Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 07, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | HarborOne Bancorp, Inc. | |
Entity Central Index Key | 1,668,224 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 32,662,295 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and due from banks | $ 15,393 | $ 16,464 |
Short-term investments | 79,412 | 33,751 |
Total cash and cash equivalents | 94,805 | 50,215 |
Securities available for sale, at fair value | 166,122 | 136,469 |
Securities held to maturity, at amortized cost | 47,752 | 47,877 |
Federal Home Loan Bank stock, at cost | 16,356 | 15,749 |
Loans held for sale, at fair value | 96,201 | 86,443 |
Loans | 2,122,509 | 1,998,715 |
Less: Allowance for loan losses | (17,933) | (16,968) |
Net Loans | 2,104,576 | 1,981,747 |
Accrued interest receivable | 5,959 | 5,603 |
Other real estate owned and repossessed assets | 1,021 | 1,767 |
Mortgage servicing rights, at fair value | 20,376 | 20,333 |
Property and equipment, net | 24,338 | 24,193 |
Retirement plan annuities | 12,381 | 12,044 |
Bank-owned life insurance | 40,199 | 39,421 |
Deferred income taxes, net | 278 | 610 |
Goodwill and other intangible assets | 13,519 | 13,585 |
Other assets | 15,576 | 12,254 |
Total assets | 2,659,459 | 2,448,310 |
Deposits | ||
Noninterest-bearing deposits | 266,299 | 239,210 |
Interest-bearing deposits | 1,664,119 | 1,511,498 |
Brokered deposits | 73,127 | 54,045 |
Total deposits | 2,003,545 | 1,804,753 |
Short-term borrowed funds | 10,000 | 80,000 |
Long-term borrowed funds | 266,366 | 195,119 |
Mortgagors' escrow accounts | 5,530 | 5,034 |
Accrued interest payable | 554 | 545 |
Other liabilities and accrued expenses | 32,863 | 33,475 |
Total liabilities | 2,318,858 | 2,118,926 |
Commitments and contingencies (Notes 8 and 9) | ||
Common stock, $0.01 par value; 90,000,000 shares authorized; 32,662,295 and 32,120,880 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively | 327 | 321 |
Additional paid-in capital | 145,525 | 144,420 |
Retained earnings | 205,997 | 197,211 |
Accumulated other comprehensive loss | (415) | (1,290) |
Unearned compensation - ESOP | (10,833) | (11,278) |
Total stockholders' equity | 340,601 | 329,384 |
Total liabilities and stockholders' equity | $ 2,659,459 | $ 2,448,310 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Paranthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Consolidated Balance Sheets | ||
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common Stock, shares issued | 32,662,295 | 32,120,880 |
Common Stock, shares outstanding | 32,622,295 | 32,120,880 |
Consolidated Statements of Net
Consolidated Statements of Net Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest and dividend income: | ||||
Interest and fees on loans | $ 20,990 | $ 17,144 | $ 59,765 | $ 49,080 |
Interest on loans held for sale | 796 | 866 | 1,962 | 1,907 |
Interest on taxable securities | 1,118 | 768 | 3,232 | 2,441 |
Interest on non-taxable securities | 216 | 220 | 650 | 669 |
Other interest and dividend income | 294 | 164 | 866 | 610 |
Total interest and dividend income | 23,414 | 19,162 | 66,475 | 54,707 |
Interest expense: | ||||
Interest on deposits | 2,812 | 2,092 | 7,811 | 6,427 |
Interest on borrowed funds | 1,333 | 1,168 | 3,748 | 3,840 |
Total interest expense | 4,145 | 3,260 | 11,559 | 10,267 |
Net interest and dividend income | 19,269 | 15,902 | 54,916 | 44,440 |
Provision for loan losses | 921 | 1,710 | 1,656 | 2,716 |
Net interest income, after provision for loan losses | 18,348 | 14,192 | 53,260 | 41,724 |
Mortgage banking income: | ||||
Changes in mortgage servicing rights fair value | (488) | 351 | (1,982) | (4,100) |
Other | 11,071 | 16,513 | 30,117 | 39,725 |
Total mortgage banking income | 10,583 | 16,864 | 28,135 | 35,625 |
Deposit account fees | 3,172 | 3,010 | 9,088 | 8,685 |
Income on retirement plan annuities | 114 | 111 | 337 | 325 |
Gain on sale of consumer loans | 78 | 79 | ||
Gain on sale and call of securities, net | 283 | |||
Bank-owned life insurance income | 260 | 275 | 778 | 825 |
Other income | 498 | 609 | 1,964 | 1,997 |
Total noninterest income | 14,627 | 20,869 | 40,380 | 47,819 |
Noninterest expense: | ||||
Compensation and benefits | 17,325 | 18,812 | 48,568 | 50,552 |
Occupancy and equipment | 2,951 | 2,458 | 8,661 | 7,705 |
Data processing | 1,547 | 1,450 | 4,597 | 4,310 |
Loan expenses | 1,884 | 3,316 | 5,129 | 7,036 |
Marketing | 1,136 | 592 | 2,659 | 1,764 |
Deposit expenses | 311 | 325 | 1,019 | 1,054 |
Postage and printing | 380 | 313 | 1,017 | 959 |
Professional fees | 1,126 | 709 | 3,136 | 1,888 |
Prepayment penalties on Federal Home Loan Bank advances | 400 | |||
Foreclosed and repossessed assets | 8 | 31 | 60 | 102 |
Deposit insurance | 397 | 437 | 1,305 | 1,258 |
Charitable foundation contributions | 4,820 | |||
Other expenses | 1,373 | 1,166 | 3,570 | 3,487 |
Total noninterest expense | 28,438 | 29,609 | 79,721 | 85,335 |
Income before income taxes | 4,537 | 5,452 | 13,919 | 4,208 |
Income tax provision | 1,699 | 1,900 | 5,133 | 1,213 |
Net income | $ 2,838 | $ 3,552 | $ 8,786 | $ 2,995 |
Earnings per common share: | ||||
Basic earnings per share (in dollars per share) | $ 0.09 | $ 0.11 | $ 0.28 | |
Diluted earnings per share (in dollars per share) | $ 0.09 | $ 0.11 | $ 0.28 | |
Weighted average shares outstanding: | ||||
Weighted average shares outstanding basic | 31,303,281 | 30,943,808 | 31,109,104 | |
Weighted average shares outstanding diluted | 31,303,281 | 30,943,808 | 31,109,104 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 2,838 | $ 3,552 | $ 8,786 | $ 2,995 |
Securities available for sale: | ||||
Unrealized holding gains (losses) | 180 | (504) | 1,155 | 2,131 |
Reclassification adjustment for net realized gains | (283) | |||
Net unrealized gains (losses) | 180 | (504) | 1,155 | 1,848 |
Related tax effect | (63) | 175 | (403) | (645) |
Net-of-tax amount | 117 | (329) | 752 | 1,203 |
Supplemental director retirement plan: | ||||
Reclassification adjustment for amortization of prior service cost | 60 | 59 | 181 | 176 |
Related tax effect | (24) | (23) | (58) | (69) |
Net-of-tax amount | 36 | 36 | 123 | 107 |
Total other comprehensive income (loss) | 153 | (293) | 875 | 1,310 |
Comprehensive income | $ 2,991 | $ 3,259 | $ 9,661 | $ 4,305 |
Consolidated Statements of Com6
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Income tax expense on reclassifications for securities available for sale | $ 0 | $ 0 | $ 0 | $ 94,000 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common StockIPO | Common StockPrivate Placement | Common Stock | Additional Paid-in CapitalIPO | Additional Paid-in CapitalPrivate Placement | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Unearned Compensation ESOP | IPO | Private Placement | Total |
Balance, beginning of period at Dec. 31, 2015 | $ 191,280 | $ (592) | $ 190,688 | |||||||||
Comprehensive income (loss) | 2,995 | 1,310 | 4,305 | |||||||||
Issuance of common stock | $ 145 | $ 4 | $ 172 | $ 140,212 | $ 3,851 | $ 140,357 | $ 3,855 | 172 | ||||
Issuance of common stock (in shares) | 14,454,396 | 385,450 | 17,281,034 | |||||||||
Purchased of shares by the ESOP | $ (11,872) | (11,872) | ||||||||||
ESOP shares committed to be released | $ 112 | 297 | 409 | |||||||||
Balance, end of period at Sep. 30, 2016 | $ 321 | 144,175 | 194,275 | 718 | (11,575) | 327,914 | ||||||
Balance, end of period (in shares) at Sep. 30, 2016 | 32,120,880 | |||||||||||
Balance, beginning of period at Jun. 30, 2016 | 1,011 | |||||||||||
Comprehensive income (loss) | 3,259 | |||||||||||
Balance, end of period at Sep. 30, 2016 | $ 321 | 144,175 | 194,275 | 718 | (11,575) | 327,914 | ||||||
Balance, end of period (in shares) at Sep. 30, 2016 | 32,120,880 | |||||||||||
Balance, beginning of period at Dec. 31, 2016 | $ 321 | 144,420 | 197,211 | (1,290) | (11,278) | $ 329,384 | ||||||
Balance, beginning of period (in shares) at Dec. 31, 2016 | 32,120,880 | 32,120,880 | ||||||||||
Comprehensive income (loss) | 8,786 | 875 | $ 9,661 | |||||||||
ESOP shares committed to be released | 412 | 445 | 857 | |||||||||
Restricted stock awards granted | $ 6 | (6) | ||||||||||
Restricted stock awards granted (in shares) | 541,415 | |||||||||||
Share-based compensation expense | 699 | 699 | ||||||||||
Balance, end of period at Sep. 30, 2017 | $ 327 | 145,525 | 205,997 | (415) | (10,833) | $ 340,601 | ||||||
Balance, end of period (in shares) at Sep. 30, 2017 | 32,662,295 | 32,622,295 | ||||||||||
Balance, beginning of period at Jun. 30, 2017 | (568) | |||||||||||
Comprehensive income (loss) | $ 2,991 | |||||||||||
Balance, end of period at Sep. 30, 2017 | $ 327 | $ 145,525 | $ 205,997 | $ (415) | $ (10,833) | $ 340,601 | ||||||
Balance, end of period (in shares) at Sep. 30, 2017 | 32,662,295 | 32,622,295 |
Consolidated Statements of Cha8
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($)shares | |
Consolidated Statements of Changes in Stockholders’ Equity | |
Offering costs | $ | $ 3,870 |
Purchase of ESOP shares | 1,187,188 |
ESOP shares committed to be released | 29,680 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 8,786,000 | $ 2,995,000 |
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||
Provision for loan losses | 1,656,000 | 2,716,000 |
Net amortization of securities premiums/discounts | 523,000 | 584,000 |
Net amortization of net deferred loan costs/fees and premiums | 3,672,000 | 4,684,000 |
Depreciation and amortization of premises and equipment | 2,122,000 | 1,914,000 |
Change in mortgage servicing rights fair value | 1,982,000 | 4,100,000 |
Mortgage and consumer servicing rights capitalized | (2,054,000) | (6,732,000) |
Amortization of consumer servicing rights | 42,000 | 54,000 |
Accretion of fair value adjustment on loans and deposits, net | (260,000) | (248,000) |
Amortization of intangible assets | 66,000 | 67,000 |
Gain on sale and call of securities, net | (283,000) | |
Bank-owned life insurance income | (778,000) | (825,000) |
Income on retirement plan annuities | (337,000) | (325,000) |
Gain on sale of portfolio loans | (36,000) | (365,000) |
Net loss (gain) on sale and write-down of other real estate owned and repossessed assets | 57,000 | (141,000) |
Deferred income tax benefit | (128,000) | (831,000) |
Issuance of common stock to The HarborOne Foundation | 3,855,000 | |
ESOP expenses | 857,000 | 409,000 |
Stock-based compensation expense | 699,000 | |
Net change in: | ||
Loans held for sale | (9,758,000) | (50,257,000) |
Other assets and liabilities, net | (4,114,000) | (888,000) |
Net cash provided (used) by operating activities | 2,997,000 | (39,517,000) |
Activity in securities available for sale: | ||
Maturities, prepayments and calls | 16,697,000 | 20,354,000 |
Purchases | (45,461,000) | (14,164,000) |
Sales | 8,735,000 | |
Activity in securities held to maturity: | ||
Maturities, prepayment and calls | 2,920,000 | 14,131,000 |
Purchases | (3,052,000) | |
Net (purchase) redemption of FHLB stock | (607,000) | 3,480,000 |
Proceeds from sale of portfolio loans | 5,007,000 | 39,831,000 |
Loan originations, net of principal payments | (133,837,000) | (223,615,000) |
Proceeds from sale of other real estate owned and repossessed assets | 1,658,000 | 2,003,000 |
Additions to property and equipment | (2,267,000) | (1,370,000) |
Net cash used by investing activities | (158,942,000) | (150,615,000) |
Cash flows from financing activities: | ||
Net increase in deposits | 198,792,000 | 43,699,000 |
Net change in borrowed funds with maturities less than ninety days | (70,000,000) | 50,000,000 |
Proceeds from other borrowed funds | 86,250,000 | 20,025,000 |
Repayment of other borrowed funds | (15,003,000) | (74,503,000) |
Net change in mortgagors' escrow accounts | 496,000 | 857,000 |
Issuance of common stock | 140,529,000 | |
Purchase of shares by the ESOP | (11,872,000) | |
Net cash provided by financing activities | 200,535,000 | 168,735,000 |
Net change in cash and cash equivalents | 44,590,000 | (21,397,000) |
Cash and cash equivalents at beginning of period | 50,215,000 | 40,652,000 |
Cash and cash equivalents at end of period | 94,805,000 | 19,255,000 |
Supplemental cash flow information: | ||
Interest paid on deposits | 7,807,000 | 6,421,000 |
Interest paid on borrowed funds | 3,734,000 | 3,916,000 |
Income taxes paid | 5,247,000 | 3,052,000 |
Transfer of loans to other real estate owned and repossessed assets | 969,000 | $ 1,502,000 |
Transfer of loans to loans held for sale | $ 5,088,000 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The unaudited interim Consolidated Financial Statements of HarborOne Bancorp, Inc. (the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by the U.S. generally accepted accounting principles (“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 year ended December 31, 2016 and 2015 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 formed on July 13, 2016 and HarborOne Bank (the “Bank”); and the Bank’s wholly-owned subsidiaries. The Bank’s subsidiaries consist of a mortgage company and two security corporations. Merrimack Mortgage Company, LLC (“Merrimack Mortgage”) was acquired and became a wholly-owned subsidiary of the Bank on July 1, 2015. The security corporations were established for the purpose of buying, holding and selling securities on their own behalf. All significant intercompany balances and transactions have been eliminated in consolidation. Stock Conversion On June 29, 2016, the Bank reorganized into a two-tier mutual holding company structure with a mid-tier stock holding company. The Company sold 14,454,396 shares of common stock at $10.00 per share, including 1,187,188 shares purchased by the Company’s Employee Stock Ownership Plan (“ESOP”). In addition, the Company issued 17,281,034 shares to HarborOne Mutual Bancshares, a mutual holding company (the “MHC”) and 385,450 shares to The HarborOne Foundation, a charitable foundation formed in connection with the stock offering and dedicated to supporting charitable organizations operating in the Bank’s local community. A total of 32,120,880 shares of common stock were outstanding following the completion of the stock offering. The direct costs of the Company’s stock offering of $3.9 million were deferred and deducted from the proceeds of the offering. Upon the completion of the stock offering, a special “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to the percentage ownership interest in the equity of the Company held by persons other than the MHC as of the date of the latest balance sheet contained in the prospectus. The Company is not permitted to pay dividends on its capital stock if the Company’s shareholders’ equity would be reduced below the amount of the liquidation account. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases in an eligible account holder’s qualifying deposits will not restore such holder’s interest in the liquidation account. Nature of Operations The Company provides a variety of financial services to individuals and businesses through its fourteen full-service and two limited-service bank offices in eastern Massachusetts, a commercial lending office in Providence, Rhode Island, and a loan office in Westford, Massachusetts. Merrimack Mortgage maintains 33 offices in Massachusetts, New Hampshire, and Maine, and is also licensed to lend in seven 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 and consumer loans, including indirect automobile lending. The Company also originates, sells and services residential mortgage loans primarily through Merrimack Mortgage. Use of Estimates In preparing unaudited interim Consolidated Financial Statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuations of mortgage servicing rights, derivatives, goodwill and deferred tax assets. Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed and generally do not exceed the time frame provided in the FDIC’s Uniform Retail Credit Classification and Account Management Policy. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components, as further described below. General component The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the Company’s loan segments. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment except commercial real estate and commercial loans. Due to the lack of historical loss experience for our commercial real estate and commercial loan portfolio, we utilize peer loss data. Adjustments to this historical loss factor are considered for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during 2016 or the nine months ended September 30, 2017. The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows: Residential real estate – The Company generally does not originate portfolio loans with a loan-to-value ratio greater than 80 percent without obtaining private mortgage insurance and does not generally grant loans that would be classified as subprime upon origination. The Company generally has first or second liens on property securing equity lines of credit. Loans in this segment are generally collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, can have an effect on the credit quality in this segment. Commercial real estate – Loans in this segment are primarily secured by income-producing properties in southeastern New England. The underlying cash flows generated by the properties can be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, could have an effect on the credit quality in this segment. Management obtains rent rolls annually and continually monitors the cash flows of these loans. Construction – Loans in this segment include both residential and commercial construction loans. Residential construction loans include loans to build one- to four-family owner-occupied properties, which are subject to the same credit quality factors as residential real estate loans. Commercial construction loans may include speculative real estate development loans for which payment is derived from lease or sale of the property. Credit risk is affected by cost overruns, time to lease or sell at an adequate price, and market conditions. Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality in this segment. Consumer – Loans in this segment are generally secured by automobiles or unsecured and repayment is dependent on the credit quality of the individual borrower. Allocated component The allocated component relates to loans that are classified as impaired. Residential real estate, commercial, commercial real estate and construction loans are evaluated for impairment on a loan-by-loan basis. Impairment is determined by nonaccrual status, whether a loan is subject to a troubled debt restructuring agreement or in the case of certain loans, based on the internal credit rating. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, except for troubled debt restructuring (“TDR”), the Company does not separately identify individual consumer loans for impairment evaluation. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are initially classified as impaired. Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. Unallocated component The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. Additionally the Company's unseasoned commercial portfolio and use of peer group data to establish general reserves for the commercial portfolio adds another element of risk to management's estimates. Stock-based Compensation Plans The Company’s stock-based compensation plans provide for awards of stock options, restricted stock and other stock-based compensation to directors, officers and employees. The cost of employee services received in exchange for awards of equity instruments is based on the grant-date fair value of those awards. Compensation cost is recognized over the requisite service period as a component of compensation expense. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. The Company has elected to early adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . Under this Update, the Company has elected to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the employee leaves the Company or does not meet specific performance measures). Earnings Per Share Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. The restricted stock awards are participating securities; therefore unvested awards are included as common shares outstanding in the computation of basic earnings per share. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options awards and are determined using the treasury stock method. Recent Accounting Pronouncements As an “emerging growth company” as defined in Title 1 of the Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As of September 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period. In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. This guidance changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line as the hedged item. This guidance also provides new alternatives for applying hedge accounting to additional hedging strategies, measuring the hedged item in fair value hedges of interest rate risk, reducing the complexity of applying hedge accounting by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method, and reducing the risk of material error corrections if a company applies the shortcut method inappropriately. