Market Overview

Blue Hills Bancorp, Inc. Reports Third Quarter 2015 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 $1,810,000, or $.07 per diluted share for the third quarter of 2015 compared to net income of $1,699,000, or $.06 per diluted share, for the second quarter of 2015. Net income for the third quarter of 2014 was $836,000, excluding a pension curtailment gain related to the Company's decision to freeze its defined benefit pension plan as of October 31, 2014 and nonrecurring expenses related to (1) the Company's funding of a new charitable foundation in July 2014, (2) the mutual-to-stock conversion that was completed on July 21, 2014, and (3) the January 2014 Nantucket Bank acquisition. The Company had a net loss of $2,958,000 on a GAAP basis in the third quarter of 2014 (see page 14 for a reconciliation of GAAP to non-GAAP measures). Blue Hills Bancorp was not a publicly traded company for all of the third quarter of 2014 and, as a result, earnings per share is not applicable for that period or for the first nine months of 2014.

For the nine months ended September 30, 2015, net income was $4,815,000, or $.18 per diluted share, versus net income of $2,032,000 for the nine months ended September 30, 2014, excluding the pension curtailment gain and three nonrecurring expenses discussed above. The Company had a net loss of $2,928,000 for the nine months ended September 30, 2014 on a GAAP basis.

Commenting on the results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said "We continue to make progress in growing our revenue base and generating operating leverage. On a quarter-over-quarter and year-over-year basis, our performance continues to show improvement. Loans and customer deposits are up more than 20% and 10%, respectively, over the past year and we have been able to grow our core net interest margin by over 10 basis points from the third quarter of 2014 despite the very difficult low rate and highly competitive operating environment, while remaining positioned for rising interest rates. During the third quarter, we also began the process of returning capital to our shareholders by paying our first quarterly dividend and launching the share repurchase program we announced in late July."

BALANCE SHEET
Compared to June 30, 2015, total assets grew $90 million, or 5%, to $1.9 billion at September 30, 2015. Total loans were up $97 million, or 8%, driven primarily by growth in the commercial real estate portfolio, which was up $49 million, or 11%, and in the residential mortgage portfolio, which was up $31 million, or 6%. In addition, the commercial business portfolio increased $13 million, or 9%, while the home equity portfolio was up $8 million, or 12%. Loans held for sale grew to $21 million at September 30, 2015 from $2 million at June 30, 2015 reflecting jumbo residential mortgages held for sale at the end of the third quarter.

As previously disclosed in the Company's Quarterly Report on Form 10-Q for the second quarter of 2015 as filed with the Securities and Exchange Commission, 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. When a security is reclassified from available for sale to held to maturity, the fair value at the time of transfer becomes the security's new cost basis. The net unrealized holding gain at the transfer date, which was $666,000, will continue to be reported in accumulated other comprehensive income and is amortized over the investment's remaining life as a yield adjustment in a manner similar to a premium or discount. The combined balance of available-for-sale and held-to-maturity securities at September 30, 2015 of $429 million was little changed from the $432 million of available-for-sale securities reported at June 30, 2015.

Compared to September 30, 2014, total assets increased $248 million, or 15%. Loans accounted for the vast majority of the growth in total assets, increasing $242 million, or 22%. By category, commercial real estate loans were up $129 million, or 35%; residential mortgages were up $74 million, or 16%; commercial business loans were up $26 million, or 19%; and home equity loans were up $11 million, or 17%.

Compared to June 30, 2015, deposits grew $71 million, or 6%, to $1.3 billion at September 30, 2015. The increase from the second quarter was mainly driven by growth in money market deposits of $45 million and NOW & demand deposits which were up $17 million. The growth in deposits was due, in part, to promotional rate programs as well as a seasonal increase at Nantucket Bank. Short-term borrowings increased $20 million and long-term debt grew $10 million from June 30, 2015 as these increases helped to fund the loan growth achieved during the third quarter.

Compared to September 30, 2014, deposits grew $193 million, or 17%. By category, there were increases of $108 million in money market deposits, $61 million in brokered deposits, $32 million in NOW & demand deposits, and $21 million in certificates of deposit. These increases were partially offset by a $30 million decline in regular savings deposits. The Milton branch, which was opened in October 2014, contributed $40 million to the growth in total deposits. Short-term borrowings also increased $40 million and long-term debt was up $10 million from a year ago.

Stockholders' equity was $408 million at September 30, 2015 compared to $414 million at June 30, 2015 and $410 million at September 30, 2014. The slight decline in stockholders' equity in both comparisons reflects a lower level of accumulated other comprehensive income, which turned negative at September 30, 2015, mainly due to a drop in the value of marketable equity securities as the S&P 500 declined 7% during the third quarter of 2015. Accumulated other comprehensive income was also impacted by the aforementioned transfer of securities to held to maturity from available for sale. Other factors that contributed to the decline in stockholder' equity during the third quarter of 2015 were the declaration of the Company's first common stock dividend and share repurchases.

