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Blue Hills Bancorp, Inc. Reports Third Quarter Earnings

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NORWOOD, Mass., Oct. 25, 2017 (GLOBE NEWSWIRE) -- 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 $3.8 million, or $0.16 per diluted share, for the third quarter of 2017 compared to net income of $3.9 million, or $0.16 per diluted share, for the second quarter of 2017 and net income of $1.6 million, or $0.07 per diluted share, for the third quarter of 2016.  The third quarter of 2017 included a pre-tax loss of $118,000 ($73,000 after tax, or less than a penny per diluted share) from the sale of a purchased home equity loan portfolio while the second quarter of 2017 included a pre-tax gain of $928,000 ($595,000 after tax, or $0.02 per diluted share) from the sale of the Company's remaining available-for-sale debt securities portfolio. Excluding these items, net income was $3.9 million, or $0.16 per diluted share for the third quarter of 2017 on a non-GAAP basis and $3.3 million, or $0.14 per diluted share, for the second quarter of 2017 on a non-GAAP basis. 

For the nine months ended September 30, 2017, net income was $15.2 million, or $0.62 per diluted share compared to $4.7 million, or $0.19 per diluted share, for the nine months ended September 30, 2016. Excluding nonrecurring items, net income for the nine months ended September 30, 2017 on a non-GAAP basis was $9.8 million or $0.40 per share (see page 15 for a reconciliation of GAAP to non-GAAP measures).

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "A key theme for us this year has been improved operating leverage and for the first nine months of 2017 revenues, excluding securities gains and other nonrecurring items, have grown 20% from a year ago while noninterest expense has risen just 5% and has been flat in each of the last three quarters. While we will continue to invest in our businesses to lay the groundwork for future bottom line growth, we have the opportunity to generate continued operating leverage."

Parent continued, "Adjusted net interest margin, which excludes volatile items, has improved in five straight quarters as our asset sensitive rate risk position has allowed us to benefit from the Fed's rate hikes. Mortgage banking earnings are up over 50% from the prior year, commercial business loans are up over 40% from a year ago, and deposits at our Seaport Branch, which has been open for about a year, reached $85 million at the end of the third quarter.  In September, we announced a tripling of our quarterly dividend to $0.15 per share, representing an over 90% payout of our second quarter earnings.  Through dividend payments, buybacks and organic growth, we have brought our tangible common equity ratio down from approximately 24% three years ago to 15.35% at September 30, 2017 and we will continue to consider all options for further deployment of the remaining excess capital. We have come a long way during our three years as a public company and enter the next phase of our evolution to a full-service, diversified community bank with building momentum and optimism for what lies ahead."

BALANCE SHEET
Compared to June 30, 2017, total assets grew $32 million, or 1%, to $2.5 billion at September 30, 2017. The increase was mainly driven by a $21 million, or 1%, increase in loans and a $19 million, or 7%, increase in held-to-maturity securities. The growth rate in loans during the third quarter was affected by (1) the sale of a $12 million home equity loan portfolio that had been purchased in 2012 and (2) timing issues related to loans that closed in October. Changes in individual loan categories compared to June 30, 2017 were relatively small with growth in commercial business, construction and residential mortgage loans more than offsetting declines in home equity, commercial real estate and consumer loans.

Compared to September 30, 2016, total assets increased $232 million, or 10%.  Loans drove the growth in total assets in this comparison, increasing $328 million, or 19%. By category, the increase from September 30, 2016 was due to residential mortgage loans, which were up $159 million, or 21%; commercial real estate loans, which were up $91 million, or 14%; and commercial business loans, which were up $72 million, or 42%. Residential mortgage loan originations were $153 million in the third quarter of 2017 compared to $172 million in the third quarter of 2016 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $64 million in the third quarter of 2017 compared to $82 million in the third quarter of 2016. The growth in loans from September 30, 2016 was partially offset by a $95 million, or 23%, decline in the combination of securities available for sale and held to maturity, primarily due to the sales of the mutual fund investment portfolio and the remaining available-for-sale debt securities portfolio in the first half of 2017.

Compared to June 30, 2017, deposits grew $20 million, or 1%, to $2.0 billion at September 30, 2017; however, excluding brokered deposits, the increase was $65 million, or 4%. The growth excluding brokered deposits by customer segment was mainly due to increases in consumer and small business deposits while the growth by deposit category was primarily due to an increase in certificates of deposit. Borrowings were $130 million at September 30, 2017 and June 30, 2017.

Compared to September 30, 2016, deposits grew $304 million, or 18%, and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the most significant increases were seen in money market deposits, which were up $148 million, certificates of deposit, which were up $82 million, and brokered certificates of deposit, which were up $65 million. Borrowings declined $79 million, as an $84 million decline in short-term borrowings was partially offset by a $5 million increase in long-term borrowings.

Stockholders' equity was $399 million at September 30, 2017 compared to $397 million at June 30, 2017 and $390 million at September 30, 2016. The increase from a year ago was mainly due to net income over the past four quarters, which added $19 million to stockholders' equity, partially offset by share repurchases that took place in the fourth quarter of 2016 and dividends, including a special dividend of $0.20 per common share in the second quarter of 2017. There were no share repurchases in the first nine months of 2017.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $17.0 million in the third quarter of 2017, up $546,000, or 3%, from $16.4 million in the second quarter of 2017 and up $2.5 million, or 17%, from $14.5 million in the third quarter of 2016. Reported net interest margin was 2.77% in the third quarter of 2017, up from 2.75% in the second quarter of 2017 and from 2.67% in the third quarter of 2016.