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company does not have any derivatives within the scope of the ASU. In March 2017, the FASB issued ASU 2017-08, Receivables- Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The Company elected to early adopt this new accounting guidance effective January 1, 2017 and the adoption did not have a material impact on the Consolidated Financial Statements. In January 2017, FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This update changes the quantitative impairment test to require an entity to perform a one-step test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. This new guidance does not amend the optional qualitative assessment of goodwill impairment. For SEC filers, the ASU is effective for impairment tests in fiscal years beginning after December 15, 2019. For non-public business entities, the ASU is effective for impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for impairment tests performed on testing dates after January 1, 2017. The Company elected to early adopt this new accounting guidance effective October 1, 2017 and the adoption did not have an impact on the Consolidated Financial Statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) , which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. For public entities that are SEC filers, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For non-public entities, this ASU is effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management has identified an implementation team that is in the process of developing an understanding of this pronouncement, evaluating the impact of this pronouncement and researching additional software resources that could assist with the implementation. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) . This update requires a lessee to record a right-to-use asset and a liability representing the obligation to make lease payments for long-term leases. For public business entities, this update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For non-public business entities, this update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2020. While we are currently evaluating the impact of the new standard, we expect an increase to the Consolidated Balance Sheets for right-of-use assets and associated lease liabilities but no material impact to the Consolidated Statement of Operations, for arrangements previously accounted for as operating leases. In January 2016, FASB issued ASU 2016-01, Financial Instruments – Overall, (Subtopic 825-10). The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Targeted improvements to generally accepted accounting principles include the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, the elimination of the requirement for non-public business entities to disclose the fair value of financial instruments measured at amortized cost and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For non-public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Management currently does not expect this to have a material impact on the Company's Consolidated Financial Statements as the Company does not currently hold any equity securities. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . The amendments in this update create Topic 606, Revenue from Contracts with Customers , and supersede the revenue recognition requirements in Topic 605, Revenue Recognition , including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, a company should apply a five step approach to revenue recognition. For public business entities, this ASU is effective for annual reporting periods, including interim periods, beginning after December 15, 2017. For non-public business entities, this ASU is effective for annual reporting periods beginning after December 31, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early application is permitted, but only for annual reporting periods beginning after December 15, 2016. The Bank's primary source of revenue is interest income on financial assets and income from mortgage banking activities, which are explicitly excluded from the scope of the new guidance. As a result, adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. However, the Company will continue to monitor developments and additional guidance up to the effective date of these amendments. |
SECURITIES
SECURITIES | 9 Months Ended |
Sep. 30, 2017 | |
SECURITIES | |
SECURITIES | 2. The amortized cost and fair value of securities with gross unrealized gains and losses is as follows: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) September 30, 2017: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 9,984 $ — $ 100 $ 9,884 U.S. government-sponsored residential mortgage-backed securities 74,553 326 426 74,453 U.S. government-sponsored collateralized mortgage obligations 38,346 327 50 38,623 SBA asset-backed securities 43,106 136 80 43,162 Total securities available for sale $ 165,989 $ 789 $ 656 $ 166,122 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 18,157 $ 109 $ 139 $ 18,127 U.S. government-sponsored collateralized mortgage obligations 2,155 86 — 2,241 SBA asset-backed securities 2,992 — 8 2,984 Municipal bonds 24,448 1,147 — 25,595 Total securities held to maturity $ 47,752 $ 1,342 $ 147 $ 48,947 December 31, 2016: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 9,983 $ — $ 236 $ 9,747 U.S. government-sponsored residential mortgage-backed securities 55,730 — 883 54,847 U.S. government-sponsored collateralized mortgage obligations 38,926 339 82 39,183 SBA asset-backed securities 32,852 40 200 32,692 Total securities available for sale $ 137,491 $ 379 $ 1,401 $ 136,469 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 20,306 $ 115 $ 283 $ 20,138 U.S. government-sponsored collateralized mortgage obligations 2,528 117 — 2,645 Municipal bonds 25,043 1,146 — 26,189 Total securities held to maturity $ 47,877 $ 1,378 $ 283 $ 48,972 Two mortgage-backed securities with a combined fair value of $5.9 million are pledged as collateral for interest rate swap agreements as of September 30, 2017 (see Note 9). All of the U.S. government-sponsored enterprise obligations, collateralized mortgage obligations and residential mortgage-backed securities are pledged to secure advances with the Federal Home Loan Bank (“FHLB”) of Boston as of September 30, 2017 (see Note 6). The amortized cost and fair value of debt securities by contractual maturity at September 30, 2017 is as follows: Available for Sale Held to Maturity Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) After 5 years through 10 years $ 5,000 $ 4,967 $ 4,451 $ 4,603 Over 10 years 4,984 4,917 19,997 20,992 9,984 9,884 24,448 25,595 U.S. government-sponsored residential mortgage-backed securities 74,553 74,453 18,157 18,127 U.S. government-sponsored collateralized mortgage obligations 38,346 38,623 2,155 2,241 SBA asset-backed securities 43,106 43,162 2,992 2,984 Total $ 165,989 $ 166,122 $ 47,752 $ 48,947 U.S. government-sponsored residential mortgage-backed securities, collateralized mortgage obligations and securities whose underlying assets are loans from the U.S. Small Business Administration (“SBA asset-backed securities”) have stated maturities of five to thirty years; however, it is expected that such securities will have shorter actual lives due to prepayments. The following table shows proceeds and gross realized gains and losses related to the sales and calls of securities for the periods indicated. There were no sales or calls of securities during the three months September 30, 2017 or 2016. Nine Months Ended September 30, 2017 2016 (in thousands) Sales Proceeds $ — $ 8,735 Gross gains — 242 Gross losses — — Calls Proceeds (1) $ 400 $ 15,725 Gross gains — 41 Gross losses — — (1) September 30, 2017 proceeds from calls consists of one held to maturity security. Information pertaining to securities with gross unrealized losses at September30, 2017 and December 31, 2016 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) September 30, 2017: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 100 $ 9,884 $ — $ — U.S. government-sponsored residential mortgage-backed securities 286 20,278 140 10,922 U.S. government-sponsored collateralized mortgage obligations 50 6,808 — — SBA asset-backed securities 80 22,084 — — $ 516 $ 59,054 $ 140 $ 10,922 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 139 $ 15,830 $ — $ — SBA asset-backed securities 8 2,984 — — $ 147 $ 18,814 $ — $ — December 31, 2016: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 236 $ 9,747 $ — $ — U.S. government-sponsored residential mortgage-backed securities 712 43,684 171 11,163 U.S. government-sponsored collateralized mortgage obligations 82 7,779 — — SBA asset-backed securities 200 26,153 — — $ 1,230 $ 87,363 $ 171 $ 11,163 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 283 $ 17,526 $ — $ — Management evaluates securities for other-than-temporary impairment (“OTTI”) at each reporting period, and more frequently when economic or market concerns warrant such evaluation. At September 30, 2017, twenty-eight debt securities with an amortized cost of $89.6 million have unrealized losses with aggregate depreciation of 0.90% from the Company’s amortized cost basis. The unrealized losses on the Company’s securities were primarily caused by changes in interest rates. All of these investments are guaranteed by government and government-sponsored enterprises. Accordingly, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the decline in fair value is attributable to changes in interest rates and not to credit quality, and because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be OTTI at September 30, 2017. |
LOANS
LOANS | 9 Months Ended |
Sep. 30, 2017 | |
LOANS | |
LOANS | 3. A summary of the balances of loans follows: September 30, December 31, 2017 2016 (in thousands) Residential real estate: One- to four-family $ 678,684 $ 677,946 Second mortgages and equity lines of credit 90,734 92,989 Commercial real estate 623,054 495,801 Construction 76,668 58,443 Total mortgage loans on real estate 1,469,140 1,325,179 Commercial 111,627 100,501 Consumer loans: Auto 518,759 547,400 Personal 14,948 15,704 Total consumer loans 533,707 563,104 Total loans 2,114,474 1,988,784 Allowance for loan losses (17,933) (16,968) Net deferred loan costs 8,035 9,931 Loans, net $ 2,104,576 $ 1,981,747 During the nine months ended September 30, 2017, the Company sold indirect auto loans of $5.0 million. The loans were classified as loans held for sale at March 31, 2017 and a gain of $78,000 was recorded in the first quarter. During the nine months ended September 30, 2016, the Company sold $10.0 million of indirect loans and recognized gains of $79,000. No indirect auto loans were sold during the three months ended September 30, 2017 and 2016. The unpaid principal balance of indirect auto loans serviced for others was $25.5 million and $31.4 million at September 30, 2017 and December 31, 2016, respectively. The Company did not sell residential portfolio loans during the three or nine months ended September 30, 2017. The Company sold residential portfolio loans of $29.5 million during the nine months ended September 30, 2016. Included in mortgage banking income for the nine months ended September 30, 2016 is the related gain on sale of $501,000. No residential loans were sold from the portfolio during the three months ended September 30, 2016. The Company has transferred a portion of its originated commercial real estate 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 September 30, 2017 and December 31, 2016, the Company was servicing loans for participants aggregating $62.1 million and $45.3 million, respectively. The following is the activity in the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016: Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) Balance at June 30, 2017 $ 4,434 $ 7,075 $ 936 $ 2,114 $ 1,033 $ 1,589 $ 17,181 Provision (credit) for loan losses (27) 372 162 346 160 (92) 921 Charge-offs — — — — (230) — (230) Recoveries 10 — — — 51 — 61 Balance at September 30, 2017 $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 Balance at June 30, 2016 $ 5,619 $ 5,359 $ 587 $ 1,164 $ 794 $ 916 $ 14,439 Provision (credit) for loan losses (253) 1,156 49 458 237 63 1,710 Charge-offs (123) — — (22) (272) — (417) Recoveries 61 — — 5 34 — 100 Balance at September 30, 2016 $ 5,304 $ 6,515 $ 636 $ 1,605 $ 793 $ 979 $ 15,832 Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) Balance at December 31, 2016 $ 4,963 $ 7,150 $ 924 $ 1,920 $ 780 $ 1,231 $ 16,968 Provision (credit) for loan losses (559) 297 174 658 820 266 1,656 Charge-offs (144) — — (134) (790) — (1,068) Recoveries 157 — — 16 204 — 377 Balance at September 30, 2017 $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 Balance at December 31, 2015 $ 5,816 $ 4,365 $ 581 $ 1,454 $ 830 $ 654 $ 13,700 Provision (credit) for loan losses (521) 2,150 55 170 537 325 2,716 Charge-offs (250) — — (27) (729) — (1,006) Recoveries 259 — — 8 155 — 422 Balance at September 30, 2016 $ 5,304 $ 6,515 $ 636 $ 1,605 $ 793 $ 979 $ 15,832 Allocation of the allowance to loan segments at September 30, 2017 and December 31, 2016 follows: Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) September 30, 2017: Loans: Impaired loans $ 36,885 $ — $ 131 $ 3,885 $ — $ — $ 40,901 Non-impaired loans 732,533 623,054 76,537 107,742 533,707 — 2,073,573 Total loans $ 769,418 $ 623,054 $ 76,668 $ 111,627 $ 533,707 $ — $ 2,114,474 Allowance for loan losses: Impaired loans $ 1,286 $ — $ — $ 906 $ — $ — $ 2,192 Non-impaired loans 3,131 7,447 1,098 1,554 1,014 1,497 15,741 Total allowance for loan losses $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 December 31, 2016: Loans: Impaired loans $ 43,012 $ — $ 134 $ 2,936 $ — $ — $ 46,082 Non-impaired loans 727,923 495,801 58,309 97,565 563,104 — 1,942,702 Total loans $ 770,935 $ 495,801 $ 58,443 $ 100,501 $ 563,104 $ — $ 1,988,784 Allowance for loan losses: Impaired loans $ 1,624 $ — $ — $ 499 $ — $ — $ 2,123 Non-impaired loans 3,339 7,150 924 1,421 780 1,231 14,845 Total allowance for loan losses $ 4,963 $ 7,150 $ 924 $ 1,920 $ 780 $ 1,231 $ 16,968 The following is a summary of past due and non-accrual loans at September 30, 2017 and December 31, 2016: 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) September 30, 2017 Residential real estate: One- to four-family $ 407 $ 4,351 $ 5,404 $ 10,162 $ 14,326 Second mortgages and equity lines of credit 347 122 375 844 1,200 Construction — — — — 131 Commercial 208 — 15 223 3,631 Consumer: Auto 1,374 318 286 1,978 286 Personal 44 28 29 101 32 Total $ 2,380 $ 4,819 $ 6,109 $ 13,308 $ 19,606 December 31, 2016 Residential real estate: One- to four-family $ 4,955 $ 1,873 $ 7,964 $ 14,792 $ 16,456 Second mortgages and equity lines of credit 588 190 724 1,502 1,686 Construction — — 134 134 134 Commercial 55 — 387 442 2,674 Consumer: Auto 1,978 297 150 2,425 205 Personal 103 41 23 167 25 Total $ 7,679 $ 2,401 $ 9,382 $ 19,462 $ 21,180 At September 30, 2017 and December 31, 2016, there were no loans past due 90 days or more and still accruing. The following information pertains to impaired loans: September 30, 2017 December 31, 2016 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance (in thousands) Impaired loans without a valuation allowance: Residential $ 14,316 $ 15,047 $ — $ 17,000 $ 18,031 $ — Construction 131 131 — 134 134 — Commercial — — — 173 301 — Total $ 14,447 $ 15,178 $ — $ 17,307 $ 18,466 $ — Impaired loans with a valuation allowance: Residential $ 22,569 $ 27,016 $ 1,286 $ 26,012 $ 27,204 $ 1,624 Commercial 3,885 3,983 906 2,763 2,763 499 Total $ 26,454 $ 30,999 $ 2,192 $ 28,775 $ 29,967 $ 2,123 Three Months Ended September 30, 2017 2016 Interest Interest Average Interest Income Average Interest Income Recorded Income Recognized Recorded Income Recognized Investment Recognized on Cash Basis Investment Recognized on Cash Basis (in thousands) Residential $ 38,114 $ 494 $ 384 $ 47,480 $ 616 $ 284 Commercial real estate — — — — — — Construction 131 2 2 134 — — Commercial 3,896 5 4 3,033 10 10 Total $ 42,141 $ 501 $ 390 $ 50,647 $ 626 $ 294 Nine Months Ended September 30, 2017 2016 Interest Interest Average Interest Income Average Interest Income Recorded Income Recognized Recorded Income Recognized Investment Recognized on Cash Basis Investment Recognized on Cash Basis (in thousands) Residential $ 40,087 $ 1,721 $ 1,382 $ 49,517 $ 2,021 $ 1,029 Commercial real estate — — — 242 — — Construction 132 10 10 135 7 7 Commercial 3,770 62 61 1,779 54 54 Total $ 43,989 $ 1,793 $ 1,453 $ 51,673 $ 2,082 $ 1,090 Interest income recognized and interest income recognized on a cash basis in the table above represents interest income for the three and nine months ended September 30, 2017 and 2016, not for the time period designated as impaired. As part of a workout agreement, the Company is committed to advance $165,000 in additional funds on one commercial impaired loan. The following table sets forth TDRs during the three and nine months ended September 30, 2017 and 2016: Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Contracts Investment Investment (dollars in thousands) Three Months Ended September 30, 2017 Residential 1 $ 54 $ 54 Nine Months Ended September 30, 2017 Residential 2 $ 363 $ 363 Commercial 2 1,578 1,578 4 $ 1,941 $ 1,941 Nine Months Ended September 30, 2016 Residential 2 $ 196 $ 232 There were no TDR loan modifications for the three months ended September 30, 2016. The recorded investment in TDRs was $29.7 million and $31.8 million at September 30, 2017 and 2016, respectively. Of these loans, $8.1 million and $6.8 million were on non-accrual at September 30, 2017 and 2016, respectively. All TDR loans are considered impaired and management performs a discounted cash flow calculation to determine the amount of impairment reserve required on each loan. TDR loans which subsequently default are reviewed to determine if the loan should be deemed collateral dependent. In either case, any reserve required is recorded as part of the allowance for loan losses. During the three and nine months ended September 30, 2017, there were no payment defaults on TDRs. During the nine months ended September 30, 2016, one troubled debt restructuring with a recorded investment of $107,000 defaulted. During the three months ended September 30, 2016, there were no payment defaults on TDRs. Credit Quality Information 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 residential construction loans and 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. 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. The following table presents the Company’s loans by risk rating at September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Commercial Commercial Real Estate Commercial Construction Real Estate Commercial Construction (in thousands) Loans rated 1 - 6 $ 619,989 $ 107,196 $ 63,914 $ 492,473 $ 97,566 $ 43,518 Loans rated 7 — 800 — — 261 — Loans rated 8 — 3,591 — — 2,287 — Loans rated 9 — 40 — — 387 — Loans rated 10 — — — — — — Loans not rated 3,065 — 12,754 3,328 — 14,925 $ 623,054 $ 111,627 $ 76,668 $ 495,801 $ 100,501 $ 58,443 |
MORTGAGE LOAN SERVICING
MORTGAGE LOAN SERVICING | 9 Months Ended |
Sep. 30, 2017 | |
MORTGAGE LOAN SERVICING | |
MORTGAGE LOAN SERVICING | 4. The Company sells residential mortgages to government-sponsored entities and other parties. The Company retains no beneficial interests in these loans, but 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 mortgage servicing rights (“MSRs”) relate primarily to changes in prepayments that primarily result from shifts in mortgage interest rates. The unpaid principal balances of mortgage loans serviced for others were $1.92 billion and $1.85 billion as of September 30, 2017 and December 31, 2016, respectively. The Company accounts for MSRs at fair value. The Company obtains valuations from independent third parties to determine the fair value of MSRs. Key assumptions used in the estimation of fair value include prepayment speeds, discount rates, default rates, cost to service, and contractual servicing fees. At September 30, 2017 and December 31, 2016, the following weighted average assumptions were used in the calculation of fair value of MSRs: September 30, December 31, 2017 2016 Prepayment speed 10.29 % 9.49 % Discount rate 9.26 9.25 Default rate 2.02 1.71 The following summarizes changes to mortgage servicing rights for the nine months ended September 30, 2017 and 2016: Nine Months Ended September 30, 2017 2016 (in thousands) Balance, beginning of period $ 20,333 $ 12,958 Additions from loans sold with servicing retained 2,025 6,676 Changes in fair value due to : Reductions from loans paid off during the period (1,138) (1,229) Changes in valuation inputs or assumptions (844) (2,871) Balance, end of period $ 20,376 $ 15,534 For the three months ended September 30, 2017 and 2016, contractually specified servicing fees included in other mortgage banking income amounted to $1.3 million and $1.1 million, respectively. For the nine months ended September 30, 2017 and 2016, contractually specified servicing fees included in other mortgage banking income amounted to $3.9 million and $2.9 million, respectively. . |
DEPOSITS
DEPOSITS | 9 Months Ended |
Sep. 30, 2017 | |
DEPOSITS | |
DEPOSITS | 5. A summary of deposit balances, by type, is as follows: September 30, December 31, 2017 2016 (in thousands) NOW and demand deposit accounts $ 395,728 $ 365,869 Regular savings and club accounts 404,465 316,947 Money market deposit accounts 666,613 595,211 Total non-certificate accounts 1,466,806 1,278,027 Term certificate accounts greater than $250,000 91,862 81,064 Term certificate accounts less than or equal to $250,000 371,750 391,617 Brokered deposits 73,127 54,045 Total certificate accounts 536,739 526,726 Total deposits $ 2,003,545 $ 1,804,753 The Company has established a relationship to participate in a reciprocal deposit program with other financial institutions. At September 30, 2017, total reciprocal deposits were $192.6 million. There were no reciprocal deposits at December 31, 2016. A summary of certificate accounts by maturity at September 30, 2017 is as follows: Weighted Average Amount Rate (dollars in thousands) Within 1 year $ 369,107 1.10 % Over 1 year to 2 years 108,905 1.44 Over 2 years to 3 years 28,920 1.50 Over 3 years to 4 years 21,736 1.57 Over 4 years to 5 years 8,071 1.41 $ 536,739 1.21 % |
BORROWED FUNDS
BORROWED FUNDS | 9 Months Ended |
Sep. 30, 2017 | |
BORROWED FUNDS | |
