Market Overview

Blue Hills Bancorp, Inc. Reports Second Quarter 2015 Earnings Share Repurchase Program Announced and Cash Dividend Declared

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NORWOOD, Mass.--(BUSINESS WIRE)--

Blue Hills Bancorp, Inc. (the "Company" or "Blue Hills Bancorp") (NASDAQ: BHBK), the parent of Blue Hills Bank (the "Bank"), today announced the initiation of a 5% share repurchase program, a $0.02 quarterly cash dividend, and net income of $1,699,000, or $.06 per diluted share, for the second quarter of 2015 compared to net income of $1,306,000, or $.05 per diluted share, for the first quarter of 2015. Net income for the second quarter of 2014 was $761,000, excluding nonrecurring expenses related to the Company's mutual-to-stock conversion and the January 2014 Nantucket Bank acquisition. Net income for the second quarter of 2014 on a GAAP basis was $429,000 (see page 14 for a reconciliation of GAAP to non-GAAP measures). Blue Hills Bancorp was not a publicly traded company in the second quarter of 2014 and earnings per share is not applicable for that period or for the first six months of 2014.

For the six months ended June 30, 2015, net income was $3,005,000, or $.11 per diluted share, versus net income of $1,197,000 for the six months ended June 30, 2014, excluding nonrecurring expenses related to the Company's mutual-to-stock conversion and the January 2014 Nantucket Bank acquisition. Net income for the six months ended June 30, 2014 on a GAAP basis was $31,000.

Commenting on the second quarter results and capital actions, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said "With loan and customer deposit growth of 27% and 9%, respectively, combined with solid asset quality and cost control, we are quite happy with the progress made during our first year as a public company. Our core net interest margin has grown from a year ago, while our balance sheet has been properly positioned for the coming rising rate environment. We also continue to be highly focused on the issue of effective capital deployment and are pleased to announce today our first share repurchase program and quarterly cash dividend."

BALANCE SHEET

Compared to March 31, 2015, total assets grew $87 million, or 5%, to $1.8 billion at June 30, 2015. Total loans were up $91 million, or 8%, driven primarily by growth in the residential mortgage portfolio, which was up $47 million, or 10%, and in the commercial real estate portfolio, which was up $42 million, or 11%. Other loan categories had only minor changes.

Compared to June 30, 2014, total assets increased $21 million, or 1%. The June 30, 2014 balance sheet was impacted by the closing of the subscription offering related to the Company's mutual-to-stock conversion. The offering was oversubscribed with the Bank receiving orders in excess of the adjusted maximum of the offering range ($278 million) and this money was held in escrow as of June 30, 2014. Excluding the impact of the funds held in escrow for the stock offering at June 30, 2014, total assets were up approximately $300 million compared to June 30, 2014. Loans accounted for the vast majority of the growth in total assets reflecting a combination of originations and participations. By category, commercial real estate loans were up $113 million, or 34%; residential mortgages were up $102 million, or 25%; commercial business loans were up $31 million, or 26%; and construction loans were up $15 million, or 34%.

Compared to March 31, 2015, deposits grew $53 million, or 4%, to $1.3 billion at June 30, 2015. The increase from the first quarter was mainly driven by increases in money market deposits of $27 million and brokered deposits of $25 million. The growth in money market deposits was due, in part, to promotional rate programs; however, the yield on money market deposits still declined 6 basis points from the first quarter.

Compared to June 30, 2014, deposits grew $123 million, or 11%. By category, there were increases of $101 million in money market deposits, $31 million in NOW & demand, $26 million in brokered deposits, and $17 million in certificates of deposit. These increases were partially offset by a $52 million decline in regular savings. The Milton branch, which was opened in October 2014, contributed $35 million to the growth in total deposits.

Stockholders' equity was $414 million at June 30, 2015 compared to $415 million at March 31, 2015 and $176 million at June 30, 2014. The slight decline from March 31 is due to a lower level of other comprehensive income, partially offset by an increase in retained earnings reflecting net income in the second quarter. The balance in other comprehensive income declined from March 31 due to a drop in the value of debt securities in the available for sale portfolio caused by the rise in interest rates. The increase in stockholders' equity from a year ago reflects the Company's mutual-to-stock conversion that was completed in July 2014. Proceeds from the stock offering were used to fund asset growth and to pay down debt and, as a result, borrowings declined to $130 million at June 30, 2015 from $195 million at June 30, 2014. As part of the conversion, the Company also (1) redeemed $18.7 million of preferred stock that had been issued to the U.S. Treasury as part of the Small Business Lending Fund Program and (2) established an employee stock ownership plan ("ESOP") which acquired 8% of the shares issued in the conversion. The $21.6 million related to the ESOP is shown as a reduction to stockholders' equity on the balance sheet at June 30, 2015. The tangible common equity to tangible assets ratio increased to 21.90% at June 30, 2015 from 7.91% at June 30, 2014 as a result of the additional capital received from the mutual-to-stock conversion. The ratio was 23.04% at March 31, 2015.