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 common stock, which represents approximately 5% of the Company's issued and outstanding shares. During the third quarter of 2015, the Company repurchased 316,500 shares of common stock at an average price per share of $14.24 for a total cost of $4.5 million. Repurchased shares are returned to the status of authorized but unissued shares. The Company had 1,106,840 shares remaining to repurchase at September 30, 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. Under Massachusetts regulations, the Company does not need approval from the Massachusetts Commissioner of Banks to repurchase the shares to fund awards under the Equity Incentive Plan.

NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income on a fully taxable equivalent basis was $13.3 million in the third quarter of 2015, up $2.1 million, or 19%, from $11.2 million in the second quarter of 2015. Net interest margin on a fully taxable equivalent basis improved to 2.96% in the third quarter from 2.65% in the second quarter. The improvement in net interest income and margin reflects a $1.5 million increase in dividends from mutual fund investments, which are typically higher in the second half of the year. In addition, the improvement in net interest income was helped by a $93 million, or 8%, increase in average loans driven mainly by growth in the commercial real estate and residential mortgage portfolios. Net interest income and margin were negatively impacted by a 2 basis point increase in the cost of interest bearing liabilities and a decline in purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Accretion in the third quarter of 2015 contributed $142,000 to net interest income and 3 basis points to net interest margin compared to $268,000 and 6 basis points, respectively, in the second quarter of 2015. The $2.9 million remaining balance of accretable yield at September 30, 2015 is expected to be recorded to net interest income in future quarters. Excluding the impact of mutual fund dividends and purchase accounting accretion from both quarters, net interest income on a fully taxable equivalent basis increased $751,000, or 7%, to $11.6 million in the third quarter of 2015 while net interest margin improved 2 basis points from the second quarter to 2.66%.

Compared to the third quarter of 2014, net interest and dividend income on a fully tax equivalent basis increased $1.8 million, or 15%, while net interest margin improved 13 basis points. The improvement in net interest income reflects a $231 million, or 21%, 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 a $233,000 increase in mutual fund dividends while the securities yield excluding mutual fund dividends improved 28 basis points to 2.39% 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 were negatively impacted by an 11 basis point increase in the cost of interest bearing liabilities reflecting competitive pricing pressures and promotional rate programs. In addition, net interest income and margin were also negatively impacted by a 9 basis point decline in loan yield due to the low rate environment, competitive pricing pressure, and the impact of purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Accretion in the third quarter of 2015 contributed $142,000 to net interest income and 3 basis points to net interest margin compared to $179,000 and 4 basis points, respectively, in the third quarter of 2014. Excluding the impact of mutual fund dividends and purchase accounting accretion from both quarters, net interest income on a fully taxable equivalent basis increased $1.6 million, or 16%, to $11.6 million while net interest margin improved 13 basis points from the third quarter of 2014.

NONINTEREST INCOME
Noninterest income was $1.7 million in the third quarter of 2015, down $783,000, or 32%, from the second quarter. The decline was mainly due to miscellaneous income and loan level derivative fee income.

  • Miscellaneous income declined to an expense of $116,000 in the third quarter from income of $393,000 in the second quarter. 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 third quarter, the Company recorded negative credit valuation marks on these contracts as interest rates declined while in the second quarter the Company recorded positive credit 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. The comparison of miscellaneous income with the second quarter was also impacted by a lower level of income received on CRA-qualified investments.
  • Loan level derivative fee income was $513,000 in the third quarter compared to $770,000 in the second 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 third quarter of 2014, noninterest income declined $1.7 million, or 50%. The major factor driving this decline was the absence of a $1.3 million pension curtailment gain recorded in the prior year quarter. Excluding this item, noninterest income fell $376,000, or 18%.

  • Mortgage banking income declined $289,000 due to the absence of a $240,000 gain on the bulk sale of jumbo residential mortgage loans recognized in the prior year quarter and a decline in gains from the sale of conventional loans.
  • Miscellaneous income fell $223,000 from the factors discussed above related to valuation marks on customer interest rate swap contracts.
  • Securities gains declined $111,000.
  • Partially offsetting these declines was a $217,000 increase in loan level derivative fee income.

NONINTEREST EXPENSE

Noninterest expense was $10.8 million in the third quarter of 2015, up $188,000, or 2%, from the second quarter. The most significant individual item behind the growth in noninterest expense relates to costs associated with the new Westwood branch. By expense category, the higher level of noninterest expense was mainly due to a $153,000 increase in occupancy and equipment expense, which was driven by the Westwood branch and other factors. Changes in all other expense categories were less than $100,000, including salaries and benefits which was down $50,000.

