Market Overview

Blue Hills Bancorp, Inc. Reports Second Quarter 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 $1,358,000, or $0.05 per diluted share, for the second quarter of 2016 compared to net income of $1,667,000, or $0.07 per diluted share, for the first quarter of 2016 and net income of $1,699,000, or $0.06 per diluted share for the second quarter of 2015. For the six months ended June 30, 2016, net income was $3,025,000, or $0.12 per diluted share, versus net income of $3,005,000, or $0.11 per diluted share, for the six months ended June 30, 2015.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said "The second quarter reflected the ongoing progression of the Bank's strategy of diversified growth. We had strong direct origination volume across our residential mortgage, commercial business and commercial real estate lending platforms matched with continued progress in core deposit growth driven by de novo branches and growing commercial and municipal relationships. The addition of experienced lenders to our residential lending team has been paying off with strong growth in mortgage banking revenue and our asset based lending and government banking teams are already contributing. While these initiatives are progressing strongly, they do put short-term pressure on our ability to generate operating leverage, which is important to our earnings strategy. We will be closely managing that impact going forward."

BALANCE SHEET
Compared to March 31, 2016, total assets grew $79 million, or 4%, to $2.2 billion at June 30, 2016. The increase was due to loan growth as total loans increased $98 million, or 6%, to $1.7 billion at June 30, 2016 driven mainly by higher levels of residential mortgage loans and commercial real estate loans. The growth in loans was partially offset by a $33 million, or 14%, decline in available-for-sale securities reflecting sales during the quarter.

Compared to June 30, 2015, total assets increased $396 million, or 22%. Loans also drove the growth in total assets in this comparison, increasing $415 million, or 33%. By category, residential mortgages were up $165 million, or 32%; commercial real estate loans were up $161 million, or 36%; construction loans increased $46 million, or 77%; commercial business loans were up $27 million, or 18%; and home equity loans increased $16 million, or 24%. In the second quarter of 2016, commercial loans (real estate and non-real estate combined) totaling $109 million were added to the balance sheet with over half related to commercial business loans versus the prior year where commercial real estate and construction accounted for the vast majority of the growth. Residential mortgage loan originations were $126 million in the second quarter of 2016, up 60% from the second quarter of 2015, as the expanded origination team gained traction.

The combined balance of available-for-sale and held-to-maturity securities at June 30, 2016 was $401 million. Securities available for sale were $432 million at June 30, 2015. The decline reflects sales of securities during the second quarter of 2016. 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.

Compared to March 31, 2016, deposits grew $116 million, or 8%, to $1.6 billion at June 30, 2016. The increase from the first quarter of 2016 was driven by increases in municipal and commercial deposits. By category, the growth was mainly reflected in money market deposits which were up $98 million. All other deposit categories had minor changes. The increase in deposits enabled the Company to fund loan growth and reduce short-term borrowings by $40 million from March 31, 2016.

Compared to June 30, 2015, deposits grew $327 million, or 26% and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the most significant increase in customer deposits was seen in money market deposits, which were up $210 million. Brokered deposits were also up $75 million, while short and long-term borrowings grew $35 million and $50 million, respectively, from the end of the second quarter of 2015. The increase in these categories helped support the growth in the loan portfolio.

Stockholders' equity was $392 million at June 30, 2016 compared to $394 million at March 31, 2016 and $414 million at June 30, 2015. The decline in stockholders' equity from a year ago reflects share repurchases, as well as the payment of common stock dividends, and a lower level of accumulated other comprehensive income that was due, in part, to a drop in the value of available-for-sale securities. These declines were partially offset by $7.2 million of earnings over the past four quarters.

In late February 2016, the Company announced the completion of its first stock repurchase program pursuant to which the Company bought back 1,423,340 shares of its common stock. At the same time, the Board of Directors authorized a second repurchase program for up to 1,119,000 shares of common stock. During the second quarter of 2016, the Company repurchased 386,900 shares of stock under the second program at an average price of $14.27 for a total cost of $5.5 million. This brings total repurchases under both programs over the past four quarters to 2,046,240 shares at an average price of $14.12 for a total cost of $28.9 million. The Company had 496,100 shares remaining to repurchase at June 30, 2016 under the second repurchase program.

NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income was $13.3 million in the second quarter of 2016, up $115 thousand, or 1%, from $13.2 million in the first quarter of 2016. Net interest margin declined to 2.56% in the second quarter of 2016 from 2.61% in the first quarter of 2016. Net interest and dividend income on a fully taxable equivalent basis was $13.4 million in the second quarter of 2016, up $105 thousand, or 1%, from $13.3 million in the first quarter of 2016. Net interest margin on a fully taxable equivalent basis declined to 2.58% in the second quarter of 2016 from 2.62% in the first quarter of 2016. Included in net interest income and margin is a $203,000 accelerated bond premium amortization on the Agribank note redemption. The table shown below provides a reconciliation of reported to adjusted net interest and dividend income and margin for the last five quarters. Commentary which follows the table will focus on changes in adjusted net interest income and margin.

