This October 27, 2025 report delivers a comprehensive evaluation of HarborOne Bancorp, Inc. (HONE), analyzing its business model, financial statements, past performance, future growth, and fair value. Our analysis contextualizes these findings by benchmarking HONE against key competitors like Brookline Bancorp, Inc. (BRKL), Independent Bank Corp. (INDB), and Merchants Bancorp (MBIN), while interpreting all data through the investment philosophies of Warren Buffett and Charlie Munger.
Negative outlook for HarborOne Bancorp.
The bank has a stable community focus but is held back by poor efficiency and low profitability.
While shareholder returns have been strong, core earnings per share have declined over the last five years.
Future growth is challenged by intense competition from larger and more profitable regional banks.
The stock also appears overvalued, with a high valuation that is not justified by its low return on equity.
A high loan-to-deposit ratio of over 100% further suggests a stretched financial position.
Investors should exercise caution, as improved profitability is needed to support the current valuation.
US: NASDAQ
HarborOne Bancorp, Inc. (HONE) operates a straightforward community banking model primarily serving eastern Massachusetts and Rhode Island. The company's core business involves gathering deposits from local individuals and businesses and using those funds to originate loans. Its main products can be categorized into three primary areas: Commercial Lending (including Commercial Real Estate and Commercial & Industrial loans), Residential Real Estate Lending (including mortgages for sale and for its own portfolio), and Consumer Banking services which generate deposits and some fee income. The bank earns revenue primarily through net interest income, which is the difference between the interest it earns on loans and the interest it pays on deposits. A secondary, but significant, source of revenue is noninterest income, driven largely by its mortgage banking activities, where it earns fees from originating and selling mortgages. HONE's strategy is centered on building deep customer relationships within its specific geographic footprint, leveraging its local knowledge to compete against larger national banks and smaller local competitors.
The largest segment for HarborOne is its lending operations, which form the core of its revenue through net interest income. Commercial Lending, particularly Commercial Real Estate (CRE), is a major focus. As of year-end 2023, CRE loans constituted approximately 47% of the total loan portfolio. This product involves providing financing for properties used for business purposes, such as office buildings, retail centers, and multi-family housing. The market for CRE lending in New England is highly competitive and mature, with growth closely tied to regional economic activity. Profit margins are influenced by the spread between loan yields and the bank's cost of funds, which has been under pressure due to rising interest rates. Key competitors include Eastern Bankshares (EBC), Rockland Trust (part of Independent Bank Corp. - INDB), and Berkshire Hills Bancorp (BHLB), all of which have a significant presence in the same market. HONE's CRE loan portfolio growth has been modest, reflecting the competitive and cautious environment. The customers for this service are local real estate investors and small-to-medium-sized businesses. These relationships can be sticky, as switching banks involves significant paperwork and the loss of a trusted local contact, creating moderate switching costs. HONE's competitive position here relies on its local decision-making and personalized service, a classic community bank moat. However, this moat is not impenetrable, as larger banks can offer more sophisticated products and sometimes more competitive pricing, while the heavy concentration in CRE exposes the bank to significant risk from a downturn in the local property market.
Residential mortgage banking is another cornerstone of HarborOne's business, contributing significantly to both net interest income (for loans held in portfolio) and noninterest income (for loans originated and sold). This segment represents about 36% of the loan book. The market for residential mortgages is vast but intensely competitive and highly cyclical, directly impacted by interest rate fluctuations which affect both demand and the profitability of selling loans. Competitors range from national giants like Wells Fargo and Rocket Mortgage to local credit unions and other community banks, all vying for the same customers. HarborOne's mortgage banking income can be very volatile; for example, it dropped significantly from $53.1 million in 2021 to $13.1 million in 2023 as interest rates rose, highlighting the segment's vulnerability. The primary consumers are homebuyers within HONE's geographic footprint. Customer stickiness in the mortgage origination business is notoriously low, as borrowers primarily shop for the best interest rate. HONE attempts to mitigate this by cross-selling other banking products, but the mortgage itself is a commoditized product. The moat for this service is therefore quite weak. While the bank has a well-established brand for mortgages locally (HarborOne Mortgage), it lacks the scale, technology, and marketing budget of national players, limiting its pricing power and long-term competitive edge in this volatile market.
Finally, the third key pillar is the deposit-gathering and consumer banking franchise. This operation is critical as it provides the low-cost funding necessary for the bank's lending activities. This segment generates revenue through service charges on deposit accounts and provides the foundation for customer relationships. The market for retail and business deposits in New England is fragmented and competitive, with customers having numerous choices from digital-only banks offering high-yield savings to large national banks with extensive ATM networks. As of Q1 2024, noninterest-bearing deposits, the cheapest source of funding, represented 20% of total deposits, which is lower than many peers, indicating a higher reliance on more expensive interest-bearing accounts. The customers are local individuals, families, and small businesses who value the convenience of a physical branch. Stickiness for primary checking accounts is generally high due to the hassle of changing direct deposits and automatic payments, creating a moderate moat. However, with the rise of digital banking, the importance of a physical branch network is diminishing. HarborOne's moat in this area is its community presence and established relationships, but it faces constant pressure from competitors on deposit pricing and digital capabilities. Its ability to retain and grow low-cost core deposits is a key determinant of its long-term profitability but remains a significant challenge in the current rate environment.
In conclusion, HarborOne's business model is that of a traditional community bank heavily reliant on real estate lending within a specific geography. Its moat is built on localized relationships and customer service, which provides a stable, though not exceptionally cheap, deposit base and a loyal commercial loan customer base. This approach offers a degree of resilience against larger, less personal competitors. However, the bank's competitive advantages are limited and face clear vulnerabilities. The heavy concentration in real estate lending, both commercial and residential, makes it highly susceptible to regional economic downturns. Furthermore, its significant exposure to the cyclical and competitive mortgage origination market introduces substantial volatility to its noninterest income stream, weakening the overall stability of its earnings. The moat is therefore present but shallow, offering protection in its core community banking niche but providing little defense in the more commoditized mortgage market or against broader economic headwinds.
A detailed look at HarborOne's financial statements reveals a bank at a crossroads. On the revenue front, the most recent quarter showed encouraging signs. Net Interest Income (NII), the bank's primary source of earnings, increased to $33.22 million, up 5.95% from the prior year's quarter. This growth was driven by a favorable combination of rising interest income and slightly decreasing interest expenses, suggesting the bank is managing its interest rate spread effectively in the current environment. However, this top-line strength is significantly diluted by high operating costs. The bank's efficiency ratio, which measures non-interest expenses as a percentage of revenue, was 71.2% in the last quarter. This is considered weak for a regional bank, as a lower number is better, indicating that a large portion of its revenue is consumed by overhead before reaching the bottom line.
The balance sheet highlights concerns regarding liquidity and capital. The bank's loan-to-deposit ratio was 104.1% as of the latest quarter, meaning its loans exceed its total deposits. While not uncommon, a ratio above 100% signals a dependence on more volatile and potentially expensive wholesale funding sources rather than stable customer deposits, which can be a risk in times of financial stress. On the capital side, the tangible common equity to total assets ratio is 9.28%, which is broadly in line with industry averages and provides a reasonable cushion against losses. However, the bank's tangible book value is being negatively impacted by -$67.24 million in accumulated other comprehensive income (AOCI), reflecting unrealized losses on its investment portfolio, which reduces its tangible equity base.
Profitability metrics reflect these competing factors. The return on assets (ROA) of 0.57% and return on equity (ROE) of 5.58% are modest and trail the performance of many peer banks. While net income has grown, the returns generated on the bank's asset and equity base are not yet robust. Cash flow generation has been inconsistent, with negative operating cash flow in the most recent quarter, though this can be volatile for banks due to changes in deposits and loan originations. Dividends have been growing, offering a yield of 2.7%, which is a positive for income-focused investors, but the payout ratio of 53.9% warrants monitoring to ensure it remains sustainable given the moderate profitability.