NET INTEREST AND DIVIDEND INCOME

Net interest and dividend income on a fully taxable equivalent basis was $11.2 million in the second quarter of 2015, up $459,000, or 4%, from $10.7 million in the first quarter of 2015. Net interest margin on a fully taxable equivalent basis improved to 2.65% in the second quarter from 2.64% in the first quarter. The improvement in net interest income reflects an increase in average loans of $45 million, or 4%, primarily due to a higher level of commercial real estate loans. The growth in net interest income and net interest margin was also helped by a further 5 basis point improvement in the yield on securities reflecting the repositioning of the debt securities portfolio as the Company shifted away from US Treasury bonds and added mortgage backed securities and corporate bonds. Overall duration of the debt securities portfolio remained unchanged at approximately four years. Net interest income and margin in both quarters were impacted by a 3 basis point decline in the cost of interest bearing liabilities and purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Accretion in the second quarter of 2015 contributed $268,000 to net interest income compared to $220,000 in the first quarter of 2015, and approximately 6 basis points to net interest margin in each quarter. The $3.1 million remaining balance of accretable yield at June 30, 2015 is expected to be recorded to net interest income in future quarters.

Compared to the second quarter of 2014, net interest and dividend income on a tax equivalent basis increased $1.2 million, or 12%, while net interest margin declined 4 basis points. Purchase accounting accretion related to the January 2014 Nantucket Bank acquisition was $779,000 in the second quarter of last year compared to $268,000 in the second quarter of 2015. Excluding Nantucket accretion, net interest income increased $1.7 million, or 19%, while net interest margin improved 11 basis points to 2.59%. The improvement in net interest income reflects a $254 million, or 26%, increase in average loans driven by higher levels of loans in all categories, with the biggest growth seen in the residential mortgage and commercial real estate portfolios. The bulk of the loan growth was funded with an increase in noninterest bearing funds, which benefited both net interest income and margin. Average equity increased $241 million due to the Company's mutual-to-stock conversion while average noninterest bearing deposits increased $17 million, or 15%, to $130 million in the second quarter of 2015. Net interest income and margin also benefited from a 16 basis point improvement in the securities yield reflecting the aforementioned repositioning of the debt securities portfolio. These benefits were partially offset by an increase in the cost of interest bearing liabilities from the second quarter of last year due, in part, to promotional rate programs. The loan yield also declined from the second quarter of last year due to the aforementioned drop in Nantucket accretion as well as competitive pricing pressures.

NONINTEREST INCOME

Noninterest income was $2.5 million in the second quarter of 2015 compared to $2.2 million in the first quarter.

  • Loan level derivative fee income was $770,000 in the second quarter compared to just $4,000 in the first quarter. Revenue in this category can be volatile since it is a function of the amount of commercial loans that customers opt to convert from floating to fixed rate via interest rate swaps in any given quarter.
  • Miscellaneous income improved to $393,000 in the second quarter from an expense of $151,000 in the first quarter. The biggest factor behind the change in miscellaneous income relates to the portfolio of commercial loan customer interest rate swap contracts discussed above. While fee income from these contracts is recorded to loan level derivative fee income, GAAP dictates that the Company must mark these contracts to market over the life of each swap and these valuation marks are reflected in miscellaneous income. During the first quarter, the Company recorded negative valuation marks on these contracts as interest rates declined while in the second quarter the Company recorded positive valuation marks as interest rates increased. While these interest rate marks create quarterly volatility in operating results, barring unforeseen credit related circumstances there is no net impact to earnings over the life of each contract. Miscellaneous income was also impacted by a higher level of income received on CRA-qualified investments in the second quarter.
  • Also contributing to the improvement in noninterest income from the first quarter was a seasonal increase in interchange & ATM fees.
  • Partially offsetting the improvements discussed above was a decline in securities gains which fell to $267,000 in the second quarter from $1.3 million in the first quarter. The high level of securities gains in the first quarter was due, in part, to a repositioning of the debt securities portfolio.

Compared to the second quarter of 2014, noninterest income increased $167,000, or 7%, due mainly to a $713,000 increase in loan level derivative fee income and a $366,000 increase in miscellaneous income. The growth in miscellaneous income was mainly due to the factors discussed above related to valuation marks on customer interest rate swap contracts and a higher level of income received on CRA-qualified investments. The improvements were partially offset by a $924,000 decline in securities gains.

NONINTEREST EXPENSE

Noninterest expense was $10.7 million in the second quarter of 2015, up $34,000 from the first quarter as a $152,000 increase in salaries and benefits expense was partially offset by a net decline in other account categories. Snow removal costs declined $116,000 reflecting the abnormally high level of expense incurred in the first quarter related to the severe winter weather experienced throughout our service area.

Noninterest expense was $10.7 million in the second quarter of 2014 and included $330,000 of expenses related to the Company's mutual-to-stock conversion and $173,000 related to one-time costs associated with the January 2014 Nantucket Bank acquisition. Excluding these items, noninterest expense in the second quarter of 2015 was $501,000 higher than the second quarter of 2014. The second quarter of 2015 included $259,000 of expense related to the ESOP that was implemented in the second half of 2014 in connection with the mutual-to-stock conversion. In addition, salaries expense increased from last year reflecting merit and promotional increases, as well as expenses related to the Milton, Massachusetts branch and a loan production office in Plymouth, Massachusetts, both of which were opened subsequent to the second quarter of 2014.