BORROWED FUNDS | 6. Borrowed funds at September 30, 2017 and December 31, 2016 consist of FHLB advances. Short-term advances were $10.0 million and $80.0 million with weighted average rates of 1.33% and 0.77% at September 30, 2017 and December 31, 2016, respectively. Long-term advances are summarized by maturity date below. There were no callable advances at September 30, 2017 or December 31, 2016. September 30, 2017 December 31, 2016 Weighted Weighted Scheduled Average Scheduled Average Maturity Rate Maturity Rate (dollars in thousands) Year ending December 31: 2017 $ 25,000 4.17 % $ 40,000 4.22 % 2018 111,250 1.47 50,000 2019 60,000 1.66 35,000 2020 50,000 1.84 50,000 2021 20,000 1.79 20,000 2022 and thereafter* 116 2.94 119 2.96 $ 266,366 1.86 % $ 195,119 % * Includes an amortizing advance requiring monthly principal and interest payments of $1,000. The FHLB advances are secured by a blanket security agreement on qualified collateral defined primarily as 75% of the carrying value of first mortgage loans on residential property and 94% of the fair value of government-sponsored enterprise and mortgage-backed securities obligations. The Company also has an available line of credit with the Federal Reserve Bank of Boston secured by 74% of the carrying value of indirect auto loans with principal balance amounting to $156.0 million and $207.9 million, respectively, of which no amount was outstanding at September 30, 2017 and December 31, 2016, respectively. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
INCOME TAXES | |
INCOME TAXES | 7. For the three and nine months ended September 30, 2017, the Company recorded an expense of $1.7 million and $5.1 million, respectively, representing an effective tax rate of 37.4% and 36.9%, respectively. For the three and nine months ended September 30, 2016, the Company recorded an expense of $1.9 million and $1.2 million, respectively, representing an effective tax rate of 34.8% and 28.8%, respectively. The increase in the effective tax rate in 2017 is due primarily to the increase in nondeductible expense related to the ESOP and decreased tax-advantaged income. |
OTHER COMMITMENTS AND CONTINGEN
OTHER COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
OTHER COMMITMENTS AND CONTINGENCIES | |
OTHER COMMITMENTS AND CONTINGENCIES | 8. 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. The following off-balance sheet financial instruments were outstanding at September 30, 2017 and December 31, 2016. The contract amounts represent credit risk. September 30, December 31, 2017 2016 (in thousands) Commitments to grant loans $ 99,062 $ 75,914 Unadvanced funds on home equity lines of credit 79,410 82,797 Unadvanced funds on revolving lines of credit 65,676 58,238 Unadvanced funds on construction loans 116,766 49,999 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, 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. Other Commitments On May 31, 2017, the Bank entered into a ground lease for property located in Stoughton, Massachusetts, to develop as a prospective branch site. Until January 31, 2018, the Bank has the right to terminate the lease without any future obligations. |
DERIVATIVES
DERIVATIVES | 9 Months Ended |
Sep. 30, 2017 | |
DERIVATIVES | |
DERIVATIVES | 9. The Company is party to a variety of derivative transactions, including derivative loan commitments, forward loan sale commitments and interest rate swap contracts. The Company enters into derivative contracts in order to meet the financing needs of its customers. The Company also enters into derivative contracts as a means of reducing its interest rate risk and market risk. All derivatives are recognized in the unaudited interim Consolidated Balance Sheets at fair value. Changes in the fair value of derivatives are recognized in earnings. The Company did not have any fair value hedges or cash flow hedges at September 30, 2017 and December 31, 2016. 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 amount 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. 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. Mortgage-backed securities with a fair value of $5.9 million are pledged to secure the Company’s liability for the offsetting interest rate swaps (see Note 2). The interest rate swap notional amount below is the aggregate notional amount of the customer swap and the offsetting third-party swap. Risk Participation Agreements The Company has entered into risk participation agreements with the 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 tables present the fair values of derivative instruments in the Consolidated Balance Sheets: Assets Liabilities Balance Balance Notional Sheet Fair Sheet Fair Amount Location Value Location Value (in thousands) September 30, 2017: Derivative loan commitments $ 122,200 Other assets $ 1,583 Other liabilities $ 16 Forward loan sale commitments 162,360 Other assets 344 Other liabilities 205 Interest rate swaps 248,887 Other assets 2,483 Other liabilities 2,483 Risk participation agreements 43,037 Other assets — Other liabilities — Total $ 4,410 $ 2,704 December 31, 2016: Derivative loan commitments $ 87,728 Other assets $ 2,231 Other liabilities $ — Forward loan sale commitments 167,289 Other assets 491 Other liabilities 576 Interest rate swaps 173,477 Other assets 248 Other liabilities 248 Total $ 2,970 $ 824 The following table presents information pertaining to the Company’s derivative instruments in the Consolidated Statements of Operations: Amount of Gain (Loss) Three Months Ended September 30, Nine Months Ended September 30, Location of Gain (Loss) 2017 2016 2017 2016 (in thousands) Derivative loan commitments Mortgage banking income $ 30 $ (649) $ 430 $ 2,442 Forward loan sale commitments Mortgage banking income (80) 1,205 (870) (1,218) Total $ (50) $ 556 $ (440) $ 1,224 |
COMPENSATION AND BENEFIT PLANS
COMPENSATION AND BENEFIT PLANS | 9 Months Ended |
Sep. 30, 2017 | |
COMPENSATION AND BENEFIT PLANS | |
COMPENSATION AND BENEFIT PLANS | 10. Directors’ Retirement Plan The Company has elected to freeze the Directors’ Retirement Plan effective December 31, 2017. The balance of the liability at September 30, 2017 was $1.6 million. Supplemental Retirement Plans On March 1, 2016, in anticipation of the reorganization, the Company amended a supplemental executive retirement Plan with an executive to accelerate vesting. This amendment increased the net present value of the benefit obligation in the amount of $891,000 and this increase was expensed in the first quarter of 2016. Employee Stock Ownership Plan On June 29, 2016, the Company established an ESOP to provide eligible employees the opportunity to own Company stock. The plan is a tax-qualified retirement plan for the benefit of the Company employees. The ESOP shares were purchased through a loan from the Company and as the debt is repaid, shares are released. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax limits. The unreleased shares are deducted from stockholders’ equity as unearned ESOP shares in the accompanying balance sheets. The number of shares committed to be released per year is 59,359 through 2035. The following table presents share information held by the ESOP: September 30, 2017 December 31, 2016 Allocated shares 59,359 — Shares committed to be allocated 44,520 59,359 Unallocated shares 1,083,309 1,127,829 Total shares 1,187,188 1,187,188 Fair value of unallocated shares $ 20,377,000 $ 21,812,000 Total compensation expense recognized in connection with the ESOP was $275,000 and $857,000 for the three and nine months ended September 30, 2017. Total compensation expense recognized in connection with the ESOP was $409,000 for the three and nine months ended September 30, 2016. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | 11. Under the HarborOne Bancorp, Inc. 2017 Stock Option and Incentive Plan (the “Equity Plan”), adopted on August 9, 2017, the Company may grant options, stock appreciation rights, restricted stock, restricted units, unrestricted stock awards, cash based awards, performance share awards, and dividend equivalent rights to its directors, officers and employees. Total shares reserved for issuance under the plan are 2,077,577. Both incentive stock options and non-qualified stock options may be granted under the Equity Plan, with the total shares reserved for options equaling 1,483,984. The exercise price of each option equals the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years. The total number of shares reserved for restricted stock or restricted units is 593,593. Options and awards vest ratably over three years. The fair value of shares awarded is based on the market price at the date of grant. Expense related to options and restricted stock granted to directors is recognized as directors' fees within noninterest expense. The Company has standard form agreements used for stock option and restricted stock awards. The standard form agreements used for the Chief Executive Officer and all other executive officers have previously been disclosed in Securities and Exchange Commission filings and generally provide that: (1) any unvested options or unvested restricted stock vest upon a Change in Control; and, that (2) any stock options which vest pursuant to a Change in Control, which is an event described in Section 280G of the Internal Revenue Code of 1986, will be cashed out at the difference between the acquisition price and the exercise price of the stock option. Stock Options The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions: · Volatility is based on peer group volatility due to lack of sufficient trading history for the Company. · Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term and the vesting period. · Expected dividend yield is based on the Company’s history and expectation of dividend payouts. · Recognize forfeitures as they occur. · The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option. The Company made the following awards of options to purchase shares of common stock in 2017: Date of grant August 16, 2017 Options granted 1,326,063 Vesting period (years) 3 Expiration date August 16, 2027 Expected volatility 24 % Expected life (years) 6 Expected dividend yield — % Risk free interest rate 1.88 % Fair value per option $ A summary of the status of the Company’s stock option grants for the quarter ended September 30, 2017, is presented in the table below: Weighted Average Weighted Remaining Aggregate Stock Option Average Contractual Intrinsic Options Awards Exercise Price Term (years) Value Balance at January 1, 2017 — $ — — $ — Granted 1,326,063 18.35 609,989 Balance at September 30, 2017 1,326,063 $ 18.35 $ 609,989 Exercisable at September 30, 2017 — $ — — $ — Unrecognized compensation cost $ 6,437,000 Weighted average remaining recognition period (years) 2.88 For the quarter ended September 30, 2017, stock-based compensation expense applicable to the stock options was $282,000 and the recognized tax benefit related to this expense was $99,000. There was no stock-based compensation expense in 2016. Restricted Stock Shares issued upon vesting may be either authorized but unissued shares or reacquired shares held by the Company. Any shares not issued because vesting requirements are not met will again be available for issuance under the plan. The fair market value of shares awarded, based on the market price at the date of grant, is unearned compensation to be amortized over the applicable vesting period. The following table presents the activity in non-vested stock awards under the Equity Plan for the quarter ended September 30, 2017: Outstanding Restricted Weighted Average Stock Awards Grant Price Non-vested stock awards at January 1, 2017 — $ — Granted 541,415 18.35 Non-vested stock awards at September 30, 2017 541,415 $ 18.35 Unrecognized compensation cost inclusive of directors' fees $ 9,518,000 Weighted average remaining recognition period (years) 2.88 Total expense for the restricted stock awards was $417,000 for the quarter ended September 30, 2017, and the recognized tax benefits related to this expense was $146,000. There was no expense related to restricted stock awards in 2016. |
MINIMUM REGULATORY CAPITAL REQU
MINIMUM REGULATORY CAPITAL REQUIREMENTS | 9 Months Ended |
Sep. 30, 2017 | |
MINIMUM REGULATORY CAPITAL REQUIREMENTS | |
MINIMUM REGULATORY CAPITAL REQUIREMENTS | 12. The Company and Bank are subject to various regulatory capital requirements administered by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (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 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%, a total capital ratio of 8.0% and a leverage ratio of 4.0%. Additionally, subject to a transition schedule, the capital rules require a bank holding company to establish 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, which became effective January 1, 2015, 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 September 30, 2017, 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 September 30, 2017 also exceeded the minimum capital requirements including the currently applicable capital conservation buffer of 1.25%. The Company’s and the Bank’s actual regulatory capital ratios as of September 30, 2017 and December 31, 2016 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. September 30, 2017 Common equity Tier 1 capital to risk-weighted assets $ 327,523 15.5 % $ 94,890 4.5 % N/A N/A Tier 1 capital to risk-weighted assets 327,523 15.5 126,520 6.0 N/A N/A Total capital to risk-weighted assets 345,456 16.4 168,693 8.0 N/A N/A Tier 1 capital to average assets 327,523 12.5 104,711 4.0 N/A N/A December 31, 2016 Common equity Tier 1 capital to risk-weighted assets $ 317,185 16.2 % $ 88,320 4.5 % N/A N/A Tier 1 capital to risk-weighted assets 317,185 16.2 117,760 6.0 N/A N/A Total capital to risk-weighted assets 334,153 17.0 157,014 8.0 N/A N/A Tier 1 capital to average assets 317,185 13.2 95,796 4.0 N/A N/A HarborOne Bank September 30, 2017 Common equity Tier 1 capital to risk-weighted assets $ 244,104 11.6 % $ 94,884 4.5 % $ 137,055 6.5 % Tier 1 capital to risk-weighted assets 244,104 11.6 126,512 6.0 168,683 8.0 Total capital to risk-weighted assets 262,037 12.4 168,683 8.0 210,853 10.0 Tier 1 capital to average assets 244,104 9.5 102,042 4.0 127,552 5.0 December 31, 2016 Common equity Tier 1 capital to risk-weighted assets $ 234,655 12.0 % $ 88,201 4.5 % $ 127,402 6.5 % Tier 1 capital to risk-weighted assets 234,655 12.0 117,602 6.0 156,802 8.0 Total capital to risk-weighted assets 251,623 12.8 156,802 8.0 196,003 10.0 Tier 1 capital to average assets 234,655 9.9 95,178 4.0 118,973 5.0 |
COMPREHENSIVE INCOME (LOSS)
COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 30, 2017 | |
COMPREHENSIVE INCOME (LOSS) | |
COMPREHENSIVE INCOME (LOSS) | 13. COMPREHENSIVE INCOME (LOSS) 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 components of accumulated other comprehensive loss, included in stockholders’ equity, are as follows: September 30, December 31, 2017 2016 (in thousands) Securities available for sale: Net unrealized gain (loss) $ 133 $ (1,022) Related tax effect (46) 357 Net-of-tax amount 87 (665) Directors' retirement plan: Prior service cost (835) (1,016) Related tax effect 333 391 Net-of-tax amount (502) (625) Total accumulated other comprehensive loss $ (415) $ (1,290) The following tables present changes in accumulated other comprehensive loss by component for the three and nine months ended September 30, 2017 and 2016: Three Months Ended September 30, 2017 2016 Unrealized Gains Unrealized Gains and Losses on Director's and Losses on Director's Available-for-Sale Retirement Available-for-Sale Retirement Securities Plan Total Securities Plan Total (in thousands) Balance at beginning of period $ (30) $ (538) $ (568) $ 1,671 $ (660) $ 1,011 Other comprehensive income before reclassifications 180 — 180 (504) — (504) Amounts reclassified from accumulated other comprehensive income — 60 60 — 59 59 Net current period other comprehensive income 180 60 240 (504) 59 (445) Related tax effect (63) (24) (87) 175 (23) 152 Balance at end of period $ 87 $ (502) $ (415) $ 1,342 $ (624) $ 718 Nine Months Ended September 30, 2017 2016 Unrealized Gains Unrealized Gains and Losses on Directors' and Losses on Directors' Available-for-Sale Retirement Available-for-Sale Retirement Securities Plan Total Securities Plan Total (in thousands) Balance at beginning of period $ (665) $ (625) $ (1,290) $ 139 $ (731) $ (592) Other comprehensive income before reclassifications 1,155 — 1,155 2,131 — 2,131 Amounts reclassified from accumulated other comprehensive income — 181 181 (283) 176 (107) Net current period other comprehensive income 1,155 181 1,336 1,848 176 2,024 Related tax effect (403) (58) (461) (645) (69) (714) Balance at end of period $ 87 $ (502) $ (415) $ 1,342 $ (624) $ 718 |
FAIR VALUE OF ASSETS AND LIABIL
FAIR VALUE OF ASSETS AND LIABILITIES | 9 Months Ended |
Sep. 30, 2017 | |
FAIR VALUE OF ASSETS AND LIABILITIES | |
FAIR VALUE OF ASSETS AND LIABILITIES | 14. Determination of Fair Value The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of an asset or liability is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets or liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The following methods and assumptions were used by the Company in estimating fair value disclosures: Cash and cash equivalents - The carrying amounts of cash and short-term instruments approximate fair values based on the short-term nature of the assets. Securities - All fair value measurements are obtained from a third-party pricing service and are not adjusted by management. Securities measured at fair value in Level 1 are based on quoted market prices in an active exchange market. Securities measured at fair value in Level 2 are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. FHLB stock - The fair value of Federal Home Loan Bank stock is equal to cost based on redemption provisions. Loans held for sale - Fair values are based on prevailing market prices for similar commitments. At September 30, 2017 and December 31, 2016, there were no loans held for sale that were greater than ninety days past due. The following table provides the fair value and contractual principal balance outstanding of loans held for sale accounted for under the fair value option: September 30, December 31, 2017 2016 (in thousands) Loans held for sale, fair value $ 96,201 $ 86,443 Loans held for sale, contractual principal outstanding 92,981 85,024 Fair value less unpaid principal $ 3,220 $ 1,419 Loans - Fair values for mortgage loans and other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable. Retirement plan annuities - The carrying value of the annuities are based on their contract values which approximate fair value. Mortgage servicing rights - 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 discounted cash flow 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 discounted cash flow 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. 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. At September 30, 2017 and December 31, 2016, the weighted average pull-through rate for derivative loan commitments was 87% and 86%, 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. The Company incorporates credit valuation analysis for counterparty nonperformance risk in the fair value measurement, including the impact of netting applicable credit enhancements such as available collateral. 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 are immaterial. Fair Value Hierarchy The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 – Valuation is based on 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 for substantially the full term of the assets or liabilities. Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation. Transfers between levels are recognized at the end of the reporting period, if applicable. There were no transfers during the periods presented. 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) September 30, 2017 Assets Securities available for sale $ — $ 166,122 $ — $ 166,122 Loans held for sale — 96,201 — 96,201 Mortgage servicing rights — 20,376 — 20,376 Derivative loan commitments — — 1,583 1,583 Forward loan sale commitments — — 344 344 Interest rate swaps — 2,483 — 2,483 $ — $ 285,182 $ 1,927 $ 287,109 Liabilities Derivative loan commitments $ — $ — $ 16 $ 16 Forward loan sale commitments — — 205 205 Interest rate swaps — 2,483 — 2,483 $ — $ 2,483 $ 221 $ 2,704 December 31, 2016 Assets Securities available for sale $ — $ 136,469 $ — $ 136,469 Loans held for sale — 86,443 — 86,443 Mortgage servicing rights — 20,333 — 20,333 Derivative loan commitments — — 2,231 2,231 Forward loan sale commitments — — 491 491 Interest rate swaps — 248 — 248 $ — $ 243,493 $ 2,722 $ 246,215 Liabilities Forward loan sale commitments $ — $ — $ 576 $ 576 Interest rate swaps — 248 — 248 $ — $ 248 $ 576 $ 824 The table below presents, for the three and nine months ended September 30, 2017 and 2016, the changes in Level 3 assets and liabilities that are measured at fair value on a recurring basis. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (in thousands) Assets: Derivative and Forward Loan Sale Commitments: Balance at beginning of period $ 1,994 $ 4,381 $ 2,722 $ 1,661 Total gains (losses) included in net income (1) (67) (622) (795) 2,098 Balance at end of period $ 1,927 $ 3,759 $ 1,927 $ 3,759 Changes in unrealized gains relating to instruments at period end $ 1,927 $ 3,759 $ 1,927 $ 3,759 Liabilities: Derivative and Forward Loan Sale Commitments: Balance at beginning of period $ (238) $ (2,141) $ (576) $ (89) Total gains (losses) included in net income (1) 17 1,178 355 (874) Balance at end of period $ (221) $ (963) $ (221) $ (963) Changes in unrealized losses relating to instruments at period end $ (221) $ (963) $ (221) $ (963) (1) Included in mortgage banking income on the Consolidated Statements of Net Income. Assets Measured at Fair Value on a Non-recurring Basis The Company may also be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no liabilities measured at fair value on a non-recurring basis at September 30, 2017 and December 31, 2016. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets. September 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 (in thousands) Impaired loans $ — $ — $ 3,490 $ — $ — $ 2,548 Other real estate owned and repossessed assets — — 1,021 — — 1,767 $ — $ — $ 4,511 $ — $ — $ 4,315 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 September 30, 2017 and December 31, 2016, respectively. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (in thousands) Impaired loans $ 444 $ 492 $ 525 $ 821 Other real estate owned and repossessed assets 11 78 58 238 $ 455 $ 570 $ 583 $ 1,059 Losses applicable to write-downs of impaired loans and other real estate owned and repossessed assets are based on the appraised value of the underlying collateral less estimated costs to sell. The losses on impaired loans are not recorded directly as an adjustment to current earnings, but rather as a component in determining the allowance for loan losses. The losses on other real estate owned and repossessed assets represent adjustments in valuation recorded during the time period indicated and not for losses incurred on sales. Appraised values are typically based on a blend of (a) an income approach using observable cash flows to measure fair value, and (b) a market approach using observable market comparables. These appraised values may be discounted based on management’s historical knowledge, expertise or changes in market conditions from time of valuation. 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. September 30, 2017 Carrying Fair Value Amount Level 1 Level 2 Level 3 Total (in thousands) Financial assets: Cash and cash equivalents $ 94,805 $ 94,805 $ — $ — $ 94,805 Securities available for sale 166,122 — 166,122 — 166,122 Securities held to maturity 47,752 — 48,947 — 48,947 Federal Home Loan Bank stock 16,356 — — 16,356 16,356 Loans held for sale 96,201 — 96,201 — 96,201 Loans, net 2,104,576 — — 2,123,695 2,123,695 Retirement plan annuities 12,381 — — 12,381 12,381 Mortgage servicing rights 20,376 — 20,376 — 20,376 Accrued interest receivable 5,959 — 5,959 — 5,959 Financial liabilities: Deposits 2,003,545 — — 2,002,218 2,002,218 Borrowed funds 276,366 — 276,531 — 276,531 Mortgagors' escrow accounts 5,530 — — 5,530 5,530 Accrued interest payable 554 — 554 — 554 Derivative loan commitments: Assets 1,583 — — 1,583 1,583 Liabilities 16 — — 16 16 Interest rate swap agreements: Assets 2,483 — 2,483 — 2,483 Liabilities 2,483 — 2,483 — 2,483 Forward loan sale commitments: Assets 344 — — 344 344 Liabilities 205 — — 205 205 December 31, 2016 Carrying Fair Value Amount Level 1 Level 2 Level 3 Total (in thousands) Financial assets: Cash and cash equivalents $ 50,215 $ 50,215 $ — $ — $ 50,215 Securities available for sale 136,469 — 136,469 — 136,469 Securities held to maturity 47,877 — 48,972 — 48,972 Federal Home Loan Bank stock 15,749 — — 15,749 15,749 Mortgage loans held for sale 86,443 — 86,443 — 86,443 Loans, net 1,981,747 — — 2,007,394 2,007,394 Retirement plan annuities 12,044 — — 12,044 12,044 Mortgage servicing rights 20,333 — 20,333 — 20,333 Accrued interest receivable 5,603 — 5,603 — 5,603 Financial liabilities: Deposits 1,804,753 — — 1,806,926 1,806,926 Borrowed funds 275,119 — 276,741 — 276,741 Mortgagors' escrow accounts 5,034 — — 5,034 5,034 Accrued interest payable 545 — 545 — 545 Derivative loan commitments: Assets 2,231 — — 2,231 2,231 Interest rate swap agreements: Assets 248 — 248 — 248 Liabilities 248 — 248 — 248 Forward loan sale commitments: Assets 491 — — 491 491 Liabilities 576 — — 576 576 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 15. Basic EPS represents net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the period. Unvested restricted shares are participating securities and included in the computation of basic earnings per share. 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. Unallocated ESOP shares are not deemed outstanding for EPS calculations. Three Months Ended September 30, 2017 2016 Net income applicable to common stock (in thousands) $ 2,838 $ 3,552 Average number of common shares outstanding 32,391,588 32,120,880 Less: Average unallocated ESOP shares (1,088,307) (1,177,072) Average number of common shares outstanding used to calculate basic earnings per common share 31,303,281 30,943,808 Common stock equivalents — — Average number of common shares outstanding used to calculate diluted earnings per common share 31,303,281 30,943,808 Earnings per common share: Basic $ 0.09 $ 0.11 Diluted $ 0.09 $ 0.11 Nine Months Ended September 30, 2017 Net income applicable to common stock (in thousands) $ 8,786 Average number of common shares outstanding 32,212,107 Less: Average unallocated ESOP shares (1,103,003) Average number of common shares outstanding used to calculate basic earnings per common share 31,109,104 Common stock equivalents — Average number of common shares outstanding used to calculate diluted earnings per common share 31,109,104 Earnings per common share: Basic $ 0.28 Diluted $ 0.28 Stock options for 1,326,063 shares of common stock for the three and nine month periods ended September 30, 2017 were not considered in computing diluted earnings per share because they were antidilutive. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2017 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | 16. The Company has two reportable segments: HarborOne Bank and Merrimack Mortgage. Revenue from HarborOne Bank consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Revenue from Merrimack 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. Information about the reportable segments and reconciliation to the unaudited interim Consolidated Financial Statements at September 30, 2017 and 2016 and for the three and nine months then ended is presented in the tables below. Merrimack Mortgage was acquired in July 2015. Three Months Ended September 30, 2017 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (In thousands) Net interest and dividend income $ 18,731 $ 487 $ 51 $ — $ 19,269 Provision for loan losses 921 — — — 921 Net interest income, after provision for loan losses 17,810 487 51 — 18,348 Mortgage banking income: Changes in mortgage servicing rights fair value (170) (318) — — (488) Other 834 10,237 — — 11,071 Total mortgage banking income 664 9,919 — — 10,583 Other noninterest income 4,034 10 — — 4,044 Total noninterest income 4,698 9,929 — — 14,627 Noninterest expense 18,716 9,457 265 — 28,438 Income (loss) before income taxes 3,792 959 (214) — 4,537 Provision (benefit) for income taxes 1,393 392 (86) — 1,699 Net income (loss) $ 2,399 $ 567 $ (128) $ — $ 2,838 Nine Months Ended September 30, 2017 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (in thousands) Net interest and dividend income $ 53,573 $ 1,251 $ 92 $ — $ 54,916 Provision for loan losses 1,656 — — — 1,656 Net interest income, after provision for loan losses 51,917 1,251 92 — 53,260 Mortgage banking income: Changes in mortgage servicing rights fair value (723) (1,259) — — (1,982) Other 2,476 27,641 — — 30,117 Total mortgage banking income 1,753 26,382 — — 28,135 Other noninterest income 12,226 19 — — 12,245 Total noninterest income 13,979 26,401 — — 40,380 Noninterest expense 53,931 25,420 370 — 79,721 Income (loss) before income taxes 11,965 2,232 (278) — 13,919 Provision (benefit) for income taxes 4,342 902 (111) — 5,133 Net income (loss) $ 7,623 $ 1,330 $ (167) $ — $ 8,786 Total assets at period end $ 2,591,620 $ 133,534 $ 340,930 $ (406,625) $ 2,659,459 Goodwill at period end $ 3,186 $ 10,179 $ — $ — $ 13,365 Three Months Ended September 30, 2016 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (In thousands) Net interest and dividend income $ 15,302 $ 600 $ — $ — $ 15,902 Provision for loan losses 1,710 — — — 1,710 Net interest income, after provision for loan losses 13,592 600 — — 14,192 Mortgage banking income: Changes in mortgage servicing rights fair value 155 196 — — 351 Other 1,336 15,177 — — 16,513 Total mortgage banking income 1,491 15,373 — — 16,864 Other noninterest income 3,996 9 — — 4,005 Total noninterest income 5,487 15,382 — — 20,869 Noninterest expense 16,594 12,937 78 — 29,609 Income (loss) before income taxes 2,485 3,045 (78) — 5,452 Provision (benefit) for income taxes 739 1,219 (58) — 1,900 Net income (loss) $ 1,746 $ 1,826 $ (20) $ — $ 3,552 Nine Months Ended September 30, 2016 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (in thousands) Net interest and dividend income $ 43,078 $ 1,362 $ — $ — $ 44,440 Provision for loan losses 2,716 — — — 2,716 Net interest income, after provision for loan losses 40,362 1,362 — — 41,724 Mortgage banking income: Changes in mortgage servicing rights fair value (1,227) (2,873) — — (4,100) Other 3,607 36,118 — — 39,725 Total mortgage banking income 2,380 33,245 — — 35,625 Other noninterest income 12,189 5 — — 12,194 Total noninterest income 14,569 33,250 — — 47,819 Noninterest expense 50,173 30,264 4,898 — 85,335 Income (loss) before income taxes 4,758 4,348 (4,898) — 4,208 Provision (benefit) for income taxes 1,456 1,740 (1,983) — 1,213 Net income (loss) $ 3,302 $ 2,608 $ (2,915) $ — $ 2,995 Total assets at period end $ 2,340,199 $ 140,152 $ 325,915 $ (459,133) $ 2,347,133 Goodwill at period end $ 3,186 $ 10,179 $ — $ — $ 13,365 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 17. SUBSEQUENT EVENTS On October 27, 2017, the Company announced that its Board of Directors has adopted a share repurchase program. Under the share repurchase program, the Company may repurchase up to 1,633,115 shares of its common stock, or approximately 5% of its current issued and outstanding shares. On October 12, 2017, the earn-out agreement with Merrimack Mortgage was negotiated and settled in full. The excess of the recorded contingent consideration liability in the amount of $1.2 million was reversed through earnings. |
SUMMARY OF SIGNIFICANT ACCOUN27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Bais of Presentation and Consolidation | Basis of Presentation and Consolidation The unaudited interim Consolidated Financial Statements of HarborOne Bancorp, Inc. (the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by the U.S. generally accepted accounting principles (“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 year ended December 31, 2016 and 2015 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 formed on July 13, 2016 and HarborOne Bank (the “Bank”); and the Bank’s wholly-owned subsidiaries. The Bank’s subsidiaries consist of a mortgage company and two security corporations. Merrimack Mortgage Company, LLC (“Merrimack Mortgage”) was acquired and became a wholly-owned subsidiary of the Bank on July 1, 2015. The security corporations were established for the purpose of buying, holding and selling securities on their own behalf. All significant intercompany balances and transactions have been eliminated in consolidation. |
Stock Conversion | Stock Conversion On June 29, 2016, the Bank reorganized into a two-tier mutual holding company structure with a mid-tier stock holding company. The Company sold 14,454,396 shares of common stock at $10.00 per share, including 1,187,188 shares purchased by the Company’s Employee Stock Ownership Plan (“ESOP”). In addition, the Company issued 17,281,034 shares to HarborOne Mutual Bancshares, a mutual holding company (the “MHC”) and 385,450 shares to The HarborOne Foundation, a charitable foundation formed in connection with the stock offering and dedicated to supporting charitable organizations operating in the Bank’s local community. A total of 32,120,880 shares of common stock were outstanding following the completion of the stock offering. The direct costs of the Company’s stock offering of $3.9 million were deferred and deducted from the proceeds of the offering. Upon the completion of the stock offering, a special “liquidation account” was established for the benefit of certain depositors of the Bank in an amount equal to the percentage ownership interest in the equity of the Company held by persons other than the MHC as of the date of the latest balance sheet contained in the prospectus. The Company is not permitted to pay dividends on its capital stock if the Company’s shareholders’ equity would be reduced below the amount of the liquidation account. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases in an eligible account holder’s qualifying deposits will not restore such holder’s interest in the liquidation account. |
Nature of Operations | Nature of Operations The Company provides a variety of financial services to individuals and businesses through its fourteen full-service and two limited-service bank offices in eastern Massachusetts, a commercial lending office in Providence, Rhode Island, and a loan office in Westford, Massachusetts. Merrimack Mortgage maintains 33 offices in Massachusetts, New Hampshire, and Maine, and is also licensed to lend in seven 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 and consumer loans, including indirect automobile lending. The Company also originates, sells and services residential mortgage loans primarily through Merrimack Mortgage. |
Use of Estimates | Use of Estimates In preparing unaudited interim Consolidated Financial Statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuations of mortgage servicing rights, derivatives, goodwill and deferred tax assets. |
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed and generally do not exceed the time frame provided in the FDIC’s Uniform Retail Credit Classification and Account Management Policy. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, allocated and unallocated components, as further described below. General component The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the Company’s loan segments. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment except commercial real estate and commercial loans. Due to the lack of historical loss experience for our commercial real estate and commercial loan portfolio, we utilize peer loss data. Adjustments to this historical loss factor are considered for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during 2016 or the nine months ended September 30, 2017. The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows: Residential real estate – The Company generally does not originate portfolio loans with a loan-to-value ratio greater than 80 percent without obtaining private mortgage insurance and does not generally grant loans that would be classified as subprime upon origination. The Company generally has first or second liens on property securing equity lines of credit. Loans in this segment are generally collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, can have an effect on the credit quality in this segment. Commercial real estate – Loans in this segment are primarily secured by income-producing properties in southeastern New England. The underlying cash flows generated by the properties can be adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, could have an effect on the credit quality in this segment. Management obtains rent rolls annually and continually monitors the cash flows of these loans. Construction – Loans in this segment include both residential and commercial construction loans. Residential construction loans include loans to build one- to four-family owner-occupied properties, which are subject to the same credit quality factors as residential real estate loans. Commercial construction loans may include speculative real estate development loans for which payment is derived from lease or sale of the property. Credit risk is affected by cost overruns, time to lease or sell at an adequate price, and market conditions. Commercial – Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality in this segment. Consumer – Loans in this segment are generally secured by automobiles or unsecured and repayment is dependent on the credit quality of the individual borrower. Allocated component The allocated component relates to loans that are classified as impaired. Residential real estate, commercial, commercial real estate and construction loans are evaluated for impairment on a loan-by-loan basis. Impairment is determined by nonaccrual status, whether a loan is subject to a troubled debt restructuring agreement or in the case of certain loans, based on the internal credit rating. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, except for troubled debt restructuring (“TDR”), the Company does not separately identify individual consumer loans for impairment evaluation. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are initially classified as impaired. Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. Unallocated component The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. Additionally the Company's unseasoned commercial portfolio and use of peer group data to establish general reserves for the commercial portfolio adds another element of risk to management's estimates. |
Stock-based Compensation Plans | Stock-based Compensation Plans The Company’s stock-based compensation plans provide for awards of stock options, restricted stock and other stock-based compensation to directors, officers and employees. The cost of employee services received in exchange for awards of equity instruments is based on the grant-date fair value of those awards. Compensation cost is recognized over the requisite service period as a component of compensation expense. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. The Company has elected to early adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . Under this Update, the Company has elected to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the employee leaves the Company or does not meet specific performance measures). |
Earnings Per Share | Earnings Per Share Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. The restricted stock awards are participating securities; therefore unvested awards are included as common shares outstanding in the computation of basic earnings per share. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options awards and are determined using the treasury stock method. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements As an “emerging growth company” as defined in Title 1 of the Jumpstart Our Business Startups (JOBS) Act, the Company has elected to use the extended transition period to delay the adoption of new or reissued accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As of September 30, 2017, there is no significant difference in the comparability of the financial statements as a result of this extended transition period. In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. This guidance changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line as the hedged item. This guidance also provides new alternatives for applying hedge accounting to additional hedging strategies, measuring the hedged item in fair value hedges of interest rate risk, reducing the complexity of applying hedge accounting by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method, and reducing the risk of material error corrections if a company applies the shortcut method inappropriately. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company does not have any derivatives within the scope of the ASU. In March 2017, the FASB issued ASU 2017-08, Receivables- Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The Company elected to early adopt this new accounting guidance effective January 1, 2017 and the adoption did not have a material impact on the Consolidated Financial Statements. In January 2017, FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This update changes the quantitative impairment test to require an entity to perform a one-step test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the amount of goodwill allocated to the reporting unit. This new guidance does not amend the optional qualitative assessment of goodwill impairment. For SEC filers, the ASU is effective for impairment tests in fiscal years beginning after December 15, 2019. For non-public business entities, the ASU is effective for impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for impairment tests performed on testing dates after January 1, 2017. The Company elected to early adopt this new accounting guidance effective October 1, 2017 and the adoption did not have an impact on the Consolidated Financial Statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) , which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. For public entities that are SEC filers, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For non-public entities, this ASU is effective for fiscal years beginning after December 15, 2020, and for interim periods within fiscal years beginning after December 15, 2021. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management has identified an implementation team that is in the process of developing an understanding of this pronouncement, evaluating the impact of this pronouncement and researching additional software resources that could assist with the implementation. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) . This update requires a lessee to record a right-to-use asset and a liability representing the obligation to make lease payments for long-term leases. For public business entities, this update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For non-public business entities, this update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2020. While we are currently evaluating the impact of the new standard, we expect an increase to the Consolidated Balance Sheets for right-of-use assets and associated lease liabilities but no material impact to the Consolidated Statement of Operations, for arrangements previously accounted for as operating leases. In January 2016, FASB issued ASU 2016-01, Financial Instruments – Overall, (Subtopic 825-10). The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Targeted improvements to generally accepted accounting principles include the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, the elimination of the requirement for non-public business entities to disclose the fair value of financial instruments measured at amortized cost and the elimination of the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For non-public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Management currently does not expect this to have a material impact on the Company's Consolidated Financial Statements as the Company does not currently hold any equity securities. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . The amendments in this update create Topic 606, Revenue from Contracts with Customers , and supersede the revenue recognition requirements in Topic 605, Revenue Recognition , including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle, a company should apply a five step approach to revenue recognition. For public business entities, this ASU is effective for annual reporting periods, including interim periods, beginning after December 15, 2017. For non-public business entities, this ASU is effective for annual reporting periods beginning after December 31, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early application is permitted, but only for annual reporting periods beginning after December 15, 2016. The Bank's primary source of revenue is interest income on financial assets and income from mortgage banking activities, which are explicitly excluded from the scope of the new guidance. As a result, adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. However, the Company will continue to monitor developments and additional guidance up to the effective date of these amendments. |