In conclusion, HarborOne's financial foundation appears stable but carries notable risks. The recent improvement in net interest income is a significant positive, but it is not yet enough to overcome the headwinds from high operational costs and a stretched liquidity profile. Investors should weigh the potential for continued core earnings growth against the balance sheet and efficiency challenges that could hinder profitability and resilience in a weaker economic environment. The financial position is not alarming, but it lacks the clear signs of strength seen in top-performing regional banks.
An analysis of HarborOne Bancorp's past performance over the last five fiscal years (FY2020–FY2024) reveals a company struggling with inconsistent execution and declining profitability, despite shareholder-friendly capital allocation. The bank's track record is marked by significant volatility in its key financial metrics. Revenue peaked in FY2021 at 239.31 million before falling to 164.29 million by FY2024. This top-line pressure, combined with rising interest expenses, has crushed earnings. Earnings per share (EPS) have been extremely choppy, peaking at $1.15 in FY2021 before crashing to $0.37 in FY2023 and recovering only partially to $0.66 in FY2024.
The durability of the bank's profitability has been poor. Return on Equity (ROE), a key measure of how effectively the bank generates profit for shareholders, has been on a clear downtrend. After reaching 8.51% in 2021, it fell to a meager 2.68% in 2023 and stood at 4.73% in 2024. These returns are substantially below the 10% or higher ROE generated by higher-quality regional competitors like Independent Bank Corp. and Camden National. Furthermore, the bank's operational cash flow has been erratic, swinging from a positive 224.3 million in 2021 to just 3.84 million in 2024, raising questions about the quality and reliability of its earnings.
In contrast to its weak operating results, the bank's capital allocation has been a bright spot. Dividends per share have grown impressively from $0.09 in 2020 to $0.32 in 2024. Management has also been aggressive in repurchasing shares, reducing the diluted share count from 54 million to 41 million over the same period. However, this impressive shareholder return has been financed by a business with deteriorating fundamentals. The payout ratio spiked to nearly 80% in 2023, a level that is not sustainable without a strong recovery in earnings. Compared to its peers, HarborOne's historical record shows a clear inability to consistently translate balance sheet growth into profitable results, making its past performance a significant concern for potential investors.
The regional and community banking industry is navigating a period of significant change, with the next 3-5 years expected to be defined by two key trends: continued consolidation and an accelerated push towards digitalization. Competitive intensity is rising, not just from traditional banks but also from credit unions and nimble fintech companies. This forces banks like HarborOne to invest heavily in technology to meet evolving customer expectations for seamless digital experiences, all while managing the high fixed costs of their branch networks. The primary driver behind this shift is the need for scale; larger asset bases allow banks to spread the growing costs of compliance, technology, and marketing, making it difficult for smaller institutions to compete effectively on price and product offerings. The number of community banks has been steadily declining for over a decade, a trend expected to continue as M&A activity picks up once interest rate uncertainty subsides.
Catalysts that could spur demand include a more stable interest rate environment, which would improve loan affordability and ease the intense pressure on deposit costs. The U.S. regional banking market is mature, with forecasted growth at a modest CAGR of 2-3% over the next five years. However, the key to success will not be market growth, but rather the ability to win market share through superior service and technology. Digital banking adoption, already high with over 70% of customers using mobile platforms, will become nearly universal, making a bank's digital interface a primary battleground for customer acquisition and retention. Competition will become harder for traditional players as digital-first competitors can operate with lower overhead, while high capital requirements and regulatory hurdles will continue to limit the entry of new, traditionally chartered banks.
As of October 27, 2025, a detailed valuation analysis of HarborOne Bancorp, Inc. (HONE) at its price of $13.31 suggests the stock is trading at a premium to its intrinsic value. A triangulated approach using multiples, yield, and asset-based methods indicates that the bank's current market price is difficult to justify based on its fundamental performance, particularly its low profitability. This analysis points to a fair value estimate between $10.50 and $12.50, suggesting significant downside from the current price and a cautious stance for investors.
HONE’s trailing twelve months (TTM) P/E ratio is a high 20.5, and while its forward P/E is more reasonable at 15.48, it remains above the peer average of around 11.8x for regional banks. Applying this peer multiple to HONE’s forward earnings per share of $0.86 implies a fair value of approximately $10.15, suggesting the market's growth expectations may be too optimistic. This overvaluation is further supported by the Price-to-Tangible-Book-Value (P/TBV) ratio, a primary valuation tool for banks.
HONE's P/TBV multiple is 1.04x, based on a tangible book value per share of $12.85. A P/TBV multiple greater than 1.0x is typically justified by a Return on Equity (ROE) that exceeds the bank's cost of equity (often 8-10%). However, HONE's ROE is currently a low 5.58%, far below the 10-11% average for healthy regional banks. Given this subpar profitability, a P/TBV multiple at or slightly below 1.0x would be more appropriate, suggesting a fair value closer to its tangible book value of $12.85. Finally, the dividend yield of 2.70% is not compelling compared to peers offering yields in the 3.2% to 4.2% range, further reinforcing the view that the stock is overvalued.
Warren Buffett's investment thesis in banking centers on finding simple, understandable businesses with durable, low-cost deposit franchises, conservative management, and a consistent ability to generate high returns on equity. When examining HarborOne Bancorp in 2025, Buffett would appreciate its straightforward community banking model but would be immediately deterred by its weak profitability metrics. The bank's Return on Assets (ROA) of approximately 0.6% and Return on Equity (ROE) of 6-7% fall well short of the 1.0% and 10%+ benchmarks he would expect from a quality institution, indicating a lack of a strong competitive advantage or pricing power. Furthermore, a high efficiency ratio near 70% signals operational bloat rather than the lean, well-run operation he prefers. While the stock's valuation, often trading below its tangible book value, might seem appealing, Buffett would classify this as a classic 'value trap'—a cheap stock that is cheap for a good reason. For retail investors, the key takeaway is that for Buffett, a low price can never compensate for a mediocre business with poor returns on capital. If forced to choose the best regional banks, Buffett would likely favor Independent Bank Corp. (INDB) for its best-in-class profitability (ROE ~12%), Merchants Bancorp (MBIN) for its phenomenal, albeit specialized, efficiency and returns (ROE >20%), and Eastern Bankshares (EBC) for its unique 'special situation' of being massively overcapitalized with a clear path to deploy it accretively. Buffett's decision on HONE would only change if a new management team demonstrated a sustained track record of lifting ROE above 10% and cutting the efficiency ratio below 65%.
Charlie Munger would view HarborOne Bancorp as a classic example of a business to avoid, placing it firmly in his 'too hard' pile. His investment thesis for banking requires identifying truly exceptional operators with durable moats, disciplined underwriting, and the ability to generate high returns on equity, as banks are inherently risky, leveraged businesses. HONE would not meet this high bar, as its financial performance, with a return on assets around 0.6% and an efficiency ratio near 70%, signals it is a mediocre, commodity-like business struggling to earn its cost of capital. While the stock may appear statistically cheap trading below tangible book value, Munger would see this as a value trap, preferring to pay a fair price for a wonderful business like Independent Bank Corp. over a wonderful price for a fair business like HONE. The key takeaway for retail investors is that in a competitive industry like banking, it's crucial to focus on best-in-class operators rather than apparent bargains, as the latter often lack the ability to compound value over the long term. If forced to choose top regional banks, Munger would gravitate towards Independent Bank Corp. (INDB) for its consistent high returns (ROE ~12%), Merchants Bancorp (MBIN) for its phenomenal, albeit cyclical, profitability (ROE >20%), and Camden National (CAC) as a model of steady, quality execution (ROA ~1.0%). A fundamental, multi-year improvement in HONE's return on equity to consistently exceed 10% would be required for Munger to even begin to reconsider his negative view.
