Market Overview

Blue Hills Bancorp, Inc. Reports 2015 Fourth Quarter and Annual Earnings

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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 net income of $2,412,000, or $0.09 per diluted share, for the fourth quarter of 2015 compared to net income of $1,810,000, or $0.07 per diluted share for the third quarter of 2015. Net income for the fourth quarter of 2014 was $2,563,000, excluding a gain related to death benefits received on bank-owned life insurance. On a GAAP basis, net income in the fourth quarter of 2014 was $2,745,000. Earnings per share on both a GAAP and non-GAAP basis was $0.10 in the fourth quarter of 2014.

For the year ended December 31, 2015, net income was $7,227,000, or $.28 per diluted share, compared to net income, excluding certain nonrecurring items, of $4,595,000 for the year ended December 31, 2014. Blue Hills Bancorp was not a publicly traded company for all of 2014 and, as a result, earnings per share is not applicable for the full year of 2014. The Company had a net loss on a GAAP basis in 2014 of $183,000 (see page 15 for a reconciliation of GAAP to non-GAAP measures).

2015 HIGHLIGHTS

  • In July, the Company announced a stock repurchase program of up to 5%, or 1,423,340 shares, of the Company's issued and outstanding shares. During the third and fourth quarters of 2015, the Company repurchased 929,300 shares under this program at an average price per share of $14.08.
  • During the second half of 2015 the Company declared the first two quarterly cash dividends on its common stock. Each dividend was two cents per share.
  • Loans grew 34% to $1.5 billion at December 31, 2015 from the end of 2014 as the Company continued to execute on its balance sheet diversification strategy through an expansion of the residential mortgage, commercial real estate and commercial business loan portfolios.
  • The Company continued to expand its residential mortgage capabilities and, in 2015, originations totaled $272 million, up 16% from 2014 and up 54% from 2013. In early 2016, the Company opened a mortgage loan production office in Cambridge, MA and is in the process of opening one in Franklin, MA.
  • Maintained strong asset quality with net chargeoffs for the year less than 0.01% of average loans. The allowance/loans ratio ended the year at 1.11%.
  • Opened a new branch office in Westwood, MA in October 2015. Deposits at the branch rose to $42 million at December 31, 2015. A branch was opened in Milton, MA during the fourth quarter of 2014 and deposits rose to $43 million at December 31, 2015 from $15 million at the end of 2014. Current plans call for the opening of a new branch in the fast-growing Seaport District of Boston later in 2016.
  • Took actions to increase commercial deposits including an expansion of the cash management team and related capabilities, as well as introducing a new online banking platform for small businesses that makes it easier for customers to bank online. Commercial deposits grew 17% from the end of 2014 to $263 million at December 31, 2015.
  • The Company recently established a Government Banking division to focus on attracting municipal deposits.
  • Expanded brand awareness with a multimedia advertising campaign with the Boston Globe.
  • The Company made donations in excess of $1 million in both 2015 and 2014 to various non-profits reflecting the Company's active involvement in the communities it serves. The bulk of the donations were made through the Blue Hills Bank foundations which support non-profits in the fields of education and the arts, health and human services, affordable housing and community services.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said "Thanks to the efforts of our dedicated employees, 2015 was a very successful year for Blue Hills Bancorp. As total assets moved above the $2 billion mark, loans grew 34% during the year and our disciplined approach to credit is reflected in our solid credit quality ratios. Customer deposits were up 11% from the end of 2014 helped by strong growth in the Milton Branch, which was opened in the fourth quarter of 2014, a very encouraging first quarter performance turned in by our newest branch in Westwood, which opened in October 2015, and a higher level of commercial deposits. Our balance sheet has been positioned to benefit from rising rates and the Fed's first rate hike in December should make a positive contribution to net interest margin in 2016. We also stepped up the pace of our share repurchase program in the fourth quarter as we continue to return capital to shareholders via buybacks and dividends. As we head into 2016, we hope to build upon the positive momentum achieved in all of our businesses over the past few years."

BALANCE SHEET

Compared to September 30, 2015, total assets grew $180 million, or 9%, to $2.1 billion at December 31, 2015. The increase was due to loan growth as total loans increased $173 million, or 13%, to $1.5 billion at December 31, 2015 due to increases across all portfolios. Commercial real estate loans increased $62 million, or 13%, while the residential mortgage portfolio was up $61 million, or 11%. In addition, construction loans increased $25 million, or 46% and the commercial business portfolio grew $19 million, or 11%. Asset categories other than loans had only minor changes during the fourth quarter.

Compared to December 31, 2014, total assets increased $386 million, or 22%. Loans also drove the growth in total assets in this comparison, increasing $394 million, or 34%. By category, commercial real estate loans were up $174 million, or 45%; residential mortgages were up $140 million, or 30%; commercial business loans were up $31 million, or 21%; and construction loans increased $26 million, or 49%. Home equity loans and consumer loans were up $16 million and $6 million, respectively.

The combined balance of available-for-sale and held-to-maturity securities at December 31, 2015 was $432 million compared to $416 million at the end of 2014. As previously disclosed, on July 31, 2015 the Company reclassified almost $200 million of securities available for sale to the held to maturity designation. Held-to-maturity investments are investments that management has the positive intent and ability to hold to maturity. The increase in securities from the end of 2014 was driven by a higher level of corporate bonds.