Net interest and dividend income on a fully taxable equivalent basis (referred to herein as "Reported net interest and dividend income (FTE)," a Non-GAAP measure) was $17.0 million in the third quarter of 2017, up $544,000, or 3%, from $16.5 million in the second quarter of 2017, and up $2.5 million, or 17%, from $14.6 million in the third quarter of 2016. Net interest margin on a fully taxable equivalent basis (referred to herein as "Reported net interest margin (FTE)," a Non-GAAP measure) improved to 2.78% in the third quarter of 2017 from 2.76% in the second quarter of 2017 and 2.68% in the third quarter of 2016. 

The table shown below provides a reconciliation of reported to adjusted net interest and dividend income and margin for the last five quarters (referred to herein as "Adjusted net interest and dividend income (FTE)" and "Adjusted net interest margin (FTE)," which are Non-GAAP measures). Commentary which follows the table will focus on changes in Adjusted net interest and dividend income (FTE) and Adjusted net interest margin (FTE).

(Unaudited, dollars in thousands) September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Net Interest and Dividend Income          
Reported net interest and dividend income $ 16,954   $ 16,408   $ 15,881   $ 15,950   $ 14,495  
FTE adjustment 58   60   66   78   65  
Reported net interest and dividend income (FTE) 17,012   16,468   15,947   16,028   14,560  
Mutual fund dividends (2)       (844 ) (96 )
Purchase accounting accretion (2) (103 ) (181 ) (107 ) (137 ) (115 )
Accelerated bond accretion on note redemptions         (193 )
Adjusted net interest and dividend income (FTE) (1) $ 16,909   $ 16,287   $ 15,840   $ 15,047   $ 14,156  
           
Net Interest Margin          
Reported net interest margin 2.77 % 2.75 % 2.70 % 2.81 % 2.67 %
FTE adjustment 0.01   0.01   0.01   0.01   0.01  
Reported net interest margin (FTE) 2.78   2.76   2.71   2.82   2.68  
Mutual fund dividends (2)     0.03   (0.10 ) 0.03  
Purchase accounting accretion (2) (0.02 ) (0.03 ) (0.02 ) (0.03 ) (0.02 )
Accelerated bond accretion on note redemptions         (0.04 )
Adjusted net interest margin (FTE) (1) 2.76 % 2.73 % 2.72 % 2.69 % 2.65 %
           
(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 (FTE), using a federal statutory tax rate of 35% (a statutory tax rate of 34% was used prior to the fourth quarter of 2016). Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.
(2) 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 to investors because of the volatility or non-recurring nature of certain items from quarter to quarter. The Company sold its investments in mutual funds during the first quarter of 2017.

Adjusted net interest and dividend income (FTE) increased $622,000, or 4%, to $16.9 million in the third quarter of 2017 from $16.3 million in the second quarter of 2017 and was up $2.8 million, or 19%, from $14.2 million in the third quarter of 2016. Adjusted net interest margin (FTE) improved to 2.76% in the third quarter of 2017 from 2.73% in the second quarter of 2017 and 2.65% in the third quarter of 2016. Adjusted net interest and dividend income (FTE) and adjusted net interest margin (FTE) benefited in both comparisons from higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank in June 2017, March 2017, and December 2016. The Company maintains an asset sensitive interest rate risk position. In addition, adjusted net interest and dividend income (FTE) was helped by loan growth, as average loans increased $50 million, or 2%, from the second quarter of this year and $370 million, or 21%, from the third quarter of last year. Compared to the second quarter of 2017, the increase was due to relatively small increases in several loan categories, while compared to the third quarter of 2016, average loan growth was mainly driven by higher levels of residential mortgages, commercial real estate loans, and commercial business loans. Partially offsetting the improvement in adjusted net interest and dividend income (FTE) from the third quarter of 2016, was a decline in average securities.

NONINTEREST INCOME
Noninterest income was $2.8 million in the third quarter of 2017, down from $4.5 million in the second quarter of 2017.  The decline reflects (1) a $1.2 million drop in loan level derivative income, which is related to a lower volume of new commercial loan customer interest rate swap contracts. The amount of revenue in the loan level derivative income 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; (2) the absence of a $928,000 gain on the sale of the Company's remaining portfolio of available-for-sale debt securities recorded in the second quarter; and (3) a third quarter loss of $118,000 from the sale of the remaining $12 million of a home equity loan portfolio that had been purchased in 2012. These declines were partially offset by a $528,000 increase in miscellaneous income mainly reflecting income on CRA-qualified Small Business Investment Company ("SBIC") investments. Mortgage banking income exceeded $1 million in the second and third quarters, and continues to be a significant contributor to noninterest income.

Compared to the third quarter of 2016, noninterest income declined $1.3 million, or 32%. This was mainly due to the absence of $562,000 of securities gains and $297,000 of bank-owned life insurance death benefit gains recorded in the year ago quarter and the $118,000 loss on the sale of home equity loans recorded in the current quarter. In addition, loan level derivative income declined by $614,000. These declines were partially offset by a $320,000 increase in miscellaneous income, mainly reflecting income on CRA-qualified SBIC investments.

NONINTEREST EXPENSE
Noninterest expense was $13.4 million in the third and second quarters of 2017 compared to $13.2 million in the third quarter of 2016. The $121,000, or 1%, increase from the third quarter of last year is mainly due to franchise growth, including the opening of the new Seaport branch in the fourth quarter of 2016, as well as the opening of new loan and mortgage production offices. The increases from franchise growth were partially offset by a lower level of professional fees.