ASSET QUALITY

The provision for loan losses was $544,000 in the second quarter of 2015 compared to $279,000 in the first quarter of 2015 and $959,000 in the second quarter of 2014. The provisions in all quarters reflect management's assessment of the growth and risks inherent in the loan portfolio. Provisions in each of the three quarters were significantly higher than net chargeoffs. The Company had net loan chargeoffs of $5,000 in the second quarter of 2015, $14,000 in the first quarter of 2015 and $13,000 in the second quarter of 2014.

The allowance for loan losses as a percentage of total loans was 1.08% at June 30, 2015 compared to 1.12% at March 31, 2015 and 1.13% at June 30, 2014. The allowance for loan losses as a percentage of nonperforming loans was 279% at June 30, 2015 compared to 278% at March 31, 2015 and 251% at June 30, 2014.

Nonperforming assets were $4.9 million at June 30, 2015 compared to $4.8 million at March 31, 2015 and $4.5 million at June 30, 2014. Nonperforming assets as a percentage of total assets were 0.27% at June 30, 2015 and March 31, 2015 compared to 0.25% at June 30, 2014.

SHARE REPURCHASE PROGRAM AND DIVIDEND

The Board of Directors has authorized a stock repurchase program pursuant to which the Company intends to purchase up to 1,423,340 shares of its issued and outstanding shares of common stock, which represents approximately 5% of the Company's issued and outstanding shares. The repurchase program is expected to commence immediately. The timing of the purchases will depend on certain factors, including but not limited to, market conditions and prices, available funds and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan that will be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. Any repurchased shares will be held by the Company as authorized but unissued shares. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. The repurchase program does not obligate the Company to purchase any particular number of shares.

The Board of Directors has also declared a regular quarterly cash dividend of $0.02 per share. The dividend is payable on August 20, 2015 to stockholders of record as of August 6, 2015.

ABOUT BLUE HILLS BANCORP

Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $1.8 billion at June 30, 2015 and operates 10 branch offices in Brookline, Dedham, Hyde Park, Milton, Nantucket, Norwood and West Roxbury, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer and commercial deposit and loan products to Eastern Massachusetts through a growing branch network and eCommerce channels. The Bank offers commercial and industrial and commercial real estate loans in addition to cash management services and commercial deposit accounts. The Bank also serves consumers through a full suite of consumer banking products including checking accounts, mortgage loans, equity lines of credit and traditional savings and certificate of deposit accounts. The Bank has invested substantially in online technology including online account opening and funding, online mortgage applications, online banking, mobile banking, bill pay and mobile deposits. Blue Hills Bank has been serving area residents for over 140 years. For more information about Blue Hills Bank, visit the Blue Hills web site at www.bluehillsbank.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by authorized officers of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our new business strategy, which includes significant asset and liability growth; changes that could adversely affect the business in which the Company and the Bank are engaged; prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services. For additional information on some of the risks and important factors that could affect the Company's future results and financial condition, see "Risk Factors" in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

               

Blue Hills Bancorp, Inc.

Consolidated Balance Sheets

 
(Dollars in thousands)             % Change
June 30, 2015     March 31, 2015     June 30, 2014    

June 30, 2015 vs.
March 31, 2015

   

June 30, 2015 vs.
June 30, 2014

Assets        
Cash and due from banks $ 10,162 $ 10,045 $ 15,308 1.2 %

(33.6)

%

Short term investments 43,240       26,966       281,618   60.4 %

(84.6)

%

Total cash and cash equivalents 53,402 37,011 296,926 44.3 %

(82.0)

%

Securities available for sale, at fair value 431,827 429,551 417,581 0.5 % 3.4 %
Federal Home Loan Bank stock, at cost 11,702 11,702 11,702 % %
Loans held for sale 1,833 17,681 22,398

(89.6)

%

(91.8)

%

Loans:
1-4 family residential 510,406 463,334 408,528 10.2 % 24.9 %
Home equity 65,735 63,276 62,508 3.9 % 5.2 %
Commercial real estate 448,125 405,670 334,647 10.5 % 33.9 %
Construction 60,553       59,513       45,192   1.7 % 34.0 %
Total real estate loans 1,084,819 991,793 850,875 9.4 % 27.5 %
Commercial business 151,012 154,367 120,313

(2.2)

%

25.5 %
Consumer 33,995       32,845       30,457   3.5 % 11.6 %
Total loans 1,269,826 1,179,005 1,001,645 7.7 % 26.8 %
Allowance for loan losses (13,777 )     (13,238 )     (11,292 ) 4.1 % 22.0 %
Loans, net 1,256,049 1,165,767 990,353 7.7 % 26.8 %
Premises and equipment, net 18,969 18,869 18,209 0.5 % 4.2 %
Accrued interest receivable 4,878 4,793 4,127 1.8 % 18.2 %
Goodwill and core deposit intangible 12,541 12,955 14,361

(3.2)

%

(12.7)

%

Net deferred tax asset 7,015 5,172 1,020 35.6 % 587.7 %
Bank-owned life insurance 31,100 30,848 30,326 0.8 % 2.6 %
Other assets 15,251       23,535       16,102  

(35.2)

%

(5.3)

%

Total assets $ 1,844,567       $ 1,757,884       $ 1,823,105   4.9 % 1.2 %
Liabilities and Stockholders' Equity
NOW and demand $ 268,126 $ 256,746 $ 237,586 4.4 % 12.9 %
Regular savings 291,628 301,932 343,697

(3.4)