Noninterest expense was $17.7 million in the third quarter of 2014 and included a $7.0 million expense related to the Company's funding of a new charitable foundation that was set up at the time of the mutual-to-stock conversion in July 2014, $51,000 of expenses related to the Company's mutual-to-stock conversion and $2,000 related to one-time costs associated with the January 2014 Nantucket Bank acquisition. Excluding these three items, noninterest expense in the third quarter of 2014 was $10.7 million. The $153,000, or 1%, increase in noninterest expense (third quarter of 2015 vs. third quarter of 2014) reflects growth initiatives, including the opening of new branches in Milton and Westwood and a loan production office in Plymouth, as well as merit and promotional salary increases. By expense category, growth in occupancy and equipment expense, salaries and benefits expense, and data processing costs were partially offset by declines in all other account categories.

ASSET QUALITY
The provision for loan losses was $1.3 million in the third quarter of 2015 compared to $544,000 in the second quarter of 2015 and $1.4 million in the third quarter of 2014. The provisions in all quarters reflect the growth and management's assessment of 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 $13,000 in the third quarter of 2015, $5,000 in the second quarter of 2015 and $9,000 in the third quarter of 2014.

The allowance for loan losses as a percentage of total loans was 1.10% at September 30, 2015 compared to 1.08% at June 30, 2015 and 1.13% at September 30, 2014. The allowance for loan losses as a percentage of nonperforming loans was 302% at September 30, 2015 compared to 279% at June 30, 2015 and 295% at September 30, 2014.

Nonperforming assets were $5.0 million at September 30, 2015 compared to $4.9 million at June 30, 2015 and $4.3 million at September 30, 2014. Nonperforming assets as a percentage of total assets were 0.26% at September 30, 2015, 0.27% at June 30, 2015 and 0.26% at September 30, 2014.

ABOUT BLUE HILLS BANCORP

Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $1.9 billion at September 30, 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 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 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

     
(Unaudited, dollars in thousands)         % Change

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30, 2015
vs. June 30, 2015

 

September 30, 2015
vs. September 30, 2014

Assets    
Cash and due from banks $ 9,447 $ 10,162 $ 14,632 (7.0 )% (35.4 )%
Short term investments   11,533       43,240       39,229   (73.3 )% (70.6 )%
Total cash and cash equivalents 20,980 53,402 53,861 (60.7 )% (61.0 )%
Securities available for sale, at fair value 231,697 431,827 417,164 (46.3 )% (44.5 )%
Securities held to maturity, at amortized cost 197,632 NM NM
Federal Home Loan Bank stock, at cost 11,702 11,702 11,702 % %
Loans held for sale 21,423 1,833 2,465 1,068.7 % 769.1 %
Loans:
1-4 family residential 541,382 510,406 466,963 6.1 % 15.9 %
Home equity 73,494 65,735 62,958 11.8 % 16.7 %
Commercial real estate 497,217 448,125 368,069 11.0 % 35.1 %
Construction   54,283       60,553       56,939   (10.4 )% (4.7 )%
Total real estate loans 1,166,376 1,084,819 954,929 7.5 % 22.1 %
Commercial business 163,971 151,012 138,357 8.6 % 18.5 %
Consumer   36,855       33,995       32,210   8.4 % 14.4 %
Total loans 1,367,202 1,269,826 1,125,496 7.7 % 21.5 %
Allowance for loan losses   (15,082 )     (13,777 )     (12,721 ) 9.5 % 18.6 %
Loans, net 1,352,120 1,256,049 1,112,775 7.6 % 21.5 %
Premises and equipment, net 19,485 18,969 18,616 2.7 % 4.7 %
Accrued interest receivable 5,174 4,878 4,367 6.1 % 18.5 %
Goodwill and core deposit intangible 12,151 12,541 13,854 (3.1 )% (12.3 )%
Net deferred tax asset 8,368 7,015 4,456 19.3 % 87.8 %
Bank-owned life insurance 31,358 31,100 30,576 0.8 % 2.6 %
Other assets   22,348       15,251       16,775   46.5 % 33.2 %
Total assets $ 1,934,438     $ 1,844,567     $ 1,686,611   4.9 % 14.7 %
Liabilities and Stockholders' Equity
NOW and demand $ 284,720 $ 268,126 $ 252,439 6.2 % 12.8 %
Regular savings 288,597 291,628 318,557 (1.0 )% (9.4 )%
Money market 341,588 296,539 233,392 15.2 % 46.4 %
Certificates of deposit 310,424 310,365 289,384 % 7.3 %
Brokered money market 33,924 23,759 42.8 % 100.0 %
Brokered certificates of deposit   85,705       83,705       58,705   2.4 % 46.0 %
Total deposits 1,344,958 1,274,122 1,152,477 5.6 % 16.7 %
Short-term borrowings 115,000 95,000 75,000 21.1 % 53.3 %
Long-term debt 45,000 35,000 35,000 28.6 % 28.6 %
Other liabilities   21,868       26,704       14,068   (18.1 )% 55.4 %
Total liabilities   1,526,826       1,430,826       1,276,545   6.7 % 19.6 %
Common stock 282 285 285 (1.1 )% (1.1 )%
Additional paid-in capital 276,730 281,164 280,926 (1.6 )% (1.5 )%
Unearned compensation- ESOP (21,445 ) (21,635 ) (22,393 ) 0.9 % (4.2 )%
Retained earnings 153,969 152,728 146,979 0.8 % 4.8 %
Accumulated other comprehensive income (loss)   (1,924 )     1,199       4,269   (260.5 )% (145.1 )%
Total stockholders' equity   407,612       413,741       410,066   (1.5 )% (0.6 )%
Total liabilities and stockholders' equity $ 1,934,438     $ 1,844,567     $ 1,686,611   4.9 % 14.7 %
 