                   
(Unaudited, dollars in thousands) June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015

Net Interest Income

Reported net interest income $ 13,316 $ 13,201 $ 14,572 $ 13,205 $ 11,115
FTE adjustment 77       87       87       88       87  
Reported net interest income (FTE) 13,393 13,288 14,659 13,293 11,202
Mutual fund dividends (21 ) (2,066 ) (1,509 ) (43 )
Purchase accounting accretion (133 ) (127 ) (303 ) (142 ) (268 )
Accelerated bond amortization-Agribank note redemption 203                          
Adjusted net interest income (FTE) (1) $ 13,463       $ 13,140       $ 12,290       $ 11,642       $ 10,891  
 

Net Interest Margin

Reported net interest margin 2.56 % 2.61 % 3.03 % 2.94 % 2.63 %
FTE adjustment 0.02       0.01       0.01       0.02       0.02  
Reported net interest margin (FTE) 2.58 2.62 3.04 2.96 2.65
Mutual fund dividends (2) 0.05 0.06 (0.36 ) (0.27 ) 0.06
Purchase accounting accretion (2) (0.03 ) (0.03 ) (0.07 ) (0.03 ) (0.07 )
Accelerated bond amortization-Agribank note redemption 0.04                          
Adjusted net interest margin (FTE)(1) 2.64 %     2.65 %     2.61 %     2.66 %     2.64 %
 
(1) Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis. Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.
(2) Note: In calculating the net interest margin impact of mutual fund dividends and purchase accounting accretion, average earning assets were adjusted to remove the average balances associated with each item. In quarters where mutual fund dividend income is low, the removal of the dividend and its related average balance has a positive impact on the adjusted net interest margin. Management believes this adjusted net interest margin is useful because of the volatility or non-recurring nature of certain items from quarter to quarter.
 

Adjusted net interest and dividend income on a fully tax equivalent basis increased $323,000, or 3%, to $13.5 million in the second quarter of 2016 compared to the first quarter of 2016. The increase was mainly driven by a $66 million, or 4.2%, increase in average loans due mainly to higher levels of residential mortgages, commercial real estate loans, and construction loans. This improvement was partially offset by a one basis point decline in adjusted net interest margin to 2.64% in the second quarter of 2016 as loan and deposit yields remain under pressure in the current low rate and competitive environment.

Compared to the second quarter of 2015, adjusted net interest and dividend income on a fully taxable equivalent basis increased $2.6 million, or 24%, while adjusted net interest margin was flat at 2.64%. As was the case in the linked quarter comparison, the growth in adjusted net interest and dividend income was mainly due to a higher level of average loans which were up $412 million, or 34%, from the second quarter of last year. All categories of loans increased led by residential mortgages and commercial real estate loans.

In 2015 and 2014, The Company received mutual funds dividends in the second half of each year, totaling $3.6 million and $3.5 million, respectively. The Company believes mutual fund dividends could be meaningfully lower in the second half of 2016 than in either of the past two years.

NONINTEREST INCOME
Noninterest income was $2.8 million in the second quarter of 2016, up $1.4 million, or 104%, from $1.4 million in the first quarter of 2016. The increase was mainly due to the following factors:

  • Mortgage banking revenue was $531,000 in the second quarter, up $287,000, or 118%, from the first quarter. Mortgage originations nearly doubled from the first quarter and the revenue improvement was mainly due to a higher level of gains on the sale of loans.
  • The Company recorded net securities gains of $664,000 in the second quarter compared to losses of $244,000 in the first quarter.
  • Miscellaneous income improved to income of $128,000 in the second quarter from an expense of $183,000 in the first quarter. The improvement in miscellaneous income was mainly due to a higher level of income received on CRA-qualified SBIC investments in the second quarter. In addition, and as has been the case in most quarters, miscellaneous income is impacted by the portfolio of commercial loan customer back to back 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. The Company recorded negative credit valuation marks in both the first and second quarters as interest rates declined and the negative marks were higher in the second quarter. 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 second quarter included $209,000 of bank-owned life insurance death benefit gains.
  • Partially offsetting these improvements, loan level derivative fee income was $322,000 in the second quarter compared to $639,000 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.

Compared to the second quarter of 2015, noninterest income increased $334,000, or 14%. The increase was primarily due to higher mortgage banking revenue, securities gains, and bank-owned life insurance death benefit gains partially offset by declines in loan level derivative fee income and miscellaneous income. The latter was impacted by the Company recording negative credit valuation marks on commercial loan customer interest rate swap contracts in the second quarter of 2016 compared to positive marks in the second quarter of 2015.