%

(15.1)

%

Money market 296,539 269,164 195,264 10.2 % 51.9 %
Certificates of deposit 310,365 310,672 293,516

(0.1)

%

5.7 %
Brokered money market 23,759 23,991

(1.0)

%

100.0 %
Brokered certificates of deposit 83,705       58,705       81,205   42.6 % 3.1 %
Total deposits 1,274,122 1,221,210 1,151,268 4.3 % 10.7 %
Stock subscriptions 283,958
Short-term borrowings 95,000 70,000 160,000 35.7 %

(40.6)

%

Long-term debt 35,000 35,000 35,000 % %
Other liabilities 26,704       16,730       16,724   59.6 % 59.7 %
Total liabilities 1,430,826       1,342,940       1,646,950   6.5 %

(13.1)

%

Preferred stock 18,724 %

(100.0)

%

Common stock 285 285 % 100.0 %
Additional paid-in capital 281,164 281,094 % 100.0 %
Unearned compensation- ESOP (21,635 ) (21,825 ) 0.9 %

(100.0)

%

Retained earnings 152,728 151,029 149,959 1.1 % 1.8 %
Accumulated other comprehensive income 1,199       4,361       7,472  

(72.5)

%

(84.0)

%

Total stockholders' equity 413,741       414,944       176,155  

(0.3)

%

134.9 %
Total liabilities and stockholders' equity $ 1,844,567       $ 1,757,884       $ 1,823,105   4.9 % 1.2 %
 
                       

Blue Hills Bancorp, Inc

Consolidated Balance Sheet Trend

                         
(Dollars in thousands) June 30, 2015     March 31, 2015     December 31, 2014     September 30, 2014     June 30, 2014
Assets
Cash and due from banks $ 10,162 $ 10,045 $ 15,345 $ 14,632 $ 15,308
Short term investments 43,240       26,966       44,801       39,229       281,618  
Total cash and cash equivalents 53,402 37,011 60,146 53,861 296,926
Securities available for sale, at fair value 431,827 429,551 416,447 417,164 417,581
Federal Home Loan Bank stock, at cost 11,702 11,702 11,702 11,702 11,702
Loans held for sale 1,833 17,681 14,591 2,465 22,398
Loans:
1-4 family residential 510,406 463,334 461,719 466,963 408,528
Home equity 65,735 63,276 61,508 62,958 62,508
Commercial real estate 448,125 405,670 385,228 368,069 334,647
Construction 60,553       59,513       53,258       56,939       45,192  
Total real estate loans 1,084,819 991,793 961,713 954,929 850,875
Commercial business 151,012 154,367 151,521 138,357 120,313
Consumer 33,995       32,845       32,653       32,210       30,457  
Total loans 1,269,826 1,179,005 1,145,887 1,125,496 1,001,645
Allowance for loan losses (13,777 )     (13,238 )     (12,973 )     (12,721 )     (11,292 )
Loans, net 1,256,049 1,165,767 1,132,914 1,112,775 990,353
Premises and equipment, net 18,969 18,869 18,788 18,616 18,209
Accrued interest receivable 4,878 4,793 4,433 4,367 4,127
Goodwill and core deposit intangible 12,541 12,955 13,392 13,854 14,361
Net deferred tax asset 7,015 5,172 6,233 4,456 1,020
Bank-owned life insurance 31,100 30,848 30,595 30,576 30,326
Other assets 15,251       23,535       18,907       16,775       16,102  
Total assets $ 1,844,567       $ 1,757,884       $ 1,728,148       $ 1,686,611       $ 1,823,105  
Liabilities and Stockholders' Equity
NOW and demand $ 268,126 $ 256,746 $ 245,117 $ 252,439 $ 237,586
Regular savings 291,628 301,932 303,834 318,557 343,697
Money market 296,539 269,164 280,139 233,392 195,264
Certificates of deposit 310,365 310,672 301,755 289,384 293,516
Brokered money market 23,759 23,991 23,166
Brokered certificates of deposit 83,705       58,705       58,705       58,705       81,205  
Total deposits 1,274,122 1,221,210 1,212,716 1,152,477 1,151,268
Stock subscriptions 283,958
Short-term borrowings 95,000 70,000 40,000 75,000 160,000
Long-term debt 35,000 35,000 35,000 35,000 35,000
Other liabilities 26,704       16,730       28,826       14,068       16,724  
Total liabilities 1,430,826       1,342,940       1,316,542       1,276,545       1,646,950  
Preferred stock 18,724
Common stock 285 285 285 285
Additional paid-in capital 281,164 281,094 281,035 280,926
Unearned compensation- ESOP (21,635 ) (21,825 ) (22,014 ) (22,393 )
Retained earnings 152,728 151,029 149,723 146,979 149,959
Accumulated other comprehensive income 1,199       4,361       2,577       4,269       7,472  
Total stockholders' equity 413,741       414,944       411,606       410,066       176,155  
Total liabilities and stockholders' equity $ 1,844,567       $ 1,757,884       $ 1,728,148       $ 1,686,611       $ 1,823,105  
 
           

Blue Hills Bancorp, Inc.