 

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

         
(Unaudited, dollars in thousands)

September 30,
2015

 

June 30,
2015

 

March 31,
2015

 

December 31,
2014

 

September 30,
2014

Assets
Cash and due from banks $ 9,447 $ 10,162 $ 10,045 $ 15,345 $ 14,632
Short term investments   11,533       43,240       26,966       44,801       39,229  
Total cash and cash equivalents 20,980 53,402 37,011 60,146 53,861
Securities available for sale, at fair value 231,697 431,827 429,551 416,447 417,164
Securities held to maturity, at amortized cost 197,632
Federal Home Loan Bank stock, at cost 11,702 11,702 11,702 11,702 11,702
Loans held for sale 21,423 1,833 17,681 14,591 2,465
Loans:
1-4 family residential 541,382 510,406 463,334 461,719 466,963
Home equity 73,494 65,735 63,276 61,508 62,958
Commercial real estate 497,217 448,125 405,670 385,228 368,069
Construction   54,283       60,553       59,513       53,258       56,939  
Total real estate loans 1,166,376 1,084,819 991,793 961,713 954,929
Commercial business 163,971 151,012 154,367 151,521 138,357
Consumer   36,855       33,995       32,845       32,653       32,210  
Total loans 1,367,202 1,269,826 1,179,005 1,145,887 1,125,496
Allowance for loan losses   (15,082 )     (13,777 )     (13,238 )     (12,973 )     (12,721 )
Loans, net 1,352,120 1,256,049 1,165,767 1,132,914 1,112,775
Premises and equipment, net 19,485 18,969 18,869 18,788 18,616
Accrued interest receivable 5,174 4,878 4,793 4,433 4,367
Goodwill and core deposit intangible 12,151 12,541 12,955 13,392 13,854
Net deferred tax asset 8,368 7,015 5,172 6,233 4,456
Bank-owned life insurance 31,358 31,100 30,848 30,595 30,576
Other assets   22,348       15,251       23,535       18,907       16,775  
Total assets $ 1,934,438     $ 1,844,567     $ 1,757,884     $ 1,728,148     $ 1,686,611  
Liabilities and Stockholders' Equity
NOW and demand $ 284,720 $ 268,126 $ 256,746 $ 245,117 $ 252,439
Regular savings 288,597 291,628 301,932 303,834 318,557
Money market 341,588 296,539 269,164 280,139 233,392
Certificates of deposit 310,424 310,365 310,672 301,755 289,384
Brokered money market 33,924 23,759 23,991 23,166
Brokered certificates of deposit   85,705     83,705     58,705     58,705     58,705  
Total deposits 1,344,958 1,274,122 1,221,210 1,212,716 1,152,477
Short-term borrowings 115,000 95,000 70,000 40,000 75,000
Long-term debt 45,000 35,000 35,000 35,000 35,000
Other liabilities   21,868       26,704       16,730       28,826       14,068  
Total liabilities   1,526,826       1,430,826       1,342,940       1,316,542       1,276,545  
Common stock 282 285 285 285 285
Additional paid-in capital 276,730 281,164 281,094 281,035 280,926
Unearned compensation- ESOP (21,445 ) (21,635 ) (21,825 ) (22,014 ) (22,393 )
Retained earnings 153,969 152,728 151,029 149,723 146,979
Accumulated other comprehensive income (loss)   (1,924 )     1,199       4,361       2,577       4,269  
Total stockholders' equity   407,612       413,741       414,944       411,606       410,066  

Total liabilities and stockholders' equity

$ 1,934,438     $ 1,844,567     $ 1,757,884     $ 1,728,148     $ 1,686,611  
 
 

Blue Hills Bancorp, Inc.
Consolidated Statement of Operations-Quarters

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

September 30,
2015

 

June 30,
2015

 

September 30,
2014

 

September 30, 2015 vs.
June 30, 2015

 