Bill Ackman would view HarborOne Bancorp as a classic activist opportunity in 2025, rather than a high-quality, long-term investment. He would be drawn to the bank's depressed valuation, frequently trading below its tangible book value, which he sees as a sign of significant mismanagement and untapped potential. The bank's poor performance metrics, such as a Return on Equity around 7% and an inefficient cost structure with an efficiency ratio near 70%, are not traits of a great business but are clear targets for improvement. Ackman's thesis would be to acquire a significant stake and advocate for catalysts to unlock value, such as aggressive cost-cutting to improve profitability or forcing a sale to a larger, more efficient competitor like Independent Bank Corp. or Eastern Bankshares. For retail investors, this means the stock is not a simple 'buy and hold' but a speculative bet on a potential corporate shake-up. If forced to choose the best banks in this sector, Ackman would likely favor Independent Bank Corp. (INDB) for its best-in-class execution and ~12% ROE, Eastern Bankshares (EBC) for its unique 'coiled spring' balance sheet with massive deployable capital for M&A, and Merchants Bancorp (MBIN) for its phenomenal, albeit cyclical, >20% ROE. Ackman's interest in HONE would solidify if the current management fails to present a credible plan to lift its Return on Equity above 10%, making an activist campaign both necessary and likely to succeed.
HarborOne Bancorp operates as a classic community-focused bank, a model built on long-term customer relationships and local market expertise. This strategy provides a degree of stability, as its core customer base is often less transient than those of larger, national banks. The bank's business is straightforward: it gathers deposits from its local community and lends that money out primarily in the form of commercial real estate, residential mortgages, and business loans. This traditional approach is generally lower-risk but can also limit growth opportunities, tying the bank's fortunes closely to the economic health of its specific operating region in New England.
When benchmarked against its competition, HarborOne's financial performance reveals notable weaknesses. Its profitability metrics, including Return on Assets (ROA) and Return on Equity (ROE), frequently fall below the peer average. A bank's ROA, which measures how effectively it uses its assets to generate profit, ideally sits above 1%; HONE often operates below this threshold. This suggests that its assets, primarily its loan portfolio, are not generating as much income as those of more successful rivals. Similarly, its efficiency ratio, a measure of non-interest expenses as a percentage of revenue, tends to be higher than competitors, indicating that it costs HarborOne more to generate a dollar of revenue. This could point to a lack of scale or a need for greater investment in technology to streamline operations.
From an investment perspective, HarborOne's appeal lies in its valuation and dividend. The stock often trades at a discount to its tangible book value, which can attract value-oriented investors. However, this lower valuation is a direct reflection of its performance challenges. The central question for a potential investor is whether the current stock price adequately compensates for the bank's lower growth and profitability profile compared to its peers. While a turnaround in efficiency or a favorable shift in the interest rate environment could provide upside, the bank faces a significant challenge in closing the performance gap with more dynamic and profitable competitors in the regional banking space.
Brookline Bancorp, Inc. (BRKL) and HarborOne Bancorp, Inc. (HONE) are both community-focused banks operating primarily in Massachusetts, but Brookline is a larger and more financially robust institution. With a larger asset base, Brookline achieves better economies of scale, leading to superior profitability and efficiency metrics. While both banks serve similar markets, Brookline's stronger financial health is reflected in its higher return on assets and equity. HONE's key advantage is its concentrated local brand presence in southeastern Massachusetts, whereas Brookline has a more diversified footprint across the greater Boston area and Rhode Island. For investors, the choice is between HONE's potential deep value and Brookline's demonstrated record of stronger, more consistent performance.
In terms of Business & Moat, both banks rely on high switching costs and local brand recognition. Brookline’s brand is strong in affluent Boston suburbs, while HONE is a leader in its South Shore territory. Brookline’s greater scale, with assets around $11 billion compared to HONE's approximate $5.8 billion, gives it an edge in operational leverage and the ability to service larger commercial clients. Both face identical high regulatory barriers, a key moat for the entire banking industry. Neither has significant network effects beyond their local branch density. Overall, Brookline's larger scale and more diversified geographic footprint within the attractive New England market give it a stronger moat. Winner: Brookline Bancorp, Inc.
From a financial statement perspective, Brookline consistently outperforms HONE. Brookline's Return on Average Assets (ROA) is typically around 0.9%, while HONE's hovers closer to 0.6%. An ROA closer to or above 1% is considered strong for a bank, so Brookline is nearer to that benchmark. This indicates Brookline generates more profit from its assets. Furthermore, Brookline’s efficiency ratio is often in the low 60s%, superior to HONE’s which can be in the high 60s% or low 70s% (a lower ratio is better). On credit quality, both are solid, but Brookline often maintains a slightly lower nonperforming assets to total assets ratio. Brookline has better profitability and efficiency. Winner: Brookline Bancorp, Inc.
Looking at Past Performance, Brookline has delivered more value to shareholders. Over the past five years, Brookline's total shareholder return has generally outpaced HONE's, reflecting its stronger earnings growth. For example, in the 2019-2024 period, Brookline has demonstrated more resilient earnings per share (EPS) growth through different economic cycles. HONE's performance has been more volatile, with flatter revenue growth. In terms of risk, both stocks have similar volatility (beta), but HONE has experienced deeper drawdowns during periods of market stress due to concerns over its profitability. Brookline wins on growth and total returns. Winner: Brookline Bancorp, Inc.
For Future Growth, both banks face similar macroeconomic headwinds, including interest rate sensitivity and a competitive lending environment. However, Brookline's larger size and presence in the economically vibrant Greater Boston area give it more diverse opportunities for organic loan growth. HONE's growth is more tightly linked to the economic prospects of southeastern Massachusetts. Brookline also has a more established track record of successful M&A, which could be a future growth driver. HONE’s path to growth relies more heavily on improving its internal efficiency and deepening its existing market penetration. Brookline has the edge due to its superior market position and scale. Winner: Brookline Bancorp, Inc.
In terms of Fair Value, HONE often trades at a lower valuation multiple, which might attract value investors. For instance, its Price-to-Tangible-Book-Value (P/TBV) ratio is often below 1.0x, while Brookline's might be slightly higher. However, this discount is justified by HONE's weaker profitability (lower ROE). Brookline's dividend yield is also typically comparable or slightly higher, backed by a more comfortable payout ratio. An investor pays a slight premium for Brookline, but this is warranted by its superior financial quality and more consistent performance. Brookline offers better quality for a very reasonable price, making it the better risk-adjusted value. Winner: Brookline Bancorp, Inc.
Winner: Brookline Bancorp, Inc. over HarborOne Bancorp, Inc. Brookline is the clear winner due to its superior scale, profitability, and operational efficiency. Its ROA of ~0.9% and efficiency ratio in the low 60s% are demonstrably better than HONE's figures (~0.6% ROA, ~70% efficiency ratio). While HONE's concentrated community focus is a strength, it also limits its growth and leaves it trailing in key financial metrics. Brookline's primary risk is its exposure to the competitive Boston real estate market, but its historical performance suggests it manages this risk well. This verdict is supported by Brookline's consistent ability to generate higher returns for shareholders from a larger, more efficient asset base.
Independent Bank Corp. (INDB), parent of Rockland Trust, is a premier New England regional bank that serves as a formidable competitor to HarborOne. INDB is significantly larger, more profitable, and operates with best-in-class efficiency, making it a benchmark for performance in the region. Its competitive advantages stem from its scale, diversified business lines including wealth management, and a highly regarded brand for customer service. HONE, while a solid community bank, operates on a much smaller scale and has not achieved the same level of financial performance. The comparison highlights the gap between a high-performing regional leader and a smaller, average-performing community bank.
Regarding Business & Moat, INDB's moat is substantially wider than HONE's. INDB's brand, 'Rockland Trust,' is one of the strongest banking brands in Massachusetts, consistently winning customer service awards. Its scale is a massive advantage, with total assets exceeding $16 billion versus HONE's $5.8 billion. This scale allows for significant investment in technology and a broader product suite. INDB has a powerful wealth management division with billions in assets under administration, creating very sticky customer relationships and diversified revenue. HONE's moat is its local entrenchment, but it lacks INDB's scale and business diversity. Winner: Independent Bank Corp.