ASSET QUALITY
The provision for loan losses reflects management's assessment of risks inherent in the loan portfolio. The provision for loan losses was $242,000 in the third quarter of 2017 compared to $1.1 million in the second quarter of 2017 and $2.9 million in the third quarter of 2016. Loan growth and loan mix impact the level of provision needed each quarter and loan growth was lower in the third quarter of 2017 than in the second quarter. The provision for loan losses in the third quarter of 2016 included a $2.7 million provision related to problem loans associated with one commercial customer.

The allowance for loan losses as a percentage of total loans was 0.97% at September 30, 2017 and June 30, 2017, compared to 1.01% at September 30, 2016. The Company had net loan recoveries of $89,000 in the third quarter of 2017 compared to net loan charge-offs of $76,000 in the second quarter of 2017 and net loan charge-offs of $3.2 million in the third quarter of 2016. The third quarter of 2016 included $3.3 million of charge-offs related to problem loans associated with one commercial customer.

Nonperforming assets were $11.5 million at September 30, 2017 compared to $12.8 million at June 30, 2017 and $7.8 million at September 30, 2016. The decline in nonperforming assets from June 30, 2017 reflects a lower level of nonaccrual loans, mainly residential mortgages. The increase in nonperforming assets from the third quarter of last year was mainly due to loans secured by one income property that were placed back on nonaccrual in the first quarter of 2017.  Nonperforming assets as a percentage of total assets was 0.45% at September 30, 2017 compared to 0.51% at June 30, 2017 and 0.34% at September 30, 2016.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.5 billion at September 30, 2017 and operates 11 branch offices in Boston, 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, commercial and municipal deposit and loan products in Eastern Massachusetts through its branch network, loan production offices 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 145 years. For more information about Blue Hills Bank, visit 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.

Media and Investor Contact:
William Parent, 617-360-6520


Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
 
(Unaudited; dollars in thousands)       % Change
  September 30, 2017 June 30, 2017 September 30, 2016 September 30, 2017
vs.
June 30, 2017
September 30, 2017
vs.
September 30, 2016
Assets          
Cash and due from banks $ 16,171   $ 17,292   $ 15,490   (6.5 )% 4.4 %
Short term investments 22,192   33,819   21,512   (34.4 )% 3.2 %
Total cash and cash equivalents 38,363   51,111   37,002   (24.9 )% 3.7 %
Securities available-for-sale, at fair value 9,943   10,437   210,273   (4.7 )% (95.3 )%
Securities held-to-maturity, at amortized cost 302,833   283,672   197,863   6.8 % 53.1 %
Federal Home Loan Bank stock, at cost 9,410   11,943   13,505   (21.2 )% (30.3 )%
Loans held for sale 12,268   6,789   2,134   80.7 % 474.9 %
Loans:          
1-4 family residential 905,585   895,015   746,366   1.2 % 21.3 %
Home equity 77,819   84,615   80,604   (8.0 )% (3.5 )%
Commercial real estate 751,209   756,093   660,458   (0.6 )% 13.7 %
Construction 88,979   78,062   71,281   14.0 % 24.8 %
Total real estate loans 1,823,592   1,813,785   1,558,709   0.5 % 17.0 %
Commercial business 240,801   227,262   169,076   6.0 % 42.4 %
Consumer 23,142   25,047   31,435   (7.6 )% (26.4 )%
Total loans 2,087,535   2,066,094   1,759,220   1.0 % 18.7 %
Allowance for loan losses (20,248 ) (19,917 ) (17,730 ) 1.7 % 14.2 %
Loans, net 2,067,287   2,046,177   1,741,490   1.0 % 18.7 %
Premises and equipment, net 21,850   22,004   21,362   (0.7 )% 2.3 %
Accrued interest receivable 5,802   5,362   5,388   8.2 % 7.7 %
Goodwill and core deposit intangible 9,892   10,091   10,831   (2.0 )% (8.7 )%
Net deferred tax asset 9,295   8,184   8,780   13.6 % 5.9 %
Bank-owned life insurance 32,800   32,533   31,743   0.8 % 3.3 %
Other assets 25,673   25,606   33,295   0.3 % (22.9 )%
Total assets $ 2,545,416   $ 2,513,909   $ 2,313,666   1.3 % 10.0 %
Liabilities and Stockholders' Equity          
Deposits:          
NOW and demand $ 376,864   $ 359,877   $ 337,225   4.7 % 11.8 %
Regular savings 244,662   246,484   270,067   (0.7 )% (9.4 )%
Money market 666,388   674,593   518,360   (1.2 )% 28.6 %
Certificates of deposit 420,765   362,261   339,064   16.1 % 24.1 %
Brokered money market 41,768   44,728   46,235   (6.6 )% (9.7 )%
Brokered certificates of deposit 235,106   277,320   170,506   (15.2 )% 37.9 %
Total deposits 1,985,553   1,965,263   1,681,457   1.0 % 18.1 %
Short-term borrowings 20,000     103,700   NM   (80.7 )%
Long-term debt 110,000   130,000   105,000   (15.4 )% 4.8 %
Other liabilities 30,829   21,328   33,820   44.5 % (8.8 )%
Total liabilities 2,146,382   2,116,591   1,923,977   1.4 % 11.6 %
Common stock 259   259   261   % (0.8 )%
Additional paid-in capital 254,034   252,504   251,341   0.6 % 1.1 %
Unearned compensation- ESOP (19,927 ) (20,117 ) (20,686 ) (0.9 )% (3.7 )%
Retained earnings 166,282   166,033   158,620   0.1 % 4.8 %
Accumulated other comprehensive income (loss) (1,614 ) (1,361 ) 153   18.6 % (1,154.9 )%
Total stockholders' equity 399,034   397,318   389,689   0.4 % 2.4 %
Total liabilities and stockholders' equity $ 2,545,416   $ 2,513,909   $ 2,313,666   1.3 % 10.0 %