Compared to September 30, 2015, deposits grew $89 million, or 7%, to $1.4 billion at December 31, 2015. The increase from the third quarter was mainly driven by growth in brokered certificates of deposit of $51 million and money market deposits of $26 million. The growth in money market deposits was due, in part, to promotional rate programs. Deposit growth from the end of the third quarter was helped by the opening of the Company's newest branch in Westwood partly offset by a seasonal decline in deposits at the Nantucket branches. Short-term borrowings increased $90 million and long-term debt grew $10 million from September 30, 2015 as these increases helped to fund the loan growth achieved during the fourth quarter.

Compared to December 31, 2014, deposits grew $221 million, or 18%. By category, the more significant increases were seen in money market deposits, which were up $88 million, brokered certificates of deposits, which were up $78 million, and NOW & demand deposits, which were up $43 million. Deposit growth from a year ago was helped by the new Westwood branch that was opened in the fourth quarter of 2015 and further growth in deposits from the Milton branch that was opened in the fourth quarter of 2014. Short and long-term borrowings grew $165 million and $20 million, respectively, from the end of 2014 which helped support the growth in the loan portfolio.

Stockholders' equity was $399 million at December 31, 2015 compared to $408 million at September 30, 2015 and $412 million at December 31, 2014. The decline in stockholders' equity in both comparisons reflects share repurchases, the payment of common stock dividends, and a lower level of other comprehensive income that was mainly due to a drop in the value of available-for-sale-securities.

On July 22, 2015, the Company announced that the Board of Directors authorized and regulators approved a stock repurchase program pursuant to which the Company intends to purchase up to 1,423,340 shares of its common stock, which represents approximately 5% of the Company's issued and outstanding shares. During the fourth quarter of 2015, the Company repurchased 612,800 shares at an average price of $13.99 for a total cost of $8.6 million. For all of 2015, the Company repurchased 929,300 shares of common stock at an average price per share of $14.08 for a total cost of $13.1 million. Repurchased shares are returned to the status of authorized but unissued shares. The Company had 494,040 shares remaining to repurchase at December 31, 2015 under this authorization. In addition, at the Company's 2015 Annual Shareholders Meeting held on September 3, 2015, shareholders approved the Company's 2015 Equity Incentive Plan and on October 7, 2015, the Company granted 983,175 restricted stock awards and 2,434,000 stock options subject to vesting provisions. The Company intends to utilize repurchased shares of common stock to satisfy stock awards made under the Equity Incentive Plan, which the Company has the authority to do without further regulatory approval.

NET INTEREST AND DIVIDEND INCOME

Net interest and dividend income on a fully taxable equivalent basis was $14.7 million in the fourth quarter of 2015, up $1.4 million, or 10%, from $13.3 million in the third quarter of 2015. Net interest margin on a fully taxable equivalent basis improved to 3.04% in the fourth quarter from 2.96% in the third quarter. The improvement in net interest income and margin reflects a $557,000 increase in dividends from mutual fund investments and a $161,000 increase in purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Mutual fund dividends were $2.1 million in the fourth quarter and added 37 basis points to net interest margin compared to $1.5 million in the third quarter which added 27 basis points to net interest margin. Accretion in the fourth quarter of 2015 contributed $303,000 to net interest income and 7 basis points to net interest margin compared to $142,000 and 4 basis points, respectively, in the third quarter of 2015. The $2.6 million remaining balance of accretable yield at December 31, 2015 will be recorded to net interest income in future quarters. In addition, the improvement in net interest income was helped by a $133 million, or 10%, increase in average loans driven by growth in all loan categories, with the largest increases in commercial real estate and residential mortgage loans. Net interest income and margin were negatively impacted by a 2 basis point increase in the cost of interest-bearing liabilities. Excluding the impact of mutual fund dividends and purchase accounting accretion from both quarters, net interest income on a fully taxable equivalent basis increased $647,000, or 6%, to $12.3 million in the fourth quarter of 2015 while net interest margin declined 4 basis points from the third quarter to 2.61%.

Compared to the fourth quarter of 2014, net interest and dividend income on a fully taxable equivalent basis increased $2.0 million, or 16%, while net interest margin declined 5 basis points. The improvement in net interest income reflects a $301 million, or 26%, increase in average loans driven mainly by higher levels of commercial real estate, residential mortgage, and commercial business loans. Net interest income and margin also benefited from an 18 basis point increase in the securities yield, excluding mutual fund dividends, to 2.37% in the fourth quarter of 2015 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. Mutual funds dividends exceeded $2.0 million in both quarters but were down $87,000 from the fourth quarter of 2014. Net interest income and margin were also negatively impacted by a 5 basis point drop in loan yield and a 5 basis point increase in the cost of interest-bearing liabilities reflecting competitive pricing pressures and promotional rate programs. The yield on loans declined due to the low rate environment and competitive pricing pressures, partially offset by the impact of purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Excluding the impact of mutual fund dividends and purchase accounting accretion from both quarters, net interest income on a fully taxable equivalent basis increased $2.0 million, or 19%, to $12.3 million while net interest margin improved 4 basis points from the fourth quarter of 2014 to 2.61%.