Consolidated Statement of Net Income-Quarters

       
(Dollars in thousands, except share data) Quarters Ended     % Change
June 30, 2015     March 31, 2015     June 30, 2014    

June 30, 2015 vs.
March 31, 2015

   

June 30, 2015 vs.
June 30, 2014

Interest and fees on loans $ 10,759     $ 10,427     $ 9,399 3.2 %     14.5 %
Interest on securities 2,237 2,136 2,003 4.7 % 11.7 %
Dividends 112 100 119 12.0 %

(5.9)

%

Other 22       19       30       15.8 %    

(26.7)

%

Total interest and dividend income 13,130       12,682       11,551       3.5 %     13.7 %
Interest on deposits 1,745 1,763 1,348

(1.0)

%

29.5 %
Interest on borrowings 270       254       326       6.3 %    

(17.2)

%

Total interest expense 2,015       2,017       1,674      

(0.1)

%

    20.4 %
Net interest and dividend income 11,115 10,665 9,877 4.2 % 12.5 %
Provision for loan losses 544       279       959       95.0 %    

(43.3)

%

Net interest and dividend income, after provision for loan losses 10,571 10,386 8,918 1.8 % 18.5 %
Deposit account fees 335 333 343 0.6 %

(2.3)

%

Interchange and ATM fees 377 326 371 15.6 % 1.6 %
Mortgage banking 83 101 75

(17.8)

%

10.7 %
Loan level derivative fee income 770 4 57 19,150.0 % 1,250.9 %
Realized securities gains and impairment losses, net 267 1,318 1,191

(79.7)

%

(77.6)

%

Bank-owned life insurance income 252 253 246

(0.4)

%

2.4 %
Miscellaneous 393       (151 )     27       NM     1,355.6 %
Total noninterest income 2,477       2,184       2,310       13.4 %     7.2 %
Salaries and employee benefits 5,641 5,489 5,212 2.8 % 8.2 %
Occupancy and equipment 1,464 1,498 1,298

(2.3)

%

12.8 %
Data processing 843 819 701 2.9 % 20.3 %
Professional fees 667 632 1,123 5.5 %

(40.6)

%

Advertising 562 500 658 12.4 %

(14.6)

%

FDIC deposit insurance 253 292 196

(13.4)

%

29.1 %
Directors' fees 93 124 156

(25.0)

%

(40.4)

%

Amortization of core deposit intangible 414 437 509

(5.3)

%

(18.7)

%

Other general and administrative 723       835       809      

(13.4)

%

   

(10.6)

%

Total noninterest expense 10,660       10,626       10,662       0.3 %     %
Income before income taxes 2,388 1,944 566 22.8 % 321.9 %
Provision for income taxes 689       638       137       8.0 %     402.9 %
Net income $ 1,699       $ 1,306       $ 429       30.1 %     296.0 %
 
Earnings per common share:
Basic $ 0.06 $ 0.05 n/a n/a n/a
Diluted $ 0.06 $ 0.05 n/a n/a n/a
Weighted average shares outstanding:
Basic 26,293,560 26,274,738 n/a n/a n/a
Diluted 26,293,560 26,274,738 n/a n/a n/a
 
       

Blue Hills Bancorp, Inc.

Consolidated Statements of Net Income-Year to Date

 
(Dollars in thousands, except share data) Year to Date  
June 30, 2015     June 30, 2014     % Change  
Interest and fees on loans $ 21,186     $ 17,450     21.4 %
Interest on securities 4,373 3,940 11.0 %
Dividends 212 284 (25.4 )%
Other 41       46       (10.9 )%
Total interest and dividend income 25,812       21,720       18.8 %
Interest on deposits 3,508 2,699 30.0 %
Interest on borrowings 524       630       (16.8 )%
Total interest expense 4,032       3,329       21.1 %
Net interest and dividend income 21,780 18,391 18.4 %
Provision for loan losses 823       1,673       (50.8 )%
Net interest and dividend income, after provision for loan losses 20,957 16,718 25.4 %
Deposit account fees 668 633 5.5 %
Interchange and ATM fees 703 657 7.0 %
Mortgage banking 184 143 28.7 %
Loan level derivative fee income 774 207 273.9 %
Realized securities gains and impairment losses, net 1,585 1,732 (8.5 )%
Gains on trading assets, net 25 (100.0 )%
Bank-owned life insurance income 505 495 2.0 %
Miscellaneous 242       47       414.9 %
Total noninterest income 4,661       3,939       18.3 %
Salaries and employee benefits 11,130 10,341 7.6 %
Occupancy and equipment 2,962 2,899 2.2 %
Data processing 1,662 1,306 27.3 %
Professional fees 1,299 2,282 (43.1 )%
Advertising 1,062 959 10.7 %
FDIC deposit insurance 545 375 45.3 %
Directors' fees 217 306 (29.1 )%
Amortization of core deposit intangible 851 862 (1.3 )%
Other general and administrative 1,558       1,588       (1.9 )%
Total noninterest expense 21,286       20,918       1.8 %
Income (loss) before income taxes 4,332 (261 ) NM
Provision (benefit) for income taxes 1,327       (292 )     NM  
Net income $ 3,005       $ 31       9,593.5 %
 
Earnings per common share:
Basic $ 0.11 n/a
Diluted $ 0.11 n/a
Weighted average shares outstanding:
Basic 26,284,201 n/a
Diluted 26,284,201 n/a
 