NONINTEREST EXPENSE
During the first half of 2016, the Company continued to execute on its investment spending plans to further its transformation into a full service community bank and enhance the overall value of the franchise. Noninterest expense was $25.0 million in the first half of 2016, up $3.7 million, or 17%, from the first half of 2015. A substantial portion of the increase comes from expenses related to the Equity Incentive Plan, the Westwood branch, which was opened in the fourth quarter of 2015, the expansion of the mortgage banking business, as in-house residential mortgage loan originations increased 79% in the first half of 2016 compared to the first half of 2015, the on boarding of new asset based lending and municipal banking businesses, accelerated advertising spending, and merit salary increases.

Noninterest expense was $12.9 million in the second quarter of 2016, up $867,000, or 7%, from the first quarter of 2016. Salaries and benefits expense increased $253,000 as the number of full-time equivalent employees grew by 12 during the second quarter to 231 at June 30, 2016. The growth included new hires as well as the impact of seasonality. Professional fees are volatile from quarter to quarter and increased $197,000 from the first quarter (although they were relatively flat with the second quarter of 2015). In addition, advertising expense grew $187,000 due to accelerated programs versus prior periods.

Compared to the second quarter of 2015, noninterest expense increased $2.3 million, or 21%. A major factor driving this increase was the recording of $1.2 million of expense in the second quarter of 2016 related to the awards under the Equity Incentive Plan. Approximately 80% of the expense related to the Equity Incentive Plan is included in salaries and benefits expense and the remainder in directors' fees. Also contributing to the growth in expense were franchise expansion, which included the opening of a new branch in Westwood in the fourth quarter of 2015 as well as new loan and mortgage production offices, the on boarding of new asset based lending and municipal banking businesses, accelerated advertising spending, and merit increases.

ASSET QUALITY
The provision for loan losses, which in all quarters reflects management's assessment of risks inherent in the loan portfolio, was a $1.1 million charge in the second quarter of 2016 compared to a credit of $27,000 in the first quarter of 2016 and a $544,000 charge in the second quarter of 2015. The increase in the provision from the first quarter is due to the following factors:

  • The establishment of a specific reserve of $558,000 in the second quarter of 2016 against loans to one commercial customer. The Company has a full commercial relationship with this customer, including an owner occupied commercial real estate loan and loans to finance other business assets. The loans were placed on nonaccrual during the second quarter of 2016.
  • The reversal of the remainder of specific reserves originally established in the fourth quarter of 2015 against loans secured by one income property as the credit situation improved. The amount of the reserve reversal in the first quarter was $290,000 higher than in the second quarter which caused an increase in the loan loss provision in the second quarter. The loan remained on nonaccrual at June 30, 2016.
  • Loan growth impacts the level of provision needed each quarter and an increase in loan growth to 6% in the second quarter from 3% in the first quarter resulted in a higher provision.

The allowance for loan losses as a percentage of total loans was 1.07% at June 30, 2016. This was unchanged from March 31, 2016 and down slightly from 1.08% at June 30, 2015. The Company had net loan charge-offs of $19,000 in the second quarter of 2016 compared to net charge-offs of $90,000 in the first quarter of 2016 and net charge-offs of $5,000 in the second quarter of 2015.

Nonperforming assets were $15.0 million at June 30, 2016 compared to $10.9 million at March 31, 2016 and $4.9 million at June 30, 2015. At June 30, 2016, more than half of the nonperforming assets total related to the two commercial loans mentioned above and the vast majority of the remainder were residential mortgage loans. Nonperforming assets as a percentage of total assets were 0.67% at June 30, 2016, 0.51% at March 31, 2016 and 0.27% at June 30, 2015.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $2.2 billion at June 30, 2016 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
June 30, 2016     March 31, 2016     June 30, 2015    

June 30, 2016
vs. March 31,
2016

   

