Press Release

Blue Hills Bancorp, Inc. Reports Second Quarter Earnings

Quarterly Dividend Increased 33% to $0.20 per share

Company Release - 7/25/2018 7:00 AM ET

NORWOOD, Mass., July 25, 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 $6.5 million, or $0.26 per diluted share, for the second quarter of 2018 compared to net income of $6.6 million, or $0.27 per diluted share, for the first quarter of 2018 and net income of $3.9 million, or $0.16 per diluted share, for the second quarter of 2017. Net income on a non-GAAP basis was $6.1 million, or $0.25 per diluted share, for the second quarter of 2018 compared to net income on a non-GAAP basis of $5.9 million, or $0.24 per diluted share, for the first quarter of 2018 and net income on a non-GAAP basis of $3.3 million, or $0.14 per diluted share, for the second quarter of 2017 (see page 14 for a reconciliation of GAAP to non-GAAP measures).

For the six months ended June 30, 2018, net income was $13.0 million, or $0.52 per diluted share, compared to net income of  $11.4 million, or $0.47 per diluted share for the six months ended June 30, 2017.  Net income on a non-GAAP basis was $12.1 million, or $0.48 per diluted share, for the first six months of 2018 compared to net income on a non-GAAP basis of $5.9 million, or $0.25 per diluted share for the first six months of 2017 (see page 15 for a reconciliation of GAAP to non-GAAP measures).

The Company also announced that its Board of Directors voted to increase the regular quarterly cash dividend to $0.20 per share from $0.15 per share. The dividend will be payable on August 22, 2018 to stockholders of record as of August 8, 2018.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "The second quarter results continue to demonstrate the significant and ongoing progress we have made as the Bank reaches its four year anniversary as a public company. Our asset sensitive interest rate risk position has allowed us to absorb increases in deposit costs and still grow net interest margin over 20 basis points from the second quarter of 2017. In addition, since the second quarter of last year our core return on assets has increased over 70% to above 90 basis points while our focus on expense management has contributed to further improvement in our efficiency ratio, which has fallen to 62% excluding nonrecurring gains. Our business units continue to perform well in a highly competitive marketplace. Mortgage banking generated originations higher than a year ago and mortgage banking revenue exceeded $1 million in the second quarter. Commercial business loans grew 8% from the end of the first quarter and 18% from a year ago as we strive to create more balance with our strong commercial real estate lending business, while on the consumer banking side we have positioned our core funding capabilities to meet our quality growth operating strategy."

Parent continued, "Our capital deployment efforts continued with today's announcement of another increase to our quarterly dividend. In the current environment, banks must be flexible and able to adjust to rapidly changing industry and economic conditions. We are all proud of the franchise we have built and as we move forward in this environment, we feel that our franchise will continue to create incremental value for our shareholders."

BALANCE SHEET
Compared to March 31, 2018, total assets grew $72 million, or 3%, to $2.7 billion at June 30, 2018. The increase was mainly driven by a $57 million, or 3%, increase in loans to $2.3 billion at June 30, 2018. By category, the growth was due to a $52 million, or 5%, increase in residential mortgage loans, a $20 million, or 8%, increase in commercial business loans, and a $15 million, or 21%, increase in construction loans. These increases were partially offset by a $24 million, or 3% decrease in commercial real estate loans reflecting paydowns and very competitive market conditions.

Compared to June 30, 2017, total assets increased $227 million, or 9%. Loans drove the growth in total assets from June 30, 2017, increasing $196 million, or 9%. By category, the increase from June 30, 2017 was due to residential mortgage loans, which were up $95 million, or 11%; commercial real estate loans, which were up $68 million, or 9%; and commercial business loans, which were up $41 million, or 18%. Residential mortgage originations were $167 million in the second quarter of 2018 compared to $139 million in the second quarter of 2017 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $97 million in the second quarter of 2018 compared to $137 million in the second quarter of 2017. The decline is due to a lower level of commercial real estate originations, partially offset by an increase in commercial business loan originations. The commercial real estate decline reflects a noticeable pick-up in competition with respect to loan terms and pricing during the first half of 2018.