NONINTEREST INCOME

Noninterest income was $2.3 million in the fourth quarter of 2015, up $630,000, or 37%, from the third quarter. The increase was mainly due to miscellaneous income and loan level derivative fee income as follows:

  • Miscellaneous income improved to income of $327,000 in the fourth quarter from an expense of $116,000 in the third quarter. As has been the case in most quarters, the biggest factor behind the change in miscellaneous income relates to the portfolio of commercial loan customer interest rate swap contracts where customers opt to convert their loans from floating to fixed rate via interest rate swaps. While fee income from these contracts is recorded to loan level derivative fee income, GAAP dictates that the Company must mark these contracts to fair value over the life of each swap and these valuation marks are reflected in miscellaneous income. During the fourth quarter, the Company recorded positive credit valuation marks on these contracts as interest rates increased while in the third quarter the Company recorded negative credit valuation marks as interest rates declined. 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. There were no other items of significance impacting the comparison of miscellaneous income with the third quarter.
  • Loan level derivative fee income was $833,000 in the fourth quarter compared to $513,000 in the third 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.

Compared to the fourth quarter of 2014, noninterest income increased $212,000, or 10%, excluding a $182,000 bank-owned life insurance death benefit recognized in the fourth quarter of 2014. Loan level derivative income increased $676,000, or 431%, reflecting a higher number of commercial loan customers opting to convert from floating to fixed rate via interest rate swaps. This increase was partially offset by a $289,000, or 67%, drop in securities gains and a $254,000, or 85%, decline in mortgage banking income. The latter was due to the absence of gains on the bulk sale of jumbo residential mortgage loans recorded in the prior year as well as a decline in gains from the sale of conventional loans.

NONINTEREST EXPENSE

Noninterest expense was $11.9 million in the fourth quarter of 2015, up $1.1 million, or 10%, from the third quarter. As previously disclosed, at the Company's 2015 Annual Shareholders Meeting held on September 3, 2015 shareholders approved the Company's 2015 Equity Incentive Plan and, on October 7, 2015, the Company granted 983,175 restricted stock awards and 2,434,000 stock options subject to vesting provisions. The fourth quarter includes charges of $1.1 million related to the Equity Incentive Plan awards of which approximately 80% is included in salaries and benefits expense and the remainder in directors' fees. The fourth quarter of 2015 represents the first quarter in which the Company recorded expenses related to the Plan. In addition, noninterest expense increased from the third quarter due to higher levels of professional fees, advertising, and other expense, as well as a full quarter of expense for the new Westwood branch. These increases were partially offset by a downward adjustment made to non-equity related incentive compensation expense recorded in the fourth quarter, which was made after the Company conducted a review of its overall compensation program in light of the awards made under the Equity Incentive Plan.

Compared to the fourth quarter of 2014, noninterest expense increased $1.2 million, or 11%. As was the case with the comparison to the third quarter of 2015, the major factor driving this increase is the recording of $1.1 million of expense in the fourth quarter of 2015 related to the awards under the Equity Incentive Plan. Also contributing to the increase were higher levels of occupancy and equipment expense, professional fees, advertising, and other expense, as well as expenses related to the new Westwood branch. Partially offsetting these increases were the impact of the aforementioned downward adjustment made to non-equity incentive compensation expense recorded in the fourth quarter of 2015 and a decline in FDIC deposit insurance expense.

ASSET QUALITY

The provision for loan losses was $1.9 million in the fourth quarter of 2015 compared to $1.3 million in the third quarter of 2015 and $270,000 in the fourth quarter of 2014. The increase in the provision from the third quarter reflects (1) a specific reserve of approximately $400,000 established against loans secured by one income property and (2) growth in the loan portfolio during the fourth quarter of 2015. The provisions in all quarters reflect management's assessment of risks inherent in the loan portfolio. The Company had net loan recoveries of $71,000 in the fourth quarter of 2015 compared to net chargeoffs of $13,000 in the third quarter of 2015 and $19,000 in the fourth quarter of 2014. For all of 2015, net chargeoffs were $40,000 compared to $80,000 in 2014.

Nonperforming assets were $10.7 million at December 31, 2015 compared to $5.0 million at September 30, 2015 and $4.5 million at December 31, 2014. The growth in nonperforming assets from prior periods was mainly due to the loans secured by one income property referred to above, which aggregate to $4.6 million. Nonperforming assets as a percentage of total assets were 0.51% at December 31, 2015, 0.26% at September 30, 2015, and 0.26% at December 31, 2014.

The allowance for loan losses as a percentage of total loans was 1.11% at December 31, 2015 compared to 1.10% at September 30, 2015 and 1.13% at December 31, 2014. The allowance for loan losses as a percentage of nonperforming loans was 159% at December 31, 2015 compared to 302% at September 30, 2015 and 290% at December 31, 2014.

ABOUT BLUE HILLS BANCORP

Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $2.1 billion at December 31, 2015 and operates 11 branch offices in Brookline, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The Bank's 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 business 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 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

       
(Unaudited, dollars in thousands)             % Change

December 31,
2015

 

September 30,
2015

 

December 31,
2014

 

December 31,
2015 vs.
September 30,
2015


 