 
Blue Hills Bancorp Inc.
Consolidated Statements of Operations - Trend
        Quarters Ended
(Dollars in thousands, except share data) June 30,     March 31,     December 31,     September 30,     June 30,
2015     2015     2014     2014     2014
Interest and fees on loans $ 10,759 $ 10,427 $ 10,207 $ 9,725 $ 9,399
Interest on securities 2,237 2,136 2,027 1,892 2,003
Dividends 112 100 2,221 1,388 119
Other 22       19       30       65       30
Total interest and dividend income 13,130       12,682       14,485       13,070       11,551
Interest on deposits 1,745 1,763 1,675 1,376 1,348
Interest on borrowings 270       254       243       275       326
Total interest expense 2,015       2,017       1,918       1,651       1,674
Net interest and dividend income 11,115 10,665 12,567 11,419 9,877
Provision for loan losses 544       279       270       1,438       959
Net interest and dividend income, after provision for loan losses 10,571 10,386 12,297 9,981 8,918
Deposit account fees 335 333 342 337 343
Interchange and ATM fees 377 326 351 390 371
Mortgage banking 83 101 300 341 75
Loan level derivative fee income 770 4 157 296 57
Realized securities gains and impairment losses, net 267 1,318 434 349 1,191
Bank-owned life insurance income 252 253 261 250 246
Bank-owned life insurance death benefit gains 182
Pension curtailment gain 1,304
Miscellaneous 393       (151 )     267       107       27
Total noninterest income 2,477       2,184       2,294       3,374       2,310
Salaries and employee benefits 5,641 5,489 5,543 5,424 5,212
Occupancy and equipment 1,464 1,498 1,256 1,150 1,298
Data processing 843 819 878 805 701
Professional fees 667 632 575 694 1,123
Advertising 562 500 653 815 658
FDIC deposit insurance 253 292 532 360 196
Directors' fees 93 124 30 150 156
Amortization of core deposit intangible 414 437 461 485 509
Charitable Foundation contribution 7,000
Other general and administrative 723       835       814       865       809
Total noninterest expense 10,660       10,626       10,742       17,748       10,662
Income (loss) before income taxes 2,388 1,944 3,849 (4,393 ) 566
Provision (benefit) for income taxes 689       638       1,104       (1,435 )     137
Net income (loss) $ 1,699       $ 1,306       $ 2,745       $ (2,958 )     $ 429
 
Earnings per common share:
Basic $ 0.06 $ 0.05 $ 0.10 n/a n/a
Diluted $ 0.06 $ 0.05 $ 0.10 n/a n/a
Weighted average shares outstanding:
Basic 26,293,560 26,274,738 26,243,957 n/a n/a
Diluted 26,293,560 26,274,738 26,243,957 n/a n/a
 
 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Dollars in thousands)         Quarters Ended
June 30, 2015     March 31, 2015     June 30, 2014

Average
balance

  Interest  

Yield/
Cost

   

Average
balance

  Interest  

Yield/
Cost

   

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets            
Total loans (1) $ 1,223,681 $ 10,812 3.54 % $ 1,178,716 $ 10,470 3.60 % $ 969,417 $ 9,454 3.91 %
Securities (1) 429,348 2,332 2.18 422,092 2,221 2.13 422,335 2,128 2.02
Other interest earning assets and FHLB stock 42,832     73     0.68   50,603     70     0.56   94,149     71     0.30  
Total interest-earning assets 1,695,861 13,217 3.13 % 1,651,411 12,761 3.13 % 1,485,901 11,653 3.15 %
Non-interest-earning assets 92,390   97,427   90,026  
Total assets $ 1,788,251   $ 1,748,838   $ 1,575,927  
 
Interest-bearing liabilities
NOW $ 123,904 $ 14 0.05 % $ 122,226 $ 14 0.05 % $ 121,263 $ 19 0.06 %
Regular savings 298,850 292 0.39 301,135 319 0.43 345,837 329 0.38
Money market 297,903 471 0.63 297,359 508 0.69 191,972 251 0.52
Certificates of deposit 371,150     968     1.05   353,480     922     1.06   359,668     749     0.84  
Total interest-bearing deposits 1,091,807 1,745 0.64 1,074,200 1,763 0.67 1,018,740 1,348 0.53
Borrowings 134,362     270     0.81   108,556     254     0.95   206,077     326     0.63  
Total interest-bearing liabilities 1,226,169 2,015 0.66 % 1,182,756 2,017 0.69 % 1,224,817 1,674 0.55 %
Non-interest-bearing deposits 130,276 125,915 112,849
Other non-interest-bearing liabilities 16,091   25,681   63,496  
Total liabilities 1,372,536 1,334,352 1,401,162
Stockholders' equity 415,715   414,486   174,765  
Total liabilities and stockholders' equity $ 1,788,251   $ 1,748,838   $ 1,575,927  
 
Net interest and dividend income (FTE) 11,202 10,744 9,979
Less: FTE adjustment (87 ) (79 ) (102 )
Net interest and dividend income (GAAP) $ 11,115   $ 10,665   $ 9,877  
 
Net interest rate spread (FTE) 2.47 % 2.44 % 2.60 %
Net interest margin (FTE) 2.65 % 2.64 % 2.69 %
Total deposit cost 0.57 % 0.60 % 0.48 %
 

(1) Beginning this quarter, interest income on tax-exempt securities and loans has been adjusted to a fully taxable-equivalent (FTE) basis using a federal tax rate of 34%. Prior periods have been restated to reflect this change.