Compared to March 31, 2018, deposits grew $34 million, or 2%, to $2.1 billion at June 30, 2018. The growth from the end of the first quarter was driven by a $38 million increase in total brokered deposits and a $21 million increase in certificates of deposit. These increases were partially offset by small declines in the other deposit account categories. In addition to the growth in deposits, short-term borrowings were up $45 million, or 69%, from March 31, 2018 while long-term debt fell $15 million, or 14%.

Compared to June 30, 2017, deposits grew $147 million, or 7%, 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 $163 million, total brokered deposits, which were up $47 million, and NOW and demand deposits, which were up $16 million. These increases were partially offset by a $46 million decline in money market deposits and a $33 million decline in regular savings deposits. Short-term borrowings increased $110 million from a year ago while long-term debt declined $40 million.

Stockholders’ equity was $400 million at June 30, 2018 compared to $395 million at March 31, 2018 and $397 million at June 30, 2017. The increases in both periods mainly reflect net income and share based compensation, partially offset by the payment of dividends.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $19.0 million in the second quarter of 2018, up $624,000, or 3%, from the first quarter of 2018 and up $2.6 million, or 16%, from the second quarter of 2017. Reported net interest margin was 2.98% in the second quarter of 2018, up from 2.91% in the first quarter of 2018 and from 2.75% in the second quarter of 2017.

Net interest and dividend income on a fully taxable equivalent basis (FTE), a Non-GAAP measure, was also $19.0 million in the second quarter of 2018, up $626,000, or 3%, from $18.4 million in the first quarter of 2018, and up $2.5 million, from $16.5 million or 15%, from the second quarter of 2017. Net interest margin on a fully taxable equivalent basis (FTE), a Non-GAAP measure, was 2.99% in the second quarter of 2018 compared to 2.92% in the first quarter of 2018 and 2.76% in the second quarter of 2017. Purchase accounting accretion added $171,000, $200,000 and $181,000 to net interest and dividend income in the second quarter of 2018, first quarter of 2018, and second quarter of 2017, respectively.  Purchase accounting accretion also added 3 basis points to net interest margin in all three quarters.

Net interest and dividend income (FTE) and net interest margin (FTE) benefited in both quarterly comparisons from higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank. There have been seven rate increases announced by the Fed since December 2015 totaling 175 basis points. The Company has maintained and continues to maintain 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 net interest and dividend income (FTE) from the second quarter of 2017 was helped by loan growth.  Average loans increased $163 million, or 8%, from the second quarter of 2017 due to higher levels of commercial real estate loans and residential mortgages.

NONINTEREST INCOME
Noninterest income was $3.6 million in the second quarter of 2018, down 266,000, or 7%, from the first quarter of 2018. The decline was due to the absence of a first quarter securities gain of $653,000, the absence of a first quarter gain of $271,000 from the sale of premises and equipment and a decline of $169,000 in miscellaneous income mainly reflecting lower income on Small Business Investment Company ("SBIC") investments. Partially offsetting these declines in the second quarter was a $452,000 unrealized gain on equity securities compared to an unrealized loss of $69,000 recorded in the first quarter and a $293,000, or 40%, increase in mortgage banking income. The Company also had increases of $67,000, or 19%, in deposit account fees and $63,000, or 16%, in interchange and ATM fees reflecting higher transaction volumes and pricing changes.

Compared to the second quarter of 2017, noninterest income declined $878,000, or 19%. This was mainly due to a $1.2 million 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. Also contributing to the decline was the absence of a $928,000 gain recognized in the second quarter of last year on the sale of the Company's remaining available-for-sale debt securities portfolio. Partially offsetting the declines were an $866,000 increase in miscellaneous income due primarily to SBIC investments, a $452,000 unrealized gain on equity securities recognized in the second quarter of 2018, and increases of $81,000 in deposit account fees and $66,000 in interchange and ATM fees.