An analysis of the Financial Statements shows a stark difference in performance. INDB consistently delivers an ROA well over 1.1% and an ROE in the low double-digits (~12%), both of which are top-tier for a regional bank. This blows past HONE’s sub-1% ROA and mid-single-digit ROE. INDB’s efficiency ratio is exceptionally strong, often below 60%, compared to HONE’s ~70%. This means INDB is a far more profitable and efficient operator. On the balance sheet, INDB has a long history of pristine credit quality and robust capital levels, setting the standard in its peer group. Winner: Independent Bank Corp.
INDB's Past Performance has been exceptional. The bank has a long track record of delivering consistent, double-digit EPS growth, fueled by both organic expansion and successful, well-integrated acquisitions. Its 5-year and 10-year total shareholder returns have significantly outperformed the broader banking index and HONE by a wide margin. For example, INDB has grown its tangible book value per share at a high single-digit or low double-digit compound annual rate, a key indicator of long-term value creation that HONE has not matched. Its stock has also shown less volatility and smaller drawdowns than HONE during market downturns. Winner: Independent Bank Corp.
Looking at Future Growth, INDB is better positioned. Its strong capital base and proven M&A capabilities mean it is a natural consolidator in the fragmented New England banking market. Its strong brand allows it to continue taking market share organically, particularly in commercial lending and wealth management. HONE’s growth prospects are more limited and tied to improving its own operational performance. While both are exposed to the same regional economy, INDB has more levers to pull to drive future earnings, including fee income growth from its non-banking businesses. Winner: Independent Bank Corp.
In terms of Fair Value, INDB commands a premium valuation, and rightfully so. It typically trades at a significant premium to its tangible book value (e.g., 1.5x or higher), whereas HONE often trades below its tangible book value. While HONE may look 'cheaper' on a simple P/B basis, it is a classic case of paying for quality. INDB's high valuation is supported by its superior ROE. An investor in INDB is buying a best-in-class operator with a clear growth trajectory, while an investment in HONE is a bet on a turnaround that has yet to materialize. On a risk-adjusted basis, INDB justifies its premium. Winner: Independent Bank Corp.
Winner: Independent Bank Corp. over HarborOne Bancorp, Inc. INDB is unequivocally the superior company and investment. It wins across every category: moat, financial performance, historical returns, and future growth prospects. Its key strengths are its exceptional profitability (ROA > 1.1%), operational efficiency (efficiency ratio < 60%), and a powerful brand that drives both organic growth and customer loyalty. HONE's main weakness in this comparison is its inability to match INDB's scale and execution. The primary risk for INDB is 'execution risk' in future M&A, but its long track record of success mitigates this concern. This verdict is based on the overwhelming quantitative and qualitative evidence of INDB's superior business model and financial results.
Merchants Bancorp (MBIN) represents a very different type of competitor to HarborOne, despite both being in the banking sector. While HONE is a traditional community bank focused on gathering deposits and making local loans, MBIN has a unique and highly profitable national business model centered on mortgage warehousing and multi-family lending. This specialization allows MBIN to achieve industry-leading profitability metrics that HONE cannot match. This comparison highlights the difference between a niche, high-performance operator and a conventional community bank. HONE's model is more stable and less cyclical, but MBIN's offers far higher returns.
MBIN’s Business & Moat is built on specialized expertise, not a local brand. Its moat comes from its deep relationships and efficient processes in the mortgage warehousing space, which provides short-term loans to mortgage originators. This is a niche market with significant barriers to entry due to the required expertise and risk management. HONE’s moat is its local deposit franchise. MBIN’s scale is national, with total assets around $17 billion, nearly three times HONE's. While HONE has high switching costs with its retail customers, MBIN has sticky relationships with its mortgage clients. MBIN's unique, expert-driven model gives it a stronger, though different, moat. Winner: Merchants Bancorp.
MBIN’s Financial Statements are in a different league from HONE’s. MBIN consistently generates an ROA above 1.5% and an ROE that can exceed 20%, figures that are at the absolute top of the entire banking industry. In contrast, HONE’s ROA is below 1% and its ROE is in the mid-single digits. This vast difference is driven by MBIN’s highly efficient model; its efficiency ratio is often below 40%, an astonishingly low number compared to HONE's ~70%. The trade-off is that MBIN’s business is more sensitive to the mortgage cycle, but its historical execution has been superb. Winner: Merchants Bancorp.
Regarding Past Performance, MBIN has been a phenomenal growth story. Over the last five years, it has compounded its earnings and book value at a much faster rate than HONE. This has translated into massive outperformance in total shareholder return, with MBIN's stock delivering returns that are multiples of what HONE investors have seen. For instance, MBIN's 5-year revenue CAGR has often been in the double digits, while HONE's has been in the low single digits. MBIN's business model carries higher cyclical risk tied to the housing market, but its historical management of this risk has been excellent, leading to superior long-term results. Winner: Merchants Bancorp.
For Future Growth, MBIN’s prospects are tied to the health of the U.S. housing and mortgage markets, as well as its ability to expand its other lending verticals. While this introduces cyclicality, it also provides a national growth runway unavailable to HONE, which is confined to the New England economy. MBIN has a clear strategy to continue gaining share in its niche markets. HONE’s growth depends on the slow grind of gaining local market share and improving efficiency. MBIN’s potential for high-growth periods is much greater, albeit with higher risk. Winner: Merchants Bancorp.
On Fair Value, MBIN, like INDB, trades at a premium valuation that reflects its superior profitability. Its P/E and P/B ratios are typically higher than HONE's. For example, MBIN might trade at 1.5x tangible book value, while HONE trades below 1.0x. However, when you consider that MBIN's ROE is more than double HONE's, its valuation seems not just fair, but potentially still attractive. The market is pricing HONE for low growth and low returns, and MBIN for high growth and high returns. Given its track record, MBIN's premium is well-earned. Winner: Merchants Bancorp.
Winner: Merchants Bancorp over HarborOne Bancorp, Inc. MBIN is the decisive winner due to its vastly superior profitability and growth, driven by a specialized and highly efficient business model. Its key strengths are its astronomical ROE (often >20%) and rock-bottom efficiency ratio (<40%), which are simply unattainable for a traditional bank like HONE. HONE’s primary weakness is its low-return, high-cost traditional banking model. The main risk for MBIN is its cyclical exposure to the mortgage market, which could lead to volatile earnings. However, its historical outperformance is so significant that it justifies the cyclical risk, making it the better investment choice.
Camden National Corporation (CAC), the largest bank headquartered in Maine, presents a compelling comparison to HarborOne. Both are community-focused institutions with deep roots in their respective New England markets. However, Camden National has historically demonstrated slightly better execution, resulting in more consistent profitability and a stronger reputation among investors. While HONE has been focused on integrating its past acquisitions and improving efficiency, CAC has operated as a steady, reliable performer. This matchup pits HONE's turnaround potential against CAC's proven track record of stability and shareholder-friendly practices.
Analyzing their Business & Moat, both banks have strong, geographically-focused brands. Camden National is 'Maine's community bank,' a powerful brand in a state with a stable, though slow-growing, economy. HONE holds a similar position in southeastern Massachusetts. CAC is slightly larger, with total assets around $5.7 billion, very close to HONE's $5.8 billion, so scale advantages are minimal. Both benefit from high regulatory barriers and sticky customer deposits. CAC also has a well-regarded wealth management arm, which adds a layer of diversification and stickiness that is more developed than HONE's. This gives CAC a slight edge. Winner: Camden National Corporation.
From a Financial Statement perspective, Camden National consistently edges out HarborOne. CAC typically produces an ROA around 1.0% and an ROE near 10%, hitting the industry benchmarks for a well-run bank. HONE, in contrast, operates with an ROA closer to 0.6% and an ROE of ~6-7%. This gap highlights CAC’s superior ability to generate profits. CAC’s efficiency ratio is also generally better, often in the low 60s% compared to HONE's ~70%. Both maintain solid credit quality and strong capital ratios, but CAC's stronger profitability metrics make it the clear winner. Winner: Camden National Corporation.
