Press Release

Blue Hills Bancorp, Inc. Reports First Quarter Earnings

Company Release - 4/24/2018 7:48 AM ET

NORWOOD, Mass., April 24, 2018 (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 $6.6 million, or $0.27 per diluted share, for the first quarter of 2018 compared to net income of $1.3 million, or $0.05 per diluted share, for the fourth quarter of 2017 and net income of $7.5 million, or $0.31 per diluted share, for the first quarter of 2017. 

The first quarter of 2018 included pre-tax net gains of $855,000 ($634,000 after-tax or $0.03 per diluted share) from gains on the exchange of an investment and the sale of property, partially offset by unrealized losses on equity securities.  This compares to the first quarter of 2017 which included pre-tax net gains of $4.9 million ($3.1 million after-tax, or $0.13 per diluted share) from the sale of investments and the reversal of a valuation allowance for state income taxes of $1.7 million, or $0.07 per diluted share.

The fourth quarter of 2017 included an additional income tax expense of approximately $2.5 million, or $0.10 per diluted share, related to the Tax Cuts and Jobs Act (the “Tax Act”) which was enacted on December 22, 2017. The Tax Act provides for a reduction in the corporate income tax rate from 35% to 21% effective January 1, 2018 and this reduction in the corporate tax rate resulted in a downward revaluation to the Company's net deferred tax asset (DTA). The fourth quarter of 2017 also included a pre-tax charge of $317,000 ($188,000 after tax, or $0.01 per diluted share) related to pension settlements.

Excluding the items discussed above, net income on a non-GAAP basis was $5.9 million, or $0.24 per diluted share, for the first quarter of 2018 compared to $4.0 million, or $0.16 per diluted share, for the fourth quarter of 2017 and $2.7 million, or $0.11 per diluted share for the first quarter of 2017 (see pages 12 and 13 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, "As our Company's transformative journey enters its next chapter, the first quarter of 2018 demonstrated our continued progress on several key financial ratios, most notably return on assets, return on equity and efficiency ratio.  During the quarter, our asset sensitive interest rate risk strategy contributed to our net interest margin improvement as the Federal Reserve continues its tightening cycle, overcoming strong competitive pressures on both the loan and deposit side.  We also continue to focus on expense discipline with total noninterest expense remaining flat on a linked quarter basis, excluding a fourth quarter nonrecurring charge.  Our capital deployment activities continued in the first quarter as well, with a special dividend of $0.30 per common share paid in March.  We feel 2018 is off to a very good start and look forward to further progress over the rest of the year."

BALANCE SHEET
Compared to December 31, 2017, total assets grew $631,000 to $2.7 billion at March 31, 2018. Individual asset categories had small changes across the board, including loans which were down $3 million to $2.2 billion at March 31, 2018. By category, declines in construction, home equity, commercial business and consumer loans were partially offset by increases in commercial real estate loans and residential mortgage loans. Commercial loan growth was impacted by seasonality, an exceptionally strong prior quarter, some loan run-off and a noticeable pick-up in competition with respect to loan terms and pricing compared to the fourth quarter.

Compared to March 31, 2017, total assets increased $173 million, or 7%.  Loans drove the growth in total assets in this comparison, increasing $217 million, or 11%. By category, the increase from March 31, 2017 was due to commercial real estate loans, which were up $148 million, or 21%; residential mortgage loans, which were up $41 million, or 5%; and commercial business loans, which were up $38 million, or 18%.  Residential mortgage originations were $72 million in the first quarter of 2018 compared to $91 million in the first quarter of 2017 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $59 million in the first quarter of 2018 compared to $55 million in the first quarter of 2017. The growth in assets from loans compared to March 31, 2017 was partially offset by a $62 million, or 16%, decline in securities, primarily due to the repositioning of the securities portfolio during the second and third quarters of 2017.

Compared to December 31, 2017, deposits grew $38 million, or 2%, to $2.1 billion at March 31, 2018. The growth from the end of 2017 was driven by a $57 million increase in certificates of deposit reflecting the Company's strategy to lengthen the duration of its funding base. As part of this strategy, short-term borrowings declined $35 million, or 35% from the end of 2017.

Compared to March 31, 2017, deposits grew $221 million, or 12%, and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the growth came from certificates of deposit, which were up $157 million, total brokered deposits, which were up $52 million, NOW and demand deposits, which were up $40 million, and money market deposits, which were up $20 million. These increases were partially offset by a $48 million decline in regular savings deposits. Short-term borrowings declined $53 million, or 45%, from a year ago.