June 30, 2016
vs. June 30,
2015

Assets                
Cash and due from banks $ 13,710 $ 13,852 $ 10,162 (1.0 )% 34.9 %
Short term investments 29,485       18,157       43,240   62.4 % (31.8 )%
Total cash and cash equivalents 43,195 32,009 53,402 34.9 % (19.1 )%
Securities available for sale, at fair value 204,973 237,669 431,827 (13.8 )% (52.5 )%
Securities held to maturity, at amortized cost 196,454 196,578 (0.1 )% NM
Federal Home Loan Bank stock, at cost 12,833 16,137 11,702 (20.5 )% 9.7 %
Loans held for sale 6,097 3,926 1,833 55.3 % 232.6 %
Loans:
1-4 family residential 675,952 621,801 510,406 8.7 % 32.4 %
Home equity 81,649 80,571 65,735 1.3 % 24.2 %
Commercial real estate 608,669 586,151 448,125 3.8 % 35.8 %
Construction 107,049       92,481       60,553   15.8 % 76.8 %
Total real estate loans 1,473,319 1,381,004 1,084,819 6.7 % 35.8 %
Commercial business 178,112 168,976 151,012 5.4 % 17.9 %
Consumer 33,707       36,977       33,995   (8.8 )% (0.8 )%
Total loans 1,685,138 1,586,957 1,269,826 6.2 % 32.7 %
Allowance for loan losses (18,079 )     (16,985 )     (13,777 ) 6.4 % 31.2 %
Loans, net 1,667,059 1,569,972 1,256,049 6.2 % 32.7 %
Premises and equipment, net 20,136 20,099 18,969 0.2 % 6.2 %
Accrued interest receivable 5,640 5,588 4,878 0.9 % 15.6 %
Goodwill and core deposit intangible 11,125 11,443 12,541 (2.8 )% (11.3 )%
Net deferred tax asset 8,958 8,774 7,015 2.1 % 27.7 %
Bank-owned life insurance 31,558 31,883 31,100 (1.0 )% 1.5 %
Other assets 32,733       28,150       15,251   16.3 % 114.6 %
Total assets $ 2,240,761       $ 2,162,228       $ 1,844,567   3.6 % 21.5 %
Liabilities and Stockholders' Equity
NOW and demand $ 298,178 $ 285,391 $ 268,126 4.5 % 11.2 %
Regular savings 274,866 283,586 291,628 (3.1 )% (5.7 )%
Money market 506,251 408,591 296,539 23.9 % 70.7 %
Certificates of deposit 339,415 329,012 310,365 3.2 % 9.4 %
Brokered money market 45,231 46,673 23,759 (3.1 )% 90.4 %
Brokered certificates of deposit 136,965       131,352       83,705   4.3 % 63.6 %
Total deposits 1,600,906 1,484,605 1,274,122 7.8 % 25.6 %
Short-term borrowings 130,000 170,000 95,000 (23.5 )% 36.8 %
Long-term debt 85,000 85,000 35,000 % 142.9 %
Other liabilities 32,903       29,067       26,704   13.2 % 23.2 %
Total liabilities 1,848,809 1,768,672 1,430,826 4.5 % 29.2 %
Common stock 265 269 285 (1.5 )% (7.0 )%
Additional paid-in capital 255,781 260,041 281,164 (1.6 )% (9.0 )%
Unearned compensation- ESOP (20,876 ) (21,065 ) (21,635 ) (0.9 )% (3.5 )%
Retained earnings 157,714 157,090 152,728 0.4 % 3.3 %
Accumulated other comprehensive income (loss) (932 )     (2,779 )     1,199   (66.5 )% (177.7 )%
Total stockholders' equity 391,952       393,556       413,741   (0.4 )% (5.3 )%
Total liabilities and stockholders' equity $ 2,240,761       $ 2,162,228       $ 1,844,567   3.6 % 21.5 %
 
 

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

 
(Unaudited, dollars in thousands)   June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015     June 30, 2015
Assets                
Cash and due from banks $ 13,710 $ 13,852 $ 10,932 $ 9,447 $ 10,162
Short term investments 29,485       18,157       22,366       11,533       43,240  
Total cash and cash equivalents 43,195 32,009 33,298 20,980 53,402
Securities available for sale, at fair value 204,973 237,669 231,690 231,697 431,827
Securities held to maturity, at amortized cost 196,454 196,578 200,141 197,632
Federal Home Loan Bank stock, at cost 12,833 16,137 13,567 11,702 11,702
Loans held for sale 6,097 3,926 12,877 21,423 1,833
Loans:
1-4 family residential 675,952 621,801 602,138 541,382 510,406
Home equity 81,649 80,571 77,633 73,494 65,735
Commercial real estate 608,669 586,151 559,609 497,217 448,125
Construction 107,049       92,481       79,386       54,283       60,553  
Total real estate loans 1,473,319 1,381,004 1,318,766 1,166,376 1,084,819
Commercial business 178,112 168,976 182,536 163,971 151,012
Consumer 33,707       36,977       39,075       36,855       33,995  
Total loans 1,685,138 1,586,957 1,540,377 1,367,202 1,269,826
Allowance for loan losses (18,079 )     (16,985 )     (17,102 )     (15,082 )     (13,777 )
Loans, net 1,667,059 1,569,972 1,523,275 1,352,120 1,256,049
Premises and equipment, net 20,136 20,099 20,015 19,485 18,969
Accrued interest receivable 5,640 5,588 5,344 5,174 4,878
Goodwill and core deposit intangible 11,125 11,443 11,785 12,151 12,541
Net deferred tax asset 8,958 8,774 10,665 8,368 7,015
Bank-owned life insurance 31,558 31,883 31,626 31,358 31,100
Other assets 32,733       28,150       20,060       22,348       15,251  
Total assets $ 2,240,761       $ 2,162,228       $ 2,114,343       $ 1,934,438       $ 1,844,567  
Liabilities and Stockholders' Equity
NOW and demand $ 298,178 $ 285,391 $ 288,143 $ 284,720 $ 268,126
Regular savings 274,866 283,586 287,344 288,597 291,628
Money market 506,251 408,591 368,050 341,588 296,539
Certificates of deposit 339,415 329,012 311,978 310,424 310,365
Brokered money market 45,231 46,673 41,807 33,924 23,759
Brokered certificates of deposit 136,965       131,352       136,527       85,705       83,705  
Total deposits 1,600,906 1,484,605 1,433,849 1,344,958 1,274,122
Short-term borrowings 130,000 170,000 205,000 115,000 95,000
Long-term debt 85,000 85,000 55,000 45,000 35,000
Other liabilities 32,903       29,067       21,665       21,868       26,704  
Total liabilities 1,848,809       1,768,672       1,715,514       1,526,826       1,430,826  
Common stock 265 269 276 282 285
Additional paid-in capital 255,781 260,041 269,078 276,730 281,164
Unearned compensation- ESOP (20,876 ) (21,065 ) (21,255 ) (21,445 ) (21,635 )
Retained earnings 157,714 157,090 155,918 153,969 152,728
Accumulated other comprehensive income (loss) (932 )     (2,779 )     (5,188 )     (1,924 )     1,199  
Total stockholders' equity 391,952       393,556       398,829       407,612       413,741  
Total liabilities and stockholders' equity $ 2,240,761       $ 2,162,228       $ 2,114,343       $ 1,934,438       $ 1,844,567  
 