 

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
 
(Unaudited; dollars in thousands) September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Assets          
Cash and due from banks $ 16,171   $ 17,292   $ 15,594   $ 14,752   $ 15,490  
Short term investments 22,192   33,819   19,555   15,744   21,512  
Total cash and cash equivalents 38,363   51,111   35,149   30,496   37,002  
Securities available-for-sale, at fair value 9,943   10,437   173,834   204,836   210,273  
Securities held-to-maturity, at amortized cost 302,833   283,672   201,684   201,027   197,863  
Federal Home Loan Bank stock, at cost 9,410   11,943   14,828   13,352   13,505  
Loans held for sale 12,268   6,789   1,675   2,761   2,134  
Loans:          
1-4 family residential 905,585   895,015   896,951   854,478   746,366  
Home equity 77,819   84,615   80,427   79,132   80,604  
Commercial real estate 751,209   756,093   701,463   686,522   660,458  
Construction 88,979   78,062   70,855   75,950   71,281  
Total real estate loans 1,823,592   1,813,785   1,749,696   1,696,082   1,558,709  
Commercial business 240,801   227,262   210,328   205,832   169,076  
Consumer 23,142   25,047   27,325   29,707   31,435  
Total loans 2,087,535   2,066,094   1,987,349   1,931,621   1,759,220  
Allowance for loan losses (20,248 ) (19,917 ) (18,875 ) (18,750 ) (17,730 )
Loans, net 2,067,287   2,046,177   1,968,474   1,912,871   1,741,490  
Premises and equipment, net 21,850   22,004   21,858   22,034   21,362  
Accrued interest receivable 5,802   5,362   5,994   6,057   5,388  
Goodwill and core deposit intangible 9,892   10,091   10,313   10,560   10,831  
Net deferred tax asset 9,295   8,184   8,751   10,146   8,780  
Bank-owned life insurance 32,800   32,533   32,271   32,015   31,743  
Other assets 25,673   25,606   21,779   23,537   33,295  
Total assets $ 2,545,416   $ 2,513,909   $ 2,496,610   $ 2,469,692   $ 2,313,666  
Liabilities and Stockholders' Equity          
Deposits:          
NOW and demand $ 376,864   $ 359,877   $ 342,118   $ 331,508   $ 337,225  
Regular savings 244,662   246,484   265,116   262,984   270,067  
Money market 666,388   674,593   622,852   573,204   518,360  
Certificates of deposit 420,765   362,261   348,042   340,114   339,064  
Brokered money market 41,768   44,728   50,129   53,357   46,235  
Brokered certificates of deposit 235,106   277,320   228,465   247,520   170,506  
Total deposits 1,985,553   1,965,263   1,856,722   1,808,687   1,681,457  
Short-term borrowings 20,000     118,000   146,000   103,700  
Long-term debt 110,000   130,000   105,000   105,000   105,000  
Other liabilities 30,829   21,328   19,944   23,098   33,820  
Total liabilities 2,146,382   2,116,591   2,099,666   2,082,785   1,923,977  
Common stock 259   259   259   259   261  
Additional paid-in capital 254,034   252,504   250,976   249,317   251,341  
Unearned compensation- ESOP (19,927 ) (20,117 ) (20,306 ) (20,496 ) (20,686 )
Retained earnings 166,282   166,033   168,160   161,896   158,620  
Accumulated other comprehensive income (loss) (1,614 ) (1,361 ) (2,145 ) (4,069 ) 153  
Total stockholders' equity 399,034   397,318   396,944   386,907   389,689  
Total liabilities and stockholders' equity $ 2,545,416   $ 2,513,909   $ 2,496,610   $ 2,469,692   $ 2,313,666  

 