SECURITIES (Tables)
SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
SECURITIES | |
Schedule of securities with gross unrealized gains and losses | Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) September 30, 2017: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 9,984 $ — $ 100 $ 9,884 U.S. government-sponsored residential mortgage-backed securities 74,553 326 426 74,453 U.S. government-sponsored collateralized mortgage obligations 38,346 327 50 38,623 SBA asset-backed securities 43,106 136 80 43,162 Total securities available for sale $ 165,989 $ 789 $ 656 $ 166,122 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 18,157 $ 109 $ 139 $ 18,127 U.S. government-sponsored collateralized mortgage obligations 2,155 86 — 2,241 SBA asset-backed securities 2,992 — 8 2,984 Municipal bonds 24,448 1,147 — 25,595 Total securities held to maturity $ 47,752 $ 1,342 $ 147 $ 48,947 December 31, 2016: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 9,983 $ — $ 236 $ 9,747 U.S. government-sponsored residential mortgage-backed securities 55,730 — 883 54,847 U.S. government-sponsored collateralized mortgage obligations 38,926 339 82 39,183 SBA asset-backed securities 32,852 40 200 32,692 Total securities available for sale $ 137,491 $ 379 $ 1,401 $ 136,469 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 20,306 $ 115 $ 283 $ 20,138 U.S. government-sponsored collateralized mortgage obligations 2,528 117 — 2,645 Municipal bonds 25,043 1,146 — 26,189 Total securities held to maturity $ 47,877 $ 1,378 $ 283 $ 48,972 |
Schedule of debt securities by contractual maturity | Available for Sale Held to Maturity Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) After 5 years through 10 years $ 5,000 $ 4,967 $ 4,451 $ 4,603 Over 10 years 4,984 4,917 19,997 20,992 9,984 9,884 24,448 25,595 U.S. government-sponsored residential mortgage-backed securities 74,553 74,453 18,157 18,127 U.S. government-sponsored collateralized mortgage obligations 38,346 38,623 2,155 2,241 SBA asset-backed securities 43,106 43,162 2,992 2,984 Total $ 165,989 $ 166,122 $ 47,752 $ 48,947 |
Schedule of proceeds and gross realized gains and losses related to sales and calls of securities | Nine Months Ended September 30, 2017 2016 (in thousands) Sales Proceeds $ — $ 8,735 Gross gains — 242 Gross losses — — Calls Proceeds (1) $ 400 $ 15,725 Gross gains — 41 Gross losses — — (1) September 30, 2017 proceeds from calls consists of one held to maturity security. |
Schedule of securities with continuous losses | Less Than Twelve Months Twelve Months and Over Gross Gross Unrealized Fair Unrealized Fair Losses Value Losses Value (in thousands) September 30, 2017: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 100 $ 9,884 $ — $ — U.S. government-sponsored residential mortgage-backed securities 286 20,278 140 10,922 U.S. government-sponsored collateralized mortgage obligations 50 6,808 — — SBA asset-backed securities 80 22,084 — — $ 516 $ 59,054 $ 140 $ 10,922 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 139 $ 15,830 $ — $ — SBA asset-backed securities 8 2,984 — — $ 147 $ 18,814 $ — $ — December 31, 2016: Securities available for sale U.S. government and government-sponsored enterprise obligations $ 236 $ 9,747 $ — $ — U.S. government-sponsored residential mortgage-backed securities 712 43,684 171 11,163 U.S. government-sponsored collateralized mortgage obligations 82 7,779 — — SBA asset-backed securities 200 26,153 — — $ 1,230 $ 87,363 $ 171 $ 11,163 Securities held to maturity U.S. government-sponsored residential mortgage-backed securities $ 283 $ 17,526 $ — $ — |
LOANS - (Tables)
LOANS - (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
LOANS | |
Summary of balances of loans | September 30, December 31, 2017 2016 (in thousands) Residential real estate: One- to four-family $ 678,684 $ 677,946 Second mortgages and equity lines of credit 90,734 92,989 Commercial real estate 623,054 495,801 Construction 76,668 58,443 Total mortgage loans on real estate 1,469,140 1,325,179 Commercial 111,627 100,501 Consumer loans: Auto 518,759 547,400 Personal 14,948 15,704 Total consumer loans 533,707 563,104 Total loans 2,114,474 1,988,784 Allowance for loan losses (17,933) (16,968) Net deferred loan costs 8,035 9,931 Loans, net $ 2,104,576 $ 1,981,747 |
Schedule of activity in allowance for loan losses and allocation of allowance to loan segments | The following is the activity in the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016: Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) Balance at June 30, 2017 $ 4,434 $ 7,075 $ 936 $ 2,114 $ 1,033 $ 1,589 $ 17,181 Provision (credit) for loan losses (27) 372 162 346 160 (92) 921 Charge-offs — — — — (230) — (230) Recoveries 10 — — — 51 — 61 Balance at September 30, 2017 $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 Balance at June 30, 2016 $ 5,619 $ 5,359 $ 587 $ 1,164 $ 794 $ 916 $ 14,439 Provision (credit) for loan losses (253) 1,156 49 458 237 63 1,710 Charge-offs (123) — — (22) (272) — (417) Recoveries 61 — — 5 34 — 100 Balance at September 30, 2016 $ 5,304 $ 6,515 $ 636 $ 1,605 $ 793 $ 979 $ 15,832 Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) Balance at December 31, 2016 $ 4,963 $ 7,150 $ 924 $ 1,920 $ 780 $ 1,231 $ 16,968 Provision (credit) for loan losses (559) 297 174 658 820 266 1,656 Charge-offs (144) — — (134) (790) — (1,068) Recoveries 157 — — 16 204 — 377 Balance at September 30, 2017 $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 Balance at December 31, 2015 $ 5,816 $ 4,365 $ 581 $ 1,454 $ 830 $ 654 $ 13,700 Provision (credit) for loan losses (521) 2,150 55 170 537 325 2,716 Charge-offs (250) — — (27) (729) — (1,006) Recoveries 259 — — 8 155 — 422 Balance at September 30, 2016 $ 5,304 $ 6,515 $ 636 $ 1,605 $ 793 $ 979 $ 15,832 Allocation of the allowance to loan segments at September 30, 2017 and December 31, 2016 follows: Mortgage Loans Commercial Residential Real Estate Construction Commercial Consumer Unallocated Total (in thousands) September 30, 2017: Loans: Impaired loans $ 36,885 $ — $ 131 $ 3,885 $ — $ — $ 40,901 Non-impaired loans 732,533 623,054 76,537 107,742 533,707 — 2,073,573 Total loans $ 769,418 $ 623,054 $ 76,668 $ 111,627 $ 533,707 $ — $ 2,114,474 Allowance for loan losses: Impaired loans $ 1,286 $ — $ — $ 906 $ — $ — $ 2,192 Non-impaired loans 3,131 7,447 1,098 1,554 1,014 1,497 15,741 Total allowance for loan losses $ 4,417 $ 7,447 $ 1,098 $ 2,460 $ 1,014 $ 1,497 $ 17,933 December 31, 2016: Loans: Impaired loans $ 43,012 $ — $ 134 $ 2,936 $ — $ — $ 46,082 Non-impaired loans 727,923 495,801 58,309 97,565 563,104 — 1,942,702 Total loans $ 770,935 $ 495,801 $ 58,443 $ 100,501 $ 563,104 $ — $ 1,988,784 Allowance for loan losses: Impaired loans $ 1,624 $ — $ — $ 499 $ — $ — $ 2,123 Non-impaired loans 3,339 7,150 924 1,421 780 1,231 14,845 Total allowance for loan losses $ 4,963 $ 7,150 $ 924 $ 1,920 $ 780 $ 1,231 $ 16,968 |
Summary of past due and non-accrual loans | 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) September 30, 2017 Residential real estate: One- to four-family $ 407 $ 4,351 $ 5,404 $ 10,162 $ 14,326 Second mortgages and equity lines of credit 347 122 375 844 1,200 Construction — — — — 131 Commercial 208 — 15 223 3,631 Consumer: Auto 1,374 318 286 1,978 286 Personal 44 28 29 101 32 Total $ 2,380 $ 4,819 $ 6,109 $ 13,308 $ 19,606 December 31, 2016 Residential real estate: One- to four-family $ 4,955 $ 1,873 $ 7,964 $ 14,792 $ 16,456 Second mortgages and equity lines of credit 588 190 724 1,502 1,686 Construction — — 134 134 134 Commercial 55 — 387 442 2,674 Consumer: Auto 1,978 297 150 2,425 205 Personal 103 41 23 167 25 Total $ 7,679 $ 2,401 $ 9,382 $ 19,462 $ 21,180 |
Schedule of information pertaining to impaired loans | September 30, 2017 December 31, 2016 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance (in thousands) Impaired loans without a valuation allowance: Residential $ 14,316 $ 15,047 $ — $ 17,000 $ 18,031 $ — Construction 131 131 — 134 134 — Commercial — — — 173 301 — Total $ 14,447 $ 15,178 $ — $ 17,307 $ 18,466 $ — Impaired loans with a valuation allowance: Residential $ 22,569 $ 27,016 $ 1,286 $ 26,012 $ 27,204 $ 1,624 Commercial 3,885 3,983 906 2,763 2,763 499 Total $ 26,454 $ 30,999 $ 2,192 $ 28,775 $ 29,967 $ 2,123 Three Months Ended September 30, 2017 2016 Interest Interest Average Interest Income Average Interest Income Recorded Income Recognized Recorded Income Recognized Investment Recognized on Cash Basis Investment Recognized on Cash Basis (in thousands) Residential $ 38,114 $ 494 $ 384 $ 47,480 $ 616 $ 284 Commercial real estate — — — — — — Construction 131 2 2 134 — — Commercial 3,896 5 4 3,033 10 10 Total $ 42,141 $ 501 $ 390 $ 50,647 $ 626 $ 294 Nine Months Ended September 30, 2017 2016 Interest Interest Average Interest Income Average Interest Income Recorded Income Recognized Recorded Income Recognized Investment Recognized on Cash Basis Investment Recognized on Cash Basis (in thousands) Residential $ 40,087 $ 1,721 $ 1,382 $ 49,517 $ 2,021 $ 1,029 Commercial real estate — — — 242 — — Construction 132 10 10 135 7 7 Commercial 3,770 62 61 1,779 54 54 Total $ 43,989 $ 1,793 $ 1,453 $ 51,673 $ 2,082 $ 1,090 |
Summary of troubled debt restructurings that were modified | Pre-Modification Post-Modification Outstanding Outstanding Number of Recorded Recorded Contracts Investment Investment (dollars in thousands) Three Months Ended September 30, 2017 Residential 1 $ 54 $ 54 Nine Months Ended September 30, 2017 Residential 2 $ 363 $ 363 Commercial 2 1,578 1,578 4 $ 1,941 $ 1,941 Nine Months Ended September 30, 2016 Residential 2 $ 196 $ 232 |
Schedule of loans by risk rating | September 30, 2017 December 31, 2016 Commercial Commercial Real Estate Commercial Construction Real Estate Commercial Construction (in thousands) Loans rated 1 - 6 $ 619,989 $ 107,196 $ 63,914 $ 492,473 $ 97,566 $ 43,518 Loans rated 7 — 800 — — 261 — Loans rated 8 — 3,591 — — 2,287 — Loans rated 9 — 40 — — 387 — Loans rated 10 — — — — — — Loans not rated 3,065 — 12,754 3,328 — 14,925 $ 623,054 $ 111,627 $ 76,668 $ 495,801 $ 100,501 $ 58,443 |
MORTGAGE LOAN SERVICING (Tables
MORTGAGE LOAN SERVICING (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
MORTGAGE LOAN SERVICING | |
Tabular disclosure of assumptions used in the calculation of fair value of MSR | September 30, December 31, 2017 2016 Prepayment speed 10.29 % 9.49 % Discount rate 9.26 9.25 Default rate 2.02 1.71 |
Schedule of summarized changes to mortgage servicing rights | The following summarizes changes to mortgage servicing rights for the nine months ended September 30, 2017 and 2016: Nine Months Ended September 30, 2017 2016 (in thousands) Balance, beginning of period $ 20,333 $ 12,958 Additions from loans sold with servicing retained 2,025 6,676 Changes in fair value due to : Reductions from loans paid off during the period (1,138) (1,229) Changes in valuation inputs or assumptions (844) (2,871) Balance, end of period $ 20,376 $ 15,534 |
DEPOSITS (Tables)
DEPOSITS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
DEPOSITS | |
Summary of deposit balances, by type | September 30, December 31, 2017 2016 (in thousands) NOW and demand deposit accounts $ 395,728 $ 365,869 Regular savings and club accounts 404,465 316,947 Money market deposit accounts 666,613 595,211 Total non-certificate accounts 1,466,806 1,278,027 Term certificate accounts greater than $250,000 91,862 81,064 Term certificate accounts less than or equal to $250,000 371,750 391,617 Brokered deposits 73,127 54,045 Total certificate accounts 536,739 526,726 Total deposits $ 2,003,545 $ 1,804,753 |
Summary of certificate accounts by maturity | Weighted Average Amount Rate (dollars in thousands) Within 1 year $ 369,107 1.10 % Over 1 year to 2 years 108,905 1.44 Over 2 years to 3 years 28,920 1.50 Over 3 years to 4 years 21,736 1.57 Over 4 years to 5 years 8,071 1.41 $ 536,739 1.21 % |
BORROWED FUNDS (Tables)
BORROWED FUNDS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
BORROWED FUNDS | |
Schedule of borrowed funds by maturity and call date | September 30, 2017 December 31, 2016 Weighted Weighted Scheduled Average Scheduled Average Maturity Rate Maturity Rate (dollars in thousands) Year ending December 31: 2017 $ 25,000 4.17 % $ 40,000 4.22 % 2018 111,250 1.47 50,000 2019 60,000 1.66 35,000 2020 50,000 1.84 50,000 2021 20,000 1.79 20,000 2022 and thereafter* 116 2.94 119 2.96 $ 266,366 1.86 % $ 195,119 % * Includes an amortizing advance requiring monthly principal and interest payments of $1,000. |
OTHER COMMITMENTS AND CONTING33
OTHER COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
OTHER COMMITMENTS AND CONTINGENCIES | |
Schedule of financial instruments with off-balance sheet credit risk | September 30, December 31, 2017 2016 (in thousands) Commitments to grant loans $ 99,062 $ 75,914 Unadvanced funds on home equity lines of credit 79,410 82,797 Unadvanced funds on revolving lines of credit 65,676 58,238 Unadvanced funds on construction loans 116,766 49,999 |
DERIVATIVES (Tables)
DERIVATIVES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
DERIVATIVES | |
Schedule of the fair values of derivative instruments in the balance sheet | Assets Liabilities Balance Balance Notional Sheet Fair Sheet Fair Amount Location Value Location Value (in thousands) September 30, 2017: Derivative loan commitments $ 122,200 Other assets $ 1,583 Other liabilities $ 16 Forward loan sale commitments 162,360 Other assets 344 Other liabilities 205 Interest rate swaps 248,887 Other assets 2,483 Other liabilities 2,483 Risk participation agreements 43,037 Other assets — Other liabilities — Total $ 4,410 $ 2,704 December 31, 2016: Derivative loan commitments $ 87,728 Other assets $ 2,231 Other liabilities $ — Forward loan sale commitments 167,289 Other assets 491 Other liabilities 576 Interest rate swaps 173,477 Other assets 248 Other liabilities 248 Total $ 2,970 $ 824 |
Schedule of information pertaining to the Company's derivative instruments on the statements of income | Amount of Gain (Loss) Three Months Ended September 30, Nine Months Ended September 30, Location of Gain (Loss) 2017 2016 2017 2016 (in thousands) Derivative loan commitments Mortgage banking income $ 30 $ (649) $ 430 $ 2,442 Forward loan sale commitments Mortgage banking income (80) 1,205 (870) (1,218) Total $ (50) $ 556 $ (440) $ 1,224 |
COMPENSATION AND BENEFIT PLANS
COMPENSATION AND BENEFIT PLANS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
COMPENSATION AND BENEFIT PLANS | |
Schedule of share information held by the ESOP | September 30, 2017 December 31, 2016 Allocated shares 59,359 — Shares committed to be allocated 44,520 59,359 Unallocated shares 1,083,309 1,127,829 Total shares 1,187,188 1,187,188 Fair value of unallocated shares $ 20,377,000 $ 21,812,000 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
STOCK-BASED COMPENSATION | |
Schedule of stock options, valuation assumptions | The Company made the following awards of options to purchase shares of common stock in 2017: Date of grant August 16, 2017 Options granted 1,326,063 Vesting period (years) 3 Expiration date August 16, 2027 Expected volatility 24 % Expected life (years) 6 Expected dividend yield — % Risk free interest rate 1.88 % Fair value per option $ |
Schedule of stock option activity | Weighted Average Weighted Remaining Aggregate Stock Option Average Contractual Intrinsic Options Awards Exercise Price Term (years) Value Balance at January 1, 2017 — $ — — $ — Granted 1,326,063 18.35 609,989 Balance at September 30, 2017 1,326,063 $ 18.35 $ 609,989 Exercisable at September 30, 2017 — $ — — $ — Unrecognized compensation cost $ 6,437,000 Weighted average remaining recognition period (years) 2.88 |
Schedule of non-vested stock award activity | Outstanding Restricted Weighted Average Stock Awards Grant Price Non-vested stock awards at January 1, 2017 — $ — Granted 541,415 18.35 Non-vested stock awards at September 30, 2017 541,415 $ 18.35 Unrecognized compensation cost inclusive of directors' fees $ 9,518,000 Weighted average remaining recognition period (years) 2.88 |
MINIMUM REGULATORY CAPITAL RE37
MINIMUM REGULATORY CAPITAL REQUIREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
MINIMUM REGULATORY CAPITAL REQUIREMENTS | |
Summary of bank's actual capital levels and minimum required levels | 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. September 30, 2017 Common equity Tier 1 capital to risk-weighted assets $ 327,523 15.5 % $ 94,890 4.5 % N/A N/A Tier 1 capital to risk-weighted assets 327,523 15.5 126,520 6.0 N/A N/A Total capital to risk-weighted assets 345,456 16.4 168,693 8.0 N/A N/A Tier 1 capital to average assets 327,523 12.5 104,711 4.0 N/A N/A December 31, 2016 Common equity Tier 1 capital to risk-weighted assets $ 317,185 16.2 % $ 88,320 4.5 % N/A N/A Tier 1 capital to risk-weighted assets 317,185 16.2 117,760 6.0 N/A N/A Total capital to risk-weighted assets 334,153 17.0 157,014 8.0 N/A N/A Tier 1 capital to average assets 317,185 13.2 95,796 4.0 N/A N/A HarborOne Bank September 30, 2017 Common equity Tier 1 capital to risk-weighted assets $ 244,104 11.6 % $ 94,884 4.5 % $ 137,055 6.5 % Tier 1 capital to risk-weighted assets 244,104 11.6 126,512 6.0 168,683 8.0 Total capital to risk-weighted assets 262,037 12.4 168,683 8.0 210,853 10.0 Tier 1 capital to average assets 244,104 9.5 102,042 4.0 127,552 5.0 December 31, 2016 Common equity Tier 1 capital to risk-weighted assets $ 234,655 12.0 % $ 88,201 4.5 % $ 127,402 6.5 % Tier 1 capital to risk-weighted assets 234,655 12.0 117,602 6.0 156,802 8.0 Total capital to risk-weighted assets 251,623 12.8 156,802 8.0 196,003 10.0 Tier 1 capital to average assets 234,655 9.9 95,178 4.0 118,973 5.0 |
COMPREHENSIVE INCOME (LOSS) (Ta
COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
COMPREHENSIVE INCOME (LOSS) | |
Schedule of components of accumulated other comprehensive loss | September 30, December 31, 2017 2016 (in thousands) Securities available for sale: Net unrealized gain (loss) $ 133 $ (1,022) Related tax effect (46) 357 Net-of-tax amount 87 (665) Directors' retirement plan: Prior service cost (835) (1,016) Related tax effect 333 391 Net-of-tax amount (502) (625) Total accumulated other comprehensive loss $ (415) $ (1,290) |
Summary of components of OCI | Three Months Ended September 30, 2017 2016 Unrealized Gains Unrealized Gains and Losses on Director's and Losses on Director's Available-for-Sale Retirement Available-for-Sale Retirement Securities Plan Total Securities Plan Total (in thousands) Balance at beginning of period $ (30) $ (538) $ (568) $ 1,671 $ (660) $ 1,011 Other comprehensive income before reclassifications 180 — 180 (504) — (504) Amounts reclassified from accumulated other comprehensive income — 60 60 — 59 59 Net current period other comprehensive income 180 60 240 (504) 59 (445) Related tax effect (63) (24) (87) 175 (23) 152 Balance at end of period $ 87 $ (502) $ (415) $ 1,342 $ (624) $ 718 Nine Months Ended September 30, 2017 2016 Unrealized Gains Unrealized Gains and Losses on Directors' and Losses on Directors' Available-for-Sale Retirement Available-for-Sale Retirement Securities Plan Total Securities Plan Total (in thousands) Balance at beginning of period $ (665) $ (625) $ (1,290) $ 139 $ (731) $ (592) Other comprehensive income before reclassifications 1,155 — 1,155 2,131 — 2,131 Amounts reclassified from accumulated other comprehensive income — 181 181 (283) 176 (107) Net current period other comprehensive income 1,155 181 1,336 1,848 176 2,024 Related tax effect (403) (58) (461) (645) (69) (714) Balance at end of period $ 87 $ (502) $ (415) $ 1,342 $ (624) $ 718 |
FAIR VALUE OF ASSETS AND LIAB39
FAIR VALUE OF ASSETS AND LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
FAIR VALUE OF ASSETS AND LIABILITIES | |
Schedule of the fair value and unpaid principal of loans held for sale | September 30, December 31, 2017 2016 (in thousands) Loans held for sale, fair value $ 96,201 $ 86,443 Loans held for sale, contractual principal outstanding 92,981 85,024 Fair value less unpaid principal $ 3,220 $ 1,419 |