Stockholders’ equity was $395 million at March 31, 2018 compared to $398 million at December 31, 2017 and $397 million at March 31, 2017.   The declines in both periods mainly reflect the payment of regular quarterly and special dividends, which more than offset the increases related to net income and other factors.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $18.4 million in the first quarter of 2018, up $565,000, or 3%, from the fourth quarter of 2017, and up $2.5 million, or 16%, from the first quarter of 2017. Reported net interest margin was 2.91% in the first quarter of 2018, up from 2.80% in the fourth quarter of 2017 and from 2.70% in the first quarter of 2017.

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 $18.4 million in the first quarter of 2018, up $533,000, or 3%, from $17.9 million in the fourth quarter of 2017, and up $2.4 million, or 15%, from the first quarter of 2017. Net interest margin on a fully taxable equivalent basis (referred to herein as "Reported net interest margin (FTE)", a Non-GAAP measure) was 2.92% in the first quarter of 2018 compared to 2.81% in the fourth quarter of 2017 and 2.71% in the first quarter of 2017.

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 focuses on changes in adjusted net interest and dividend income (FTE) and adjusted net interest margin (FTE).

 Quarters Ended
(Unaudited, dollars in thousands)March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 
Net Interest and Dividend Income     
Reported net interest and dividend income$18,359 $17,794 $16,954 $16,408 $15,881 
FTE adjustment32 64 58 60 66 
Reported net interest and dividend income (FTE)18,391 17,858 17,012 16,468 15,947 
Purchase accounting accretion (1)(200)(100)(103)(181)(107)
Adjusted net interest and dividend income (FTE) (2)$18,191 $17,758 $16,909 $16,287 $15,840 
      
Net Interest Margin     
Reported net interest margin2.91%2.80%2.77%2.75%2.70%
FTE adjustment0.01 0.01 0.01 0.01 0.01 
Reported net interest margin (FTE)2.92 2.81 2.78 2.76 2.71 
Mutual fund dividends (1)    0.03 
Purchase accounting accretion (1)(0.03)(0.02)(0.02)(0.03)(0.02)
Adjusted net interest margin (FTE) (2)2.89%2.79%2.76%2.73%2.72%
      
(1) 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 the first quarter of 2017 when the mutual fund dividend income was zero, the removal of the average balance had 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. 
 
(2) 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 the federal statutory tax rate.  The rate used for the first quarter of 2018 was 21%, while 35% was used for all prior periods. Management believes these measures provide useful information to investors by allowing them to make peer comparisons.

Adjusted net interest and dividend income (FTE) increased $433,000, or 2%, to $18.2 million in the first quarter of 2018 from $17.8 million in the fourth quarter of 2017 and was up $2.4 million, or 15%, from $15.8 million in the first quarter of 2017.  Adjusted net interest margin (FTE) improved to 2.89% in the first quarter of 2018 from 2.79% in the fourth quarter of 2017 and 2.72% in the first quarter of 2017. 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 December 2017, June 2017, March 2017, December 2016 and, to a lesser extent, the rate hike that was announced in March 2018. The Company maintains an asset sensitive interest rate risk position, which has resulted in earning asset yields increasing at a faster pace than interest bearing liability costs. In addition, the improvement in adjusted net interest and dividend income (FTE) in both comparisons was helped by loan growth.  Average loans increased $30 million, or 1%, from the fourth quarter of 2017 and were up $249 million, or 13%, from the first quarter of 2017.  The increase in average loans from the fourth quarter was mostly due to a higher level of commercial real estate loans while the increase from a year ago was driven by higher levels of commercial real estate loans, residential mortgages, and commercial business loans. Partially offsetting the improvement in adjusted net interest and dividend income (FTE) from the first quarter of 2017, was an $85 million, or 21%, decline in average securities reflecting the sales of the mutual fund portfolio during the first quarter of 2017 and the remaining available for sale corporate debt securities portfolio in the second quarter of 2017.

NONINTEREST INCOME
Noninterest income was $3.9 million in the first quarter of 2018, up $968,000, or 33%, from the fourth quarter of 2017.  The improvement was due to an increase in miscellaneous income of $835,000 mainly reflecting higher income on Small Business Investment Company ("SBIC") investments.  In addition, during the first quarter of 2018, the Company recorded a gain of $653,000, which was previously deferred due to escrow restrictions on the transaction, from an investment in Northeast Retirement Services, Inc., which was acquired by Community Bank System, Inc. in the first quarter of 2017, and a gain of $271,000 from the sale of property, plant and equipment.  Mortgage banking income also improved $188,000. These increases were partially offset by an $865,000 decline in loan level derivative income, which is related to a lower volume of new commercial loan customer back-to-back 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.