 

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

                 
(Unaudited, dollars in thousands, except share data) Quarters Ended     % Change
June 30, 2016     March 31, 2016     June 30, 2015    

June 30, 2016 vs.
March 31, 2016

   

June 30, 2016 vs.
June 30, 2015

Interest and fees on loans $ 14,138     $ 13,603     $ 10,759     3.9 %     31.4 %
Interest on securities 2,037 2,295 2,237 (11.2 )% (8.9 )%
Dividends 155 139 112 11.5 % 38.4 %
Other 26       26       22       %     18.2 %
Total interest and dividend income 16,356       16,063       13,130       1.8 %     24.6 %
Interest on deposits 2,484 2,292 1,745 8.4 % 42.3 %
Interest on borrowings 556       570       270       (2.5 )%     105.9 %
Total interest expense 3,040       2,862       2,015       6.2 %     50.9 %
Net interest and dividend income 13,316 13,201 11,115 0.9 % 19.8 %
Provision (credit) for loan losses 1,113       (27 )     544       NM     104.6 %
Net interest and dividend income, after provision for loan losses 12,203       13,228       10,571       (7.7 )%     15.4 %
Deposit account fees 307 317 335 (3.2 )% (8.4 )%
Interchange and ATM fees 393 347 377 13.3 % 4.2 %
Mortgage banking 531 244 83 117.6 % 539.8 %
Loan level derivative fee income 322 639 770 (49.6 )% (58.2 )%
Realized securities gains (losses), net 664 (244 ) 267 (372.1 )% 148.7 %
Bank-owned life insurance income 257 257 252 % 2.0 %
Bank-owned life insurance death benefit gains 209 NM NM
Miscellaneous 128       (183 )     393       (169.9 )%     (67.4 )%
Total noninterest income 2,811       1,377       2,477       104.1 %     13.5 %
Salaries and employee benefits 7,138 6,885 5,641 3.7 % 26.5 %
Occupancy and equipment 1,653 1,619 1,464 2.1 % 12.9 %
Data processing 803 761 843 5.5 % (4.7 )%
Professional fees 678 481 667 41.0 % 1.6 %
Advertising 719 532 562 35.2 % 27.9 %
FDIC deposit insurance 352 346 253 1.7 % 39.1 %
Directors' fees 399 338 93 18.0 % 329.0 %
Amortization of core deposit intangible 318 342 414 (7.0 )% (23.2 )%
Other general and administrative 875       764       723       14.5 %     21.0 %
Total noninterest expense 12,935       12,068       10,660       7.2 %     21.3 %
Income before income taxes 2,079 2,537 2,388 (18.1 )% (12.9 )%
Provision for income taxes 721       870       689       (17.1 )%     4.6 %
Net income $ 1,358       $ 1,667       $ 1,699       (18.5 )%     (20.1 )%
 
Earnings per common share:
Basic $ 0.06 $ 0.07 $ 0.06
Diluted $ 0.05 $ 0.07 $ 0.06
Weighted average shares outstanding:
Basic 24,575,211 25,066,086 26,293,560
Diluted 24,699,794 25,132,441 26,293,560
 
 

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

       
(Unaudited, dollars in thousands, except share data)   Year to Date
  June 30, 2016     June 30, 2015     % Change
Interest and fees on loans

$

 

27,741  

$

 

21,186     30.9 %
Interest on securities 4,332 4,373 (0.9 )%
Dividends 294 212 38.7 %
Other   52       41       26.8 %
Total interest and dividend income   32,419       25,812       25.6 %
Interest on deposits 4,776 3,508 36.1 %
Interest on borrowings   1,126       524       114.9 %
Total interest expense   5,902       4,032       46.4 %
Net interest and dividend income 26,517 21,780 21.7 %
Provision for loan losses

 