December 31,
2015 vs.
December 31,
2014


Assets  
Cash and due from banks $ 10,932 $ 9,447 $ 15,345 15.7 % (28.8 )%
Short term investments   22,366       11,533       44,801     93.9 % (50.1 )%
Total cash and cash equivalents 33,298 20,980 60,146 58.7 % (44.6 )%
Securities available for sale, at fair value 231,690 231,697 416,447 % (44.4 )%
Securities held to maturity, at amortized cost 200,141 197,632 1.3 % NM
Federal Home Loan Bank stock, at cost 13,567 11,702 11,702 15.9 % 15.9 %
Loans held for sale 12,877 21,423 14,591 (39.9 )% (11.7 )%
Loans:
1-4 family residential 602,138 541,382 461,719 11.2 % 30.4 %
Home equity 77,633 73,494 61,508 5.6 % 26.2 %
Commercial real estate 559,609 497,217 385,228 12.5 % 45.3 %
Construction   79,386       54,283       53,258     46.2 % 49.1 %
Total real estate loans 1,318,766 1,166,376 961,713 13.1 % 37.1 %
Commercial business 182,536 163,971 151,521 11.3 % 20.5 %
Consumer   39,075       36,855       32,653     6.0 % 19.7 %
Total loans 1,540,377 1,367,202 1,145,887 12.7 % 34.4 %
Allowance for loan losses   (17,102 )     (15,082 )     (12,973 )   13.4 % 31.8 %
Loans, net 1,523,275 1,352,120 1,132,914 12.7 % 34.5 %
Premises and equipment, net 20,015 19,485 18,788 2.7 % 6.5 %
Accrued interest receivable 5,344 5,174 4,433 3.3 % 20.6 %
Goodwill and core deposit intangible 11,785 12,151 13,392 (3.0 )% (12.0 )%
Net deferred tax asset 10,665 8,368 6,233 27.4 % 71.1 %
Bank-owned life insurance 31,626 31,358 30,595 0.9 % 3.4 %
Other assets   20,060       22,348       18,907     (10.2 )% 6.1 %
Total assets $ 2,114,343     $ 1,934,438     $ 1,728,148     9.3 % 22.3 %
Liabilities and Stockholders' Equity
NOW and demand $ 288,143 $ 284,720 $ 245,117 1.2 % 17.6 %
Regular savings 287,344 288,597 303,834 (0.4 )% (5.4 )%
Money market 368,050 341,588 280,139 7.7 % 31.4 %
Certificates of deposit 311,978 310,424 301,755 0.5 % 3.4 %
Brokered money market 41,807 33,924 23,166 23.2 % 80.5 %
Brokered certificates of deposit   136,527       85,705       58,705     59.3 % 132.6 %
Total deposits 1,433,849 1,344,958 1,212,716 6.6 % 18.2 %
Short-term borrowings 205,000 115,000 40,000 78.3 % 412.5 %
Long-term debt 55,000 45,000 35,000 22.2 % 57.1 %
Other liabilities   21,665       21,868       28,826     (0.9 )% (24.8 )%
Total liabilities   1,715,514       1,526,826       1,316,542     12.4 % 30.3 %
Common stock 276 282 285 (2.1 )% (3.2 )%
Additional paid-in capital 269,078 276,730 281,035 (2.8 )% (4.3 )%
Unearned compensation- ESOP (21,255 ) (21,445 ) (22,014 ) 0.9 % (3.4 )%
Retained earnings 155,918 153,969 149,723 1.3 % 4.1 %
Accumulated other comprehensive income (loss)   (5,188 )     (1,924 )     2,577     169.6 % (301.3 )%
Total stockholders' equity   398,829       407,612       411,606     (2.2 )% (3.1 )%
Total liabilities and stockholders' equity $ 2,114,343     $ 1,934,438     $ 1,728,148     9.3 % 22.3 %
 
       

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

                 
(Unaudited, dollars in thousands)

December 31,
2015

 

September 30,
2015

 

June 30,
2015

 

March 31,
2015

 

December 31,
2014

Assets
Cash and due from banks $ 10,932 $9,447 $10,162 $10,045 $15,345
Short term investments   22,366     11,533     43,240     26,966     44,801  
Total cash and cash equivalents 33,298 20,980 53,402 37,011 60,146
Securities available for sale, at fair value 231,690 231,697 431,827 429,551 416,447
Securities held to maturity, at amortized cost 200,141 197,632
Federal Home Loan Bank stock, at cost 13,567 11,702 11,702 11,702 11,702
Loans held for sale 12,877 21,423 1,833 17,681 14,591
Loans:
1-4 family residential 602,138 541,382 510,406 463,334 461,719
Home equity 77,633 73,494 65,735 63,276 61,508
Commercial real estate 559,609 497,217 448,125 405,670 385,228
Construction   79,386     54,283     60,553     59,513     53,258  
Total real estate loans 1,318,766 1,166,376 1,084,819 991,793 961,713
Commercial business 182,536 163,971 151,012 154,367 151,521
Consumer   39,075     36,855     33,995     32,845     32,653  
Total loans 1,540,377 1,367,202 1,269,826 1,179,005 1,145,887
Allowance for loan losses   (17,102 )   (15,082 )   (13,777 )   (13,238 )   (12,973 )
Loans, net 1,523,275 1,352,120 1,256,049 1,165,767 1,132,914
Premises and equipment, net 20,015 19,485 18,969 18,869 18,788
Accrued interest receivable 5,344 5,174 4,878 4,793 4,433
Goodwill and core deposit intangible 11,785 12,151 12,541 12,955 13,392
Net deferred tax asset 10,665 8,368 7,015 5,172 6,233
Bank-owned life insurance 31,626 31,358 31,100 30,848 30,595
Other assets   20,060     22,348     15,251     23,535     18,907  
Total assets $ 2,114,343     $1,934,438     $1,844,567     $1,757,884     $1,728,148  
Liabilities and Stockholders' Equity
NOW and demand $ 288,143 $284,720 $268,126 $256,746 $245,117
Regular savings 287,344 288,597 291,628 301,932 303,834
Money market 368,050 341,588 296,539 269,164 280,139
Certificates of deposit 311,978 310,424 310,365 310,672 301,755
Brokered money market 41,807 33,924 23,759 23,991 23,166
Brokered certificates of deposit   136,527     85,705     83,705     58,705     58,705  
Total deposits 1,433,849 1,344,958 1,274,122 1,221,210 1,212,716
Short-term borrowings 205,000 115,000 95,000 70,000 40,000
Long-term debt 55,000 45,000 35,000 35,000 35,000
Other liabilities   21,665     21,868     26,704     16,730     28,826  
Total liabilities   1,715,514     1,526,826     1,430,826     1,342,940     1,316,542  
Common stock 276 282 285 285 285
Additional paid-in capital 269,078 276,730 281,164 281,094 281,035
Unearned compensation- ESOP (21,255 ) (21,445 ) (21,635 ) (21,825 ) (22,014 )
Retained earnings 155,918 153,969 152,728 151,029 149,723
Accumulated other comprehensive income (loss)   (5,188 )   (1,924   ) 1,199     4,361     2,577  
Total stockholders' equity   398,829     407,612     413,741     414,944     411,606  
Total liabilities and stockholders' equity $ 2,114,343     $1,934,438     $1,844,567     $1,757,884     $1,728,148  
 

