James Blake, CEO of HarborOne Bancorp in Brockton, Mass., wants to make the onetime credit union operate more like a commercial bank.
The $2.9 billion-asset HarborOne — which converted to a mutual savings bank in 2013 and then a partially shareholder-owned company a few years later — recently bought its first bank. It has also been hiring commercial lenders and diversifying its loan book.
“We have been busy," Blake said in an interview. "There’s been a lot of change that took place here to go from a credit union to a bank."
More change could be on the way.
HarborOne is expected to keep looking for expansion opportunities. It might also lay the groundwork for a second-step conversion to a fully stock-owned company, which could bring in millions of dollars in fresh capital.
For those reasons, Blake is one of American Banker's five community bankers to watch in 2019.
“There aren’t many credit unions that have transitioned to banks — and even fewer that have done it successfully,” said Mark Fitzgibbon, an analyst at Sandler O'Neill who thinks a second-step conversion is likely in the next two years. “HarborOne has demonstrated its ability to compete as a publicly traded bank.”
HarborOne's biggest headline this year was its
“The more we looked at it, the more we liked it — and it accommodated the kind of growth we were looking for,” Blake said. “The customer-facing side of the business is excellent. They had no compliance, audit or regulatory issues. It was a clean operation with good people.”
HarborOne could add more branches in Rhode Island over time, though Blake said the focus is on combining the companies' best practices to streamline operations and improve customer service.
“It’s the intelligent way to go,” Blake added. “They did a better job than us in some areas, and they have some better technology in some areas, so why in the world wouldn’t we adopt what they’ve done and what has been successful? In doing that you gain the acceptance of the people in the organization.”
HarborOne is also planning its first branch in downtown Boston after opening a loan production office there over the summer.
Blake has coveted a Boston presence for years. As a credit union, HarborOne was barred from doing business in Boston due to geographic limitations.
Once the credit union hit $1 billion in assets, Blake said the board and management felt limited by legal restrictions. He estimated that in 2013 HarborOne had to turn away $70 million of business from potential clients located outside of the four counties it operated in.
As a credit union, HarborOne could not raise capital. Executives also wanted another source of fee income. After converting to a mutual, HarborOne bought Merrimack Mortgage in 2015.
“You can’t buy a mortgage company and say you're only going to do business in four counties,” Blake said. “We wanted to buy a mortgage company to give us scale.”
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The key to retaining and recruiting talent during a period of change is transparency, Blake said. Before HarborOne shed its status as a credit union, Blake spent five days meeting with employees, helping them to understand the process and his vision.
Senior management has maintained that level of transparency since the conversion, Blake said. The mutual holds monthly staff meetings to address any questions employees might have.
“The more they know, the better off we're going to be,” Blake said.
Blake said he will spend much of 2019 continuing to restructure HarborOne’s balance sheet. HarborOne plans to keep adding commercial and small-business lenders while evaluating new businesses to enter.
As a credit union, HarborOne’s commercial loans were capped at 12.5% of total assets. Blake's goal is to have commercial loans make up 40% of the portfolio by mid-2019.
“Continuing to remix the balance in favor of higher-yielding loans and lower-cost deposits — those are the priorities,” Fitzgibbon said.
At the same time, Blake and his team will be handling the Coastway integration.
“We want to retain the customer base and employees, and we want to grow that business,” Blake said.
Longer term, Blake said he would consider more acquisitions or branch openings in new markets. The goal is to remain independent and surpass $6 billion in assets within five years.
Blake is largely mum on the timing of a second-step conversion, only acknowledging that it is an option if HarborOne needs more capital.
One this is clear: HarborOne is intent on getting bigger.
“Our position hasn’t changed — we are a growth-oriented company,” Blake said.