Schedule of assets and liabilities measured at fair value on a recurring basis | Total Level 1 Level 2 Level 3 Fair Value (in thousands) September 30, 2017 Assets Securities available for sale $ — $ 166,122 $ — $ 166,122 Loans held for sale — 96,201 — 96,201 Mortgage servicing rights — 20,376 — 20,376 Derivative loan commitments — — 1,583 1,583 Forward loan sale commitments — — 344 344 Interest rate swaps — 2,483 — 2,483 $ — $ 285,182 $ 1,927 $ 287,109 Liabilities Derivative loan commitments $ — $ — $ 16 $ 16 Forward loan sale commitments — — 205 205 Interest rate swaps — 2,483 — 2,483 $ — $ 2,483 $ 221 $ 2,704 December 31, 2016 Assets Securities available for sale $ — $ 136,469 $ — $ 136,469 Loans held for sale — 86,443 — 86,443 Mortgage servicing rights — 20,333 — 20,333 Derivative loan commitments — — 2,231 2,231 Forward loan sale commitments — — 491 491 Interest rate swaps — 248 — 248 $ — $ 243,493 $ 2,722 $ 246,215 Liabilities Forward loan sale commitments $ — $ — $ 576 $ 576 Interest rate swaps — 248 — 248 $ — $ 248 $ 576 $ 824 |
Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis | Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (in thousands) Assets: Derivative and Forward Loan Sale Commitments: Balance at beginning of period $ 1,994 $ 4,381 $ 2,722 $ 1,661 Total gains (losses) included in net income (1) (67) (622) (795) 2,098 Balance at end of period $ 1,927 $ 3,759 $ 1,927 $ 3,759 Changes in unrealized gains relating to instruments at period end $ 1,927 $ 3,759 $ 1,927 $ 3,759 Liabilities: Derivative and Forward Loan Sale Commitments: Balance at beginning of period $ (238) $ (2,141) $ (576) $ (89) Total gains (losses) included in net income (1) 17 1,178 355 (874) Balance at end of period $ (221) $ (963) $ (221) $ (963) Changes in unrealized losses relating to instruments at period end $ (221) $ (963) $ (221) $ (963) (1) Included in mortgage banking income on the Consolidated Statements of Net Income. |
Schedule of assets measured at fair value on a non-recurring basis | September 30, 2017 December 31, 2016 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 (in thousands) Impaired loans $ — $ — $ 3,490 $ — $ — $ 2,548 Other real estate owned and repossessed assets — — 1,021 — — 1,767 $ — $ — $ 4,511 $ — $ — $ 4,315 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 September 30, 2017 and December 31, 2016, respectively. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (in thousands) Impaired loans $ 444 $ 492 $ 525 $ 821 Other real estate owned and repossessed assets 11 78 58 238 $ 455 $ 570 $ 583 $ 1,059 |
Schedule of estimated fair values and related carrying amounts of financial instruments | September 30, 2017 Carrying Fair Value Amount Level 1 Level 2 Level 3 Total (in thousands) Financial assets: Cash and cash equivalents $ 94,805 $ 94,805 $ — $ — $ 94,805 Securities available for sale 166,122 — 166,122 — 166,122 Securities held to maturity 47,752 — 48,947 — 48,947 Federal Home Loan Bank stock 16,356 — — 16,356 16,356 Loans held for sale 96,201 — 96,201 — 96,201 Loans, net 2,104,576 — — 2,123,695 2,123,695 Retirement plan annuities 12,381 — — 12,381 12,381 Mortgage servicing rights 20,376 — 20,376 — 20,376 Accrued interest receivable 5,959 — 5,959 — 5,959 Financial liabilities: Deposits 2,003,545 — — 2,002,218 2,002,218 Borrowed funds 276,366 — 276,531 — 276,531 Mortgagors' escrow accounts 5,530 — — 5,530 5,530 Accrued interest payable 554 — 554 — 554 Derivative loan commitments: Assets 1,583 — — 1,583 1,583 Liabilities 16 — — 16 16 Interest rate swap agreements: Assets 2,483 — 2,483 — 2,483 Liabilities 2,483 — 2,483 — 2,483 Forward loan sale commitments: Assets 344 — — 344 344 Liabilities 205 — — 205 205 December 31, 2016 Carrying Fair Value Amount Level 1 Level 2 Level 3 Total (in thousands) Financial assets: Cash and cash equivalents $ 50,215 $ 50,215 $ — $ — $ 50,215 Securities available for sale 136,469 — 136,469 — 136,469 Securities held to maturity 47,877 — 48,972 — 48,972 Federal Home Loan Bank stock 15,749 — — 15,749 15,749 Mortgage loans held for sale 86,443 — 86,443 — 86,443 Loans, net 1,981,747 — — 2,007,394 2,007,394 Retirement plan annuities 12,044 — — 12,044 12,044 Mortgage servicing rights 20,333 — 20,333 — 20,333 Accrued interest receivable 5,603 — 5,603 — 5,603 Financial liabilities: Deposits 1,804,753 — — 1,806,926 1,806,926 Borrowed funds 275,119 — 276,741 — 276,741 Mortgagors' escrow accounts 5,034 — — 5,034 5,034 Accrued interest payable 545 — 545 — 545 Derivative loan commitments: Assets 2,231 — — 2,231 2,231 Interest rate swap agreements: Assets 248 — 248 — 248 Liabilities 248 — 248 — 248 Forward loan sale commitments: Assets 491 — — 491 491 Liabilities 576 — — 576 576 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
EARNINGS PER SHARE | |
Schedule of basic and diluted earnings per share | Three Months Ended September 30, 2017 2016 Net income applicable to common stock (in thousands) $ 2,838 $ 3,552 Average number of common shares outstanding 32,391,588 32,120,880 Less: Average unallocated ESOP shares (1,088,307) (1,177,072) Average number of common shares outstanding used to calculate basic earnings per common share 31,303,281 30,943,808 Common stock equivalents — — Average number of common shares outstanding used to calculate diluted earnings per common share 31,303,281 30,943,808 Earnings per common share: Basic $ 0.09 $ 0.11 Diluted $ 0.09 $ 0.11 Nine Months Ended September 30, 2017 Net income applicable to common stock (in thousands) $ 8,786 Average number of common shares outstanding 32,212,107 Less: Average unallocated ESOP shares (1,103,003) Average number of common shares outstanding used to calculate basic earnings per common share 31,109,104 Common stock equivalents — Average number of common shares outstanding used to calculate diluted earnings per common share 31,109,104 Earnings per common share: Basic $ 0.28 Diluted $ 0.28 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
SEGMENT REPORTING | |
Summary of reportable segments | Three Months Ended September 30, 2017 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (In thousands) Net interest and dividend income $ 18,731 $ 487 $ 51 $ — $ 19,269 Provision for loan losses 921 — — — 921 Net interest income, after provision for loan losses 17,810 487 51 — 18,348 Mortgage banking income: Changes in mortgage servicing rights fair value (170) (318) — — (488) Other 834 10,237 — — 11,071 Total mortgage banking income 664 9,919 — — 10,583 Other noninterest income 4,034 10 — — 4,044 Total noninterest income 4,698 9,929 — — 14,627 Noninterest expense 18,716 9,457 265 — 28,438 Income (loss) before income taxes 3,792 959 (214) — 4,537 Provision (benefit) for income taxes 1,393 392 (86) — 1,699 Net income (loss) $ 2,399 $ 567 $ (128) $ — $ 2,838 Nine Months Ended September 30, 2017 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (in thousands) Net interest and dividend income $ 53,573 $ 1,251 $ 92 $ — $ 54,916 Provision for loan losses 1,656 — — — 1,656 Net interest income, after provision for loan losses 51,917 1,251 92 — 53,260 Mortgage banking income: Changes in mortgage servicing rights fair value (723) (1,259) — — (1,982) Other 2,476 27,641 — — 30,117 Total mortgage banking income 1,753 26,382 — — 28,135 Other noninterest income 12,226 19 — — 12,245 Total noninterest income 13,979 26,401 — — 40,380 Noninterest expense 53,931 25,420 370 — 79,721 Income (loss) before income taxes 11,965 2,232 (278) — 13,919 Provision (benefit) for income taxes 4,342 902 (111) — 5,133 Net income (loss) $ 7,623 $ 1,330 $ (167) $ — $ 8,786 Total assets at period end $ 2,591,620 $ 133,534 $ 340,930 $ (406,625) $ 2,659,459 Goodwill at period end $ 3,186 $ 10,179 $ — $ — $ 13,365 Three Months Ended September 30, 2016 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (In thousands) Net interest and dividend income $ 15,302 $ 600 $ — $ — $ 15,902 Provision for loan losses 1,710 — — — 1,710 Net interest income, after provision for loan losses 13,592 600 — — 14,192 Mortgage banking income: Changes in mortgage servicing rights fair value 155 196 — — 351 Other 1,336 15,177 — — 16,513 Total mortgage banking income 1,491 15,373 — — 16,864 Other noninterest income 3,996 9 — — 4,005 Total noninterest income 5,487 15,382 — — 20,869 Noninterest expense 16,594 12,937 78 — 29,609 Income (loss) before income taxes 2,485 3,045 (78) — 5,452 Provision (benefit) for income taxes 739 1,219 (58) — 1,900 Net income (loss) $ 1,746 $ 1,826 $ (20) $ — $ 3,552 Nine Months Ended September 30, 2016 HarborOne Merrimack HarborOne Bank Mortgage Bancorp, Inc. Eliminations Consolidated (in thousands) Net interest and dividend income $ 43,078 $ 1,362 $ — $ — $ 44,440 Provision for loan losses 2,716 — — — 2,716 Net interest income, after provision for loan losses 40,362 1,362 — — 41,724 Mortgage banking income: Changes in mortgage servicing rights fair value (1,227) (2,873) — — (4,100) Other 3,607 36,118 — — 39,725 Total mortgage banking income 2,380 33,245 — — 35,625 Other noninterest income 12,189 5 — — 12,194 Total noninterest income 14,569 33,250 — — 47,819 Noninterest expense 50,173 30,264 4,898 — 85,335 Income (loss) before income taxes 4,758 4,348 (4,898) — 4,208 Provision (benefit) for income taxes 1,456 1,740 (1,983) — 1,213 Net income (loss) $ 3,302 $ 2,608 $ (2,915) $ — $ 2,995 Total assets at period end $ 2,340,199 $ 140,152 $ 325,915 $ (459,133) $ 2,347,133 Goodwill at period end $ 3,186 $ 10,179 $ — $ — $ 13,365 |
SUMMARY OF SIGNIFICANT ACCOUN42
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ / shares in Units, $ in Thousands | Jun. 29, 2016USD ($)$ / sharesshares | Sep. 30, 2017companyitemstateshares | Sep. 30, 2016USD ($) | Dec. 31, 2016shares |
Number of security corporations | company | 2 | |||
Issuance of common stock (in shares) | 14,454,396 | |||
Shares issued (in dollars per share) | $ / shares | $ 10 | |||
Shares in ESOP | 1,187,188 | 1,187,188 | 1,187,188 | |
Common stock, shares outstanding | 32,120,880 | 32,622,295 | 32,120,880 | |
Offering costs | $ | $ 3,900 | $ 3,870 | ||
Number of full-service bank offices | item | 14 | |||
Number of limited-service bank offices | item | 2 | |||
Merrimack Mortgage | ||||
Number of offices | item | 33 | |||
Additional states licensed to lend | state | 7 | |||
HarborOne Mutual Bancshares | ||||
Issuance of common stock (in shares) | 17,281,034 | |||
HarborOne Foundation | ||||
Issuance of common stock (in shares) | 385,450 | |||
Residential | LTV 80 to 100 Percent | ||||
Loan To Value Ratio | 80.00% |
SECURITIES - Gross unrealized g
SECURITIES - Gross unrealized gains and losses (Details) $ in Thousands | Sep. 30, 2017USD ($)security | Dec. 31, 2016USD ($) |
Securities available for sale | ||
Amortized Cost | $ 165,989 | $ 137,491 |
Gross Unrealized Gains | 789 | 379 |
Gross Unrealized Losses | 656 | 1,401 |
Fair Value | 166,122 | 136,469 |
Securities held to maturity | ||
Amortized Cost | 47,752 | 47,877 |
Gross Unrealized Gains | 1,342 | 1,378 |
Gross Unrealized Losses | 147 | 283 |
Fair Value | $ 48,947 | 48,972 |
Number of securities pledged | security | 2 | |
Pledged as collateral | $ 5,900 | |
U.S. government and government-sponsored enterprise obligations | ||
Securities available for sale | ||
Amortized Cost | 9,984 | 9,983 |
Gross Unrealized Losses | 100 | 236 |
Fair Value | 9,884 | 9,747 |
U.S. government-sponsored residential mortgage-backed securities | ||
Securities available for sale | ||
Amortized Cost | 74,553 | 55,730 |
Gross Unrealized Gains | 326 | |
Gross Unrealized Losses | 426 | 883 |
Fair Value | 74,453 | 54,847 |
Securities held to maturity | ||
Amortized Cost | 18,157 | 20,306 |
Gross Unrealized Gains | 109 | 115 |
Gross Unrealized Losses | 139 | 283 |
Fair Value | 18,127 | 20,138 |
U.S. government-sponsored collateralized mortgage obligations | ||
Securities available for sale | ||
Amortized Cost | 38,346 | 38,926 |
Gross Unrealized Gains | 327 | 339 |
Gross Unrealized Losses | 50 | 82 |
Fair Value | 38,623 | 39,183 |
Securities held to maturity | ||
Amortized Cost | 2,155 | 2,528 |
Gross Unrealized Gains | 86 | 117 |
Fair Value | 2,241 | 2,645 |
SBA asset-backed securities | ||
Securities available for sale | ||
Amortized Cost | 43,106 | 32,852 |
Gross Unrealized Gains | 136 | 40 |
Gross Unrealized Losses | 80 | 200 |
Fair Value | 43,162 | 32,692 |
Securities held to maturity | ||
Amortized Cost | 2,992 | |
Gross Unrealized Losses | 8 | |
Fair Value | 2,984 | |
Municipal bonds | ||
Securities held to maturity | ||
Amortized Cost | 24,448 | 25,043 |
Gross Unrealized Gains | 1,147 | 1,146 |
Fair Value | $ 25,595 | $ 26,189 |
SECURITIES - Contractual maturi
SECURITIES - Contractual maturity (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)security | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Amortized Cost-Available-for-Sale | |||||
After 5 years through 10 years | $ 5,000,000 | $ 5,000,000 | |||
Over 10 years | 4,984,000 | 4,984,000 | |||
Total for contractual maturity | 9,984,000 | 9,984,000 | |||
Amortized Cost | 165,989,000 | 165,989,000 | $ 137,491,000 | ||
Fair Value-Available-for-Sale | |||||
After 5 years through 10 years | 4,967,000 | 4,967,000 | |||
Over 10 years | 4,917,000 | 4,917,000 | |||
Total for contractual maturity | 9,884,000 | 9,884,000 | |||
Total | 166,122,000 | 166,122,000 | 136,469,000 | ||
Amortized Cost-Held-to-Maturity | |||||
After 5 years through 10 years | 4,451,000 | 4,451,000 | |||
Over 10 years | 19,997,000 | 19,997,000 | |||
Total for contractual maturity | 24,448,000 | 24,448,000 | |||
Amortized Cost | 47,752,000 | 47,752,000 | 47,877,000 | ||
Fair Value-Held-to-Maturity | |||||
After 5 years through 10 years | 4,603,000 | 4,603,000 | |||
Over 10 years | 20,992,000 | 20,992,000 | |||
Total for contractual maturity | 25,595,000 | 25,595,000 | |||
Total | 48,947,000 | 48,947,000 | 48,972,000 | ||
Number of sales or calls of securities | 0 | $ 0 | |||
Sales | |||||
Proceeds | $ 8,735,000 | ||||
Gross gains | 242,000 | ||||
Calls | |||||
Proceeds | $ 400,000 | 15,725,000 | |||
Gross gains | $ 41,000 | ||||
HTM securities | |||||
Fair Value-Held-to-Maturity | |||||
Number of securities | security | 1 | ||||
Minimum | |||||
Fair Value-Held-to-Maturity | |||||
Maturity period | 5 years | ||||
Maximum | |||||
Fair Value-Held-to-Maturity | |||||
Maturity period | 30 years | ||||
U.S. government-sponsored residential mortgage-backed securities | |||||
Amortized Cost-Available-for-Sale | |||||
No single maturity date | 74,553,000 | $ 74,553,000 | |||
Amortized Cost | 74,553,000 | 74,553,000 | 55,730,000 | ||
Fair Value-Available-for-Sale | |||||
No single maturity date | 74,453,000 | 74,453,000 | |||
Total | 74,453,000 | 74,453,000 | 54,847,000 | ||
Amortized Cost-Held-to-Maturity | |||||
No single maturity date | 18,157,000 | 18,157,000 | |||
Amortized Cost | 18,157,000 | 18,157,000 | 20,306,000 | ||
Fair Value-Held-to-Maturity | |||||
No single maturity date | 18,127,000 | 18,127,000 | |||
Total | 18,127,000 | 18,127,000 | 20,138,000 | ||
U.S. government-sponsored collateralized mortgage obligations | |||||
Amortized Cost-Available-for-Sale | |||||
No single maturity date | 38,346,000 | 38,346,000 | |||
Amortized Cost | 38,346,000 | 38,346,000 | 38,926,000 | ||
Fair Value-Available-for-Sale | |||||
No single maturity date | 38,623,000 | 38,623,000 | |||
Total | 38,623,000 | 38,623,000 | 39,183,000 | ||
Amortized Cost-Held-to-Maturity | |||||
No single maturity date | 2,155,000 | 2,155,000 | |||
Amortized Cost | 2,155,000 | 2,155,000 | 2,528,000 | ||
Fair Value-Held-to-Maturity | |||||
No single maturity date | 2,241,000 | 2,241,000 | |||
Total | 2,241,000 | 2,241,000 | 2,645,000 | ||
SBA asset-backed securities | |||||
Amortized Cost-Available-for-Sale | |||||
No single maturity date | 43,106,000 | 43,106,000 | |||
Amortized Cost | 43,106,000 | 43,106,000 | 32,852,000 | ||
Fair Value-Available-for-Sale | |||||
No single maturity date | 43,162,000 | 43,162,000 | |||
Total | 43,162,000 | 43,162,000 | $ 32,692,000 | ||
Amortized Cost-Held-to-Maturity | |||||
No single maturity date | 2,992,000 | 2,992,000 | |||
Amortized Cost | 2,992,000 | 2,992,000 | |||
Fair Value-Held-to-Maturity | |||||
No single maturity date | 2,984,000 | 2,984,000 | |||
Total | $ 2,984,000 | $ 2,984,000 |
SECURITIES - Gross unrealized l
SECURITIES - Gross unrealized losses aggregated by category (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)security | Dec. 31, 2016USD ($) | |
Securities | ||
Number of debt securities with unrealized loss | security | 28 | |
Amortized cost of securities with unrealized losses | $ 89,600 | |
Aggregate depreciation of securities with unrealized losses (as a percent) | 0.90% | |
Continuous unrealized losses, Gross Unrealized Losses, Available-for-Sale | ||
Less than Twelve Months | $ 516 | $ 1,230 |
Twelve Months and Over | 140 | 171 |
Continuous unrealized losses, Fair Value, Available-for-Sale | ||
Less Than Twelve Months | 59,054 | 87,363 |
Twelve Months and Over | 10,922 | 11,163 |
Continuous unrealized losses, Gross Unrealized Losses, Held-to-Maturity | ||
Less than Twelve Months | 147 | |
Continuous unrealized losses, Fair Value, Held-for-Maturity | ||
Less Than Twelve Months | 18,814 | |
U.S. government and government-sponsored enterprise obligations | ||
Continuous unrealized losses, Gross Unrealized Losses, Available-for-Sale | ||
Less than Twelve Months | 100 | 236 |
Continuous unrealized losses, Fair Value, Available-for-Sale | ||
Less Than Twelve Months | 9,884 | 9,747 |
U.S. government-sponsored residential mortgage-backed securities | ||
Continuous unrealized losses, Gross Unrealized Losses, Available-for-Sale | ||
Less than Twelve Months | 286 | 712 |
Twelve Months and Over | 140 | 171 |
Continuous unrealized losses, Fair Value, Available-for-Sale | ||
Less Than Twelve Months | 20,278 | 43,684 |
Twelve Months and Over | 10,922 | 11,163 |
Continuous unrealized losses, Gross Unrealized Losses, Held-to-Maturity | ||
Less than Twelve Months | 139 | 283 |
Continuous unrealized losses, Fair Value, Held-for-Maturity | ||
Less Than Twelve Months | 15,830 | 17,526 |
U.S. government-sponsored collateralized mortgage obligations | ||
Continuous unrealized losses, Gross Unrealized Losses, Available-for-Sale | ||
Less than Twelve Months | 50 | 82 |
Continuous unrealized losses, Fair Value, Available-for-Sale | ||
Less Than Twelve Months | 6,808 | 7,779 |
SBA asset-backed securities | ||
Continuous unrealized losses, Gross Unrealized Losses, Available-for-Sale | ||
Less than Twelve Months | 80 | 200 |
Continuous unrealized losses, Fair Value, Available-for-Sale | ||
Less Than Twelve Months | 22,084 | $ 26,153 |
Continuous unrealized losses, Gross Unrealized Losses, Held-to-Maturity | ||
Less than Twelve Months | 8 | |
Continuous unrealized losses, Fair Value, Held-for-Maturity | ||
Less Than Twelve Months | $ 2,984 |
LOANS - Summary of Balances of
LOANS - Summary of Balances of Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Loans | ||||||
Total loans | $ 2,114,474 | $ 1,988,784 | ||||
Less: Allowance for loan losses | (17,933) | $ (17,181) | (16,968) | $ (15,832) | $ (14,439) | $ (13,700) |
Net deferred loan costs | 8,035 | 9,931 | ||||
Net Loans | 2,104,576 | 1,981,747 | ||||
Mortgage loans on real estate | ||||||
Loans | ||||||
Total loans | 1,469,140 | 1,325,179 | ||||
Residential | ||||||
Loans | ||||||
Total loans | 769,418 | 770,935 | ||||
Less: Allowance for loan losses | (4,417) | (4,434) | (4,963) | (5,304) | (5,619) | (5,816) |
Residential | 1-4 family | ||||||
Loans | ||||||
Total loans | 678,684 | 677,946 | ||||
Residential | Second mortgages and equity lines of credit | ||||||
Loans | ||||||
Total loans | 90,734 | 92,989 | ||||
Commercial real estate | ||||||
Loans | ||||||
Total loans | 623,054 | 495,801 | ||||
Less: Allowance for loan losses | (7,447) | (7,075) | (7,150) | (6,515) | (5,359) | (4,365) |
Construction | ||||||
Loans | ||||||
Total loans | 76,668 | 58,443 | ||||
Less: Allowance for loan losses | (1,098) | (936) | (924) | (636) | (587) | (581) |
Commercial | ||||||
Loans | ||||||
Total loans | 111,627 | 100,501 | ||||
Less: Allowance for loan losses | (2,460) | (2,114) | (1,920) | (1,605) | (1,164) | (1,454) |
Consumer loans | ||||||
Loans | ||||||
Total loans | 533,707 | 563,104 | ||||
Less: Allowance for loan losses | (1,014) | $ (1,033) | (780) | $ (793) | $ (794) | $ (830) |
Consumer loans | Auto | ||||||
Loans | ||||||
Total loans | 518,759 | 547,400 | ||||
Consumer loans | Personal | ||||||
Loans | ||||||
Total loans | $ 14,948 | $ 15,704 |
LOANS - Loans Sold or Transferr
LOANS - Loans Sold or Transferred (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Auto | |||||
Loans | |||||
Amount of loans sold | $ 5,000,000 | ||||
Gain on sale of loans | 78,000 | ||||
Unpaid principal balance of loans serviced for others | $ 25,500,000 | 25,500,000 | $ 31,400,000 | ||
Commercial - real estate | |||||
Loans | |||||
Unpaid principal balance of loans serviced for others | 62,100,000 | 62,100,000 | $ 45,300,000 | ||
Auto | |||||
Loans | |||||
Amount of loans sold | 0 | $ 0 | $ 10,000,000 | ||
Gain on sale of loans | 79,000 | ||||
Residential | |||||
Loans | |||||
Amount of loans sold | $ 0 | $ 0 | $ 0 | 29,500,000 | |
Residential | Mortgage banking income | |||||
Loans | |||||
Gain on sale of loans | $ 501,000 |
LOANS - Allowance for Loan Loss
LOANS - Allowance for Loan Losses Activity and Allocation to Loan Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | |
Activity in the allowance for loan losses | ||||||
Balance | $ 17,181 | $ 14,439 | $ 16,968 | $ 13,700 | ||
Provision (credit) for loan losses | 921 | 1,710 | 1,656 | 2,716 | ||
Charge-offs | (230) | (417) | (1,068) | (1,006) | ||
Recoveries | 61 | 100 | 377 | 422 | ||
Balance | 17,933 | 15,832 | 17,933 | 15,832 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | $ 2,114,474 | $ 1,988,784 | ||||
Total allowance for loan losses | 17,181 | 14,439 | 16,968 | 13,700 | 17,933 | 16,968 |
Impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 2,123 | |||||
Balance | 2,192 | 2,192 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 40,901 | 46,082 | ||||
Total allowance for loan losses | 2,192 | 2,123 | 2,192 | 2,123 | ||
Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 14,845 | |||||
Balance | 15,741 | 15,741 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 2,073,573 | 1,942,702 | ||||
Total allowance for loan losses | 15,741 | 14,845 | 15,741 | 14,845 | ||