Blue Hills Bancorp, Inc.
Consolidated Statement of Net Income-Quarters

       
(Unaudited, dollars in thousands, except share data) Quarters Ended   % Change

December 31,
2015

 

September 30,
2015

 

December 31,
2014

 

December 31,
2015 vs.
September 30,
2015


 

December 31,
2015 vs.
December 31,
2014


Interest and fees on loans $ 12,647   $ 11,509   $ 10,207   9.9 %   23.9 %
Interest on securities 2,228 2,227 2,027 % 9.9 %
Dividends 2,183 1,673 2,221 30.5 % (1.7 )%
Other   13     9       30   44.4 %   (56.7 )%
Total interest and dividend income   17,071     15,418       14,485   10.7 %   17.9 %
Interest on deposits 2,093 1,926 1,675 8.7 % 25.0 %
Interest on borrowings   406     287       243   41.5 %   67.1 %
Total interest expense   2,499     2,213       1,918   12.9 %   30.3 %
Net interest and dividend income 14,572 13,205 12,567 10.4 % 16.0 %
Provision for loan losses   1,949     1,318       270   47.9 %   621.9 %
Net interest and dividend income, after provision for loan losses   12,623     11,887       12,297   6.2 %   2.7 %
Deposit account fees 327 319 342 2.5 % (4.4 )%
Interchange and ATM fees 378 430 351 (12.1 )% 7.7 %
Mortgage banking 46 52 300 (11.5 )% (84.7 )%
Loan level derivative fee income 833 513 157 62.4 % 430.6 %
Realized securities gains and impairment losses, net 145 238 434 (39.1 )% (66.6 )%
Bank-owned life insurance income 268 258 261 3.9 % 2.7 %
Bank-owned life insurance death benefit gains 182 NM NM
Miscellaneous   327     (116 )     267   NM     22.5 %
Total noninterest income   2,324     1,694       2,294   37.2 %   1.3 %
Salaries and employee benefits 5,849 5,591 5,543 4.6 % 5.5 %
Occupancy and equipment 1,688 1,617 1,256 4.4 % 34.4 %
Data processing 909 939 878 (3.2 )% 3.5 %
Professional fees 780 610 575 27.9 % 35.7 %
Advertising 776 620 653 25.2 % 18.8 %
FDIC deposit insurance 192 262 532 (26.7 )% (63.9 )%
Directors' fees 315 112 30 181.3 % 950.0 %
Amortization of core deposit intangible 366 390 461 (6.2 )% (20.6 )%
Other general and administrative   1,073     707       814   51.8 %   31.8 %
Total noninterest expense   11,948     10,848       10,742   10.1 %   11.2 %
Income before income taxes 2,999 2,733 3,849 9.7 % (22.1 )%
Provision for income taxes   587     923       1,104   (36.4 )%   (46.8 )%
Net income $ 2,412   $ 1,810     $ 2,745   33.3 %   (12.1 )%
 
Earnings per common share:
Basic $ 0.09 $ 0.07 $ 0.10
Diluted $ 0.09 $ 0.07 $ 0.10
Weighted average shares outstanding:
Basic 25,500,755 26,183,381 26,243,957
Diluted 25,554,961 26,183,381 26,243,957

Blue Hills Bancorp, Inc.
Consolidated Statements of Operations-Year to Date

 
(Unaudited, dollars in thousands, except share data) Year to Date

December 31,
2015

 