In Past Performance, Camden National has been the more reliable performer for investors. Over the last five years, CAC has delivered a steadier stream of earnings growth and a more stable, rising dividend. Its total shareholder return has been less volatile and generally higher than HONE's. HONE's performance has been hampered by costs associated with its 2018 merger, which have weighed on its efficiency and profitability. CAC has a longer, cleaner history as a public company with a consistent strategy, whereas HONE is still working to optimize its current structure. Winner: Camden National Corporation.
Regarding Future Growth, both banks face similar prospects tied to their local economies. Maine's economy (for CAC) and southeastern Massachusetts's economy (for HONE) are not high-growth regions, so organic growth for both will likely be modest. Growth will have to come from taking market share or through acquisitions. CAC has a strong history of smart, small acquisitions within its region and has the financial strength to continue this strategy. HONE's focus is more likely to remain internal, centered on improving its own profitability before it can look to expand aggressively. CAC's proven ability to execute on M&A gives it more options. Winner: Camden National Corporation.
When assessing Fair Value, both stocks often trade at similar, modest valuations, frequently below or near their tangible book value. For example, both might trade at a P/TBV of ~0.9x to 1.1x. However, given that CAC delivers a higher ROE, it can be argued that it is the better value. An investor is getting a higher-quality, more profitable bank for a similar price. CAC also has a strong dividend history, often yielding ~4% or more, backed by a healthy payout ratio, making it attractive to income-focused investors. Winner: Camden National Corporation.
Winner: Camden National Corporation over HarborOne Bancorp, Inc. Camden National is the winner due to its consistent and superior profitability, better operational efficiency, and a stronger track record of creating shareholder value. Its key strengths are its solid execution, reflected in an ROA near 1.0% and a healthy ROE of ~10%, and its stable, shareholder-friendly capital return policy. HONE's main weakness is its persistent profitability gap relative to well-run peers like CAC. The primary risk for CAC is its concentration in the slow-growing Maine economy, but it has proven it can thrive in this environment. The verdict is supported by CAC's ability to consistently generate better returns from a similar community banking model.
Berkshire Hills Bancorp, Inc. (BHLB) is perhaps the most direct and interesting competitor for HarborOne, as both have faced similar struggles with profitability and efficiency in recent years. BHLB, which operates as Berkshire Bank, is a larger institution with a wider geographic footprint across New England and New York. Both banks have been undergoing strategic shifts to improve performance, making this a comparison of two turnaround stories. BHLB's larger scale presents potential advantages, but its more complex operations have also led to significant challenges that HONE, with its simpler model, has avoided.
Regarding Business & Moat, BHLB is larger, with assets of approximately $12 billion compared to HONE's $5.8 billion, giving it a scale advantage. Its brand, 'Berkshire Bank,' has a presence in multiple states, but this diversification has also led to a less concentrated market identity compared to HONE's dominance in its core territory. Both rely on community ties and customer inertia. In recent years, BHLB has been divesting from non-core markets to simplify its business, implicitly acknowledging that its broader geographic strategy did not create a strong moat. HONE’s moat, while geographically limited, is deeper in its home market. This one is close, but HONE’s local dominance gives it a slight edge in moat quality. Winner: HarborOne Bancorp, Inc.
Financially, both banks have posted underwhelming results. BHLB has struggled with an elevated efficiency ratio, often above 70%, and an ROA that has been inconsistent and frequently below 0.7%. These figures are very similar to HONE's, indicating both banks are less profitable than top-performing peers. BHLB has also undertaken significant balance sheet restructuring, which has impacted short-term results. HONE’s financial performance has been more stable, albeit at a low level. Given BHLB's recent strategic turmoil and restructuring charges, HONE's steady, if unimpressive, performance looks slightly better in comparison. Winner: HarborOne Bancorp, Inc.
Analyzing Past Performance, both banks have disappointed investors over the last five years. Both stocks have significantly underperformed the regional banking index, delivering low or even negative total shareholder returns during that period (2019-2024). BHLB's stock has been particularly volatile due to leadership changes and strategic pivots. HONE's stock has been less volatile but has also failed to generate meaningful growth. This is a case of two underperformers, but HONE's relative stability and lack of major strategic blunders make its past performance slightly less concerning. Winner: HarborOne Bancorp, Inc.
For Future Growth, both management teams are focused on similar goals: improving profitability through cost-cutting and optimizing their lending businesses. BHLB’s 'BEST' strategic transformation plan aims to improve its efficiency ratio and ROA to be more in line with peers. HONE has a similar focus. BHLB’s larger size gives it more absolute dollars to cut, but also more complexity to manage. HONE’s smaller size could make it more nimble in implementing changes. Success for both depends entirely on management execution. This category is evenly matched, as both are 'show-me' stories. Winner: Even.
From a Fair Value perspective, both stocks trade at deep discounts to the sector, often well below their tangible book value. It is common to see both BHLB and HONE with P/TBV ratios in the 0.7x to 0.9x range. This reflects investor skepticism about their ability to execute their turnaround plans and improve their ROE. Both offer high dividend yields as a result of their depressed stock prices. Because both are turnaround plays with similar low valuations and profitability profiles, neither offers a clear value advantage over the other. They are both value traps until they can demonstrate sustained improvement. Winner: Even.
Winner: HarborOne Bancorp, Inc. over Berkshire Hills Bancorp, Inc. This is a victory by a narrow margin in a matchup of two underperforming banks. HONE wins due to its greater stability, simpler business model, and deeper moat in its core market. While its financial metrics (~0.6% ROA, ~70% efficiency) are weak, they have been more consistent than BHLB's, which has been plagued by strategic missteps and restructuring. BHLB's primary weakness has been a lack of strategic focus, leading to poor returns. The risk for HONE is that it remains a 'value trap,' unable to improve its profitability. This verdict is supported by HONE representing a lower-risk, albeit low-return, proposition compared to BHLB's more volatile and uncertain turnaround effort.
Based on industry classification and performance score:
HarborOne Bancorp operates as a traditional community bank with a significant concentration in residential and commercial real estate lending in the competitive New England market. Its primary strength lies in its local relationships and deposit base, which provides stable, low-cost funding for its loan operations. However, its heavy reliance on mortgage banking creates revenue volatility tied to interest rate cycles, and its competitive moat is relatively narrow against larger regional players. The overall investor takeaway is mixed, as the bank’s stability is challenged by its cyclical mortgage business and limited product diversification.
The bank's revenue is heavily skewed towards its volatile mortgage banking business, making its noninterest income stream unstable and less diversified than peers with more balanced fee sources.
Diversified fee income can provide a stable revenue source to offset fluctuations in net interest income. HarborOne's noninterest income represents a significant portion of its total revenue, but it is not well-diversified. In 2023, mortgage banking income accounted for $13.1 million, or roughly 40%, of its $33.1 million in total noninterest income. This heavy reliance is a major weakness, as mortgage banking is highly cyclical. For instance, in 2021, mortgage banking income was a much higher $53.1 million. Other sources of fee income, such as service charges on deposit accounts ($9.1 million) and wealth management fees (not broken out, but part of 'other income'), are comparatively small. A strong community bank would typically have more balanced contributions from wealth management, treasury services, and card fees. Because HONE's fee income is dominated by a single, volatile line of business, it fails to provide the stabilizing benefit that a truly diversified fee stream would offer.
HarborOne shows a reasonable mix of deposit customers, but its relatively high reliance on time deposits and lack of detailed disclosure on customer concentration present a mixed picture.