NONINTEREST EXPENSE
Noninterest expense was $13.7 million in the second quarter of 2018, down $180,000, or 1%, from the first quarter of 2018. Several categories of expenses had declines from last quarter and these declines were partially offset by an increase in advertising expense, which was at a low level in the first quarter. Compared to the second quarter of 2017, noninterest expense increased $325,000, or 2%. The increase was mainly driven by higher salaries and benefits expense which was up $600,000, or 8%. The growth in salaries and benefits expense was due, in part, to an increase in full time equivalent employees to 245 at June 30, 2018 from 230 at June 30, 2017 as well as merit increases.

INCOME TAXES
The effective income tax rate was 26.8% in the second quarter of 2018 and 25.6% in the first quarter of 2018. This is down from 39.9% in the second quarter of 2017. The lower effective tax rates in 2018 are mainly due to the Tax Act, which was enacted on December 22, 2017 and provided for a reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 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 $101,000 in the second quarter of 2018 compared to a credit of $460,000 in the first quarter of 2018 and a provision of $1.1 million in the second quarter of 2017. The decline in the provision from 2017 reflects lower loan growth in 2018 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 0.89% at June 30, 2018 compared to 0.92% at March 31, 2018 and 0.97% at June 30, 2017. The Company had net loan charge-offs of $161,000 in the second quarter of 2018 compared to $232,000 in the first quarter of 2018 and $76,000 in the second quarter of 2017.

Nonperforming assets were $13.9 million at June 30, 2018 compared to $13.3 million at March 31, 2018 and $12.8 million at June 30, 2017. Nonperforming assets as a percentage of total assets were 0.51% at June 30, 2018 compared to 0.50% at March 31, 2018 and 0.51% at June 30, 2017.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.7 billion at June 30, 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
 June 30, 2018March 31, 2018June 30, 2017June 30, 2018
vs.
March 31, 2018
June 30, 2018
vs. 
June 30, 2017
Assets     
Cash and due from banks$17,566 $18,194 $17,292 (3.5)%1.6%
Short term investments34,383 26,878 33,819 27.9%1.7%
Total cash and cash equivalents51,949 45,072 51,111 15.3%1.6%
Equity securities, at fair value5,331 9,651  (44.8)%%
Securities available-for-sale, at fair value  10,437 %(100.0)%
Securities held-to-maturity, at amortized cost303,137 304,036 283,672 (0.3)%6.9%
Federal Home Loan Bank stock, at cost14,375 10,730 11,943 34.0%20.4%
Loans held for sale10,005 5,865 6,789 70.6%47.4%
Loans:       
1-4 family residential989,598 938,030 895,015 5.5%10.6%
Home equity72,813 75,737 84,615 (3.9)%(13.9)%
Commercial real estate824,541 849,040 756,093 (2.9)%9.1%
Construction88,132 73,113 78,062 20.5%12.9%
  Total real estate loans1,975,084 1,935,920 1,813,785 2.0%8.9%
Commercial business268,435 248,521 227,262 8.0%18.1%
Consumer18,352 20,034 25,047 (8.4)%(26.7)%
Total loans2,261,871 2,204,475 2,066,094 2.6%9.5%
Allowance for loan losses(20,125)(20,185)(19,917)(0.3)%1.0%
Loans, net2,241,746 2,184,290 2,046,177 2.6%9.6%
Premises and equipment, net20,192 20,685 22,004 (2.4)%(8.2)%
Other real estate owned3,649 3,649 202 %NM 
Accrued interest receivable6,531 6,120 5,362 6.7%21.8%
Goodwill and core deposit intangible9,438 9,566 10,091 (1.3)%(6.5)%
Net deferred tax asset6,480 5,197 8,184 24.7%(20.8)%
Bank-owned life insurance33,610 33,354 32,533 0.8%3.3%
Other assets34,719 30,936 25,404 12.2%36.7%
Total assets$2,741,162 $2,669,151 $2,513,909 2.7%9.0%
Liabilities and Stockholders' Equity       
Deposits:       
NOW and demand$375,934 $382,406 $359,877 (1.7)%4.5%
Regular savings213,205 216,894 246,484 (1.7)%(13.5)%
Money market628,718 643,336 674,593 (2.3)%(6.8)%
Certificates of deposit525,587 504,996 362,261 4.1%45.1%
Brokered money market85,951 90,369 44,728 (4.9)%92.2%
Brokered certificates of deposit282,672 239,837 277,320 17.9%1.9%
  Total deposits2,112,067 2,077,838 1,965,263 1.6%7.5%
Short-term borrowings110,000 65,000  69.2%NM 
Long-term debt90,000 105,000 130,000 (14.3)%(30.8)%
Other liabilities28,850 25,869 21,328 11.5%35.3%
Total liabilities2,340,917 2,273,707 2,116,591 3.0%10.6%
Common stock268 268 268 %%
Additional paid-in capital258,225 256,470 252,495 0.7%2.3%
Unearned compensation- ESOP(19,357)(19,547)(20,117)(1.0)%(3.8)%
Retained earnings162,948 160,124 166,033 1.8%(1.9)%
Accumulated other comprehensive loss(1,839)(1,871)(1,361)(1.7)%35.1%
Total stockholders' equity400,245 395,444 397,318 1.2%0.7%
Total liabilities and stockholders' equity$2,741,162 $2,669,151 $2,513,909 2.7%9.0%
              