December 31,
2014

  % Change
Interest and fees on loans $ 45,342   $ 37,382   21.3 %
Interest on securities 8,828 7,859 12.3 %
Dividends 4,068 3,894 4.5 %
Other   63     140     (55.0 )%
Total interest and dividend income   58,301     49,275     18.3 %
Interest on deposits 7,527 5,750 30.9 %
Interest on borrowings   1,217     1,148     6.0 %
Total interest expense   8,744     6,898     26.8 %
Net interest and dividend income 49,557 42,377 16.9 %
Provision for loan losses   4,090     3,381     21.0 %
Net interest and dividend income, after provision for loan losses   45,467     38,996     16.6 %
Deposit account fees 1,314 1,313 0.1 %
Interchange and ATM fees 1,511 1,397 8.2 %
Mortgage banking 282 784 (64.0 )%
Loan level derivative fee income 2,120 660 221.2 %
Realized securities gains and impairment losses, net 1,968 2,515 (21.7 )%
Gains on trading assets, net 25 (100.0 )%
Bank-owned life insurance income 1,031 1,006 2.5 %
Bank-owned life insurance death benefit gains 182 (100.0 )%
Pension curtailment gain 1,304 (100.0 )%
Miscellaneous   453     421     7.6 %
Total noninterest income   8,679     9,607     (9.7 )%
Salaries and employee benefits 22,570 21,308 5.9 %
Occupancy and equipment 6,267 5,305 18.1 %
Data processing 3,510 2,989 17.4 %
Professional fees 2,689 3,551 (24.3 )%
Advertising 2,458 2,427 1.3 %
FDIC deposit insurance 999 1,266 (21.1 )%
Directors' fees 644 486 32.5 %
Amortization of core deposit intangible 1,607 1,808 (11.1 )%
Charitable Foundation contribution 7,000 (100.0 )%
Other general and administrative   3,338     3,268     2.1 %
Total noninterest expense   44,082     49,408     (10.8 )%
Income (loss) before income taxes 10,064 (805 ) NM
Provision (benefit) for income taxes   2,837     (622 )   NM  
Net income (loss) $ 7,227   $ (183 )   NM  
 
Earnings per common share:
Basic $ 0.28 n/a
Diluted $ 0.28 n/a
Weighted average shares outstanding:
Basic 26,064,947 n/a
Diluted 26,069,589 n/a
 
Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
  Quarters Ended
(Unaudited, dollars in thousands, except share data) December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
Interest and fees on loans $ 12,647   $ 11,509   $ 10,759   $ 10,427   $ 10,207
Interest on securities 2,228 2,227 2,237 2,136 2,027
Dividends 2,183 1,673 112 100 2,221
Other   13     9       22     19       30
Total interest and dividend income   17,071     15,418       13,130     12,682       14,485
Interest on deposits 2,093 1,926 1,745 1,763 1,675
Interest on borrowings   406     287       270     254       243
Total interest expense   2,499     2,213       2,015     2,017       1,918
Net interest and dividend income 14,572 13,205 11,115 10,665 12,567
Provision for loan losses   1,949     1,318       544     279       270
Net interest and dividend income, after provision for loan losses   12,623     11,887       10,571     10,386       12,297
Deposit account fees 327 319 335 333 342
Interchange and ATM fees 378 430 377 326 351
Mortgage banking 46 52 83 101 300
Loan level derivative fee income 833 513 770 4 157
Realized securities gains and impairment losses, net 145 238 267 1,318 434
Bank-owned life insurance income 268 258 252 253 261
Bank-owned life insurance death benefit gains 182
Miscellaneous   327     (116 )     393     (151 )     267
Total noninterest income   2,324     1,694       2,477     2,184       2,294
Salaries and employee benefits 5,849 5,591 5,641 5,489 5,543
Occupancy and equipment 1,688 1,617 1,464 1,498 1,256
Data processing 909 939 843 819 878
Professional fees 780 610 667 632 575
Advertising 776 620 562 500 653
FDIC deposit insurance 192 262 253 292 532
Directors' fees 315 112 93 124 30
Amortization of core deposit intangible 366 390 414 437 461
Other general and administrative   1,073     707       723     835       814
Total noninterest expense   11,948     10,848       10,660     10,626       10,742
Income before income taxes 2,999 2,733 2,388 1,944 3,849
Provision for income taxes   587     923       689     638       1,104
Net income $ 2,412   $ 1,810     $ 1,699   $ 1,306     $ 2,745
 
Earnings per common share:
Basic $ 0.09 $ 0.07 $ 0.06 $ 0.05 $ 0.10
Diluted $ 0.09 $ 0.07 $ 0.06 $ 0.05 $ 0.10
Weighted average shares outstanding:
Basic 25,500,755 26,183,381 26,293,560 26,274,738 26,243,957
Diluted 25,554,961 26,183,381 26,293,560 26,274,738 26,243,957
 
 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)   Quarters Ended
December 31, 2015   September 30, 2015   December 31, 2014

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

 

Interest-earning assets            
Total loans (1) $ 1,449,494 $ 12,700 3.48 % $ 1,316,514 $ 11,562 3.48 % $ 1,148,744 $ 10,250 3.54 %
Securities (1) 427,752 4,347 4.03 429,667 3,838 3.54 416,867 4,251 4.05
Other interest earning assets and FHLB stock   33,222     111     1.33     34,061     106     1.23     59,028     73     0.49  
Total interest-earning assets 1,910,468 17,158 3.56 % 1,780,242 15,506 3.46 % 1,624,639 14,574 3.56 %
Non-interest-earning assets   91,732   89,085   92,241
Total assets $ 2,002,200 $ 1,869,327 $ 1,716,880
 