A well-diversified deposit base reduces funding risk. HarborOne serves a mix of consumer and business customers, which is typical for a community bank. However, the composition of its deposits raises some concerns. The bank has a significant reliance on time deposits (CDs), which stood at 34% of total deposits in Q1 2024. These deposits are more rate-sensitive and less sticky than core checking or savings accounts. The bank does not explicitly break down its deposits by retail, small business, and public funds, making a full assessment difficult. However, its reporting indicates that brokered deposits, which are a less stable funding source, were minimal at $50 million, or about 1% of total deposits, which is a positive. The lack of clear disclosure on concentrations, such as the percentage of deposits from its top 10 depositors, makes it hard to fully dismiss concentration risk. Without strong evidence of superior diversification, and with a high level of rate-sensitive CDs, the bank's funding mix appears average at best and does not represent a strong competitive advantage.
HarborOne is primarily a real estate lender with heavy concentrations in commercial and residential properties, lacking a distinct, specialized lending niche to differentiate itself from competitors.
While expertise in a specific lending niche can create a strong moat, HarborOne's loan portfolio is concentrated in general real estate categories rather than a unique specialty. As of Q1 2024, its loan book was dominated by commercial real estate (47%) and residential real estate (36%). While it engages in commercial & industrial (C&I) lending (14%), it is not a defining characteristic or a specialized focus like SBA or agriculture lending might be for other banks. The bank does not report significant SBA loan production or a focus on other defensible niches. This positions HONE as a generalist competing directly with nearly every other bank in its market on the most common loan types. Without a specialized franchise to command better pricing or attract a specific type of high-quality borrower, its lending business lacks a durable competitive advantage and is subject to intense price-based competition and the cyclical risks of the broader real estate market.
The bank's deposit base is under pressure, with a declining proportion of low-cost deposits and a rising cost of funds that is in line with the industry, indicating a lack of pricing power.
A community bank's strength often comes from a loyal, low-cost deposit base. For HarborOne, this has become a point of weakness. As of Q1 2024, noninterest-bearing deposits made up 20% of total deposits, down from 25% a year prior. This is below the average for many high-performing community banks, which often boast percentages closer to 30%. This decline forces the bank to rely more on higher-cost funding like certificates of deposit (CDs), which have grown to 34% of total deposits. Consequently, the bank's total cost of deposits rose sharply to 2.31% in Q1 2024 from just 0.63% in the prior year, a reflection of intense competition for funds. While total deposits grew a modest 2% year-over-year, the changing composition reveals a lower-quality, more expensive funding mix. With estimated uninsured deposits at 34%, the bank is not an outlier, but it doesn't possess the exceptionally sticky, insured deposit base that would constitute a strong moat.
HarborOne maintains a focused branch network in its core markets, but its deposits per branch are modest, suggesting average operational efficiency compared to peers.
HarborOne operates a network of 30 full-service branches primarily in eastern Massachusetts and Rhode Island. This concentrated physical presence is central to its community banking strategy of building local relationships. As of March 2024, the bank held $4.7 billion in deposits, which translates to approximately $157 million in deposits per branch. This figure is respectable but does not stand out as particularly strong when compared to more efficient regional competitors, some of whom achieve well over $200 million per branch. A higher deposits-per-branch figure indicates better operating leverage, as the bank can generate more business from the fixed cost of each location. While HONE's network is geographically focused, which is a strength, the middling efficiency suggests its moat from its branch network is not as powerful as it could be. The bank has not been aggressively expanding or contracting its network, indicating a stable but not particularly dynamic strategy. Therefore, the branch network provides a localized advantage but lacks the scale and efficiency to be a defining competitive edge.
HarborOne Bancorp's recent financial statements present a mixed picture for investors. The bank shows positive momentum in its core earnings, with Net Interest Income growing to $33.22 million in the latest quarter. However, this is offset by significant weaknesses, including a high efficiency ratio of 71.2%, suggesting operational costs are elevated. Furthermore, its loan-to-deposit ratio stands at a high 104.1%, indicating a reliance on funding beyond its core deposit base. The overall takeaway is mixed, as improving core profitability is challenged by cost inefficiencies and a stretched liquidity position.
While the bank's core capital ratio is adequate, its high loan-to-deposit ratio of over `100%` indicates a stretched liquidity position.
HarborOne's capital and liquidity profile is mixed. On the positive side, its tangible common equity to total assets ratio is 9.28% ($520.73M in TCE vs. $5.61B in assets). This is generally considered average and in line with the 8-9% benchmark for regional banks, providing a satisfactory cushion to absorb potential losses. However, the bank's liquidity position raises concerns.
The loans-to-deposits ratio is 104.1% ($4.68B in net loans vs. $4.49B in deposits). A ratio exceeding 100% is a significant weakness, as it means the bank is funding its loan growth with sources other than stable customer deposits, such as borrowings from the Federal Home Loan Bank (FHLB). These wholesale funding sources can be more expensive and less reliable during periods of market stress. While the bank has available liquidity, this high ratio points to a structural reliance on borrowed funds to support its lending activities, which is a less conservative approach than funding loans primarily with core deposits.
The bank's allowance for credit losses appears slightly below typical industry levels, and a lack of data on nonperforming loans makes it difficult to confirm the adequacy of its reserves.
Assessing HarborOne's credit quality is challenging due to limited data, but the available metrics suggest a need for caution. The bank's allowance for credit losses stands at $47.96 million against a gross loan portfolio of $4.73 billion, resulting in a reserve ratio of 1.01%. This is slightly weak compared to industry benchmarks, which often range from 1.2% to 1.5% for similar banks. A lower reserve level could mean future earnings are more exposed if credit conditions worsen and more provisions are needed.
The provision for credit losses was a relatively small $0.74 million in the most recent quarter. While a low provision helps current profits, it must be sufficient to cover expected future loan losses. Crucial data points like the percentage of nonperforming loans (NPLs) and net charge-offs are not provided, creating a significant blind spot for investors. Without knowing the actual performance of the loan book, it's impossible to be fully confident that the current reserve level is sufficient. Given the slightly low reserve ratio and missing performance data, a conservative stance is warranted.
The bank's tangible equity is significantly reduced by unrealized losses on its securities portfolio, indicating high sensitivity to interest rate changes.
HarborOne's balance sheet shows signs of vulnerability to interest rate fluctuations. The most direct evidence is the Accumulated Other Comprehensive Income (AOCI), which currently stands at a negative -$67.24 million. This figure represents unrealized losses on the bank's investment securities, which have declined in value as interest rates have risen. When measured against the bank's tangible common equity of $520.73 million, these unrealized losses represent a significant 12.9% drag. This reduces the bank's tangible book value and can limit its financial flexibility.
While specific data on the duration of its securities portfolio or the mix of variable-rate loans is not provided, the large negative AOCI is a clear red flag. It suggests a mismatch between the duration of its assets (like fixed-rate bonds and loans) and its liabilities. If the bank were forced to sell these securities, it would have to realize these losses, directly impacting its regulatory capital. This exposure makes the bank's earnings and capital more volatile in a shifting rate environment.
The bank demonstrated strong core performance in the last quarter, with growing Net Interest Income driven by both higher interest income and lower funding costs.
HarborOne's core profitability from lending and borrowing showed positive momentum in the most recent quarter. Net Interest Income (NII) grew to $33.22 million, a healthy 5.95% increase compared to the same quarter last year. This growth is a key indicator of a bank's fundamental earnings power. The improvement appears to be high-quality, as it was driven by favorable trends on both sides of the balance sheet.
Total interest income increased quarter-over-quarter, while total interest expense actually declined from $32.97 million to $32.39 million. This suggests the bank is effectively pricing its loans and managing its funding costs, particularly the interest paid on deposits and borrowings. This ability to widen the spread between what it earns on assets and what it pays for liabilities is crucial for profitability, especially in a competitive rate environment. Although a precise Net Interest Margin (NIM) percentage is not provided, the strong growth in NII is a clear sign of strength in this area.
The bank's efficiency ratio is consistently high, indicating that its operating costs are consuming too much of its revenue and weighing on profitability.
HarborOne struggles with cost control, as shown by its high efficiency ratio. In the most recent quarter, the ratio was 71.2%, calculated from $32.37 million in non-interest expenses against $45.44 million in total revenue. For the full year 2024, the ratio was even higher at 75.4%. These figures are weak compared to the industry benchmark, where well-run community banks often target a ratio below 60%. An efficiency ratio above 70% suggests that the bank's overhead, including salaries and occupancy costs, is elevated relative to the income it generates.