 
Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
 
                
(Unaudited; dollars in thousands)June 30, 2018March 31, 2018December 31, 2017September 30, 2017June 30, 2017
Assets     
Cash and due from banks$17,566 $18,194 $16,149 $16,171 $17,292 
Short term investments34,383 26,878 30,018 22,192 33,819 
Total cash and cash equivalents51,949 45,072 46,167 38,363 51,111 
Equity securities, at fair value5,331 9,651    
Securities available for sale, at fair value  9,720 9,943 10,437 
Securities held-to-maturity, at amortized cost303,137 304,036 303,716 302,833 283,672 
Federal Home Loan Bank stock, at cost14,375 10,730 12,105 9,410 11,943 
Loans held for sale10,005 5,865 8,992 12,268 6,789 
Loans:     
1-4 family residential989,598 938,030 926,117 905,585 895,015 
Home equity72,813 75,737 81,358 77,819 84,615 
Commercial real estate824,541 849,040 833,978 751,209 756,093 
Construction88,132 73,113 90,712 88,979 78,062 
  Total real estate loans1,975,084 1,935,920 1,932,165 1,823,592 1,813,785 
Commercial business268,435 248,521 253,001 240,801 227,262 
Consumer18,352 20,034 21,858 23,142 25,047 
Total loans2,261,871 2,204,475 2,207,024 2,087,535 2,066,094 
Allowance for loan losses(20,125)(20,185)(20,877)(20,248)(19,917)
Loans, net2,241,746 2,184,290 2,186,147 2,067,287 2,046,177 
Premises and equipment, net20,192 20,685 21,573 21,850 22,004 
Other real estate owned3,649 3,649  202 202 
Accrued interest receivable6,531 6,120 6,438 5,802 5,362 
Goodwill and core deposit intangible9,438 9,566 9,717 9,892 10,091 
Net deferred tax asset6,480 5,197 6,000 9,295 8,184 
Bank-owned life insurance33,610 33,354 33,078 32,800 32,533 
Other assets34,719 30,936 24,867 25,471 25,404 
Total assets$2,741,162 $2,669,151 $2,668,520 $2,545,416 $2,513,909 
Liabilities and Stockholders' Equity     
Deposits:     
NOW and demand$375,934 $382,406 $381,316 $376,864 $359,877 
Regular savings213,205 216,894 221,004 244,662 246,484 
Money market628,718 643,336 646,603 666,388 674,593 
Certificates of deposit525,587 504,996 448,382 420,765 362,261 
Brokered money market85,951 90,369 92,798 41,768 44,728 
Brokered certificates of deposit282,672 239,837 249,766 235,106 277,320 
  Total deposits2,112,067 2,077,838 2,039,869 1,985,553 1,965,263 
Short-term borrowings110,000 65,000 100,000 20,000  
Long-term debt90,000 105,000 105,000 110,000 130,000 
Other liabilities28,850 25,869 25,845 30,829 21,328 
Total liabilities2,340,917 2,273,707 2,270,714 2,146,382 2,116,591 
Common stock268 268 268 268 268 
Additional paid-in capital258,225 256,470 254,750 254,025 252,495 
Unearned compensation- ESOP(19,357)(19,547)(19,737)(19,927)(20,117)
Retained earnings162,948 160,124 163,978 166,282 166,033 
Accumulated other comprehensive loss(1,839)(1,871)(1,453)(1,614)(1,361)
Total stockholders' equity400,245 395,444 397,806 399,034 397,318 
  Total liabilities and stockholders' equity$2,741,162 $2,669,151 $2,668,520 $2,545,416 $2,513,909 