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
 
(Unaudited; dollars in thousands, except share data) Quarters Ended % Change
  September 30, 2017 June 30, 2017 September 30, 2016 September 30, 2017
vs.
June 30, 2017
September 30, 2017
vs.
September 30, 2016
Interest and fees on loans $ 19,721   $ 18,715   $ 15,113   5.4 % 30.5 %
Interest on securities 1,565   1,572   2,238   (0.4 )% (30.1 )%
Dividends 194   193   312   0.5 % (37.8 )%
Other 65   94   22   (30.9 )% 195.5 %
Total interest and dividend income 21,545   20,574   17,685   4.7 % 21.8 %
Interest on deposits 4,089   3,523   2,732   16.1 % 49.7 %
Interest on borrowings 502   643   458   (21.9 )% 9.6 %
Total interest expense 4,591   4,166   3,190   10.2 % 43.9 %
Net interest and dividend income 16,954   16,408   14,495   3.3 % 17.0 %
Provision for loan losses 242   1,118   2,872   (78.4 )% (91.6 )%
Net interest and dividend income, after provision for loan losses 16,712   15,290   11,623   9.3 % 43.8 %
Deposit account fees 385   341   347   12.9 % 11.0 %
Interchange and ATM fees 455   388   418   17.3 % 8.9 %
Mortgage banking 1,146   1,219   1,262   (6.0 )% (9.2 )%
Loss on sale of purchased home equity portfolio
(118 )     NM   NM  
Loan level derivative fee income 156   1,367   770   (88.6 )% (79.7 )%
Realized securities gains, net   928   562   (100.0 )% (100.0 )%
Bank-owned life insurance income 268   261   262   2.7 % 2.3 %
Bank-owned life insurance death benefit gains     297   NM   NM  
Miscellaneous 534   6   214   8,800.0 % 149.5 %
Total noninterest income 2,826   4,510   4,132   (37.3 )% (31.6 )%
Salaries and employee benefits 7,979   7,664   7,596   4.1 % 5.0 %
Occupancy and equipment 2,024   2,030   1,807   (0.3 )% 12.0 %
Data processing 1,016   1,022   908   (0.6 )% 11.9 %
Professional fees 340   526   743   (35.4 )% (54.2 )%
Advertising 563   489   495   15.1 % 13.7 %
FDIC deposit insurance 226   223   270   1.3 % (16.3 )%
Directors' fees 382   428   344   (10.7 )% 11.0 %
Amortization of core deposit intangible 199   222   294   (10.4 )% (32.3 )%
Other general and administrative 626   762   777   (17.8 )% (19.4 )%
Total noninterest expense 13,355   13,366   13,234   (0.1 )% 0.9 %
Income before income taxes 6,183   6,434   2,521   (3.9 )% 145.3 %
Provision for income taxes 2,342   2,566   891   (8.7 )% 162.9 %
Net income $ 3,841   $ 3,868   $ 1,630   (0.7 )% 135.6 %
           
Earnings per common share:          
Basic $ 0.16   $ 0.16   $ 0.07      
Diluted $ 0.16   $ 0.16   $ 0.07      
Weighted average shares outstanding:          
Basic 23,973,116   23,952,443   24,129,512      
Diluted 24,510,092   24,346,553   24,307,540      
           
Dividends declared per share $ 0.15   $ 0.05   $ 0.03      
Special dividends declared per share $   $ 0.20   $      

 

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Year to Date
 
(Unaudited; dollars in thousands, except share data) Year to Date
  September 30, 2017 September 30, 2016 % Change
Interest and fees on loans $ 55,818   $ 42,854   30.3 %
Interest on securities 5,347   6,570   (18.6 )%
Dividends 544   606   (10.2 )%
Other 191   74   158.1 %
Total interest and dividend income 61,900   50,104   23.5 %
Interest on deposits 10,866   7,508   44.7 %
Interest on borrowings 1,791   1,584   13.1 %
Total interest expense 12,657   9,092   39.2 %
Net interest and dividend income 49,243   41,012   20.1 %
Provision for loan losses 1,417   3,958   (64.2 )%
Net interest and dividend income, after provision for loan losses 47,826   37,054   29.1 %
Deposit account fees 1,046   971   7.7 %
Interchange and ATM fees 1,191   1,158   2.8 %
Mortgage banking 3,105   2,037   52.4 %
Loss on sale of purchased home equity portfolio
(118 )   NM  
Loan level derivative fee income 1,687   1,731   (2.5 )%
Realized securities gains (losses), net (94 ) 982   (109.6 )%
Gain on exchange of investment in Northeast Retirement Services 5,947     NM  
Bank-owned life insurance income 786   776   1.3 %
Bank-owned life insurance death benefit gains   506   NM  
Miscellaneous 602   159   278.6 %
Total noninterest income 14,152   8,320   70.1 %
Salaries and employee benefits 23,206   21,619   7.3 %
Occupancy and equipment 6,169   5,079   21.5 %
Data processing 3,082   2,472   24.7 %
Professional fees 1,735   1,902   (8.8 )%
Advertising 1,419   1,746   (18.7 )%
FDIC deposit insurance 661   968   (31.7 )%
Directors' fees 1,184   1,081   9.5 %
Amortization of core deposit intangible 668   954   (30.0 )%
Other general and administrative 1,997   2,416   (17.3 )%
Total noninterest expense 40,121   38,237   4.9 %
Income before income taxes 21,857   7,137   206.2 %
Provision for income taxes 6,661   2,482   168.4 %
Net income $ 15,196   $ 4,655   226.4 %
       
Earnings per common share:      
Basic $ 0.63   $ 0.19    
Diluted $ 0.62   $ 0.19    
Weighted average shares outstanding:      
Basic 23,945,885   24,585,570    
Diluted 24,377,662   24,708,559    
       
Dividends declared per share $ 0.25   $ 0.08    
Special dividends declared per share $ 0.20   $    

 

Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
  Quarters Ended
(Unaudited; dollars in thousands, except share data) September 30, June 30, March 31, December 31, September 30,
  2017 2017 2017 2016 2016
Interest and fees on loans $ 19,721   $ 18,715   $ 17,382   $ 16,099   $ 15,113  
Interest on securities 1,565   1,572   2,210   2,325   2,238  
Dividends 194   193   157   990   312  
Other 65   94   32   20   22  
Total interest and dividend income 21,545   20,574   19,781   19,434   17,685  
Interest on deposits 4,089   3,523   3,254   2,980   2,732  
Interest on borrowings 502   643   646   504   458  
Total interest expense 4,591   4,166   3,900   3,484   3,190  
Net interest and dividend income 16,954   16,408   15,881   15,950   14,495  
Provision for loan losses 242   1,118   57   927   2,872  
Net interest and dividend income, after provision for loan losses 16,712   15,290   15,824   15,023   11,623  
Deposit account fees 385   341   320   356   347  
Interchange and ATM fees 455   388   348   388   418  
Mortgage banking 1,146   1,219   740   436   1,262  
Loss on sale of purchased home equity portfolio
(118 )        
Loan level derivative fee income 156   1,367   164   640   770  
Realized securities gains (losses), net   928   (1,022 ) 298   562  
Gain on exchange of investment in Northeast Retirement Services     5,947      
Bank-owned life insurance income 268   261   257   272   262  
Bank-owned life insurance death benefit gains         297  
Miscellaneous 534   6   62   1,417   214  
Total noninterest income 2,826   4,510   6,816   3,807   4,132  
Salaries and employee benefits 7,979   7,664   7,563   7,234   7,596  
Occupancy and equipment 2,024   2,030   2,115   2,291   1,807  
Data processing 1,016   1,022   1,044   988   908  
Professional fees 340   526   869   736   743  
Advertising 563   489   367   677   495  
FDIC deposit insurance 226   223   212   157   270  
Directors' fees 382   428   374   377   344  
Amortization of core deposit intangible 199   222   247   271   294  
Other general and administrative 626   762   609   778   777  
Total noninterest expense 13,355   13,366   13,400   13,509   13,234  
Income before income taxes 6,183   6,434   9,240   5,321   2,521  
Provision for income taxes 2,342   2,566   1,753   1,323   891  
Net income $ 3,841   $ 3,868   $ 7,487   $ 3,998   $ 1,630  
           
Earnings per common share:          
Basic $ 0.16   $ 0.16   $ 0.31   $ 0.17   $ 0.07  
Diluted $ 0.16   $ 0.16   $ 0.31   $ 0.17   $ 0.07  
Weighted average shares outstanding:          
Basic 23,973,116   23,952,443   23,911,419   23,919,483   24,129,512  
Diluted 24,510,092   24,346,553   24,275,665   24,032,613   24,307,540  
           
Dividends declared per share $ 0.15   $ 0.05   $ 0.05   $ 0.03   $ 0.03  
Special dividends declared per share $   $ 0.20   $   $   $  

 

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands) Quarters Ended
  September 30, 2017   June 30, 2017   September 30, 2016
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets                      
Total loans (1) $ 2,096,034   $ 19,779   3.74 %   $ 2,046,288   $ 18,770   3.68 %   $ 1,726,088   $ 15,166   3.50 %
Securities (1) 301,484   1,609   2.12     309,909   1,621   2.10     403,038   2,414   2.38  
Other interest earning assets and FHLB stock 32,051   215   2.66     36,768   243   2.65     31,236   170   2.17  
Total interest-earning assets 2,429,569   21,603   3.53 %   2,392,965   20,634   3.46 %   2,160,362   17,750   3.27 %
Non-interest-earning assets 101,188         102,750         106,589      
Total assets $ 2,530,757         $ 2,495,715         $ 2,266,951      
                       
Interest-bearing liabilities                      
NOW $ 153,224   $ 17   0.04 %   $ 150,711   $ 17   0.05 %   $ 140,273   $ 17   0.05 %
Regular savings 243,680   191   0.31     255,255   208   0.33     272,950   229   0.33  
Money market 708,748   1,769   0.99     688,600   1,669   0.97     560,098   1,173   0.83  
Certificates of deposit 653,339   2,112   1.28     573,997   1,629   1.14     471,040   1,313   1.11  
Total interest-bearing deposits 1,758,991   4,089   0.92     1,668,563   3,523   0.85     1,444,361   2,732   0.75  
Borrowings 133,788   502   1.49     204,786   643   1.26     224,660   458   0.81  
Total interest-bearing liabilities 1,892,779   4,591   0.96 %   1,873,349   4,166   0.89 %   1,669,021   3,190   0.76 %
Non-interest-bearing deposits 213,459         189,180         171,317      
Other non-interest-bearing liabilities 23,603         33,664         33,936      
Total liabilities 2,129,841         2,096,193         1,874,274      
Stockholders' equity 400,916         399,522         392,677      
Total liabilities and stockholders' equity $ 2,530,757         $ 2,495,715         $ 2,266,951      
                       
Net interest and dividend income (FTE)   17,012         16,468         14,560    
Less: FTE adjustment   (58 )       (60 )       (65 )  
Net interest and dividend income (GAAP)   $ 16,954         $ 16,408         $ 14,495    
                       
Net interest rate spread (FTE)     2.57 %       2.57 %       2.51 %
Net interest margin (FTE)     2.78 %       2.76 %       2.68 %
Total deposit cost     0.82 %       0.76 %       0.67 %
 
(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 35%.
A statutory tax rate of 34% was used prior to the fourth quarter of 2016.