Compared to the first quarter of 2017, noninterest income declined $2.9 million, or 43%.  This was mainly due to a decline in the gain recognized on the Company's investment in Northeast Retirement Services, Inc., which was acquired by Community Bank System, Inc. in the first quarter of 2017.  The Company recognized a gain of $653,000, which was previously deferred due to escrow restrictions of the transaction, in the first quarter of 2018 compared to a gain of $5.9 million in the first quarter of 2017.  This decline was partially offset by (1) the absence of a $1.0 million loss recorded in the first quarter of 2017 from the sale of the Company's investments in mutual funds, (2) an increase in miscellaneous income of $979,000 reflecting higher income on SBIC investments, and (3) a gain of $271,000 from the sale of property, plant and equipment in the first quarter of 2018.

NONINTEREST EXPENSE
Noninterest expense was $13.9 million in the first quarter of 2018, down $314,000, or 2%, from the fourth quarter of 2017. The fourth quarter of 2017 included a $317,000 charge related to pension settlements.  Aside from that item, salaries and benefits expense increased $627,000, or 8% from the fourth quarter of 2017 due, in part, to merit increases, a higher number of employees, and an increase related to the impact of the recent $0.30 special dividend on unvested restricted stock.  Several categories of expenses had linked-quarter declines including occupancy and equipment, data processing, professional fees and advertising.

Compared to the first quarter of 2017, noninterest expense increased $471,000, or 4%.  The increase was mainly driven by higher salaries and benefits expense which was up $819,000, or 11%.  This increase was mainly due to the same factors that caused the linked-quarter increase discussed above.  The growth in salaries and benefits expense was partially offset by declines in professional fees, advertising and occupancy and equipment expense.

INCOME TAXES
The Tax Act was enacted on December 22, 2017 and provided for a reduction in the corporate income tax rate from 35% to 21% effective January 1, 2018.  This reduction in the corporate tax rate also resulted in a fourth quarter charge of $2.5 million related to the downward revaluation of the Company's net deferred tax asset.  As a result of the new tax law, the Company's effective tax rate declined from 35% in the fourth quarter of 2017, excluding the aforementioned $2.5 million charge, to 26% in the first quarter of 2018.

ASSET QUALITY
The provision for loan losses reflects management’s assessment of risks inherent in the loan portfolio. The provision for loan losses was a credit of $460,000 in the first quarter of 2018 compared to charges of $681,000 in the fourth quarter of 2017 and $57,000 in the first quarter of 2017.  The credit balance in the provision for the first quarter of 2018 reflects a decline in loans from the end of 2017 coupled with the impact of the Company's continued migration from the use of historical loss rates based on national FDIC data to loss rates based on the Company's own experience.

The allowance for loan losses as a percentage of total loans was 0.92% at March 31, 2018 compared to 0.95% at both December 31, 2017 and March 31, 2017.  The Company had net loan charge-offs of $232,000 in the first quarter of 2018 compared to net loan charge-offs $52,000 in the fourth quarter of 2017 and net loan recoveries of $68,000 in the first quarter of 2017.

Nonperforming assets were $13.3 million at March 31, 2018 compared to $11.5 million at December 31, 2017 and $13.1 million at March 31, 2017.  The increase in nonperforming assets from December 31, 2017 is mainly due to the placement of one commercial real estate loan on nonaccrual during the first quarter.  Nonperforming assets as a percentage of total assets were 0.50% at March 31, 2018 compared to 0.43% at December 31, 2017 and 0.53% at March 31, 2017.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.7 billion at March 31, 2018 and operates 11 retail 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
 March 31, 2018 December 31, 2017 March 31, 2017 March 31,
2018
vs.
December 31,
2017
 March 31,
2018
vs.
March 31,
2017
 