September 30, 2015 vs.
September 30, 2014

Interest and fees on loans $ 11,509   $ 10,759   $ 9,725 7.0 %   18.3 %
Interest on securities 2,227 2,237 1,892 (0.4 )% 17.7 %
Dividends 1,673 112 1,388 1,393.8 % 20.5 %
Other   9       22     65     (59.1 )%   (86.2 )%
Total interest and dividend income   15,418       13,130     13,070     17.4 %   18.0 %
Interest on deposits 1,926 1,745 1,376 10.4 % 40.0 %
Interest on borrowings   287       270     275     6.3 %   4.4 %
Total interest expense   2,213       2,015     1,651     9.8 %   34.0 %
Net interest and dividend income 13,205 11,115 11,419 18.8 % 15.6 %
Provision for loan losses   1,318       544     1,438     142.3 %   (8.3 )%
Net interest and dividend income, after provision for loan losses   11,887       10,571     9,981     12.4 %   19.1 %
Deposit account fees 319 335 337 (4.8 )% (5.3 )%
Interchange and ATM fees 430 377 390 14.1 % 10.3 %
Mortgage banking 52 83 341 (37.3 )% (84.8 )%
Loan level derivative fee income 513 770 296 (33.4 )% 73.3 %
Realized securities gains and impairment losses, net 238 267 349 (10.9 )% (31.8 )%
Bank-owned life insurance income 258 252 250 2.4 % 3.2 %
Pension curtailment gain 1,304 NM NM
Miscellaneous   (116 )     393     107     NM     (208.4 )%
Total noninterest income   1,694       2,477     3,374     (31.6 )%   (49.8 )%
Salaries and employee benefits 5,591 5,641 5,424 (0.9 )% 3.1 %
Occupancy and equipment 1,617 1,464 1,150 10.5 % 40.6 %
Data processing 939 843 805 11.4 % 16.6 %
Professional fees 610 667 694 (8.5 )% (12.1 )%
Advertising 620 562 815 10.3 % (23.9 )%
FDIC deposit insurance 262 253 360 3.6 % (27.2 )%
Directors' fees 112 93 150 20.4 % (25.3 )%
Amortization of core deposit intangible 390 414 485 (5.8 )% (19.6 )%
Charitable Foundation contribution 7,000 NM NM
Other general and administrative   707       723     865     (2.2 )%   (18.3 )%
Total noninterest expense   10,848       10,660     17,748     1.8 %   (38.9 )%
Income (loss) before income taxes 2,733 2,388 (4,393 ) 14.4 % (162.2 )%
Provision (benefit) for income taxes   923       689     (1,435 )   34.0 %   (164.3 )%
Net income (loss) $ 1,810     $ 1,699   $ (2,958 )   6.5 %   (161.2 )%
 
Earnings per common share:
Basic $ 0.07 $ 0.06 n/a n/a n/a
Diluted $ 0.07 $ 0.06 n/a n/a n/a
Weighted average shares outstanding:
Basic 26,183,381 26,293,560 n/a n/a n/a
Diluted 26,183,381 26,293,560 n/a n/a n/a
 
 

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

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

September 30,
2015

 

September 30,
2014

  % Change  
Interest and fees on loans $ 32,695   $ 27,175   20.3 %
Interest on securities 6,600 5,832 13.2 %
Dividends 1,885 1,673 12.7 %
Other   50     110     (54.5 )%
Total interest and dividend income   41,230     34,790     18.5 %
Interest on deposits 5,434 4,075 33.3 %
Interest on borrowings   811     905     (10.4 )%
Total interest expense   6,245     4,980     25.4 %
Net interest and dividend income 34,985 29,810 17.4 %
Provision for loan losses   2,141     3,111     (31.2 )%
Net interest and dividend income, after provision for loan losses   32,844     26,699     23.0 %
Deposit account fees 987 971 1.6 %
Interchange and ATM fees 1,133 1,046 8.3 %
Mortgage banking 236 484 (51.2 )%
Loan level derivative fee income 1,287 503 155.9 %
Realized securities gains and impairment losses, net 1,823 2,081 (12.4 )%
Bank-owned life insurance income 763 745 2.4 %
Pension curtailment gain 1,304 100.0 %
Miscellaneous   126     179     (29.6 )%
Total noninterest income   6,355     7,313     (13.1 )%
Salaries and employee benefits 16,721 15,765 6.1 %
Occupancy and equipment 4,579 4,049 13.1 %
Data processing 2,601 2,111 23.2 %
Professional fees 1,909 2,976 (35.9 )%
Advertising 1,682 1,774 (5.2 )%
FDIC deposit insurance 807 734 9.9 %
Directors' fees 329 456 (27.9 )%
Amortization of core deposit intangible 1,241 1,347 (7.9 )%
Charitable Foundation contribution 7,000 100.0 %
Other general and administrative   2,265     2,454     (7.7 )%
Total noninterest expense   32,134     38,666     (16.9 )%
Income (loss) before income taxes 7,065 (4,654 ) NM
Provision (benefit) for income taxes   2,250     (1,726 )   NM  
Net income (loss) $ 4,815   $ (2,928 )   (264.4 )%
 