1,086       823       32.0 %
Net interest and dividend income, after provision for loan losses   25,431       20,957       21.3 %
Deposit account fees 624 668 (6.6 )%
Interchange and ATM fees 740 703 5.3 %
Mortgage banking 775 184 321.2 %
Loan level derivative fee income 961 774 24.2 %
Realized securities gains, net 420 1,585 (73.5 )%
Bank-owned life insurance income 514 505 1.8 %
Bank-owned life insurance death benefit gains 209 NM
Miscellaneous   (55 )     242       (122.7 )%
Total noninterest income   4,188       4,661       (10.1 )%
Salaries and employee benefits 14,023 11,130 26.0 %
Occupancy and equipment 3,272 2,962 10.5 %
Data processing 1,564 1,662 (5.9 )%
Professional fees 1,159 1,299 (10.8 )%
Advertising 1,251 1,062 17.8 %
FDIC deposit insurance 698 545 28.1 %
Directors' fees 737 217 239.6 %
Amortization of core deposit intangible 660 851 (22.4 )%
Other general and administrative   1,639       1,558       5.2 %
Total noninterest expense   25,003       21,286       17.5 %
Income before income taxes 4,616 4,332 6.6 %
Provision for income taxes   1,591       1,327       19.9 %
Net income

$

 

3,025    

$

 

3,005       0.7 %
 
Earnings per common share:
Basic

$

 

0.12

$

 

0.11
Diluted

$

 

0.12

$

 

0.11
Weighted average shares outstanding:
Basic 24,817,260 26,284,201
Diluted 24,912,729 26,284,201
 
Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
    Quarters Ended
(Unaudited, dollars in thousands, except share data) June 30,   March 31,   December 31,   September 30,   June 30,
  2016     2016     2015     2015     2015
Interest and fees on loans

$

 

14,138

$

 

13,603

$

 

12,647

$

 

11,509

$

 

10,759
Interest on securities 2,037 2,295 2,228 2,227 2,237
Dividends 155 139 2,183 1,673 112
Other   26       26       13       9       22  
Total interest and dividend income   16,356       16,063       17,071       15,418       13,130  
Interest on deposits 2,484 2,292 2,093 1,926

1,745

 

Interest on borrowings   556       570       406       287       270  
Total interest expense   3,040       2,862       2,499       2,213       2,015  
Net interest and dividend income 13,316 13,201 14,572 13,205 11,115
Provision (credit) for loan losses   1,113       (27 )     1,949       1,318       544  
Net interest and dividend income, after provision (credit) for loan losses   12,203       13,228       12,623       11,887       10,571  
Deposit account fees 307 317 327 319 335
Interchange and ATM fees 393 347 378 430 377
Mortgage banking 531 244 46 52 83
Loan level derivative fee income 322 639 833 513 770
Realized securities gains (losses), net 664 (244 ) 145 238 267
Bank-owned life insurance income 257 257 268 258 252
Bank-owned life insurance death benefit gains 209
Miscellaneous   128       (183 )     327       (116 )     393  
Total noninterest income   2,811       1,377       2,324       1,694       2,477  
Salaries and employee benefits 7,138 6,885 5,849 5,591 5,641
Occupancy and equipment 1,653 1,619 1,688 1,617 1,464
Data processing 803 761 909 939 843
Professional fees 678 481 780 610 667
Advertising 719 532 776 620 562
FDIC deposit insurance 352 346 192 262 253
Directors' fees 399 338 315 112 93
Amortization of core deposit intangible 318 342 366 390 414
Other general and administrative   875       764       1,073       707       723  
Total noninterest expense   12,935       12,068       11,948       10,848       10,660  
Income before income taxes 2,079 2,537 2,999 2,733 2,388
Provision for income taxes   721       870       587       923       689  
Net income

$

 

1,358    

$

 

1,667    

$

 

2,412    

$

 

1,810    

$

 

1,699  
 
Earnings per common share:
Basic

$

 

0.06

$

 

0.07

$

 

0.09

$

 

0.07

$

 

0.06
Diluted

$

 

0.05

$

 

0.07

$

 

0.09

$

 

0.07

$

 

0.06
Weighted average shares outstanding:
Basic 24,575,211 25,066,086 25,500,755 26,183,381 26,293,560
Diluted 24,699,794 25,132,441 25,554,961 26,183,381 26,293,560
 
 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)     Quarters Ended
June 30, 2016       March 31, 2016       June 30, 2015

Average
balance

    Interest    

Yield/
Cost

     

Average
balance

    Interest    

Yield/
Cost

     

Average
balance

    Interest    

Yield/
Cost

Interest-earning assets                        
Total loans (1) $ 1,635,256 $ 14,191 3.49 % $ 1,569,240 $ 13,656 3.50 % $ 1,223,681 $ 10,812 3.54 %
Securities (1) 419,685 2,080 1.99 430,015 2,368 2.21 429,348 2,332 2.18
Other interest earning assets and FHLB stock 36,584       162       1.78   36,723       126       1.38   42,832       73       0.68  
Total interest-earning assets 2,091,525 16,433 3.16 % 2,035,978 16,150 3.19 % 1,695,861 13,217 3.13 %
Non-interest-earning assets 100,104   100,534   92,390  
Total assets $ 2,191,629   $ 2,136,512   $ 1,788,251  
 