Assets     
Cash and due from banks$18,194 $16,149 $15,594 12.7%16.7%
Short term investments26,878 30,018 19,555 (10.5)%37.4%
Total cash and cash equivalents45,072 46,167 35,149 (2.4)%28.2%
Equity securities, at fair value9,651   NM NM 
Securities available-for-sale, at fair value 9,720 173,834 (100.0)%(100.0)%
Securities held-to-maturity, at amortized cost304,036 303,716 201,684 0.1%50.7%
Federal Home Loan Bank stock, at cost10,730 12,105 14,828 (11.4)%(27.6)%
Loans held for sale5,865 8,992 1,675 (34.8)%250.1%
Loans:     
1-4 family residential938,030 926,117 896,951 1.3%4.6%
Home equity75,737 81,358 80,427 (6.9)%(5.8)%
Commercial real estate849,040 833,978 701,463 1.8%21.0%
Construction73,113 90,712 70,855 (19.4)%3.2%
Total real estate loans1,935,920 1,932,165 1,749,696 0.2%10.6%
Commercial business248,521 253,001 210,328 (1.8)%18.2%
Consumer20,034 21,858 27,325 (8.3)%(26.7)%
Total loans2,204,475 2,207,024 1,987,349 (0.1)%10.9%
Allowance for loan losses(20,185)(20,877)(18,875)(3.3)%6.9%
Loans, net2,184,290 2,186,147 1,968,474 (0.1)%11.0%
Premises and equipment, net20,685 21,573 21,858 (4.1)%(5.4)%
Other real estate owned3,649   NM NM 
Accrued interest receivable6,120 6,438 5,994 (4.9)%2.1%
Goodwill and core deposit intangible9,566 9,717 10,313 (1.6)%(7.2)%
Net deferred tax asset5,197 6,000 8,751 (13.4)%(40.6)%
Bank-owned life insurance33,354 33,078 32,271 0.8%3.4%
Other assets30,936 24,867 21,779 24.4%42.0%
Total assets$2,669,151 $2,668,520 $2,496,610 %6.9%
Liabilities and Stockholders' Equity     
Deposits:     
NOW and demand$382,406 $381,316 $342,118 0.3%11.8%
Regular savings216,894 221,004 265,116 (1.9)%(18.2)%
Money market643,336 646,603 622,852 (0.5)%3.3%
Certificates of deposit504,996 448,382 348,042 12.6%45.1%
Brokered money market90,369 92,798 50,129 (2.6)%80.3%
Brokered certificates of deposit239,837 249,766 228,465 (4.0)%5.0%
Total deposits2,077,838 2,039,869 1,856,722 1.9%11.9%
Short-term borrowings65,000 100,000 118,000 (35.0)%(44.9)%
Long-term debt105,000 105,000 105,000 %%
Other liabilities25,869 25,845 19,944 0.1%29.7%
Total liabilities2,273,707 2,270,714 2,099,666 0.1%8.3%
Common stock268 268 268 %%
Additional paid-in capital256,470 254,750 250,967 0.7%2.2%
Unearned compensation- ESOP(19,547)(19,737)(20,306)(1.0)%(3.7)%
Retained earnings160,124 163,978 168,160 (2.4)%(4.8)%
Accumulated other comprehensive loss(1,871)(1,453)(2,145)28.8%(12.8)%
Total stockholders' equity395,444 397,806 396,944 (0.6)%(0.4)%
Total liabilities and stockholders' equity$2,669,151 $2,668,520 $2,496,610 %6.9%
              