High expenses act as a direct drag on profitability, meaning less revenue flows through to the bottom line for shareholders. In Q2 2025, salaries and employee benefits alone accounted for $18.79 million, or 58% of total non-interest expenses. While the bank showed some improvement from the prior quarter's 79.4% efficiency ratio, its cost structure remains a persistent headwind that limits its ability to translate top-line growth into strong earnings.
HarborOne's past performance presents a mixed but concerning picture for investors. The bank has excelled at returning capital, evidenced by strong dividend growth and a significant 24% reduction in shares outstanding since 2020. However, its core operational performance has been volatile and weak, with earnings per share declining at a -5.3% annual rate over the last five years and return on equity falling to a low 4.73% in 2024. While balance sheet growth is positive, it has not translated into stable profits, and key metrics lag those of stronger regional peers. The investor takeaway is negative, as aggressive capital returns appear unsustainable without a significant improvement in core profitability.
HarborOne has achieved solid loan and deposit growth, but its loan-to-deposit ratio has climbed above 100%, suggesting an increasing reliance on more expensive wholesale funding to support its lending activities.
Over the past five years, HarborOne has successfully grown its core business. Net loans grew from $3.44 billion in 2020 to $4.80 billion in 2024, a compound annual growth rate of 8.6%. Similarly, total deposits grew from $3.51 billion to $4.55 billion, a CAGR of 6.7%. This indicates the bank is successfully expanding its balance sheet and gaining traction in its communities.
A key risk has emerged in how this growth is funded. The bank's loan-to-deposit ratio (LDR), which was 98% in 2020, has steadily climbed and stood at 105.4% in 2024. An LDR above 100% means the bank is lending more than it holds in customer deposits, forcing it to rely on other, often more expensive, funding sources like borrowings from the Federal Home Loan Bank. This strategy can squeeze profitability and introduces higher risk to the balance sheet, outweighing the benefits of the raw growth.
The bank's profitability has been squeezed from both sides, with its net interest income declining from its peak and its efficiency ratio deteriorating to a poor level above 75%.
HarborOne's core profitability trends are negative. Net interest income (NII), the profit made from lending and borrowing, peaked in 2022 at 149 million but has since fallen sharply to 125.7 million in 2024. This decline occurred even as the bank's loan portfolio grew, indicating its Net Interest Margin (NIM) is under severe pressure. The bank is earning less profit on each dollar it lends.
At the same time, the bank has struggled with cost control. Its efficiency ratio, which measures non-interest expenses as a percentage of revenue, has worsened significantly. After standing at a more reasonable 68.0% in 2021, it ballooned to 75.3% by 2024. For a community bank, a ratio above 70% is considered inefficient, and it puts HarborOne at a competitive disadvantage to peers like Independent Bank Corp., which operates with an efficiency ratio below 60%. This combination of falling margins and rising relative costs is a clear sign of poor operational performance.
HarborOne's earnings per share have been highly volatile and have declined significantly from their 2021 peak, resulting in a negative multi-year growth rate and a very poor average return on equity.
The bank's earnings track record is poor. EPS has followed a boom-and-bust cycle, rising from $0.82 in 2020 to a peak of $1.15 in 2021, before collapsing to $0.37 in 2023. The partial recovery to $0.66 in 2024 does little to smooth this volatile path. The compound annual growth rate for EPS from FY2020 to FY2024 is negative -5.3%. This demonstrates a fundamental inability to generate consistent earnings growth for shareholders.
This weakness is further confirmed by the bank's low profitability. The average Return on Equity (ROE) over the last three fiscal years (2022-2024) was just 4.8%. This is substantially below the performance of strong regional banks, which typically generate ROEs of 10% or more. Such a low return indicates the bank is not creating adequate value for its shareholders from its equity base and lags far behind its competitors.
The bank's credit provisioning has been volatile, with a large reserve release in 2021 that artificially boosted earnings, followed by a trend of rising provisions that now act as a headwind to profits.
HarborOne's management of credit risk lacks a record of stability. The Provision for Loan Losses on the income statement shows significant swings. In 2020, the bank set aside a large $34.82 million provision. In 2021, however, it booked a negative provision of -$7.26 million, meaning it released reserves back into earnings. This release significantly inflated the reported net income and EPS for that year, masking underlying performance. Since that release, provisions have been steadily climbing, reaching $8.28 million in 2024, indicating that credit costs are normalizing and creating a drag on earnings.
This is also reflected in the allowance for loan losses as a percentage of gross loans. This coverage ratio fell from 1.58% in 2020 to a low of 0.99% in 2022 before beginning to rebuild to 1.16% in 2024. The combination of volatile provisioning and a dip in reserve coverage during a period of rapid loan growth suggests that credit management has not been conservative and that past earnings quality was low.
The bank has an excellent record of returning capital through aggressive dividend growth and share buybacks, though the high payout ratio on volatile earnings raises sustainability questions.
HarborOne has consistently prioritized returning capital to its shareholders. Dividends per share have grown at a compound annual growth rate (CAGR) of approximately 37% from $0.09 in 2020 to $0.32 in 2024. Alongside this, the company has executed a substantial share repurchase program, reducing its diluted shares outstanding from 54 million to 41 million in five years, a decline of over 24%. This has provided a significant boost to earnings per share, separate from net income performance.
However, this aggressive capital return policy is juxtaposed with deteriorating earnings. The dividend payout ratio, which measures the proportion of earnings paid out as dividends, spiked to a high 79.8% in 2023 when net income plummeted. While it moderated to 47.8% in 2024, it highlights the risk that the dividend could be threatened if profitability does not recover. While the historical actions are commendable, their sustainability is a valid concern.
HarborOne Bancorp's future growth outlook is challenging, constrained by intense competition in its slow-growth New England market. The bank faces significant headwinds from its heavy reliance on the cyclical mortgage industry and persistent pressure on its net interest margin due to rising deposit costs. While its community focus provides some stability, it lacks clear, aggressive growth drivers in loan origination, fee income diversification, or digital innovation compared to more dynamic peers. The investor takeaway is negative, as the path to meaningful earnings and shareholder value growth over the next 3-5 years appears limited and fraught with industry-wide challenges.
Management's outlook points to continued low single-digit loan growth, reflecting a cautious stance that prioritizes credit quality over the aggressive market share gains needed for meaningful expansion.
HarborOne's guidance consistently points toward a low-to-mid single-digit loan growth forecast, which is uninspiring and likely to lag faster-growing peers. This conservative outlook is a direct reflection of the slow economic expansion and intense competition within its New England footprint. The bank does not disclose key forward-looking metrics like the size of its loan pipeline or utilization rates for commercial lines of credit, leaving investors with little evidence of a burgeoning demand pipeline. While a prudent approach to credit is essential, the lack of a more ambitious growth target suggests that the bank is, at best, aiming to maintain its current market position rather than capture new share, signaling a future of slow, plodding growth.
With a conservative approach to capital, the bank lacks a clear M&A strategy or a significant buyback program, limiting potential avenues for accelerated EPS growth.
HarborOne maintains a solid capital position, which is crucial for stability, but its deployment strategy lacks catalysts for future growth. The bank has a modest share repurchase program in place, but activity is often limited and not substantial enough to be a major driver of earnings per share (EPS) growth. Furthermore, in a consolidating industry, there is no clear indication that HarborOne is pursuing strategic M&A, either as a buyer to gain scale or as a seller to unlock shareholder value. This conservative, 'wait-and-see' approach means the bank is reliant almost entirely on slow organic growth, a difficult proposition in its mature market. For long-term investors, this lack of strategic capital action is a significant drawback.
The bank's strategy appears passive, maintaining its physical branch network without announcing aggressive plans for consolidation or demonstrating significant momentum in digital user growth.
