases in spread and margin were due primarily to commercial real estate loan growth and lower funding costs.

Total interest and dividend income was $19.2 million for the quarter ended September 30, 2016, up $1.1 million, or 5.8%, from the quarter ended June 30, 2016 and up $1.5 million, or 8.3%, from the quarter ended September 30, 2015, primarily due to growth in the Company’s average loan balances to $1.983 billion and increases in the yield on loans to 3.61% from 3.53% for the 2015 quarter. Total interest expense decreased to $3.3 million for the quarter ended September 30, 2016, down $194,000, or 5.6%, from the quarter ended June 30, 2016 and down $543,000, or 14.3%, from the quarter ended September 30, 2015, primarily due to a decrease in average Federal Home Loan Bank (“FHLB”) borrowings to $232.6 million from $239.2 million for the second quarter of 2016 and $313.5 million from the third quarter of 2015.  The Company’s yield on interest-earning assets on a tax-equivalent basis increased to 3.53% for the quarter ended September 30, 2016 from 3.47% for the quarter ended June 30, 2016 and 3.39% for the quarter ended September 30, 2015, while the cost of funds was 0.75% for the quarter ended September 30, 2016 compared to 0.79% for the quarter ended June 30, 2016 and 0.83% for the quarter ended September 30, 2015.

Noninterest Income

Noninterest income increased to $20.9 million for the quarter ended September 30, 2016, up $5.0 million, or 31.4%, from the quarter ended June 30, 2016 and up $6.9 million, or 49.6% from the quarter ended September 30, 2015, primarily due to the continued low interest rate environment which has provided robust residential mortgage origination activity in the third quarter of 2016.  Mortgage banking income was $16.8 million for the quarter ended September 30, 2016, up $5.2 million, or 44.6%, from $11.6 million for the quarter ended June 30, 2016 and up $6.8 million, or 68.0%, from $10.0 million for the quarter ended September 30, 2015 as a result of increased mortgage loan origination and sales volume. The fair value of mortgage servicing rights increased $351,000 in the third quarter of 2016 compared to decreases of $2.2 million in the second quarter of 2016 and $677,000 in the third quarter of 2015 as interest rates increased slightly at the end of the 2016 quarter.

Noninterest Expense

Noninterest expenses were $29.6 million for the quarter ended September 30, 2016, a decrease of $1.6 million, or 5.0%, from the quarter ended June 30, 2016 and an increase of $5.5 million, or 22.8%, from the quarter ended September 30, 2015. The 2016 decrease reflects the one-time expense of $4.8 million incurred in the second quarter of 2016 in connection with the establishment of the Foundation. Various expense elements offset the decrease. Compensation and benefits expense was $18.9 million for the quarter ended September 30, 2016 up $2.5 million, or 15.2%, from $16.4 million for the quarter ended June 30, 2016 and up $4.0 million, or 27.1%, for the quarter ended September 30, 2015.  These increases primarily reflect increased commission expense consistent with the mortgage origination volume and employee stock option plan (“ESOP”) expense related to the establishment of the ESOP as part of the stock offering. Loan expense was $3.3 million for the quarter ended September 30, 2016 up $1.2 million, or 55.8%, from $2.1 million for the quarter ended June 30, 2016 and up $1.5 million, or 82.1%, from $1.8 million for the quarter ended September 30, 2015, both increases are due to the increased mortgage loan origination volume. Additionally in the second quarter of 2016 and the third quarter of 2015 the Bank prepaid borrowings resulting in $400,000 and $355,000, respectively, in Federal Home Loan Bank (‘FHLB”) prepayment penalties while no FHLB borrowings were prepaid in the third quarter of 2016.

Asset Quality

The Company’s provision for loan losses increased to $1.7 million for the quarter ended September 30, 2016 from $801,000 for the quarter ended June 30, 2016 and $325,000 for the quarter ended September 30, 2015, primarily due to commercial loan growth. The increase between the 2016 quarters also reflects increased net charge-offs for the quarter ended September 30, 2016 and the establishment of a $360,000 specific reserve for a substandard commercial loan.  The increases in the provision for loan losses were 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 $15.8 million or 0.82% of total loans at September 30, 2016, compared to $14.4 million or 0.79% of total loans at June 30, 2016 and $14.0 million or 0.80% of total loans at September 30, 2015. Net charge-offs totaled $317,000 for the quarter ended September 30, 2016, or 0.07% of average loans outstanding on an annualized basis compared to $58,000 and 0.01% for the quarter ended June 30, 2016 and $440,000 and 0.10% for the quarter ended September 30, 2015.

Nonperforming assets were $26.0 million at September 30, 2016 compared to $27.8 million at June 30, 2016 and $32.8 million at September 30, 2015. Nonperforming assets as a percentage of total assets were 1.11% at September 30, 2016, 1.23% at June 30, 2016 and 1.50% at September 30, 2015. The reductions reflect the Company’s continued efforts to minimize nonperforming assets through diligent collection efforts and prudent workout arrangements.

Balance Sheet

Total assets increased $80.4 million, or 3.5%, to $2.347 billion at September 30, 2016 from $2.267 billion at June 30, 2016. Net loans increased $84.0 million, or 4.6%, to $1.905 billion at September 30, 2016 from $1.821 billion at June 30, 2016. The net increase in loans for the three months ended September 30, 2016 was primarily due to increases of $73.6 million in commercial real estate loans, $9.0 million in construction loans, $6.4 million in commercial and industrial loans and $1.2 in residential real estate loans, partially offset by decreases of $4.3 million in consumer loans. Mortgage loans held for sale increased $14.4 million, or 14.4%, to $114.1 million at September 30, 2016 from $99.7 million at June 30, 2016 spurred by the continued low interest rate environment and seasonal home purchase activity. Cash and cash equivalents decreased $10.9 million, or 36.1%, to $19.3 million at September 30, 2016 from $30.1 million at June 30, 2016 with the funds primarily deployed to commercial real estate loan growth.

Total deposits increased $24.7 million, or 1.4%, to $1.735 billion at September 30, 2016 from $1.710 billion at June 30, 2016 primarily due to the establishment of brokered deposits in the third quarter.  Brokered deposits increased $20.2 million and term certificate accounts increased $8.8 million offset by a decrease in non-certificate accounts of $4.3 million. Borrowings increased $50.0 million, or 25.6%, to $245.1 million at September 30, 2016 from $195.1 million at June 30, 2016, due to an increase in FHLB short-term borrowings.

Total stockholders’ equity was $327.9 million at September 30, 2016 compared to $324.3 million at June 30, 2016 and $190.2 million at September 30, 2015. The increase from 2015 reflects the Company’s mutual to stock conversion that was completed on June 29, 2016. As part of the conversion, the Company established an ESOP which acquired 8% of the shares issued in the conversion, including shares contributed to the Foundation. The $11.6 million related to the ESOP is shown as a reduction to stockholders’ equity on the consolidated balance sheet. The tangible common equity to tangible assets ratio decreased to 13.47% at September 30, 2016 from 13.79% at June 30, 2016.  At September 30, 2016, 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 34 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 Company’s Registration Statement on Form S-1 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 measurements and ratios based on tangible stockholders’ equity and tangible assets, 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.