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

(Unaudited; dollars in thousands)March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 
Assets     
Cash and due from banks$18,194 $16,149 $16,171 $17,292 $15,594 
Short term investments26,878 30,018 22,192 33,819 19,555 
Total cash and cash equivalents45,072 46,167 38,363 51,111 35,149 
Equity securities, at fair value9,651     
Securities available for sale, at fair value 9,720 9,943 10,437 173,834 
Securities held-to-maturity, at amortized cost304,036 303,716 302,833 283,672 201,684 
Federal Home Loan Bank stock, at cost10,730 12,105 9,410 11,943 14,828 
Loans held for sale5,865 8,992 12,268 6,789 1,675 
Loans:     
1-4 family residential938,030 926,117 905,585 895,015 896,951 
Home equity75,737 81,358 77,819 84,615 80,427 
Commercial real estate849,040 833,978 751,209 756,093 701,463 
Construction73,113 90,712 88,979 78,062 70,855 
Total real estate loans1,935,920 1,932,165 1,823,592 1,813,785 1,749,696 
Commercial business248,521 253,001 240,801 227,262 210,328 
Consumer20,034 21,858 23,142 25,047 27,325 
Total loans2,204,475 2,207,024 2,087,535 2,066,094 1,987,349 
Allowance for loan losses(20,185)(20,877)(20,248)(19,917)(18,875)
Loans, net2,184,290 2,186,147 2,067,287 2,046,177 1,968,474 
Premises and equipment, net20,685 21,573 21,850 22,004 21,858 
Other real estate owned3,649     
Accrued interest receivable6,120 6,438 5,802 5,362 5,994 
Goodwill and core deposit intangible9,566 9,717 9,892 10,091 10,313 
Net deferred tax asset5,197 6,000 9,295 8,184 8,751 
Bank-owned life insurance33,354 33,078 32,800 32,533 32,271 
Other assets30,936 24,867 25,673 25,606 21,779 
Total assets$2,669,151 $2,668,520 $2,545,416 $2,513,909 $2,496,610 
Liabilities and Stockholders' Equity     
Deposits:     
NOW and demand$382,406 $381,316 $376,864 $359,877 $342,118 
Regular savings216,894 221,004 244,662 246,484 265,116 
Money market643,336 646,603 666,388 674,593 622,852 
Certificates of deposit504,996 448,382 420,765 362,261 348,042 
Brokered money market90,369 92,798 41,768 44,728 50,129 
Brokered certificates of deposit239,837 249,766 235,106 277,320 228,465 
Total deposits2,077,838 2,039,869 1,985,553 1,965,263 1,856,722 
Short-term borrowings65,000 100,000 20,000  118,000 
Long-term debt105,000 105,000 110,000 130,000 105,000 
Other liabilities25,869 25,845 30,829 21,328 19,944 
Total liabilities2,273,707 2,270,714 2,146,382 2,116,591 2,099,666 
Common stock268 268 268 268 268 
Additional paid-in capital256,470 254,750 254,025 252,495 250,967 
Unearned compensation- ESOP(19,547)(19,737)(19,927)(20,117)(20,306)
Retained earnings160,124 163,978 166,282 166,033 168,160 
Accumulated other comprehensive loss(1,871)(1,453)(1,614)(1,361)(2,145)
Total stockholders' equity395,444 397,806 399,034 397,318 396,944 
Total liabilities and stockholders' equity$2,669,151 $2,668,520 $2,545,416 $2,513,909 $2,496,610 
                

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

(Unaudited; dollars in thousands, except share data)Quarters Ended% Change
 March 31, 2018 December 31, 2017 March 31, 2017 March 31,
2018
vs.
December 31,
2017
March 31,
2018
vs.
March 31,
2017
Interest and fees on loans$21,809 $20,883 $17,382 4.4%25.5%
Interest on securities1,857 1,763 2,210 5.3%(16.0)%
Dividends204 189 157 7.9%29.9%
Other78 40 32 95.0%143.8%
Total interest and dividend income23,948 22,875 19,781 4.7%21.1%
Interest on deposits4,775 4,349 3,254 9.8%46.7%
Interest on borrowings814 732 646 11.2%26.0%
Total interest expense5,589 5,081 3,900 10.0%43.3%
Net interest and dividend income18,359 17,794 15,881 3.2%15.6%
Provision (credit) for loan losses(460)681 57 NM NM 
Net interest and dividend income, after provision for loan losses18,819 17,113 15,824 10.0%18.9%
Deposit account fees355 372 320 (4.6)%10.9%
Interchange and ATM fees391 418 348 (6.5)%12.4%
Mortgage banking740 552 740 34.1%%
Loan level derivative fee income240 1,105 164 (78.3)%46.3%
Unrealized losses on equity securities(69)  NM NM 
Realized securities gains (losses), net  (1,022)NM NM 
Gain on exchange of investment in Northeast Retirement Services653  5,947 NM (89.0)
%
Bank-owned life insurance income276 277 257 (0.4)%7.4%
Gain on sale of property plant and equipment271   NM NM
 
Miscellaneous1,041 206 62 405.3%1,579.0%
Total noninterest income3,898 2,930 6,816 33.0%(42.8)%
Salaries and employee benefits8,382 7,755 7,563 8.1%10.8%
Pension settlement charges 317  NM NM 
Occupancy and equipment2,083 2,224 2,115 (6.3)%(1.5)%
Data processing1,044 1,067 1,044 (2.2)%%
Professional fees453 540 869 (16.1)%(47.9)%
Advertising304 503 367 (39.6)%(17.2)%
FDIC deposit insurance233 220 212 5.9%9.9%
Directors' fees409 382 374 7.1%9.4%
Amortization of core deposit intangible151 175 247 (13.7)%(38.9)%
Other general and administrative812 1,002 609 (19.0)%33.3%
Total noninterest expense13,871 14,185 13,400 (2.2)%3.5%
Income before income taxes8,846 5,858 9,240 51.0%(4.3)%
Provision for income taxes2,263 4,565 1,753 (50.4)%29.1%
Net income$6,583 $1,293 $7,487 409.1%(12.1)%
      