Residential | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 4,434 | 5,619 | 4,963 | 5,816 | ||
Provision (credit) for loan losses | (27) | (253) | (559) | (521) | ||
Charge-offs | (123) | (144) | (250) | |||
Recoveries | 10 | 61 | 157 | 259 | ||
Balance | 4,417 | 5,304 | 4,417 | 5,304 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | 769,418 | 770,935 | ||||
Total allowance for loan losses | 4,434 | 5,619 | 4,963 | 5,816 | 4,417 | 4,963 |
Residential | Impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 1,624 | |||||
Balance | 1,286 | 1,286 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 36,885 | 43,012 | ||||
Total allowance for loan losses | 1,286 | 1,624 | 1,286 | 1,624 | ||
Residential | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 3,339 | |||||
Balance | 3,131 | 3,131 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 732,533 | 727,923 | ||||
Total allowance for loan losses | 3,131 | 3,339 | 3,131 | 3,339 | ||
Commercial real estate | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 7,075 | 5,359 | 7,150 | 4,365 | ||
Provision (credit) for loan losses | 372 | 1,156 | 297 | 2,150 | ||
Balance | 7,447 | 6,515 | 7,447 | 6,515 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | 623,054 | 495,801 | ||||
Total allowance for loan losses | 7,075 | 5,359 | 7,150 | 4,365 | 7,447 | 7,150 |
Commercial real estate | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 7,150 | |||||
Balance | 7,447 | 7,447 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 623,054 | 495,801 | ||||
Total allowance for loan losses | 7,447 | 7,150 | 7,447 | 7,150 | ||
Construction | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 936 | 587 | 924 | 581 | ||
Provision (credit) for loan losses | 162 | 49 | 174 | 55 | ||
Balance | 1,098 | 636 | 1,098 | 636 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | 76,668 | 58,443 | ||||
Total allowance for loan losses | 936 | 587 | 924 | 581 | 1,098 | 924 |
Construction | Impaired loans | ||||||
Allocation of the allowance to loan segments | ||||||
Total loans | 131 | 134 | ||||
Construction | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 924 | |||||
Balance | 1,098 | 1,098 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 76,537 | 58,309 | ||||
Total allowance for loan losses | 1,098 | 924 | 1,098 | 924 | ||
Commercial | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 2,114 | 1,164 | 1,920 | 1,454 | ||
Provision (credit) for loan losses | 346 | 458 | 658 | 170 | ||
Charge-offs | (22) | (134) | (27) | |||
Recoveries | 5 | 16 | 8 | |||
Balance | 2,460 | 1,605 | 2,460 | 1,605 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | 111,627 | 100,501 | ||||
Total allowance for loan losses | 2,114 | 1,164 | 1,920 | 1,454 | 2,460 | 1,920 |
Commercial | Impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 499 | |||||
Balance | 906 | 906 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 3,885 | 2,936 | ||||
Total allowance for loan losses | 906 | 499 | 906 | 499 | ||
Commercial | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 1,421 | |||||
Balance | 1,554 | 1,554 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 107,742 | 97,565 | ||||
Total allowance for loan losses | 1,554 | 1,421 | 1,554 | 1,421 | ||
Consumer loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 1,033 | 794 | 780 | 830 | ||
Provision (credit) for loan losses | 160 | 237 | 820 | 537 | ||
Charge-offs | (230) | (272) | (790) | (729) | ||
Recoveries | 51 | 34 | 204 | 155 | ||
Balance | 1,014 | 793 | 1,014 | 793 | ||
Allocation of the allowance to loan segments | ||||||
Total loans | 533,707 | 563,104 | ||||
Total allowance for loan losses | 1,033 | 794 | 780 | 830 | 1,014 | 780 |
Consumer loans | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 780 | |||||
Balance | 1,014 | 1,014 | ||||
Allocation of the allowance to loan segments | ||||||
Total loans | 533,707 | 563,104 | ||||
Total allowance for loan losses | 1,014 | 780 | 1,014 | 780 | ||
Unallocated | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 1,589 | 916 | 1,231 | 654 | ||
Provision (credit) for loan losses | (92) | 63 | 266 | 325 | ||
Balance | 1,497 | 979 | 1,497 | 979 | ||
Allocation of the allowance to loan segments | ||||||
Total allowance for loan losses | 1,589 | $ 916 | 1,231 | $ 654 | 1,497 | 1,231 |
Unallocated | Non-impaired loans | ||||||
Activity in the allowance for loan losses | ||||||
Balance | 1,231 | |||||
Balance | 1,497 | 1,497 | ||||
Allocation of the allowance to loan segments | ||||||
Total allowance for loan losses | $ 1,497 | $ 1,231 | $ 1,497 | $ 1,231 |
LOANS - Summary of Past Due and
LOANS - Summary of Past Due and Non-Accrual Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Summary of past due and non-accrual loans | ||
Past Due | $ 13,308 | $ 19,462 |
Loans on Non-accrual | 19,606 | 21,180 |
Loans past due 90 days or more and still accruing | 0 | 0 |
30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 2,380 | 7,679 |
60 to 89 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 4,819 | 2,401 |
90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 6,109 | 9,382 |
Residential | 1-4 family | ||
Summary of past due and non-accrual loans | ||
Past Due | 10,162 | 14,792 |
Loans on Non-accrual | 14,326 | 16,456 |
Residential | 1-4 family | 30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 407 | 4,955 |
Residential | 1-4 family | 60 to 89 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 4,351 | 1,873 |
Residential | 1-4 family | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 5,404 | 7,964 |
Residential | Second mortgages and equity lines of credit | ||
Summary of past due and non-accrual loans | ||
Past Due | 844 | 1,502 |
Loans on Non-accrual | 1,200 | 1,686 |
Residential | Second mortgages and equity lines of credit | 30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 347 | 588 |
Residential | Second mortgages and equity lines of credit | 60 to 89 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 122 | 190 |
Residential | Second mortgages and equity lines of credit | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 375 | 724 |
Construction | ||
Summary of past due and non-accrual loans | ||
Past Due | 134 | |
Loans on Non-accrual | 131 | 134 |
Construction | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 134 | |
Commercial | ||
Summary of past due and non-accrual loans | ||
Past Due | 223 | 442 |
Loans on Non-accrual | 3,631 | 2,674 |
Commercial | 30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 208 | 55 |
Commercial | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 15 | 387 |
Consumer loans | Auto | ||
Summary of past due and non-accrual loans | ||
Past Due | 1,978 | 2,425 |
Loans on Non-accrual | 286 | 205 |
Consumer loans | Auto | 30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 1,374 | 1,978 |
Consumer loans | Auto | 60 to 89 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 318 | 297 |
Consumer loans | Auto | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | 286 | 150 |
Consumer loans | Personal | ||
Summary of past due and non-accrual loans | ||
Past Due | 101 | 167 |
Loans on Non-accrual | 32 | 25 |
Consumer loans | Personal | 30 to 59 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 44 | 103 |
Consumer loans | Personal | 60 to 89 Days | ||
Summary of past due and non-accrual loans | ||
Past Due | 28 | 41 |
Consumer loans | Personal | 90 Days or More | ||
Summary of past due and non-accrual loans | ||
Past Due | $ 29 | $ 23 |
LOANS - Impaired Loans (Details
LOANS - Impaired Loans (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Recorded Investment | |||||
Impaired loans without a valuation allowance | $ 14,447,000 | $ 14,447,000 | $ 17,307,000 | ||
Impaired loans with a valuation allowance | 26,454,000 | 26,454,000 | 28,775,000 | ||
Unpaid Principal Balance | |||||
Impaired loans without a valuation allowance | 15,178,000 | 15,178,000 | 18,466,000 | ||
Impaired loans with a valuation allowance | 30,999,000 | 30,999,000 | 29,967,000 | ||
Activity in the allowance for loan losses | |||||
Allowance for loan losses for impaired loans | 2,192,000 | 2,192,000 | 2,123,000 | ||
Impaired loans | |||||
Average Recorded Investment | 42,141,000 | $ 50,647,000 | 43,989,000 | $ 51,673,000 | |
Interest Income Recognized | 501,000 | 626,000 | 1,793,000 | 2,082,000 | |
Interest Income Recognized on Cash Basis | 390,000 | 294,000 | 1,453,000 | 1,090,000 | |
Additional funds committed to be advanced in connection with impaired loans | 165,000 | 165,000 | |||
Residential | |||||
Recorded Investment | |||||
Impaired loans without a valuation allowance | 14,316,000 | 14,316,000 | 17,000,000 | ||
Impaired loans with a valuation allowance | 22,569,000 | 22,569,000 | 26,012,000 | ||
Unpaid Principal Balance | |||||
Impaired loans without a valuation allowance | 15,047,000 | 15,047,000 | 18,031,000 | ||
Impaired loans with a valuation allowance | 27,016,000 | 27,016,000 | 27,204,000 | ||
Activity in the allowance for loan losses | |||||
Allowance for loan losses for impaired loans | 1,286,000 | 1,286,000 | 1,624,000 | ||
Impaired loans | |||||
Average Recorded Investment | 38,114,000 | 47,480,000 | 40,087,000 | 49,517,000 | |
Interest Income Recognized | 494,000 | 616,000 | 1,721,000 | 2,021,000 | |
Interest Income Recognized on Cash Basis | 384,000 | 284,000 | 1,382,000 | 1,029,000 | |
Commercial real estate | |||||
Impaired loans | |||||
Average Recorded Investment | 242,000 | ||||
Construction | |||||
Recorded Investment | |||||
Impaired loans without a valuation allowance | 131,000 | 131,000 | 134,000 | ||
Unpaid Principal Balance | |||||
Impaired loans without a valuation allowance | 131,000 | 131,000 | 134,000 | ||
Impaired loans | |||||
Average Recorded Investment | 131,000 | 134,000 | 132,000 | 135,000 | |
Interest Income Recognized | 2,000 | 10,000 | 7,000 | ||
Interest Income Recognized on Cash Basis | 2,000 | 10,000 | 7,000 | ||
Commercial | |||||
Recorded Investment | |||||
Impaired loans without a valuation allowance | 173,000 | ||||
Impaired loans with a valuation allowance | 3,885,000 | 3,885,000 | 2,763,000 | ||
Unpaid Principal Balance | |||||
Impaired loans without a valuation allowance | 301,000 | ||||
Impaired loans with a valuation allowance | 3,983,000 | 3,983,000 | 2,763,000 | ||
Activity in the allowance for loan losses | |||||
Allowance for loan losses for impaired loans | 906,000 | 906,000 | $ 499,000 | ||
Impaired loans | |||||
Average Recorded Investment | 3,896,000 | 3,033,000 | 3,770,000 | 1,779,000 | |
Interest Income Recognized | 5,000 | 10,000 | 62,000 | 54,000 | |
Interest Income Recognized on Cash Basis | $ 4,000 | $ 10,000 | $ 61,000 | $ 54,000 |
LOANS - Troubled Debt Restructu
LOANS - Troubled Debt Restructurings (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($)contract | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)contract | Sep. 30, 2016USD ($)contract | |
Troubled debt restructurings | ||||
Troubled debt restructurings during the period | contract | 4 | |||
Pre-Modification Outstanding Recorded Investment | $ 1,941,000 | |||
Post-Modification Outstanding Recorded Investment | 1,941,000 | |||
TDR modifications | $ 0 | |||
Recorded investment of troubled debt restructurings | $ 29,700,000 | 31,800,000 | 29,700,000 | $ 31,800,000 |
Recorded investment of troubled debt restructurings that were nonaccruing | $ 8,100,000 | $ 6,800,000 | $ 8,100,000 | $ 6,800,000 |
Number of troubled debt restructurings that defaulted | contract | 0 | 0 | 1 | |
Recorded investment of troubled debt restructurings that defaulted | $ 107,000 | |||
Residential | ||||
Troubled debt restructurings | ||||
Troubled debt restructurings during the period | contract | 1 | 2 | 2 | |
Pre-Modification Outstanding Recorded Investment | $ 54,000 | $ 363,000 | $ 196,000 | |
Post-Modification Outstanding Recorded Investment | $ 54,000 | $ 363,000 | $ 232,000 | |
Commercial | ||||
Troubled debt restructurings | ||||
Troubled debt restructurings during the period | contract | 2 | |||
Pre-Modification Outstanding Recorded Investment | $ 1,578,000 | |||
Post-Modification Outstanding Recorded Investment | $ 1,578,000 |
LOANS - Risk Rating (Details)
LOANS - Risk Rating (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)grade | Dec. 31, 2016USD ($) | |
Loans by risk rating | ||
Number of grades utilized in internal loan rating system | grade | 10 | |
Total loans | $ 2,114,474 | $ 1,988,784 |
Commercial real estate | ||
Loans by risk rating | ||
Total loans | 623,054 | 495,801 |
Commercial real estate | Loans rated 1 - 6, pass | ||
Loans by risk rating | ||
Total loans | 619,989 | 492,473 |
Commercial real estate | Loans not rated | ||
Loans by risk rating | ||
Total loans | 3,065 | 3,328 |
Commercial | ||
Loans by risk rating | ||
Total loans | 111,627 | 100,501 |
Commercial | Loans rated 1 - 6, pass | ||
Loans by risk rating | ||
Total loans | 107,196 | 97,566 |
Commercial | Loans rated 7, special mention | ||
Loans by risk rating | ||
Total loans | 800 | 261 |
Commercial | Loans rated 8, substandard | ||
Loans by risk rating | ||
Total loans | 3,591 | 2,287 |
Commercial | Loans rated 9, doubtful | ||
Loans by risk rating | ||
Total loans | 40 | 387 |
Construction | ||
Loans by risk rating | ||
Total loans | 76,668 | 58,443 |
Construction | Loans rated 1 - 6, pass | ||
Loans by risk rating | ||
Total loans | 63,914 | 43,518 |
Construction | Loans not rated | ||
Loans by risk rating | ||
Total loans | $ 12,754 | $ 14,925 |
MORTGAGE LOAN SERVICING - Key A
MORTGAGE LOAN SERVICING - Key Assumptions (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Unpaid Principal Balance | ||
Unpaid principal balances of mortgage loans serviced | $ 1,920 | $ 1,850 |
Prepayment speed (weighted average) | 10.29% | 9.49% |
Discount rate (weighted average) | 9.26% | 9.25% |
Default rate | 2.02% | 1.71% |
MORTGAGE LOAN SERVICING - Fair
MORTGAGE LOAN SERVICING - Fair value of MSR (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2015 | |
Changes to the fair value of Mortgage Servicing Rights | |||||
Mortgage servicing rights, at fair value, beginning of period | $ 20,333 | ||||
Amortized cost, beginning of period | $ 12,958 | ||||
Additions from loans sold with servicing retained | 2,025 | $ 6,676 | |||
Changes in fair value due to : | |||||
Reductions from loans paid off during the period | (1,138) | (1,229) | |||
Changes in valuation inputs or assumptions | (844) | (2,871) | |||
Mortgage servicing rights, at fair value, end of period | $ 20,376 | $ 15,534 | 20,376 | 15,534 | |
Fees and commissions, mortgage banking and servicing | $ 1,300 | $ 1,100 | $ 3,900 | $ 2,900 |
DEPOSITS - Summary of deposits
DEPOSITS - Summary of deposits (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
DEPOSITS | ||
NOW and demand deposit accounts | $ 395,728 | $ 365,869 |
Regular savings and club accounts | 404,465 | 316,947 |
Money market deposit accounts | 666,613 | 595,211 |
Total non-certificate accounts | 1,466,806 | 1,278,027 |
Term certificate accounts greater than $250,000 | 91,862 | 81,064 |
Term certificate accounts less than or equal to $250,000 | 371,750 | 391,617 |
Brokered deposits | 73,127 | 54,045 |
Total certificate accounts | 536,739 | 526,726 |
Total deposits | 2,003,545 | 1,804,753 |
Reciprocal deposits | $ 192,600 | $ 0 |
DEPOSITS - Maturity of deposits
DEPOSITS - Maturity of deposits (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Summary of certificate accounts by maturity | ||
Within 1 year | $ 369,107 | |
Over 1 year to 2 years | 108,905 | |
Over 2 years to 3 years | 28,920 | |
Over 3 years to 4 years | 21,736 | |
Over 4 years to 5 years | 8,071 | |
Total certificate accounts | $ 536,739 | $ 526,726 |
Summary of certificate accounts by maturity | ||
Within 1 year | 1.10% | |
Over 1 year to 2 years | 1.44% | |
Over 2 years to 3 years | 1.50% | |
Over 3 years to 4 years | 1.57% | |
Over 4 years to 5 years | 1.41% | |
Weighted average interest rate | 1.21% |
BORROWED FUNDS - FHLB Advances
BORROWED FUNDS - FHLB Advances (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Short-term borrowed funds | $ 10,000,000 | $ 80,000,000 |
Scheduled Maturity | ||
2,017 | 25,000,000 | |
2,017 | 40,000,000 | |
2,018 | 111,250,000 | 50,000,000 |
2,019 | 60,000,000 | 35,000,000 |
2,020 | 50,000,000 | 50,000,000 |
2,021 | 20,000,000 | 20,000,000 |
2022 and thereafter | 116,000 | 119,000 |
Total | 266,366,000 | 195,119,000 |
Monthly principal and interest payment on amortizing advance | $ 1,000 | $ 1,000 |
Weighted Average Rate | ||
Weighted average rate | 1.33% | 0.77% |
Weighted Average Rate | ||
2,017 | 4.17% | |
2,017 | 4.22% | |
2,018 | 1.47% | 1.65% |
2,019 | 1.66% | 1.68% |
2,020 | 1.84% | 1.84% |
2,021 | 1.79% | 1.79% |
2022 and thereafter | 2.94% | 2.96% |
Total | 1.86% | 2.24% |
FHLB advances, callable | ||
Scheduled Maturity | ||
Total | $ 0 | $ 0 |
BORROWED FUNDS - Others (Detail
BORROWED FUNDS - Others (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Federal Reserve Bank | ||
Borrowed funds | ||
Percentage of carrying value pledged as collateral | 74.00% | |
Amortized borrowing capacity | $ 156,000,000 | $ 207,900,000 |
Amount outstanding | $ 0 | $ 0 |
Federal Home Loan Bank Advances | U.S. government-sponsored enterprise and mortgage-backed securities obligations | ||
Borrowed funds | ||
Percentage of carrying value pledged as collateral on FHLB advances | 94.00% | |
Federal Home Loan Bank Advances | First mortgage loans on owner-occupied residential property | ||
Borrowed funds | ||
Percentage of carrying value pledged as collateral on FHLB advances | 75.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Deferred tax (benefit) provision: | ||||
Income tax provision | $ 1,699 | $ 1,900 | $ 5,133 | $ 1,213 |
Effective tax rate | 37.40% | 34.80% | 36.90% | 28.80% |
OTHER COMMITMENTS AND CONTING60
OTHER COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Commitments to grant loans | ||
OTHER COMMITMENTS AND CONTINGENCIES | ||
Financial instruments committed contract amount | $ 99,062 | $ 75,914 |
Unadvanced funds on home equity lines of credit | ||
OTHER COMMITMENTS AND CONTINGENCIES | ||
Financial instruments committed contract amount | 79,410 | 82,797 |
Unadvanced funds on revolving lines of credit | ||
OTHER COMMITMENTS AND CONTINGENCIES | ||
Financial instruments committed contract amount | 65,676 | 58,238 |
Unadvanced funds on construction loans | ||
OTHER COMMITMENTS AND CONTINGENCIES | ||
Financial instruments committed contract amount | $ 116,766 | $ 49,999 |
DERIVATIVES (Details)
DERIVATIVES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Derivative disclosures | |||||
Gain (loss) on interest rate derivative instruments not designated as hedging instrument | $ (50) | $ 556 | $ (440) | $ 1,224 | |
Not designated as hedging instruments | Other assets | |||||
Derivative disclosures | |||||
Fair Value, Assets | 4,410 | 4,410 | $ 2,970 | ||
Not designated as hedging instruments | Other liabilities | |||||
Derivative disclosures | |||||
Fair Value, Liabilities | 2,704 | $ 2,704 | 824 | ||
Commitments to grant loans | |||||
Derivative disclosures | |||||
Loan commitment specified period | 60 days | ||||
Commitments to grant loans | Mortgage banking income | |||||
Derivative disclosures | |||||
Gain (loss) on interest rate derivative instruments not designated as hedging instrument | 30 | (649) | $ 430 | 2,442 | |
Commitments to grant loans | Not designated as hedging instruments | |||||
Derivative disclosures | |||||
Notional Amount | 122,200 | 122,200 | 87,728 | ||
Commitments to grant loans | Not designated as hedging instruments | Other assets | |||||
Derivative disclosures | |||||
Fair Value, Assets | 1,583 | 1,583 | 2,231 | ||
Commitments to grant loans | Not designated as hedging instruments | Other liabilities | |||||
Derivative disclosures | |||||
Fair Value, Liabilities | 16 | 16 | |||
Forward loan sale commitments | Mortgage banking income | |||||
Derivative disclosures | |||||
Gain (loss) on interest rate derivative instruments not designated as hedging instrument | (80) | $ 1,205 | (870) | $ (1,218) | |
Forward loan sale commitments | Not designated as hedging instruments | |||||
Derivative disclosures | |||||
Notional Amount | 162,360 | 162,360 | 167,289 | ||
Forward loan sale commitments | Not designated as hedging instruments | Other assets | |||||
Derivative disclosures | |||||
Fair Value, Assets | 344 | 344 | 491 | ||
Forward loan sale commitments | Not designated as hedging instruments | Other liabilities | |||||
Derivative disclosures | |||||
Fair Value, Liabilities | 205 | 205 | 576 | ||
Interest rate swaps | Mortgage-backed securities | |||||
Derivative disclosures | |||||
Securities pledged to secure the Company's liability for the offsetting interest rate swaps | 5,900 | 5,900 | |||
Interest rate swaps | Not designated as hedging instruments | |||||
Derivative disclosures | |||||
Notional Amount | 248,887 | 248,887 | 173,477 | ||
Interest rate swaps | Not designated as hedging instruments | Other assets | |||||
Derivative disclosures | |||||
Fair Value, Assets | 2,483 | 2,483 | 248 | ||
Interest rate swaps | Not designated as hedging instruments | Other liabilities | |||||
Derivative disclosures | |||||
Fair Value, Liabilities | 2,483 | 2,483 | $ 248 | ||
Risk Participation Agreements | Not designated as hedging instruments | |||||
Derivative disclosures | |||||
Notional Amount | $ 43,037 | $ 43,037 |
COMPENSATION AND BENEFIT PLAN62
COMPENSATION AND BENEFIT PLANS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Jun. 29, 2016 | |
Defined Benefit Plan Disclosure [Line Items] | ||||||
Shares committed per year | 59,359 | 59,359 | ||||
Allocated shares | 59,359 | 59,359 | ||||
Shares committed to be allocated | 44,520 | 29,680 | 44,520 | 29,680 | 59,359 | |
Unallocated shares | 1,083,309 | 1,083,309 | 1,127,829 | |||
Total shares | 1,187,188 | 1,187,188 | 1,187,188 | 1,187,188 | ||
Fair value of unallocated shares, end of period | $ 20,377,000 | $ 20,377,000 | $ 21,812,000 | |||
ESOP compensation expense | 275,000 | $ 409,000 | 857,000 | $ 409,000 | ||