 
Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
 
              
(Unaudited; dollars in thousands, except share data)Quarters Ended% Change
 June 30, 2018March 31, 2018June 30, 2017June 30, 2018
vs. 
March 31, 2018
June 30, 2018
vs.
June 30, 2017
Interest and fees on loans$23,081 $21,809 $18,715 5.8%23.3%
Interest on securities1,809 1,857 1,572 (2.6)%15.1%
Dividends195 204 193 (4.4)%1.0%
Other62 78 94 (20.5)%(34.0)%
Total interest and dividend income25,147 23,948 20,574 5.0%22.2%
Interest on deposits5,252 4,775 3,523 10.0%49.1%
Interest on borrowings912 814 643 12.0%41.8%
Total interest expense6,164 5,589 4,166 10.3%48.0%
Net interest and dividend income18,983 18,359 16,408 3.4%15.7%
Provision (credit) for loan losses101 (460)1,118 (122.0)%(91.0)%
Net interest and dividend income, after provision for loan losses18,882 18,819 15,290 0.3%23.5%
Deposit account fees422 355 341 18.9%23.8%
Interchange and ATM fees454 391 388 16.1%17.0%
Mortgage banking1,033 740 1,219 39.6%(15.3)%
Loan level derivative fee income143 240 1,367 (40.4)%(89.5)%
Unrealized gains (losses) on equity securities452 (69) (755.1)%NM 
Realized securities gains (losses), net  928 NM (100.0)%
Gain on exchange of investment in Northeast Retirement Services 653  (100.0)%NM 
Bank-owned life insurance income256 276 261 (7.2)%(1.9)%
Gain on sale of premises and equipment 271  (100.0)%NM 
Miscellaneous872 1,041 6 (16.2)%14,433.3%
Total noninterest income3,632 3,898 4,510 (6.8)%(19.5)%
Salaries and employee benefits8,264 8,382 7,664 (1.4)%7.8%
Occupancy and equipment2,050 2,083 2,030 (1.6)%1.0%
Data processing1,054 1,044 1,022 1.0%3.1%
Professional fees450 453 526 (0.7)%(14.4)%
Advertising499 304 489 64.1%2.0%
FDIC deposit insurance230 233 223 (1.3)%3.1%
Directors' fees362 409 428 (11.5)%(15.4)%
Amortization of core deposit intangible127 151 222 (15.9)%(42.8)%
Other general and administrative655 812 762 (19.3)%(14.0)%
Total noninterest expense13,691 13,871 13,366 (1.3)%2.4%
Income before income taxes8,823 8,846 6,434 (0.3)%37.1%
Provision for income taxes2,366 2,263 2,566 4.6%(7.8)%
Net income$6,457 $6,583 $3,868 (1.9)%66.9%
      