Earnings per common share:     
Basic$0.27 $0.05 $0.31   
Diluted$0.27 $0.05 $0.31   
Weighted average shares outstanding:     
Basic24,172,237 24,104,329 23,911,419   
Diluted24,827,850 24,795,366 24,275,665   
Regular dividends declared per share$0.15 $0.15 $0.05   
Special dividends declared per share$0.30 $ $   
            

Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend

 Quarters Ended
(Unaudited; dollars in thousands, except share data)March 31,December 31,September 30,June 30,March 31,
 20182017201720172017
Interest and fees on loans$21,809 $20,883 $19,721 $18,715 $17,382 
Interest on securities1,857 1,763 1,565 1,572 2,210 
Dividends204 189 194 193 157 
Other78 40 65 94 32 
Total interest and dividend income23,948 22,875 21,545 20,574 19,781 
Interest on deposits4,775 4,349 4,089 3,523 3,254 
Interest on borrowings814 732 502 643 646 
Total interest expense5,589 5,081 4,591 4,166 3,900 
Net interest and dividend income18,359 17,794 16,954 16,408 15,881 
Provision (credit) for loan losses(460)681 242 1,118 57 
Net interest and dividend income, after provision for loan losses18,819 17,113 16,712 15,290 15,824 
Deposit account fees355 372 385 341 320 
Interchange and ATM fees391 418 455 388 348 
Mortgage banking740 552 1,146 1,219 740 
Loss on sale of purchased home equity portfolio

  (118)  
Loan level derivative fee income240 1,105 156 1,367 164 
Unrealized losses on equity securities(69)    
Realized securities gains (losses), net   928 (1,022)
Gain on exchange of investment in Northeast Retirement Services653    5,947 
Bank-owned life insurance income276 277 268 261 257 
Gain on sale of property plant and equipment271     
Miscellaneous1,041 206 534 6 62 
Total noninterest income3,898 2,930 2,826 4,510 6,816 
Salaries and employee benefits8,382 7,755 7,979 7,664 7,563 
Pension settlement charges 317    
Occupancy and equipment2,083 2,224 2,024 2,030 2,115 
Data processing1,044 1,067 1,016 1,022 1,044 
Professional fees453 540 340 526 869 
Advertising304 503 563 489 367 
FDIC deposit insurance233 220 226 223 212 
Directors' fees409 382 382 428 374 
Amortization of core deposit intangible151 175 199 222 247 
Other general and administrative812 1,002 626 762 609 
Total noninterest expense13,871 14,185 13,355 13,366 13,400 
Income before income taxes8,846 5,858 6,183 6,434 9,240 
Provision for income taxes2,263 4,565 2,342 2,566 1,753 
Net income$6,583 $1,293 $3,841 $3,868 $7,487 
      
Earnings per common share:     
Basic$0.27 $0.05 $0.16 $0.16 $0.31 
Diluted$0.27 $0.05 $0.16 $0.16 $0.31 
Weighted average shares outstanding:     
Basic24,172,237 24,104,329 23,973,116 23,952,443 23,911,419 
Diluted24,827,850 24,795,366 24,510,092 24,346,553 24,275,665 
      
Regular dividends declared per share$0.15 $0.15 $0.15 $0.05 $0.05 
Special dividends declared per share$0.30 $ $ $0.20 $ 

Blue Hills Bancorp Inc.
Average Balances/Yields

(Unaudited; dollars in thousands)Quarters Ended
 March 31, 2018 December 31, 2017 March 31, 2017
 Average balanceInterestYield/
Cost
 Average balanceInterestYield/
Cost
 Average balanceInterestYield/
Cost
Interest-earning assets           
Total loans (1)$2,207,895 $21,841 4.01% $2,178,388 $20,947 3.81% $1,958,647 $17,436 3.61%
Securities (1)313,212 1,902 2.46  312,313 1,836 2.33  398,201 2,240 2.28 
Other interest earning assets and FHLB stock33,533 237 2.87  28,842 156 2.15  31,842 171 2.18 
Total interest-earning assets2,554,640 23,980 3.81% 2,519,543 22,939 3.61% 2,388,690 19,847 3.37%
Non-interest-earning assets96,629    96,781    93,397   
Total assets$2,651,269    $2,616,324    $2,482,087   
            