Earnings per common share:
Basic $ 0.18 n/a
Diluted $ 0.18 n/a
Weighted average shares outstanding:
Basic 26,250,065 n/a
Diluted 26,250,065 n/a
 
 
Blue Hills Bancorp Inc.
Consolidated Statements of Operations - Trend
  Quarters Ended
(Unaudited, dollars in thousands, except share data) September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Interest and fees on loans $11,509   $10,759   $10,427   $10,207   $9,725
Interest on securities 2,227 2,237 2,136 2,027 1,892
Dividends 1,673 112 100 2,221 1,388
Other 9   22   19   30   65
Total interest and dividend income 15,418   13,130   12,682   14,485   13,070
Interest on deposits 1,926 1,745 1,763 1,675 1,376
Interest on borrowings 287   270   254   243   275
Total interest expense 2,213   2,015   2,017   1,918   1,651
Net interest and dividend income 13,205 11,115 10,665 12,567 11,419
Provision for loan losses 1,318   544   279   270   1,438
Net interest and dividend income, after provision for loan losses 11,887   10,571   10,386   12,297   9,981
Deposit account fees 319 335 333 342 337
Interchange and ATM fees 430 377 326 351 390
Mortgage banking 52 83 101 300 341
Loan level derivative fee income 513 770 4 157 296
Realized securities gains and impairment losses, net 238 267 1,318 434 349
Bank-owned life insurance income 258 252 253 261 250
Bank-owned life insurance death benefit gains 182
Pension curtailment gain 1,304
Miscellaneous (116)   393   (151)   267   107
Total noninterest income 1,694   2,477   2,184   2,294   3,374
Salaries and employee benefits 5,591 5,641 5,489 5,543 5,424
Occupancy and equipment 1,617 1,464 1,498 1,256 1,150
Data processing 939 843 819 878 805
Professional fees 610 667 632 575 694
Advertising 620 562 500 653 815
FDIC deposit insurance 262 253 292 532 360
Directors' fees 112 93 124 30 150
Amortization of core deposit intangible 390 414 437 461 485
Charitable Foundation contribution 7,000
Other general and administrative 707   723   835   814   865
Total noninterest expense 10,848   10,660   10,626   10,742   17,748
Income (loss) before income taxes 2,733 2,388 1,944 3,849 (4,393)
Provision (benefit) for income taxes 923   689   638   1,104   (1,435)
Net income (loss) $1,810   $1,699   $1,306   $2,745   $(2,958)
 
Earnings per common share:
Basic $0.07 $0.06 $0.05 $0.10 n/a
Diluted $0.07 $0.06 $0.05 $0.10 n/a
Weighted average shares outstanding:
Basic 26,183,381 26,293,560 26,274,738 26,243,957 n/a
Diluted 26,183,381 26,293,560 26,274,738 26,243,957 n/a
 
 

Blue Hills Bancorp Inc.
Average Balances/Yields

(Unaudited, dollars in thousands)   Quarters Ended
September 30, 2015   June 30, 2015   September 30, 2014

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets            
Total loans (1) $ 1,316,514 $ 11,562 3.48 % $ 1,223,681 $ 10,812 3.54 % $ 1,085,951 $ 9,780 3.57 %
Securities (1) 429,667 3,838 3.54 429,348 2,332 2.18 414,864 3,284 3.14
Other interest earning assets and FHLB stock 34,061     106     1.23   42,832     73     0.68   113,163     108     0.38  
Total interest-earning assets 1,780,242 15,506 3.46 % 1,695,861 13,217 3.13 % 1,613,978 13,172 3.24 %
Non-interest-earning assets 89,085   92,390   91,717  
Total assets $ 1,869,327   $ 1,788,251   $ 1,705,695  
 
Interest-bearing liabilities
NOW $ 128,298 $ 15 0.05 % $ 123,904 $ 14 0.05 % $ 124,846 $ 19 0.06 %
Regular savings 289,236 269 0.37 298,850 292 0.39 336,151 360 0.42
Money market 348,658 606 0.69 297,903 471 0.63 197,500 270 0.54
Certificates of deposit 392,170     1,036     1.05   371,150     968     1.05   346,807     727     0.83  
Total interest-bearing deposits 1,158,362 1,926 0.66 1,091,807 1,745 0.64 1,005,304 1,376 0.54
Borrowings 135,554     287     0.84   134,362     270     0.81   145,848     275     0.75  
Total interest-bearing liabilities 1,293,916 2,213   0.68 % 1,226,169 2,015   0.66 % 1,151,152 1,651   0.57 %
Non-interest-bearing deposits 142,328 130,276 117,393
Other non-interest-bearing liabilities 20,368   16,091   78,377  
Total liabilities 1,456,612 1,372,536 1,346,922
Stockholders' equity 412,715   415,715   358,773  
Total liabilities and stockholders' equity $ 1,869,327   $ 1,788,251   $ 1,705,695  
 