HarborOne operates a stable network of 30 branches with approximately $157 million in deposits per branch, a respectable but unremarkable figure that suggests average operational efficiency. The bank has not articulated a clear public strategy for optimizing this physical footprint through consolidation to reduce costs, nor has it presented compelling targets for growing its digital user base. In an environment where competitors are leveraging technology to improve efficiency and enhance customer experience, HarborOne's seemingly defensive posture is a weakness. Without a proactive plan to rationalize its branch costs and accelerate digital adoption, the bank risks falling behind more forward-thinking peers, leading to a higher efficiency ratio and stagnant market share.
The bank's net interest margin (NIM) remains under severe pressure from rising deposit costs, with guidance suggesting stabilization at best and very limited potential for near-term expansion.
The core driver of HarborOne's profitability, its net interest margin, faces significant headwinds. The bank's cost of deposits has surged from 0.63% to 2.31% over the past year as it competes for funding, and its proportion of low-cost, noninterest-bearing deposits has fallen to just 20%. Management's outlook for NIM is cautious, signaling that the primary goal is to stop the compression rather than achieve meaningful expansion. Given the competitive landscape for deposits and the bank's liability-sensitive position, it is unlikely that NIM will become a significant tailwind for earnings growth in the next 1-2 years without a substantial drop in market interest rates. This constraint on its primary revenue source is a critical weakness for the bank's future earnings power.
The bank's fee income is dangerously concentrated in the volatile mortgage banking business, with no clear strategy or targets to grow more stable revenue streams.
A major weakness in HarborOne's growth profile is its heavy reliance on mortgage banking for noninterest income, which accounted for roughly 40% of the total in 2023. This revenue stream is highly cyclical and has fallen dramatically from $53.1 million in 2021 to $13.1 million in 2023 due to rising interest rates. The bank has not presented a convincing plan to diversify its fee income by meaningfully growing more stable sources like wealth management, treasury services, or card fees. This lack of diversification makes the bank's earnings highly susceptible to interest rate cycles and fails to provide a buffer when net interest income is under pressure, indicating a poor outlook for overall revenue stability and growth.
Based on an analysis of its key financial metrics, HarborOne Bancorp, Inc. appears to be overvalued as of October 27, 2025. The stock's valuation, at a closing price of $13.31 on October 24, 2025, seems stretched when considering its profitability and earnings multiples relative to the regional banking sector. The most significant factors pointing to this conclusion are its high trailing P/E ratio of 20.5, a Price-to-Tangible-Book (P/TBV) ratio of 1.04 that is not supported by its low Return on Equity (ROE) of 5.58%, and a dividend yield of 2.70% that lags some peers. While trading in the upper end of its 52-week range, the underlying performance metrics suggest the current price may not be justified. The overall takeaway for investors is one of caution, as the stock's valuation appears to have outpaced its fundamental performance.
The stock trades above its tangible book value per share ($12.85), a premium that is not supported by its low Return on Equity of 5.58%.
A core valuation metric for banks is the Price-to-Tangible-Book-Value (P/TBV) ratio. HONE currently trades at a price of $13.31 against a tangible book value per share of $12.85, resulting in a P/TBV of 1.04x. Typically, a bank trading above its tangible book value should be generating a high Return on Tangible Common Equity (ROTCE) or ROE. HONE's ROE is only 5.58%, which is well below the level needed to justify this premium. Healthy regional banks often post ROEs in the double digits. Because the bank's profitability is not creating value above its tangible asset base, the stock should arguably trade at or below its tangible book value, making the current price look expensive.
There is a significant misalignment between the company's low profitability (5.58% ROE) and its Price-to-Book multiple of 0.93, suggesting the stock is overvalued relative to the returns it generates for shareholders.
A bank's P/B ratio should logically reflect its ROE. A bank that earns a higher return on its equity deserves a higher market valuation. HONE's ROE of 5.58% is quite low, falling below the average for the U.S. banking sector and likely below its own cost of equity, especially with the 10-Year Treasury yield around 4.0%. A simple valuation rule suggests a bank's P/B ratio should approximate its ROE divided by the cost of equity (e.g., 5.6% / 10% = 0.56x). HONE’s P/B ratio of 0.93 (and P/TBV of 1.04x) is far above what its current profitability would justify. This disconnect is a strong indicator that the market price is not aligned with the bank's fundamental ability to generate shareholder value.
The stock's trailing P/E ratio of 20.5 is significantly elevated for a regional bank, and historical earnings growth has been too volatile to justify such a premium valuation.
HarborOne's valuation on an earnings basis appears stretched. Its trailing P/E ratio of 20.5 is high when compared to peer regional banks, which often trade in the low-to-mid teens. For example, some analyses show average P/E ratios for regional banks around 10x to 15x. While the forward P/E of 15.48 is an improvement, it still doesn't screen as cheap. Furthermore, the company's earnings growth has been erratic, with a recent quarterly EPS growth of 13.2% following a prior quarter's decline of -19.81%. This inconsistency makes it difficult to justify paying a premium multiple for future earnings. The high P/E ratio combined with volatile growth presents a valuation risk.
The company demonstrates a solid commitment to shareholder returns through a combination of a stable dividend and meaningful share buybacks, resulting in an attractive total yield.
HarborOne Bancorp offers a respectable total shareholder yield. Its dividend yield stands at 2.70% with a reasonable payout ratio of 53.89%, suggesting the dividend is well-covered by earnings and sustainable. More impressively, the company has been actively repurchasing shares, providing a buyback yield of 3.35%. This combines for a total shareholder yield of over 6%. For income-oriented investors, this combination of dividends and buybacks is a significant positive, providing a direct return of capital and supporting the stock price. This strong capital return policy earns a passing mark.
Compared to its regional banking peers, HarborOne appears expensive across key metrics like P/E ratio and profitability-adjusted P/TBV, with a dividend yield that is not high enough to compensate.
On a relative basis, HONE's valuation is unattractive. Its trailing P/E ratio of 20.5 is high for the sector. Its P/TBV of 1.04x is not supported by a compelling ROE, whereas peers may command similar multiples with stronger returns. The dividend yield of 2.70% is also modest when compared to industry averages which can be north of 3%. The stock is also trading near the top of its 52-week range ($8.89 - $14.29), suggesting limited near-term upside without a significant improvement in fundamentals. Overall, when stacked against competitors, HONE does not appear to offer a favorable risk/reward profile at its current price.
HarborOne's profitability is highly sensitive to macroeconomic forces, particularly interest rates. The bank's core business relies on its net interest margin (NIM), which is the difference between the interest it earns on loans and what it pays for deposits. If the Federal Reserve begins cutting rates, the rates on HONE's new loans could fall faster than its deposit costs, compressing its NIM and reducing earnings. Furthermore, as a bank concentrated in Massachusetts and Rhode Island, it is exposed to any regional economic slowdown. A recession could increase loan defaults, especially within its substantial commercial real estate (CRE) portfolio, which represents a significant portion of its total loans.
The competitive landscape for regional banks like HarborOne is becoming increasingly challenging. HONE competes against money-center banks like JPMorgan Chase and Bank of America, which have vast resources for technology and marketing, making it difficult to attract and retain customers. At the same time, digital-only banks and fintech companies are luring away deposits by offering higher interest rates and more user-friendly apps. This forces HarborOne to either increase what it pays for deposits, which hurts margins, or risk losing its funding base. Additionally, the regulatory environment is tightening, potentially leading to stricter capital requirements and higher compliance costs that could restrain lending and profitability.
From a company-specific standpoint, HarborOne's primary vulnerability is its loan concentration. Its heavy focus on commercial real estate in a limited geographic area means a downturn in the New England property market could have an outsized negative impact on its balance sheet. With hybrid work trends affecting office space demand, this CRE concentration is a key risk to monitor. As a smaller bank with roughly $5.6 billion in assets, HarborOne also struggles with economies of scale. It must continuously invest in technology to keep pace with larger rivals, yet its smaller revenue base makes these investments a heavier burden, potentially leading to a less efficient operation.
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