Interest-bearing liabilities           
NOW$157,582 $16 0.04% $160,371 $17 0.04% $145,396 $16 0.04%
Regular savings219,834 165 0.30  235,864 183 0.31  262,578 218 0.34 
Money market742,035 1,972 1.08  718,489 1,823 1.01  653,165 1,519 0.94 
Certificates of deposit694,526 2,622 1.53  653,573 2,326 1.41  567,642 1,501 1.07 
Total interest-bearing deposits1,813,977 4,775 1.07  1,768,297 4,349 0.98  1,628,781 3,254 0.81 
Borrowings202,944 814 1.63  202,255 732 1.44  256,500 646 1.02 
Total interest-bearing liabilities2,016,921 5,589 1.12% 1,970,552 5,081 1.02% 1,885,281 3,900 0.84%
Non-interest-bearing deposits208,561    220,167    183,520   
Other non-interest-bearing liabilities26,063    23,602    21,035   
Total liabilities2,251,545    2,214,321    2,089,836   
Stockholders' equity399,724    402,003    392,251   
Total liabilities and stockholders' equity$2,651,269    $2,616,324    $2,482,087   
            
Net interest and dividend income (FTE) 18,391    17,858    15,947  
Less: FTE adjustment (32)   (64)   (66) 
Net interest and dividend income (GAAP) $18,359    $17,794    $15,881  
            
Net interest rate spread (FTE)  2.69%   2.59%   2.53%
Net interest margin (FTE)  2.92%   2.81%   2.71%
Total deposit cost  0.96%   0.87%   0.73%
               
(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 21% for the three months ended March 31, 2018. A statutory rate of 35% was used prior to the first quarter of 2018.

Blue Hills Bancorp, Inc.
Average Balances - Trend


(Unaudited; dollars in thousands)Quarters Ended
 March 31,December 31,September 30,June 30,March 31,
 20182017201720172017
Interest-earning assets     
Total loans$2,207,895 $2,178,388 $2,096,034 $2,046,288 $1,958,647 
Securities313,212 312,313 301,484 309,909 398,201 
Other interest earning assets and FHLB stock33,533 28,842 32,051 36,768 31,842 
Total interest-earning assets2,554,640 2,519,543 2,429,569 2,392,965 2,388,690 
Non-interest-earning assets96,629 96,781 101,188 102,750 93,397 
Total assets$2,651,269 $2,616,324 $2,530,757 $2,495,715 $2,482,087 
      
Interest-bearing liabilities     
NOW$157,582 $160,371 $153,224 $150,711 $145,396 
Regular savings219,834 235,864 243,680 255,255 262,578 
Money market742,035 718,489 708,748 688,600 653,165 
Certificates of deposit694,526 653,573 653,339 573,997 567,642 
Total interest-bearing deposits1,813,977 1,768,297 1,758,991 1,668,563 1,628,781 
Borrowings202,944 202,255 133,788 204,786 256,500 
Total interest-bearing liabilities2,016,921 1,970,552 1,892,779 1,873,349 1,885,281 
Non-interest-bearing deposits208,561 220,167 213,459 189,180 183,520 
Other non-interest-bearing liabilities26,063 23,602 23,603 33,664 21,035 
Total liabilities2,251,545 2,214,321 2,129,841 2,096,193 2,089,836 
Stockholders' equity399,724 402,003 400,916 399,522 392,251 
Total liabilities and stockholders' equity$2,651,269 $2,616,324 $2,530,757 $2,495,715 $2,482,087 
                

Blue Hills Bancorp, Inc.
Yield Trend

(Unaudited)Quarters Ended
 March 31,December 31,September 30,June 30,March 31,
 2018 2017 2017 2017 2017 
Interest-earning assets     
Total loans (1)4.01%3.81%3.74%3.68%3.61%
Securities (1)2.46%2.33%2.12%2.10%2.28%
Other interest earning assets and FHLB stock2.87%2.15%2.66%2.65%2.18%
Total interest-earning assets3.81%3.61%3.53%3.46%3.37%
      