Net interest and dividend income (FTE) 13,293 11,202 11,521
Less: FTE adjustment (88 ) (87 ) (102 )
Net interest and dividend income (GAAP) $ 13,205   $ 11,115   $ 11,419  
 
Net interest rate spread (FTE) 2.78 % 2.47 % 2.67 %
Net interest margin (FTE) 2.96 % 2.65 % 2.83 %
Total deposit cost 0.59 % 0.57 % 0.49 %

(1) Beginning in the second quarter of 2015, 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
(Unaudited, dollars in thousands)   Year to Date
September 30, 2015   September 30, 2014

Average
balance

  Interest  

Yield/
Cost

Average balance   Interest  

Yield/
Cost

Interest-earning assets
Total loans (1) $ 1,240,142 $ 32,844 3.54 % $ 979,459 $ 27,340 3.73 %
Securities (1) 427,064 8,391 2.63 426,658 7,526 2.36
Other interest earning assets and FHLB stock 42,438     249     0.78   84,741     231     0.36  
Total interest-earning assets 1,709,644 41,484 3.24 % 1,490,858 35,097 3.15 %
Non-interest-earning assets 92,937   85,450  
Total assets $ 1,802,581   $ 1,576,308  
 
Interest-bearing liabilities
NOW $ 124,832 $ 43 0.05 % $ 120,382 $ 59 0.07 %
Regular savings 296,364 880 0.40 344,069 1,043 0.41
Money market 314,828 1,585 0.67 186,685 730 0.52
Certificates of deposit 372,408   2,926   1.05   353,947   2,243   0.85  
Total interest-bearing deposits 1,108,432 5,434 0.66 1,005,083 4,075 0.54
Borrowings 126,256   811   0.86   172,348   905   0.70  
Total interest-bearing liabilities 1,234,688 6,245   0.68 % 1,177,431 4,980   0.57 %
Non-interest-bearing deposits 132,900 108,889
Other non-interest-bearing liabilities 20,694   53,648  
Total liabilities 1,388,282 1,339,968
Stockholders' equity 414,299   236,340  
Total liabilities and stockholders' equity $ 1,802,581   $ 1,576,308  
 
Net interest and dividend income (FTE) 35,239 30,117
Less: FTE adjustment (254 ) (307 )
Net interest and dividend income (GAAP) $ 34,985   $ 29,810  
 
Net interest rate spread (FTE) 2.56 % 2.58 %
Net interest margin (FTE) 2.76 % 2.70 %
Total deposit cost 0.59 % 0.49 %

(1) Beginning in the second quarter of 2015, 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
 
(Unaudited, dollars in thousands)       Quarters Ended
September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Interest-earning assets      
Total loans $ 1,316,514 $ 1,223,681 $ 1,178,716 $ 1,148,744 $ 1,085,951
Securities 429,667 429,348 422,092 416,867 414,864
Other interest earning assets and FHLB stock 34,061     42,832     50,603     59,028     113,163
Total interest-earning assets 1,780,242 1,695,861 1,651,411 1,624,639 1,613,978
Non-interest-earning assets 89,085     92,390     97,427     92,241     91,717
Total assets $ 1,869,327     $ 1,788,251     $ 1,748,838     $ 1,716,880     $ 1,705,695
 
Interest-bearing liabilities
NOW $ 128,298 $ 123,904 $ 122,226 $ 136,210 $ 124,846
Regular savings 289,236 298,850 301,135 310,591 336,151
Money market 348,658 297,903 297,359 279,622 197,500
Certificates of deposit 392,170     371,150     353,480     356,255     346,807
Total interest-bearing deposits 1,158,362 1,091,807 1,074,200 1,082,678 1,005,304
Borrowings 135,554     134,362     108,556     83,054     145,848
Total interest-bearing liabilities 1,293,916 1,226,169 1,182,756 1,165,732 1,151,152
Non-interest-bearing deposits 142,328 130,276 125,915 122,263 117,393
Other non-interest-bearing liabilities 20,368     16,091     25,681     16,876     78,377
Total liabilities 1,456,612 1,372,536 1,334,352 1,304,871 1,346,922
Stockholders' equity 412,715   415,715   414,486   412,009   358,773
Total liabilities and stockholders' equity $ 1,869,327     $ 1,788,251     $ 1,748,838     $ 1,716,880     $ 1,705,695
 
 
Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands)   Quarters Ended
September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Interest-earning assets        
Total loans (1) 3.48% 3.54% 3.60% 3.54% 3.57%
Securities (1) 3.54% 2.18% 2.13% 4.05% 3.14%
Other interest earning assets and FHLB stock 1.23%   0.68%   0.56%   0.49%   0.38%
Total interest-earning assets 3.46%   3.13%   3.13%   3.56%   3.24%
 