 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Dollars in thousands)         Year to Date
June 30, 2015     June 30, 2014

Average
balance

  Interest  

Yield/
Cost

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets        
Total loans (1) $ 1,201,323 $ 21,282 3.57 % $ 925,331 $ 17,560 3.83 %
Securities (1) 425,740 4,553 2.16 432,652 4,241 1.98
Other interest earning assets and FHLB stock 46,696     143     0.62   70,295     123     0.35  
Total interest-earning assets 1,673,759 25,978 3.13 % 1,428,278 21,924 3.10 %
Non-interest-earning assets 94,894   83,328  
Total assets $ 1,768,653   $ 1,511,606  
 
Interest-bearing liabilities
NOW $ 123,070 $ 28 0.05 % $ 118,113 $ 40 0.07 %
Regular savings 299,986 611 0.41 348,094 684 0.40
Money market 297,633 979 0.66 181,187 460 0.51
Certificates of deposit 362,364     1,890     1.05   357,577     1,515     0.85  
Total interest-bearing deposits 1,083,053 3,508 0.65 1,004,971 2,699 0.54
Borrowings 121,530     524     0.87   185,818     630     0.68  
Total interest-bearing liabilities 1,204,583 4,032   0.67 % 1,190,789 3,329   0.56 %
Non-interest-bearing deposits 128,108 104,567
Other non-interest-bearing liabilities 20,858   42,143  
Total liabilities 1,353,549 1,337,499
Stockholders' equity 415,104   174,107  
Total liabilities and stockholders' equity $ 1,768,653   $ 1,511,606  
 
Net interest and dividend income (FTE) 21,946 18,595
Less: FTE adjustment (166 ) (204 )
Net interest and dividend income (GAAP) $ 21,780   $ 18,391  
 
Net interest rate spread (FTE) 2.46 % 2.54 %
Net interest margin (FTE) 2.64 % 2.63 %
Total deposit cost 0.58 % 0.49 %
 

(1) Beginning this quarter, interest income on tax-exempt securities and loans has been adjusted to a fully taxable-equivalent (FTE) basis using a federal tax rate of 34%. Prior periods have been restated to reflect this change.

 
Blue Hills Bancorp, Inc.
Average Balances - Trend
        Quarters Ended
(Dollars in thousands) June 30,   March 31,   December 31,   September 30,   June 30,
2015   2015   2014   2014   2014
Interest-earning assets
Total loans $ 1,223,681 $ 1,178,716 $ 1,148,744 $ 1,085,951 $ 969,417
Securities 429,348 422,092 416,867 414,864 422,335
Other interest earning assets and FHLB stock 42,832     50,603     59,028     113,163     94,149
Total interest-earning assets 1,695,861 1,651,411 1,624,639 1,613,978 1,485,901
Non-interest-earning assets 92,390     97,427     92,241     91,717     90,026
Total assets $ 1,788,251     $ 1,748,838     $ 1,716,880     $ 1,705,695     $ 1,575,927
 
Interest-bearing liabilities
NOW $ 123,904 $ 122,226 $ 136,210 $ 124,846 $ 121,263
Regular savings 298,850 301,135 310,591 336,151 345,837
Money market 297,903 297,359 279,622 197,500 191,972
Certificates of deposit 371,150     353,480     356,255     346,807     359,668
Total interest-bearing deposits 1,091,807 1,074,200 1,082,678 1,005,304 1,018,740
Borrowings 134,362     108,556     83,054     145,848     206,077
Total interest-bearing liabilities 1,226,169 1,182,756 1,165,732 1,151,152 1,224,817
Non-interest-bearing deposits 130,276 125,915 122,263 117,393 112,849
Other non-interest-bearing liabilities 16,091     25,681     16,876     78,377     63,496
Total liabilities 1,372,536 1,334,352 1,304,871 1,346,922 1,401,162
Stockholders' equity 415,715     414,486     412,009     358,773     174,765
Total liabilities and stockholders' equity $ 1,788,251     $ 1,748,838     $ 1,716,880     $ 1,705,695     $ 1,575,927
 
 
Blue Hills Bancorp, Inc.
Yield Trend
        Quarters Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2015   2015   2014   2014   2014
Interest-earning assets
Total loans (1) 3.54% 3.60% 3.54% 3.57% 3.91%
Securities (1) 2.18% 2.13% 4.05% 3.14% 2.02%
Other interest earning assets and FHLB stock 0.68%   0.56%   0.49%   0.38%   0.30%
Total interest-earning assets 3.13%   3.13%   3.56%   3.24%   3.15%
 
Interest-bearing liabilities
NOW 0.05% 0.05% 0.09% 0.06% 0.06%
Regular savings 0.39% 0.43% 0.44% 0.42% 0.38%
Money market 0.63% 0.69% 0.67% 0.54% 0.52%
Certificates of deposit 1.05%   1.06%   0.93%   0.83%   0.84%
Total interest-bearing deposits 0.64% 0.67% 0.61% 0.54% 0.53%
Borrowings 0.81%   0.95%   1.16%   0.75%   0.63%
Total interest-bearing liabilities 0.66%   0.69%   0.65%   0.57%   0.55%
 
Net interest rate spread (FTE) 2.47% 2.44% 2.91% 2.67% 2.60%
Net interest margin (FTE) 2.65% 2.64% 3.09% 2.83% 2.69%
Total deposit cost 0.57% 0.60% 0.55% 0.49% 0.48%
 

(1) Beginning this quarter, interest income on tax-exempt securities and loans has been adjusted to a fully taxable-equivalent (FTE) basis using a federal tax rate of 34%. Prior periods have been restated to reflect this change.