Interest-bearing liabilities
NOW $ 139,100 $ 16 0.05 % $ 135,367 $ 16 0.05 % $ 123,904 $ 14 0.05 %
Regular savings 276,451 233 0.34 286,533 251 0.35 298,850 292 0.39
Money market 479,564 983 0.82 430,989 846 0.79 297,903 471 0.63
Certificates of deposit 458,328       1,252       1.10   435,574       1,179       1.09   371,150       968       1.05  
Total interest-bearing deposits 1,353,443 2,484 0.74 1,288,463 2,292 0.72 1,091,807 1,745 0.64
Borrowings 271,242       556       0.82   277,857       570       0.83   134,362       270       0.81  
Total interest-bearing liabilities 1,624,685 3,040   0.75 % 1,566,320 2,862   0.73 % 1,226,169 2,015   0.66 %
Non-interest-bearing deposits 145,171 147,961 130,276
Other non-interest-bearing liabilities 27,513   26,471   16,091  
Total liabilities 1,797,369 1,740,752 1,372,536
Stockholders' equity 394,260   395,760   415,715  
Total liabilities and stockholders' equity $ 2,191,629   $ 2,136,512   $ 1,788,251  
 
Net interest and dividend income (FTE) 13,393 13,288 11,202
Less: FTE adjustment (77 ) (87 ) (87 )
Net interest and dividend income (GAAP) $ 13,316   $ 13,201   $ 11,115  
 
Net interest rate spread (FTE) 2.41 % 2.46 % 2.47 %
Net interest margin (FTE) 2.58 % 2.62 % 2.65 %
Total deposit cost 0.67 % 0.64 % 0.57 %
 

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.

 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)     Year to Date
June 30, 2016     June 30, 2015

Average
balance

    Interest    

Yield/
Cost

   

Average
balance

    Interest    

Yield/
Cost

Interest-earning assets                
Total loans (1) $ 1,602,248 $ 27,847 3.50 % $ 1,201,323 $ 21,282 3.57 %
Securities (1) 424,850 4,448 2.11 425,740 4,553 2.16
Other interest earning assets and FHLB stock 36,654       288       1.58   46,696       143       0.62  
Total interest-earning assets 2,063,752 32,583 3.17 % 1,673,759 25,978 3.13 %
Non-interest-earning assets 100,319   94,894  
Total assets $ 2,164,071   $ 1,768,653  
 
Interest-bearing liabilities
NOW $ 137,234 $ 32 0.05 % $ 123,070 $ 28 0.05 %
Regular savings 281,492 484 0.35 299,986 611 0.41
Money market 455,276 1,829 0.81 297,633 979 0.66
Certificates of deposit 446,951       2,431       1.09   362,364       1,890       1.05  
Total interest-bearing deposits 1,320,953 4,776 0.73 1,083,053 3,508 0.65
Borrowings 274,549       1,126       0.82   121,530       524       0.87  
Total interest-bearing liabilities 1,595,502 5,902   0.74 % 1,204,583 4,032   0.67 %
Non-interest-bearing deposits 146,566 128,108
Other non-interest-bearing liabilities 26,993   20,858  
Total liabilities 1,769,061 1,353,549
Stockholders' equity 395,010   415,104  
Total liabilities and stockholders' equity $ 2,164,071   $ 1,768,653  
 
Net interest and dividend income (FTE) 26,681 21,946
Less: FTE adjustment (164 ) (166 )
Net interest and dividend income (GAAP) $ 26,517   $ 21,780  
 
Net interest rate spread (FTE) 2.43 % 2.46 %
Net interest margin (FTE) 2.60 % 2.64 %
Total deposit cost 0.65 % 0.58 %
 

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.

 
Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited, dollars in thousands)     Quarters Ended
June 30,     March 31,     December 31,     September 30,     June 30,
2016     2016     2015     2015     2015
Interest-earning assets
Total loans $ 1,635,256 $ 1,569,240 $ 1,449,494 $ 1,316,514 $ 1,223,681
Securities 419,685 430,015 427,752 429,667 429,348
Other interest earning assets and FHLB stock 36,584       36,723       33,222       34,061       42,832
Total interest-earning assets 2,091,525 2,035,978 1,910,468 1,780,242 1,695,861
Non-interest-earning assets 100,104       100,534       91,732       89,085       92,390
Total assets $ 2,191,629       $ 2,136,512       $ 2,002,200       $ 1,869,327       $ 1,788,251
 