Interest-bearing liabilities
NOW 0.05% 0.05% 0.05% 0.09% 0.06%
Regular savings 0.37% 0.39% 0.43% 0.44% 0.42%
Money market 0.69% 0.63% 0.69% 0.67% 0.54%
Certificates of deposit 1.05%   1.05%   1.06%   0.93%   0.83%
Total interest-bearing deposits 0.66% 0.64% 0.67% 0.61% 0.54%
Borrowings 0.84%   0.81%   0.95%   1.16%   0.75%
Total interest-bearing liabilities 0.68%   0.66%   0.69%   0.65%   0.57%
 
Net interest rate spread (FTE) 2.78% 2.47% 2.44% 2.91% 2.67%
Net interest margin (FTE) 2.96% 2.65% 2.64% 3.09% 2.83%
Total deposit cost 0.59% 0.57% 0.60% 0.55% 0.49%

(1) Beginning in the second quarter of 2015, 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
(Unaudited, dollars in thousands)   September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
       
Net income (loss)-GAAP basis $ 1,810 $ 1,699 $ 1,306 $ 2,745 $ (2,958 )
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
Add expenses related to mutual to stock conversion 51
Add Charitable Foundation contribution 7,000
Income tax effects of adjustments                 (1,955 )
Net income-Non-GAAP basis $ 1,810     $ 1,699     $ 1,306     $ 2,563     $ 836  
 
 
Year to Date

September 30,
2015

 

September 30,
2014

 
Net income (loss)- GAAP basis $ 4,815 $ (2,928 )
Noninterest income adjustments:
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 $ 4,815   $ 2,032  
 

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
September 30,
2015
  June 30,
2015
  March 31,
2015
  December 31,
2014
  September 30,
2014
Performance Ratios (annualized)        
Basic and diluted EPS
GAAP $ 0.07 $ 0.06 $ 0.05 $ 0.10 n/a
Non-GAAP(1) $ 0.07 $ 0.06 $ 0.05 $ 0.10 n/a
Return (loss) on average assets (ROAA):
GAAP 0.38 % 0.38 % 0.30 % 0.63 % (0.69 )%
Non-GAAP(1) 0.38 % 0.38 % 0.30 % 0.59 % 0.19 %
Return (loss) on average equity (ROAE):
GAAP 1.74 % 1.64 % 1.28 % 2.64 % (3.27 )%
Non-GAAP(1) 1.74 % 1.64 % 1.28 % 2.47 % 0.92 %
Return (loss) on average tangible common equity (ROATCE):
GAAP 1.79 % 1.70 % 1.32 % 2.73 % (3.53 )%
Non-GAAP(1) 1.79 % 1.70 % 1.32 % 2.55 % 1.00 %
Efficiency Ratio:
GAAP 73 % 78 % 83 % 72 % 120 %
Non-GAAP(1) 73 % 78 % 83 % 73 % 79 %
 
  Year to Date

September 30,
2015

 

September 30,
2015

Performance Ratios (annualized)  
Basic and diluted EPS
GAAP $ 0.18 n/a
Non-GAAP(1) $ 0.18 n/a
Return on average assets (ROAA):
GAAP 0.36 % (0.25 )%
Non-GAAP(1) 0.36 % 0.17 %
Return on average equity (ROAE):
GAAP 1.55 % (1.66 )%
Non-GAAP(1) 1.55 % 1.15 %
Return on average tangible common equity (ROATCE):
GAAP 1.60 % (1.86 )%
Non-GAAP(1) 1.60 % 1.29 %
Efficiency Ratio:
GAAP 78 % 104 %
Non-GAAP(1) 78 % 83 %

(1) See page 14 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 Nine Months Ended
September 30,
2015
  June 30,
2015
  September 30,
2014
September 30,
2015
  September 30,
2014
Asset Quality
Nonperforming Assets $ 4,999 $ 4,938 $ 4,307 $ 4,999 $ 4,307
Nonperforming Assets/Total Assets 0.26 % 0.27 % 0.26 % 0.26 % 0.26 %
Allowance for Loan Losses/Total Loans 1.10 % 1.08 % 1.13 % 1.10 % 1.13 %
Net Charge-offs $ 13 $ 5 $ 9 $ 32 $ 61
Annualized Net Charge-offs/Average Loans % % % % 0.01 %
Allowance for Loan Losses/ Nonperforming Loans 302 % 279 % 295 % 302 % 295 %
 
Capital/Other
Common shares outstanding 28,150,313 28,466,813 28,466,813
Book value per share $ 14.48 $ 14.53 14.41
Tangible book value per share $ 14.05 $ 14.09 13.92
Tangible Common Equity/Tangible Assets 20.57 % 21.9 % 23.69 %
Full-time Equivalent Employees 204 203 198
 

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

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