 
Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income (Loss)
        Quarters Ended
(Dollars in thousands) June 30,   March 31,   December 31,   September 30,   June 30,
2015   2015   2014   2014   2014
 
Net income (loss)-GAAP basis $ 1,699 $ 1,306 $ 2,745 $ (2,958 ) $ 429
Noninterest income adjustments:
Less Bank-owned life insurance death benefit gains (182 )
Less pension curtailment gain (1,304 )
Noninterest expense adjustments:
Add Nantucket Bank acquisition expenses 2 173
Add expenses related to mutual to stock conversion 51 330
Add Charitable Foundation contribution 7,000
Income tax effects of adjustments             (1,955 )   (171 )
Net income-Non-GAAP basis $ 1,699     $ 1,306     $ 2,563     $ 836     $ 761  
 
       
Year to Date
June 30, 2015     June 30, 2014
   
Net income- GAAP basis $ 3,005 $ 31
Noninterest income adjustments:
Less Bank-owned life insurance death benefit gains
Less pension curtailment gain
Noninterest expense adjustments:
Add Nantucket Bank acquisition expenses 948
Add expenses related to mutual to stock conversion 818
Add Charitable Foundation contribution
Income tax effects of adjustments       (600 )
Net income Non-GAAP basis $ 3,005       $ 1,197  
 

The Company's management believes that the presentation of net income on a non-GAAP basis excluding nonrecurring items provides useful information for evaluating the Company's operating results and any related trends that may be affecting the Company's business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
        Quarters Ended
June 30,   March 31,   December 31,   September 30,   June 30,
2015   2015   2014   2014   2014

Performance Ratios (annualized)

Basic and diluted EPS
GAAP $ 0.06 $ 0.05 $ 0.10 n/a n/a
Non-GAAP(1) $ 0.06 $ 0.05 $ 0.10 n/a n/a
Return (loss) on average assets (ROAA):
GAAP 0.38 % 0.30 % 0.63 %

(0.69)

%

0.11 %
Non-GAAP(1) 0.38 % 0.30 % 0.59 % 0.19 % 0.19 %
Return (loss) on average equity (ROAE):
GAAP 1.64 % 1.28 % 2.64 %

(3.27)

%

0.98 %
Non-GAAP(1) 1.64 % 1.28 % 2.47 % 0.92 % 1.75 %
Return (loss) on average tangible common equity (ROATCE):
GAAP 1.70 % 1.32 % 2.73 %

(3.53)

%

1.21 %
Non-GAAP(1) 1.70 % 1.32 % 2.55 % 1.00 % 2.14 %
Efficiency Ratio:
GAAP 78 % 83 % 72 % 120 % 87 %
Non-GAAP(1) 78 % 83 % 73 % 79 % 83 %
 
       
Year to Date
June 30, 2015     June 30, 2014

Performance Ratios (annualized)

Basic and diluted EPS
GAAP $ 0.11 n/a
Non-GAAP(1) $ 0.11 n/a
Return on average assets (ROAA):
GAAP 0.34 % %
Non-GAAP(1) 0.34 % 0.16 %
Return on average equity (ROAE):
GAAP 1.46 % 0.04 %
Non-GAAP(1) 1.46 % 1.39 %
Return on average tangible common equity (ROATCE):
GAAP 1.51 % 0.04 %
Non-GAAP(1) 1.51 % 1.69 %
Efficiency Ratio:
GAAP 81 % 94 %
Non-GAAP(1) 81 % 86 %
 

(1) See page 14 for a reconciliation of Non-GAAP financial measures.

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Dollars in thousands, except share data)         At or for the Quarters Ended     At or for the Six Months Ended
June 30,   March 31,   June 30, June 30,   June 30,
2015   2015   2014 2015   2014

Asset Quality

Nonperforming Assets $ 4,938 $ 4,766 $ 4,502 $ 4,938 $ 4,502
Nonperforming Assets/Total Assets 0.27 % 0.27 % 0.25 % 0.27 % 0.25 %
Allowance for Loan Losses/Total Loans 1.08 % 1.12 % 1.13 % 1.08 % 1.13 %
Net Charge-offs $ 5 $ 14 $ 13 $ 19 $ 52
Annualized Net Charge-offs/Average Loans % % 0.01 % % 0.01 %
Allowance for Loan Losses/ Nonperforming Loans 279 % 278 % 251 % 279 % 251 %
 

Capital/Other

Common shares outstanding 28,466,813 28,466,813 n/a
Book value per share $ 14.53 $ 14.58 n/a
Tangible book value per share $ 14.09 $ 14.12 n/a
Tangible Common Equity/Tangible Assets 21.90 % 23.04 % 7.91 %
Full-time Equivalent Employees 203 197 209
 

Media and Investor Contact:
Blue Hills Bancorp, Inc.
William Parent, 617-360-6520

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