Interest-bearing liabilities
NOW $ 134,162 $ 19 0.06 % $ 128,298 $ 15 0.05 % $ 136,210 $ 31 0.09 %
Regular savings 287,003 264 0.36 289,236 269 0.37 310,591 342 0.44
Money market 397,998 729 0.73 348,658 606 0.69 279,622 469 0.67
Certificates of deposit   396,552     1,081     1.08     392,170     1,036     1.05     356,255     833     0.93  
Total interest-bearing deposits 1,215,715 2,093 0.68 1,158,362 1,926 0.66 1,082,678 1,675 0.61
Borrowings   207,446     406     0.78     135,554     287     0.84     83,054     243     1.16  
Total interest-bearing liabilities 1,423,161   2,499   0.70 % 1,293,916   2,213   0.68 % 1,165,732   1,918   0.65 %
Non-interest-bearing deposits 154,872 142,328 122,263
Other non-interest-bearing liabilities   21,878   20,368   16,876
Total liabilities 1,599,911 1,456,612 1,304,871
Stockholders' equity   402,289   412,715   412,009
Total liabilities and stockholders' equity $ 2,002,200 $ 1,869,327 $ 1,716,880
 
Net interest and dividend income (FTE) 14,659 13,293 12,656
Less: FTE adjustment   (87 )   (88 )   (89 )
Net interest and dividend income (GAAP) $ 14,572   $ 13,205   $ 12,567  
 
Net interest rate spread (FTE) 2.86 % 2.78 % 2.91 %
Net interest margin (FTE) 3.04 % 2.96 % 3.09 %
Total deposit cost 0.61 % 0.59 % 0.55 %
 

(1) Beginning in the second quarter of 2015, interest income on tax-exempt securities and loans was 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
(Unaudited, dollars in thousands)   Year to Date
December 31, 2015   December 31, 2014

Average
balance

  Interest  

Yield/
Cost

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets        
Total loans (1) $ 1,292,909 $ 45,544 3.52 % $ 1,022,128 $ 37,590 3.68 %
Securities (1) 427,237 12,738 2.98 424,190 11,777 2.78
Other interest earning assets and FHLB stock   40,115     360     0.90     78,260     304     0.39  
Total interest-earning assets 1,760,261 58,642 3.33 % 1,524,578 49,671 3.26 %
Non-interest-earning assets   92,634   87,137
Total assets $ 1,852,895 $ 1,611,715
 
Interest-bearing liabilities
NOW $ 127,183 $ 62 0.05 % $ 124,372 $ 103 0.08 %
Regular savings 294,004 1,144 0.39 335,631 1,372 0.41
Money market 335,791 2,314 0.69 210,110 1,199 0.57
Certificates of deposit   378,494     4,007     1.06     354,529     3,076     0.87  
Total interest-bearing deposits 1,135,472 7,527 0.66 1,024,642 5,750 0.56
Borrowings   146,720   1,217   0.83     149,841     1,148     0.77  
Total interest-bearing liabilities 1,282,192   8,744   0.68 % 1,174,483   6,898   0.59 %
Non-interest-bearing deposits 138,438 112,260
Other non-interest-bearing liabilities   20,993   44,354
Total liabilities 1,441,623 1,331,097
Stockholders' equity   411,272   280,618
Total liabilities and stockholders' equity $ 1,852,895 $ 1,611,715
 
Net interest and dividend income (FTE) 49,898 42,773
Less: FTE adjustment   (341 )   (396 )
Net interest and dividend income (GAAP) $ 49,557   $ 42,377  
 
Net interest rate spread (FTE) 2.65 % 2.67 %
Net interest margin (FTE) 2.83 % 2.81 %
Total deposit cost 0.59 % 0.51 %
 

(1) Beginning in the second quarter of 2015, interest income on tax-exempt securities and loans was 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
(Unaudited, dollars in thousands)       Quarters Ended
December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
Interest-earning assets        
Total loans $ 1,449,494 $ 1,316,514 $ 1,223,681 $ 1,178,716 $ 1,148,744
Securities 427,752 429,667 429,348 422,092 416,867
Other interest earning assets and FHLB stock   33,222     34,061     42,832     50,603     59,028
Total interest-earning assets 1,910,468 1,780,242 1,695,861 1,651,411 1,624,639
Non-interest-earning assets   91,732     89,085     92,390     97,427     92,241
Total assets $ 2,002,200   $ 1,869,327   $ 1,788,251   $ 1,748,838   $ 1,716,880
 
Interest-bearing liabilities
NOW $ 134,162 $ 128,298 $ 123,904 $ 122,226 $ 136,210
Regular savings 287,003 289,236 298,850 301,135 310,591
Money market 397,998 348,658 297,903 297,359 279,622
Certificates of deposit   396,552     392,170     371,150     353,480     356,255
Total interest-bearing deposits 1,215,715 1,158,362 1,091,807 1,074,200 1,082,678
Borrowings   207,446     135,554     134,362     108,556     83,054
Total interest-bearing liabilities 1,423,161 1,293,916 1,226,169 1,182,756 1,165,732
Non-interest-bearing deposits 154,872 142,328 130,276 125,915 122,263
Other non-interest-bearing liabilities   21,878     20,368     16,091     25,681     16,876
Total liabilities 1,599,911 1,456,612 1,372,536 1,334,352 1,304,871
Stockholders' equity   402,289     412,715     415,715     414,486     412,009
Total liabilities and stockholders' equity $ 2,002,200   $ 1,869,327   $ 1,788,251   $ 1,748,838   $ 1,716,880
 