Supplemental Retirement Plans | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Increase in benefit obligation | $ 891,000 | |||||
Directors Retirement Plan | ||||||
Defined Benefit Plan Disclosure [Line Items] | ||||||
Benefit plan liability | $ 1,600,000 | $ 1,600,000 |
STOCK-BASED COMPENSATION - Equi
STOCK-BASED COMPENSATION - Equity Plan (Details) - shares | Aug. 09, 2017 | Sep. 30, 2017 |
STOCK-BASED COMPENSATION | ||
Shares reserved for issuance | 2,077,577 | |
Contractual term of awards | 10 years | |
Stock Options | ||
STOCK-BASED COMPENSATION | ||
Shares reserved for issuance | 1,483,984 | |
Vesting period (years) | 3 years | |
Restricted Stock | ||
STOCK-BASED COMPENSATION | ||
Shares reserved for issuance | 593,593 | |
Vesting period (years) | 3 years |
STOCK-BASED COMPENSATION - Valu
STOCK-BASED COMPENSATION - Valuation assumptions (Details) - Stock Options | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
STOCK-BASED COMPENSATION | |
Granted | shares | 1,326,063 |
Vesting period (years) | 3 years |
Expected volatility | 24.00% |
Expected life (years) | 6 years |
Risk free interest rate | 1.88% |
Fair value per option | $ / shares | $ 5.07 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock options (Details) - Stock Options - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Stock Option Awards | |||
Granted | 1,326,063 | ||
Balance at the end of the period | 1,326,063 | 1,326,063 | |
Unrecognized compensation cost | $ 6,437,000 | $ 6,437,000 | |
Weighted average remaining recognition period (years) | 2 years 10 months 17 days | ||
Weighted Average Exercise Price | |||
Granted | $ 18.35 | ||
Balance at the end of the period | $ 18.35 | $ 18.35 | |
Weighted Average Remaining Contractual Term (years) | |||
Granted | 9 years 10 months 17 days | ||
Weighted average remaining contractual term, balance (years) | 9 years 10 months 17 days | ||
Aggregate Intrinsic Value | |||
Granted | $ 609,989 | $ 609,989 | |
Balance at the end of the period | 609,989 | $ 609,989 | |
Other stock-based compensation | |||
Stock based compensation expense | 282,000 | $ 0 | |
Recognized tax benefit related to stock based compensation expense | $ 99,000 |
STOCK-BASED COMPENSATION - Rest
STOCK-BASED COMPENSATION - Restricted stock (Details) - Restricted Stock - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Outstanding Restricted Stock Awards | |||
Granted | 541,415 | ||
Non-vested stock awards at September 30, 2017 | 541,415 | 541,415 | |
Unrecognized compensation cost inclusive of directors' fees | $ 9,518,000 | $ 9,518,000 | |
Weighted average remaining recognition period (years) | 2 years 10 months 17 days | ||
Weighted Average Grant Price | |||
Granted | $ 18.35 | ||
Non-vested stock awards at September 30, 2017 | $ 18.35 | $ 18.35 | |
Other stock-based compensation | |||
Stock based compensation expense | $ 417,000 | $ 0 | |
Recognized tax benefit related to stock based compensation expense | $ 146,000 |
MINIMUM REGULATORY CAPITAL RE67
MINIMUM REGULATORY CAPITAL REQUIREMENTS (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items] | ||
Common equity Tier 1 capital conversation buffer ratio | 2.50% | |
Currently applicable capital conversation buffer ratio | 1.25% | |
Common equity Tier 1 to risk-weighted assets [Abstract] | ||
Actual, Capital amount | $ 327,523 | $ 317,185 |
Actual, Ratio (as a percent) | 15.50% | 16.20% |
Minimum Capital Requirement | $ 94,890 | $ 88,320 |
Minimum Capital Requirement (as a percent) | 4.50% | 4.50% |
Tier 1 capital to risk weighted assets | ||
Actual, Capital amount | $ 327,523 | $ 317,185 |
Actual, Ratio (as a percent) | 15.50% | 16.20% |
Minimum Capital Requirement | $ 126,520 | $ 117,760 |
Minimum Capital Requirement (as a percent) | 6.00% | 6.00% |
Total capital to risk-weighted assets | ||
Actual, Capital amount | $ 345,456 | $ 334,153 |
Actual, Ratio (as a percent) | 16.40% | 17.00% |
Minimum Capital Requirement | $ 168,693 | $ 157,014 |
Minimum Capital Requirement (as a percent) | 8.00% | 8.00% |
Tier 1 capital to average assets | ||
Actual, Capital amount | $ 327,523 | $ 317,185 |
Actual, Ratio (as a percent) | 12.50% | 13.20% |
Minimum Capital Requirement | $ 104,711 | $ 95,796 |
Minimum Capital Requirement (as a percent) | 4.00% | 4.00% |
HarborOne Bank | ||
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items] | ||
Currently applicable capital conversation buffer ratio | 1.25% | |
Common equity Tier 1 to risk-weighted assets [Abstract] | ||
Actual, Capital amount | $ 244,104 | $ 234,655 |
Actual, Ratio (as a percent) | 11.60% | 12.00% |
Minimum Capital Requirement | $ 94,884 | $ 88,201 |
Minimum Capital Requirement (as a percent) | 4.50% | 4.50% |
Minimum Required To Be Well Capitalized | $ 137,055 | $ 127,402 |
Minimum Required To Be Well Capitalized (as a percent) | 6.50% | 6.50% |
Tier 1 capital to risk weighted assets | ||
Actual, Capital amount | $ 244,104 | $ 234,655 |
Actual, Ratio (as a percent) | 11.60% | 12.00% |
Minimum Capital Requirement | $ 126,512 | $ 117,602 |
Minimum Capital Requirement (as a percent) | 6.00% | 6.00% |
Minimum Required To Be Well Capitalized | $ 168,683 | $ 156,802 |
Minimum Required To Be Well Capitalized (as a percent) | 8.00% | 8.00% |
Total capital to risk-weighted assets | ||
Actual, Capital amount | $ 262,037 | $ 251,623 |
Actual, Ratio (as a percent) | 12.40% | 12.80% |
Minimum Capital Requirement | $ 168,683 | $ 156,802 |
Minimum Capital Requirement (as a percent) | 8.00% | 8.00% |
Minimum Required To Be Well Capitalized | $ 210,853 | $ 196,003 |
Minimum Required To Be Well Capitalized (as a percent) | 10.00% | 10.00% |
Tier 1 capital to average assets | ||
Actual, Capital amount | $ 244,104 | $ 234,655 |
Actual, Ratio (as a percent) | 9.50% | 9.90% |
Minimum Capital Requirement | $ 102,042 | $ 95,178 |
Minimum Capital Requirement (as a percent) | 4.00% | 4.00% |
Minimum Required To Be Well Capitalized | $ 127,552 | $ 118,973 |
Minimum Required To Be Well Capitalized (as a percent) | 5.00% | 5.00% |
COMPREHENSIVE INCOME (LOSS) (De
COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Components of AOCI | ||
Accumulated other comprehensive income (loss) | $ (415) | $ (1,290) |
Securities available for sale | ||
Components of AOCI | ||
AOCI prior to tax impact | 133 | (1,022) |
Related tax effect | (46) | 357 |
Accumulated other comprehensive income (loss) | 87 | (665) |
Directors' retirement plan | ||
Components of AOCI | ||
AOCI prior to tax impact | (835) | (1,016) |
Related tax effect | 333 | 391 |
Accumulated other comprehensive income (loss) | $ (502) | $ (625) |
COMPREHENSIVE INCOME (LOSS) - C
COMPREHENSIVE INCOME (LOSS) - Changes in AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | $ 329,384 | $ 190,688 | ||
Balance, end of period | $ 340,601 | $ 327,914 | 340,601 | 327,914 |
Accumulated Other Comprehensive Income (Loss) | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (568) | 1,011 | (1,290) | (592) |
Other comprehensive income before reclassifications | 180 | (504) | 1,155 | 2,131 |
Amounts reclassified from accumulated other comprehensive income | 60 | 59 | 181 | (107) |
Net current period other comprehensive income | 240 | (445) | 1,336 | 2,024 |
Related tax effect | (87) | 152 | (461) | (714) |
Balance, end of period | (415) | 718 | (415) | 718 |
Securities available for sale | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (30) | 1,671 | (665) | 139 |
Other comprehensive income before reclassifications | 180 | (504) | 1,155 | 2,131 |
Amounts reclassified from accumulated other comprehensive income | (283) | |||
Net current period other comprehensive income | 180 | (504) | 1,155 | 1,848 |
Related tax effect | (63) | 175 | (403) | (645) |
Balance, end of period | 87 | 1,342 | 87 | 1,342 |
Directors' retirement plan | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Balance, beginning of period | (538) | (660) | (625) | (731) |
Amounts reclassified from accumulated other comprehensive income | 60 | 59 | 181 | 176 |
Net current period other comprehensive income | 60 | 59 | 181 | 176 |
Related tax effect | (24) | (23) | (58) | (69) |
Balance, end of period | $ (502) | $ (624) | $ (502) | $ (624) |
FAIR VALUE OF ASSETS AND LIAB70
FAIR VALUE OF ASSETS AND LIABILITIES - Loans held for sale - (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Fair value and contractual principal outstanding: | ||
Loans held for sale, fair value | $ 96,201,000 | $ 86,443,000 |
Loans held for sale, contractual principal outstanding | 92,981,000 | 85,024,000 |
Fair value less unpaid principal | 3,220,000 | 1,419,000 |
90 Days or More | ||
Loans held for sale | $ 0 | $ 0 |
FAIR VALUE OF ASSETS AND LIAB71
FAIR VALUE OF ASSETS AND LIABILITIES - Derivatives (Details) | Sep. 30, 2017 | Dec. 31, 2016 |
Derivative loan commitments | ||
Assets and liabilities measured on recurring basis | ||
Weighted average pull-through rate | 87.00% | 86.00% |
FAIR VALUE OF ASSETS AND LIAB72
FAIR VALUE OF ASSETS AND LIABILITIES - Recurring basis (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Assets | |||
Securities available for sale | $ 166,122 | $ 136,469 | |
Loans held for sale | 96,201 | 86,443 | |
Mortgage servicing rights | 20,376 | 20,333 | $ 15,534 |
Recurring | |||
Assets | |||
Loans held for sale | 96,201 | 86,443 | |
Mortgage servicing rights | 20,376 | 20,333 | |
Total assets | 287,109 | 246,215 | |
Liabilities | |||
Total liabilities | 2,704 | 824 | |
Recurring | Derivative loan commitments | |||
Assets | |||
Derivative assets | 1,583 | 2,231 | |
Liabilities | |||
Derivative liabilities | 16 | ||
Recurring | Forward loan sale commitments | |||
Assets | |||
Derivative assets | 344 | 491 | |
Liabilities | |||
Derivative liabilities | 205 | 576 | |
Recurring | Interest rate swaps | |||
Assets | |||
Derivative assets | 2,483 | 248 | |
Liabilities | |||
Derivative liabilities | 2,483 | 248 | |
Recurring | U.S. government and government-sponsored enterprise obligations | |||
Assets | |||
Securities available for sale | 166,122 | 136,469 | |
Recurring | Level 2 | |||
Assets | |||
Loans held for sale | 96,201 | 86,443 | |
Mortgage servicing rights | 20,376 | 20,333 | |
Total assets | 285,182 | 243,493 | |
Liabilities | |||
Total liabilities | 2,483 | 248 | |
Recurring | Level 2 | Interest rate swaps | |||
Assets | |||
Derivative assets | 2,483 | 248 | |
Liabilities | |||
Derivative liabilities | 2,483 | 248 | |
Recurring | Level 2 | U.S. government and government-sponsored enterprise obligations | |||
Assets | |||
Securities available for sale | 166,122 | 136,469 | |
Recurring | Level 3 | |||
Assets | |||
Total assets | 1,927 | 2,722 | |
Liabilities | |||
Total liabilities | 221 | 576 | |
Recurring | Level 3 | Derivative loan commitments | |||
Assets | |||
Derivative assets | 1,583 | 2,231 | |
Liabilities | |||
Derivative liabilities | 16 | ||
Recurring | Level 3 | Forward loan sale commitments | |||
Assets | |||
Derivative assets | 344 | 491 | |
Liabilities | |||
Derivative liabilities | $ 205 | $ 576 |
FAIR VALUE OF ASSETS AND LIAB73
FAIR VALUE OF ASSETS AND LIABILITIES - Level 3 (Details) - Derivative and Forward Loan Sale Commitments - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Changes in Level 3 assets | ||||
Balance at beginning of period | $ 1,994 | $ 4,381 | $ 2,722 | $ 1,661 |
Total gains (losses) included in net income | (67) | (622) | (795) | 2,098 |
Balance at end of period | 1,927 | 3,759 | 1,927 | 3,759 |
Changes in unrealized gains relating to instruments at period end | 1,927 | 3,759 | 1,927 | 3,759 |
Changes in Level 3 liabilities | ||||
Balance at beginning of period | (238) | (2,141) | (576) | (89) |
Total gains (losses) included in net income | 17 | 1,178 | 355 | (874) |
Balance at end of period | (221) | (963) | (221) | (963) |
Changes in unrealized (losses) relating to instruments at period end | $ (221) | $ (963) | $ (221) | $ (963) |
FAIR VALUE OF ASSETS AND LIAB74
FAIR VALUE OF ASSETS AND LIABILITIES - Impaired Loans (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Assets and liabilities measured on non-recurring basis | |||||
Total Losses | $ 455,000 | $ 570,000 | $ 583,000 | $ 1,059,000 | |
Impaired loans | |||||
Assets and liabilities measured on non-recurring basis | |||||
Total Losses | 444,000 | 492,000 | 525,000 | 821,000 | |
Other real estate owned and repossessed assets | |||||
Assets and liabilities measured on non-recurring basis | |||||
Total Losses | 11,000 | $ 78,000 | 58,000 | $ 238,000 | |
Non-recurring | |||||
Assets and liabilities measured on non-recurring basis | |||||
Fair value | 0 | 0 | $ 0 | ||
Non-recurring | Level 3 | |||||
Assets and liabilities measured on non-recurring basis | |||||
Fair value | 4,511,000 | 4,511,000 | 4,315,000 | ||
Non-recurring | Level 3 | Impaired loans | |||||
Assets and liabilities measured on non-recurring basis | |||||
Fair value | 3,490,000 | 3,490,000 | 2,548,000 | ||
Non-recurring | Level 3 | Other real estate owned and repossessed assets | |||||
Assets and liabilities measured on non-recurring basis | |||||
Fair value | $ 1,021,000 | $ 1,021,000 | $ 1,767,000 |
FAIR VALUE OF ASSETS AND LIAB75
FAIR VALUE OF ASSETS AND LIABILITIES - Balance Sheet Grouping (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Financial assets: | |||
Securities available for sale | $ 166,122 | $ 136,469 | |
Securities held to maturity | 48,947 | 48,972 | |
Loans held for sale | 96,201 | 86,443 | |
Mortgage servicing rights | 20,376 | 20,333 | $ 15,534 |
Carrying Amount | |||
Financial assets: | |||
Cash and cash equivalents | 94,805 | 50,215 | |
Securities available for sale | 166,122 | 136,469 | |
Securities held to maturity | 47,752 | 47,877 | |
Federal Home Loan Bank stock | 16,356 | 15,749 | |
Loans held for sale | 96,201 | 86,443 | |
Loans, net | 2,104,576 | 1,981,747 | |
Retirement plan annuities | 12,381 | 12,044 | |
Mortgage servicing rights | 20,376 | 20,333 | |
Accrued interest receivable | 5,959 | 5,603 | |
Financial liabilities: | |||
Deposits | 2,003,545 | 1,804,753 | |
Borrowed funds | 276,366 | 275,119 | |
Mortgagors' escrow accounts | 5,530 | 5,034 | |
Accrued interest payable | 554 | 545 | |
Carrying Amount | Derivative loan commitments | |||
Derivative commitments/agreements: | |||
Assets | 1,583 | 2,231 | |
Liabilities | 16 | ||
Carrying Amount | Interest rate swaps | |||
Derivative commitments/agreements: | |||
Assets | 2,483 | 248 | |
Liabilities | 2,483 | 248 | |
Carrying Amount | Forward loan sale commitments | |||
Derivative commitments/agreements: | |||
Assets | 344 | 491 | |
Liabilities | 205 | 576 | |
Fair Value | |||
Financial assets: | |||
Cash and cash equivalents | 94,805 | 50,215 | |
Securities available for sale | 166,122 | 136,469 | |
Securities held to maturity | 48,947 | 48,972 | |
Federal Home Loan Bank stock | 16,356 | 15,749 | |
Loans held for sale | 96,201 | 86,443 | |
Loans, net | 2,123,695 | 2,007,394 | |
Retirement plan annuities | 12,381 | 12,044 | |
Mortgage servicing rights | 20,376 | 20,333 | |
Accrued interest receivable | 5,959 | 5,603 | |
Financial liabilities: | |||
Deposits | 2,002,218 | 1,806,926 | |
Borrowed funds | 276,531 | 276,741 | |
Mortgagors' escrow accounts | 5,530 | 5,034 | |
Accrued interest payable | 554 | 545 | |
Fair Value | Derivative loan commitments | |||
Derivative commitments/agreements: | |||
Assets | 1,583 | 2,231 | |
Liabilities | 16 | ||
Fair Value | Interest rate swaps | |||
Derivative commitments/agreements: | |||
Assets | 2,483 | 248 | |
Liabilities | 2,483 | 248 | |
Fair Value | Forward loan sale commitments | |||
Derivative commitments/agreements: | |||
Assets | 344 | 491 | |
Liabilities | 205 | 576 | |
Fair Value | Level 1 | |||
Financial assets: | |||
Cash and cash equivalents | 94,805 | 50,215 | |
Fair Value | Level 2 | |||
Financial assets: | |||
Securities available for sale | 166,122 | 136,469 | |
Securities held to maturity | 48,947 | 48,972 | |
Loans held for sale | 96,201 | 86,443 | |
Mortgage servicing rights | 20,376 | 20,333 | |
Accrued interest receivable | 5,959 | 5,603 | |
Financial liabilities: | |||
Borrowed funds | 276,531 | 276,741 | |
Accrued interest payable | 554 | 545 | |
Fair Value | Level 2 | Interest rate swaps | |||
Derivative commitments/agreements: | |||
Assets | 2,483 | 248 | |
Liabilities | 2,483 | 248 | |
Fair Value | Level 3 | |||
Financial assets: | |||
Federal Home Loan Bank stock | 16,356 | 15,749 | |
Loans, net | 2,123,695 | 2,007,394 | |
Retirement plan annuities | 12,381 | 12,044 | |
Financial liabilities: | |||
Deposits | 2,002,218 | 1,806,926 | |
Mortgagors' escrow accounts | 5,530 | 5,034 | |
Fair Value | Level 3 | Derivative loan commitments | |||
Derivative commitments/agreements: | |||
Assets | 1,583 | 2,231 | |
Liabilities | 16 | ||
Fair Value | Level 3 | Forward loan sale commitments | |||
Derivative commitments/agreements: | |||
Assets | 344 | 491 | |
Liabilities | $ 205 | $ 576 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
EARNINGS PER SHARE | ||||
Net income applicable to common stock | $ 2,838 | $ 3,552 | $ 8,786 | $ 2,995 |
Average number of common shares outstanding | 32,391,588 | 32,120,880 | 32,212,107 | |
Less: Average unallocated ESOP shares | (1,088,307) | (1,177,072) | (1,103,003) | |
Average number of common shares outstanding used to calculate basic earnings per common share | 31,303,281 | 30,943,808 | 31,109,104 | |
Average number of common shares outstanding used to calculate diluted earnings per common share | 31,303,281 | 30,943,808 | 31,109,104 | |
Earnings per common share, Basic | $ 0.09 | $ 0.11 | $ 0.28 | |
Earnings per common share, Diluted | $ 0.09 | $ 0.11 | $ 0.28 | |
Stock Options | ||||
EARNINGS PER SHARE | ||||
Antidilutive securities excluded from computation of earnings per share | 1,326,063 | 1,326,063 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)segment | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Segment Reporting Information [Line Items] | |||||
Number of reportable segments | segment | 2 | ||||
Net interest and dividend income | $ 19,269 | $ 15,902 | $ 54,916 | $ 44,440 | |
Provision for loan losses | 921 | 1,710 | 1,656 | 2,716 | |
Net interest income, after provision for loan losses | 18,348 | 14,192 | 53,260 | 41,724 | |
Total assets | 2,659,459 | 2,347,133 | 2,659,459 | 2,347,133 | $ 2,448,310 |
Goodwill | 13,365 | 13,365 | 13,365 | 13,365 | |
Mortgage banking income: | |||||
Changes in mortgage servicing rights fair value | (488) | 351 | (1,982) | (4,100) | |
Other | 11,071 | 16,513 | 30,117 | 39,725 | |
Total mortgage banking income | 10,583 | 16,864 | 28,135 | 35,625 | |
Other noninterest income | 4,044 | 4,005 | 12,245 | 12,194 | |
Total noninterest income | 14,627 | 20,869 | 40,380 | 47,819 | |
Noninterest expense | 28,438 | 29,609 | 79,721 | 85,335 | |
Income (loss) before income taxes | 4,537 | 5,452 | 13,919 | 4,208 | |
Provision (benefit) for income taxes | 1,699 | 1,900 | 5,133 | 1,213 | |
Net income | 2,838 | 3,552 | 8,786 | 2,995 | |
Operating Segments | Harbor One Bank Segment | |||||
Segment Reporting Information [Line Items] | |||||
Net interest and dividend income | 18,731 | 15,302 | 53,573 | 43,078 | |
Provision for loan losses | 921 | 1,710 | 1,656 | 2,716 | |
Net interest income, after provision for loan losses | 17,810 | 13,592 | 51,917 | 40,362 | |
Total assets | 2,591,620 | 2,340,199 | 2,591,620 | 2,340,199 | |
Goodwill | 3,186 | 3,186 | 3,186 | 3,186 | |
Mortgage banking income: | |||||
Changes in mortgage servicing rights fair value | (170) | 155 | (723) | (1,227) | |
Other | 834 | 1,336 | 2,476 | 3,607 | |
Total mortgage banking income | 664 | 1,491 | 1,753 | 2,380 | |
Other noninterest income | 4,034 | 3,996 | 12,226 | 12,189 | |
Total noninterest income | 4,698 | 5,487 | 13,979 | 14,569 | |
Noninterest expense | 18,716 | 16,594 | 53,931 | 50,173 | |
Income (loss) before income taxes | 3,792 | 2,485 | 11,965 | 4,758 | |
Provision (benefit) for income taxes | 1,393 | 739 | 4,342 | 1,456 | |
Net income | 2,399 | 1,746 | 7,623 | 3,302 | |
Operating Segments | Merrimack Mortgage Segment | |||||
Segment Reporting Information [Line Items] | |||||
Net interest and dividend income | 487 | 600 | 1,251 | 1,362 | |
Net interest income, after provision for loan losses | 487 | 600 | 1,251 | 1,362 | |
Total assets | 133,534 | 140,152 | 133,534 | 140,152 | |
Goodwill | 10,179 | 10,179 | 10,179 | 10,179 | |
Mortgage banking income: | |||||
Changes in mortgage servicing rights fair value | (318) | 196 | (1,259) | (2,873) | |
Other | 10,237 | 15,177 | 27,641 | 36,118 | |
Total mortgage banking income | 9,919 | 15,373 | 26,382 | 33,245 | |
Other noninterest income | 10 | 9 | 19 | 5 | |
Total noninterest income | 9,929 | 15,382 | 26,401 | 33,250 | |
Noninterest expense | 9,457 | 12,937 | 25,420 | 30,264 | |
Income (loss) before income taxes | 959 | 3,045 | 2,232 | 4,348 | |
Provision (benefit) for income taxes | 392 | 1,219 | 902 | 1,740 | |
Net income | 567 | 1,826 | 1,330 | 2,608 | |
Operating Segments | HarborOne Bancorp Segment | |||||
Segment Reporting Information [Line Items] | |||||
Net interest and dividend income | 51 | 92 | |||
Net interest income, after provision for loan losses | 51 | 92 | |||
Total assets | 340,930 | 325,915 | 340,930 | 325,915 | |
Mortgage banking income: | |||||
Noninterest expense | 265 | 78 | 370 | 4,898 | |
Income (loss) before income taxes | (214) | (78) | (278) | (4,898) | |
Provision (benefit) for income taxes | (86) | (58) | (111) | (1,983) | |
Net income | (128) | (20) | (167) | (2,915) | |
Eliminations | |||||
Segment Reporting Information [Line Items] | |||||
Total assets | $ (406,625) | $ (459,133) | $ (406,625) | $ (459,133) |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event - USD ($) $ in Millions | Oct. 27, 2017 | Oct. 12, 2017 |
Merrimack Mortgage | ||
Subsequent Event [Line Items] | ||
Reduction of contingent consideration liability | $ (1.2) | |
Share Repurchase Program | ||
Subsequent Event [Line Items] | ||
Shares available for repurchase | 1,633,115 | |
Current issued and outstanding shares available for repurchase (as a percentage) | 5.00% |