  

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands) Year to Date
  September 30, 2017   September 30, 2016
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets              
Total loans (1) $ 2,034,160   $ 55,985   3.68 %   $ 1,643,829   $ 43,013   3.50 %
Securities (1) 335,117   5,470   2.18     417,526   6,862   2.20  
Other interest earning assets and FHLB stock 33,554   629   2.51     34,835   458   1.76  
Total interest-earning assets 2,402,831   62,084   3.45 %   2,096,190   50,333   3.21 %
Non-interest-earning assets 100,200         102,425      
Total assets $ 2,503,031         $ 2,198,615      
               
Interest-bearing liabilities              
NOW $ 149,806   $ 50   0.04 %   $ 138,254   $ 49   0.05 %
Regular savings 253,768   617   0.33     278,624   713   0.34  
Money market 683,708   4,957   0.97     490,472   3,002   0.82  
Certificates of deposit 598,640   5,242   1.17     455,039   3,744   1.10  
Total interest-bearing deposits 1,685,922   10,866   0.86     1,362,389   7,508   0.74  
Borrowings 197,908   1,791   1.21     257,798   1,584   0.82  
Total interest-bearing liabilities 1,883,830   12,657   0.90 %   1,620,187   9,092   0.75 %
Non-interest-bearing deposits 195,496         154,877      
Other non-interest-bearing liabilities 26,110         29,324      
Total liabilities 2,105,436         1,804,388      
Stockholders' equity 397,595         394,227      
Total liabilities and stockholders' equity $ 2,503,031         $ 2,198,615      
               
Net interest and dividend income (FTE)   49,427         41,241    
Less: FTE adjustment   (184 )       (229 )  
Net interest and dividend income (GAAP)   $ 49,243         $ 41,012    
               
Net interest rate spread (FTE)     2.55 %       2.46 %
Net interest margin (FTE)     2.75 %       2.63 %
Total deposit cost     0.77 %       0.66 %
 
(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 35%.
A statutory tax rate of 34% was used for 2016.

 

Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands) Quarters Ended
  September 30, June 30, March 31, December 31, September 30,
  2017 2017 2017 2016 2016
Interest-earning assets          
Total loans $ 2,096,034   $ 2,046,288   $ 1,958,647   $ 1,823,046   $ 1,726,088  
Securities 301,484   309,909   398,201   408,351   403,038  
Other interest earning assets and FHLB stock 32,051   36,768   31,842   29,235   31,236  
Total interest-earning assets 2,429,569   2,392,965   2,388,690   2,260,632   2,160,362  
Non-interest-earning assets 101,188   102,750   93,397   104,188   106,589  
Total assets $ 2,530,757   $ 2,495,715   $ 2,482,087   $ 2,364,820   $ 2,266,951  
           
Interest-bearing liabilities          
NOW $ 153,224   $ 150,711   $ 145,396   $ 144,520   $ 140,273  
Regular savings 243,680   255,255   262,578   265,589   272,950  
Money market 708,748   688,600   653,165   597,891   560,098  
Certificates of deposit 653,339   573,997   567,642   526,433   471,040  
Total interest-bearing deposits 1,758,991   1,668,563   1,628,781   1,534,433   1,444,361  
Borrowings 133,788   204,786   256,500   223,693   224,660  
Total interest-bearing liabilities 1,892,779   1,873,349   1,885,281   1,758,126   1,669,021  
Non-interest-bearing deposits 213,459   189,180   183,520   188,797   171,317  
Other non-interest-bearing liabilities 23,603   33,664   21,035   29,861   33,936  
Total liabilities 2,129,841   2,096,193   2,089,836   1,976,784   1,874,274  
Stockholders' equity 400,916   399,522   392,251   388,036   392,677  
Total liabilities and stockholders' equity $ 2,530,757   $ 2,495,715   $ 2,482,087   $ 2,364,820   $ 2,266,951  

 

Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited; dollars in thousands) Quarters Ended
  September 30, June 30, March 31, December 31, September 30,
  2017
2017
2017
2016
2016
Interest-earning assets          
Total loans (1) 3.74 % 3.68 % 3.61 % 3.53 % 3.50 %
Securities (1) 2.12 % 2.10 % 2.28 % 3.12 % 2.38 %
Other interest earning assets and FHLB stock 2.66 % 2.65 % 2.18 % 1.97 % 2.17 %
Total interest-earning assets 3.53 % 3.46 % 3.37 % 3.43 % 3.27 %
           
Interest-bearing liabilities          
NOW 0.04 % 0.05 % 0.04 % 0.05 % 0.05 %
Regular savings 0.31 % 0.33 % 0.34 % 0.34 % 0.33 %
Money market 0.99 % 0.97 % 0.94 % 0.88 % 0.83 %
Certificates of deposit 1.28 % 1.14 % 1.07 % 1.07 % 1.11 %
Total interest-bearing deposits 0.92 % 0.85 % 0.81 % 0.77 % 0.75 %
Borrowings 1.49 % 1.26 % 1.02 % 0.90 % 0.81 %
Total interest-bearing liabilities 0.96 % 0.89 % 0.84 % 0.79 % 0.76 %
           
Net interest rate spread (FTE) (1) 2.57 % 2.57 % 2.53 % 2.64 % 2.51 %
Net interest margin (FTE) (1) 2.78 % 2.76 % 2.71 % 2.82 % 2.68 %
Total deposit cost 0.82 % 0.76 % 0.73 % 0.69 % 0.67 %
 
(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 35%.
A statutory tax rate of 34% was used prior to the fourth quarter of 2016.


Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data) Quarter Ended
  September 30, 2017
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 6,183     $ 2,342     $ 3,841     $ 0.16  
Add loss on sale of purchased home equity portfolio 118     45     73      
Non-GAAP basis $ 6,301     $ 2,387     $ 3,914     $ 0.16  
                               
  Quarter Ended
  June 30, 2017
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 6,434     $ 2,566     $ 3,868     $ 0.16  
Less gain on sale of remaining available-for-sale debt securities portfolio (928 )   (333 )   (595 )   (0.02 )
Non-GAAP basis $ 5,506     $ 2,233     $ 3,273     $ 0.14  
                               
  Quarter Ended
  March 31, 2017
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 9,240     $ 1,753     $ 7,487     $ 0.31  
Less gain on exchange of investment in Northeast Retirement Services (5,947 )   (2,133 )   (3,814 )   (0.16 )
Add realized loss on sale of mutual funds 1,054     378     676     0.03  
Less reversal of state tax valuation allowance     1,697     (1,697 )   (0.07 )
Non-GAAP basis $ 4,347     $ 1,695     $ 2,652     $ 0.11  
               
  Year to Date
  September 30, 2017
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share (diluted)
GAAP basis $ 21,857     $ 6,661     $ 15,196     $ 0.62  
Less gain on exchange of investment in Northeast Retirement Services (5,947 )   (2,133 )   (3,814 )   (0.16 )
Less gain on sale of remaining available-for-sale debt securities portfolio (928 )   (333 )   (595 )   (0.02 )
Add realized loss on sale of mutual funds 1,054     378     676     0.03  
Add loss on sale of purchased home equity portfolio 118     45     73      
Less reversal of state tax valuation allowance     1,697     (1,697 )   (0.07 )
Non-GAAP basis $ 16,154     $ 6,315     $ 9,839     $ 0.40  
               


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, June 30, March 31, December 31, September 30,
  2017 2017 2017 2016 2016
Performance Ratios (annualized)          
           
Diluted EPS          
GAAP $ 0.16   $ 0.16   $ 0.31   $ 0.17   $ 0.07  
Non-GAAP 0.16   0.14   0.11   n/a   n/a  
           
Return on average assets (ROAA)          
GAAP 0.60 % 0.62 % 1.22 % 0.67 % 0.29 %
Non-GAAP 0.61 % 0.53 % 0.43 % n/a   n/a  
           
Return on average equity (ROAE)          
GAAP 3.80 % 3.88 % 7.74 % 4.10 % 1.65 %
Non-GAAP 3.87 % 3.29 % 2.74 % n/a   n/a  
           
Return on average tangible common equity (ROATCE) (1) (3)          
GAAP 3.90 % 3.99 % 7.95 % 4.22 % 1.70 %
Non-GAAP 3.97 % 3.37 % 2.82 % n/a   n/a  
           
Efficiency ratio (2) (3)          
GAAP 68 % 64 % 59 % 68 % 71 %
Non-GAAP 67 % 67 % 75 % n/a   n/a  


(1) Average tangible common equity equals average total equity less goodwill and intangibles.
 
(2) Efficiency ratio equals noninterest expense divided by net interest and dividend income and noninterest income.
 
(3) ROATCE and the efficiency ratio are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. Management believes that these non-GAAP measures are meaningful because it is standard practice for companies in the banking industry to disclose these measures. Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons.
 
See page 15 for Non-GAAP financial measures.


Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited; dollars in thousands, except share data) Year to Date
  September 30, 2017 September 30, 2016
Performance Ratios (annualized)    
     
Diluted EPS    
GAAP $ 0.62   $ 0.19  
Non-GAAP 0.40   n/a  
     
Return on average assets (ROAA)    
GAAP 0.81 % 0.28 %
Non-GAAP 0.53 % n/a  
     
Return on average equity (ROAE)    
GAAP 5.11 % 1.58 %
Non-GAAP 3.31 % n/a  
     
Return on average tangible common equity (ROATCE) (1) (3)    
GAAP 5.24 % 1.62 %
Non-GAAP 3.40 % n/a  
     
Efficiency ratio (2) (3) 63 % 78 %
GAAP 70 % n/a  
Non-GAAP    


(1) Average tangible common equity equals average total equity less goodwill and intangibles.
 
(2) Efficiency ratio equals noninterest expense divided by net interest and dividend income and noninterest income.
 
(3) ROATCE and the efficiency ratio are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. Management believes that these non-GAAP measures are meaningful because it is standard practice for companies in the banking industry to disclose these measures. Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons.
 
See page 15 for 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, June 30, September 30,   September 30, September 30,
  2017 2017 2016   2017 2016
Asset Quality            
Non-performing Assets $ 11,540   $ 12,779   $ 7,849     $ 11,540   $ 7,849  
Non-performing Assets/ Total Assets 0.45 % 0.51 % 0.34 %   0.45 % 0.34 %
Allowance for Loan Losses/ Total Loans 0.97 % 0.97 % 1.01 %   0.97 % 1.01 %
Net Charge-offs (Recoveries) $ (89 ) $ 76   $ 3,221     $ (81 ) $ 3,330  
Annualized Net Charge-offs (Recoveries)/ Average Loans (0.02 )% 0.01 % 0.74 %   (0.01 )% 0.27 %
Allowance for Loan Losses/ Nonperforming Loans 175 % 156 % 226 %   175 % 226 %
             
Capital/Other            
Common shares outstanding 26,869,088   26,860,988   26,996,942        
Book value per share $ 14.85   $ 14.79   $ 14.43        
Tangible book value per share $ 14.48   $ 14.42   $ 14.03        
Tangible Common Equity/Tangible Assets (1) (2) 15.35 % 15.47 % 16.45 %      
Full-time Equivalent Employees 232   230   223        
 
(1) Tangible common equity equals total equity less goodwill and intangibles, Tangible assets equals total assets less goodwill and intangibles.
 
(2)Tangible common equity/tangible assets is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Management believes that this non-GAAP measure is meaningful because it is standard practice for companies in the banking industry to disclose this measure. Therefore, management believes this measure provides useful information to investors by allowing them to make peer comparisons.

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