Interest-bearing liabilities     
NOW0.04%0.04%0.04%0.05%0.04%
Regular savings0.30%0.31%0.31%0.33%0.34%
Money market1.08%1.01%0.99%0.97%0.94%
Certificates of deposit1.53%1.41%1.28%1.14%1.07%
Total interest-bearing deposits1.07%0.98%0.92%0.85%0.81%
Borrowings1.63%1.44%1.49%1.26%1.02%
Total interest-bearing liabilities1.12%1.02%0.96%0.89%0.84%
      
Net interest rate spread (FTE) (1)2.69%2.59%2.57%2.57%2.53%
Net interest margin (FTE) (1)2.92%2.81%2.78%2.76%2.71%
Total deposit cost0.96%0.87%0.82%0.76%0.73%
           
(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 21% for the three months ended March 31, 2018. A statutory rate of 35% was used prior to the first quarter of 2018.

Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income

(Unaudited; dollars in thousands, except share data)Quarter Ended
 March 31, 2018
 Income Before
Income Taxes
 Provision for
Income Taxes
 Net Income Earnings per
Common Share
(diluted)
GAAP basis$8,846  $2,263  $6,583  $0.27 
Add unrealized loss on equity securities69  18  51   
Less gain on exchange of investment in Northeast Retirement Service(653) (169) (484) (0.02)
Less gain on sale of property, plant and equipment(271) (70) (201) (0.01)
Non-GAAP basis$7,991  $2,042  $5,949  $0.24 
 Quarter Ended
 December 31, 2017
 Income Before
Income Taxes
 Provision for
Income Taxes
 Net Income Earnings per
Common Share
(diluted)
GAAP basis$5,858  $4,565  $1,293  $0.05 
Add pension settlement charges317  129  188  0.01 
Add impact of tax reform on DTA valuation  (2,500) 2,500  0.10 
Non-GAAP basis$6,175  $2,194  $3,981  $0.16 
 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 portfolio118  45  73   
Non-GAAP basis$6,301  $2,387  $3,914  $0.16 
  

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.
Reconciliation of GAAP to Non-GAAP Net Income (continued)

        
 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  realized 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 funds1,054  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 

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)Quarters Ended
 March 31,December 31,September 30,June 30,March 31,
 20182017201720172017
Performance Ratios (annualized)     
      
Diluted EPS:     
GAAP$0.27 $0.05 $0.16 $0.16 $0.31 
Non-GAAP$0.24 $0.16 $0.16 $0.14 $0.11 
      
Return on average assets (ROAA):     
GAAP1.01%0.20%0.60%0.62%1.22%
Non-GAAP0.91%0.60%0.61%0.53%0.43%
      
Return on average equity (ROAE):     
GAAP6.68%1.28%3.80%3.88%7.74%
Non-GAAP6.04%3.93%3.87%3.29%2.74%
      
Return on average tangible common equity (ROATCE) (1) (3):     
GAAP6.84%1.31%3.90%3.99%7.95%
Non-GAAP6.19%4.03%3.97%3.37%2.82%
      
Efficiency ratio (2) (3):     
GAAP62%68%68%64%59%
Non-GAAP65%67%67%67%75%
           
(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 pages 12 and 13 for reconciliation of Non-GAAP financial measures.

Blue Hills Bancorp, Inc.
Selected Financial Highlights

(Unaudited; dollars in thousands, except share data) At or for the Quarters Ended
 March 31,December 31,March 31,
 201820172017
Asset Quality   
Non-performing Assets$13,319 $11,523 $13,109 
Non-performing Assets/ Total Assets0.50%0.43%0.53%
Allowance for Loan Losses/ Total Loans0.92%0.95%0.95%
Net Charge-offs (Recoveries)$232 $52 $(68)
Annualized Net Charge-offs (Recoveries)/ Average Loans0.04%0.01%(0.01)%
Allowance for Loan Losses/ Nonperforming Loans209%181%144%
    
Capital/Other   
Common shares outstanding26,861,521 26,827,660 26,858,328 
Book value per share$14.72 $14.83 $14.78 
Tangible book value per share$14.37 $14.47 $14.40 
Tangible Common Equity/Tangible Assets (1) (2)14.51%14.60%15.55%
Full-time Equivalent Employees246 237 227 
       
(1) Tangible common equity equals total equity less goodwill and core deposit intangibles. Tangible assets equals total assets less goodwill and core deposit 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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Source: Blue Hills Bank