 
Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands)   Quarters Ended
December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
Interest-earning assets        
Total loans (1) 3.48 % 3.48 % 3.54 % 3.60 % 3.54 %
Securities (1) 4.03 % 3.54 % 2.18 % 2.13 % 4.05 %
Other interest earning assets and FHLB stock 1.33 %   1.23 %   0.68 %   0.56 %   0.49 %
Total interest-earning assets 3.56 %   3.46 %   3.13 %   3.13 %   3.56 %
 
Interest-bearing liabilities
NOW 0.06 % 0.05 % 0.05 % 0.05 % 0.09 %
Regular savings 0.36 % 0.37 % 0.39 % 0.43 % 0.44 %
Money market 0.73 % 0.69 % 0.63 % 0.69 % 0.67 %
Certificates of deposit 1.08 %   1.05 %   1.05 %   1.06 %   0.93 %
Total interest-bearing deposits 0.68 % 0.66 % 0.64 % 0.67 % 0.61 %
Borrowings 0.78 %   0.84 %   0.81 %   0.95 %   1.16 %
Total interest-bearing liabilities 0.70 %   0.68 %   0.66 %   0.69 %   0.65 %
 
Net interest rate spread (FTE) 2.86 % 2.78 % 2.47 % 2.44 % 2.91 %
Net interest margin (FTE) 3.04 % 2.96 % 2.65 % 2.64 % 3.09 %
Total deposit cost 0.61 % 0.59 % 0.57 % 0.60 % 0.55 %
 

(1) Beginning in the second quarter of 2015, interest income on tax-exempt securities and loans was 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)
  Year to Date
(Unaudited, dollars in thousands)

December 31,
2015

 

December 31,
2014

 
Net income (loss)- GAAP basis $ 7,227 $ (183 )
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 950
Add expenses related to mutual to stock conversion 869
Add Charitable Foundation contribution 7,000
Income tax effects of adjustments     (2,555 )
Net income Non-GAAP basis $ 7,227 $ 4,595  
 
 
Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
  Quarter Ended
(Unaudited, dollars in thousands) December 31, 2014
 
Net income - GAAP basis $ 2,745
Noninterest income adjustment:
Less Bank-owned life insurance death benefit gains (182 )
Income tax effect of adjustment    
Net income Non-GAAP basis $ 2,563  
 

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
(Unaudited, dollars in thousands, except share data)   Quarters Ended
December 31,
2015
  September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014

Performance Ratios (annualized)

       
Basic and diluted EPS
GAAP $ 0.09 $ 0.07 $ 0.06 $ 0.05 $ 0.10
Non-GAAP(1) $ 0.10
Return on average assets (ROAA):
GAAP 0.48 % 0.38 % 0.38 % 0.30 % 0.63 %
Non-GAAP(1) 0.59 %
Return on average equity (ROAE):
GAAP 2.38 % 1.74 % 1.64 % 1.28 % 2.64 %
Non-GAAP(1) 2.47 %
Return on average tangible common equity (ROATCE):
GAAP 2.45 % 1.79 % 1.70 % 1.32 % 2.73 %
Non-GAAP(1) 2.55 %
Efficiency Ratio:
GAAP 70 % 73 % 78 % 83 % 72 %
Non-GAAP(1) 73 %
 
 
Year to Date
December 31, 2015   December 31, 2014

Performance Ratios

 
Basic and diluted EPS
GAAP $ 0.28 n/a
Non-GAAP(1) $ 0.28 n/a
Return (loss) on average assets (ROAA):
GAAP 0.39 % (0.01 )%
Non-GAAP(1) 0.39 % 0.29 %
Return (loss) on average equity (ROAE):
GAAP 1.76 % (0.07 )%
Non-GAAP(1) 1.76 % 1.64 %
Return (loss) on average tangible common equity (ROATCE):
GAAP 1.81 % (0.07 )%
Non-GAAP(1) 1.81 % 1.78 %
Efficiency Ratio:
GAAP 76 % 95 %
Non-GAAP(1) 76 % 80 %
 

(1) See page 15 for a reconciliation of Non-GAAP financial measures.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)   At or for the Quarters Ended   At or for the Year Ended
December 31,
2015
  September 30,
2015
  December 31,
2014
December 31,
2015
  December 31,
2014
Asset Quality      
Nonperforming Assets $ 10,744 $ 4,999 $ 4,481 $ 10,744 $ 4,481
Nonperforming Assets/Total Assets 0.51 % 0.26 % 0.26 % 0.51 % 0.26 %
Allowance for Loan Losses/Total Loans 1.11 % 1.10 % 1.13 % 1.11 % 1.13 %
Annualized Net Charge-offs (Recoveries) $ (71 ) $ 13 $ 19 $ 40 $ 79
Annualized Net Charge-offs (Recoveries)/Average Loans (0.02 )% % % % 0.01 %
Allowance for Loan Losses/ Nonperforming Loans 159 % 302 % 290 % 159 % 290 %
 
Capital/Other
Common shares outstanding 28,492,732 28,150,313 28,466,813
Book value per share $ 14.00 $ 14.48 14.46
Tangible book value per share $ 13.58 $ 14.05 13.99
Tangible Common Equity/Tangible Assets 18.41 % 20.57 % 23.22 %
Full-time Equivalent Employees 209 204 202

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

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