Interest-bearing liabilities
NOW $ 139,100 $ 135,367 $ 134,162 $ 128,298 $ 123,904
Regular savings 276,451 286,533 287,003 289,236 298,850
Money market 479,564 430,989 397,998 348,658 297,903
Certificates of deposit 458,328       435,574       396,552       392,170       371,150
Total interest-bearing deposits 1,353,443 1,288,463 1,215,715 1,158,362 1,091,807
Borrowings 271,242       277,857       207,446       135,554       134,362
Total interest-bearing liabilities 1,624,685 1,566,320 1,423,161 1,293,916 1,226,169
Non-interest-bearing deposits 145,171 147,961 154,872 142,328 130,276
Other non-interest-bearing liabilities 27,513       26,471       21,878       20,368       16,091
Total liabilities 1,797,369 1,740,752 1,599,911 1,456,612 1,372,536
Stockholders' equity 394,260       395,760       402,289       412,715       415,715
Total liabilities and stockholders' equity $ 2,191,629       $ 2,136,512       $ 2,002,200       $ 1,869,327       $ 1,788,251
 
 
Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands)     Quarters Ended
June 30,     March 31,     December 31,     September 30,     June 30,
2016     2016     2015     2015     2015
Interest-earning assets
Total loans (1) 3.49 % 3.50 % 3.48 % 3.48 % 3.54 %
Securities (1) 1.99 % 2.21 % 4.03 % 3.54 % 2.18 %
Other interest earning assets and FHLB stock 1.78 %     1.38 %     1.33 %     1.23 %     0.68 %
Total interest-earning assets 3.16 %     3.19 %     3.56 %     3.46 %     3.13 %
 
Interest-bearing liabilities
NOW 0.05 % 0.05 % 0.06 % 0.05 % 0.05 %
Regular savings 0.34 % 0.35 % 0.36 % 0.37 % 0.39 %
Money market 0.82 % 0.79 % 0.73 % 0.69 % 0.63 %
Certificates of deposit 1.10 %     1.09 %     1.08 %     1.05 %     1.05 %
Total interest-bearing deposits 0.74 % 0.72 % 0.68 % 0.66 % 0.64 %
Borrowings 0.82 %     0.83 %     0.78 %     0.84 %     0.81 %
Total interest-bearing liabilities 0.75 %     0.73 %     0.70 %     0.68 %     0.66 %
 
Net interest rate spread (FTE) 2.41 % 2.46 % 2.86 % 2.78 % 2.47 %
Net interest margin (FTE) 2.58 % 2.62 % 3.04 % 2.96 % 2.65 %
Total deposit cost 0.67 % 0.64 % 0.61 % 0.59 % 0.57 %

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)     Quarters Ended
June 30,     March 31,     December 31,     September 30,     June 30,
2016     2016     2015     2015     2015

Performance Ratios (annualized)

 
Basic EPS $ 0.06 $ 0.07 $ 0.09 $ 0.07 $ 0.06
Diluted EPS $ 0.05 $ 0.07 $ 0.09 $ 0.07 $ 0.06
 
Return on average assets (ROAA) 0.25 % 0.31 % 0.48 % 0.38 % 0.38 %
 
Return on average equity (ROAE) 1.39 % 1.69 % 2.38 % 1.74 % 1.64 %
 
Return on average tangible common equity (ROATCE) (1) 1.43 % 1.75 % 2.45 % 1.79 % 1.7 %
 
Efficiency Ratio 80 % 83 % 70 % 73 % 78 %

(1) Average tangible common equity equals average total equity less goodwill and intangibles.

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)     Year to Date
June 30, 2016     June 30, 2015

Performance Ratios (annualized)

   
 
Basic and diluted EPS $ 0.12 $ 0.11
 
Return on average assets (ROAA) 0.28 % 0.34 %
 
Return on average equity (ROAE) 1.54 % 1.46 %
 
Return on average tangible common equity (ROATCE) (1) 1.53 % 1.51 %
 
Efficiency Ratio 81 % 81 %

(1) Average tangible common equity equals average total equity less goodwill and intangibles.

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, 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,
2016     2016     2015 2016     2015

Asset Quality

Nonperforming Assets

$

 

14,983

$

 

10,941

$

 

4,938

$

 

14,983

$

 

4,938
Nonperforming Assets/Total Assets 0.67 % 0.51 % 0.27 % 0.67 % 0.27 %
Allowance for Loan Losses/Total Loans 1.07 % 1.07 % 1.08 % 1.07 % 1.08 %
Net Charge-offs

$

 

19

$

 

90

$

 

5

$

 

109

$

 

19
Annualized Net Charge-offs/Average Loans % 0.02 % % 0.01 % %
Allowance for Loan Losses/ Nonperforming Loans 121 % 155 % 279 % 121 % 279 %
 

Capital/Other

Common shares outstanding 27,397,842 27,786,642 28,466,813
Book value per share

$

 

14.31

$

 

14.16

$

 

14.53
Tangible book value per share

$

 

13.90

$

 

13.75

$

 

14.09
Tangible Common Equity/Tangible Assets (2) 17.08 % 17.77 % 21.9 %
Full-time Equivalent Employees 231 219 203
 

(2) Tangible common equity equals total equity less goodwill and intangibles, Tangible assets equals total assets less goodwill and intangibles.

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

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