Earnings per common share:     
Basic$0.27 $0.27 $0.16   
Diluted$0.26 $0.27 $0.16   
Weighted average shares outstanding:     
Basic 24,230,098  24,172,237  23,952,443   
Diluted 24,991,958  24,827,850  24,346,553   
Regular dividends declared per share$0.15 $0.15 $0.05   
Special dividends declared per share$ $0.30 $0.20   


 
Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date
         
(Unaudited; dollars in thousands, except share data)Year to Date
 June 30, 2018June 30, 2017% Change
Interest and fees on loans$44,890 $36,097 24.4%
Interest on securities3,666 3,782 (3.1)%
Dividends399 350 14.0%
Other140 126 11.1%
  Total interest and dividend income49,095 40,355 21.7%
Interest on deposits10,027 6,777 48.0%
Interest on borrowings1,726 1,289 33.9%
  Total interest expense11,753 8,066 45.7%
Net interest and dividend income37,342 32,289 15.6%
Provision (credit) for loan losses(359)1,175 (130.6)%
Net interest and dividend income, after provision for loan losses37,701 31,114 21.2%
Deposit account fees777 661 17.5%
Interchange and ATM fees845 736 14.8%
Mortgage banking1,773 1,959 (9.5)%
Loan level derivative fee income383 1,531 (75.0)%
Unrealized gains on equity securities383  NM 
Realized securities gains (losses), net (94)(100.0)%
Gain on exchange of investment in Northeast Retirement Services653 5,947 (89.0)%
Bank-owned life insurance income532 518 2.7%
Gain on sale of premises and equipment271  NM 
Miscellaneous1,913 68 2,713.2%
  Total noninterest income7,530 11,326 (33.5)%
Salaries and employee benefits16,646 15,227 9.3%
Occupancy and equipment4,133 4,145 (0.3)%
Data processing2,098 2,066 1.5%
Professional fees903 1,395 (35.3)%
Advertising803 856 (6.2)%
FDIC deposit insurance463 435 6.4%
Directors' fees771 802 (3.9)%
Amortization of core deposit intangible278 469 (40.7)%
Other general and administrative1,467 1,371 7.0%
Total noninterest expense27,562 26,766 3.0%
Income before income taxes17,669 15,674 12.7%
Provision for income taxes4,629 4,319 7.2%
Net income$13,040 $11,355 14.8%
    
Earnings per common share:   
Basic$0.54 $0.47  
Diluted$0.52 $0.47  
Weighted average shares outstanding:   
Basic 24,201,328  23,932,044  
Diluted 24,910,065  24,311,222  
    
Regular dividends declared per share$0.30 $0.10  
Special dividends declared per share$0.30 $0.20  


 
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,
 20182018201720172017
Interest and fees on loans$23,081 $21,809 $20,883 $19,721 $18,715 
Interest on securities1,809 1,857 1,763 1,565 1,572 
Dividends195 204 189 194 193 
Other62 78 40 65 94 
  Total interest and dividend income25,147 23,948 22,875 21,545 20,574 
Interest on deposits5,252 4,775 4,349 4,089 3,523 
Interest on borrowings912 814 732 502 643 
  Total interest expense6,164 5,589 5,081 4,591 4,166 
Net interest and dividend income18,983 18,359 17,794 16,954 16,408 
Provision (credit) for loan losses101 (460)681 242 1,118 
Net interest and dividend income, after provision for loan losses18,882 18,819 17,113 16,712 15,290 
Deposit account fees422 355 372 385 341 
Interchange and ATM fees454 391 418 455 388 
Mortgage banking1,033 740 552 1,146 1,219 
Loss on sale of purchased home equity portfolio   (118) 
Loan level derivative fee income143 240 1,105 156 1,367 
Unrealized gains (losses) on equity securities452 (69)   
Realized securities gains (losses), net    928 
Gain on exchange of investment in Northeast Retirement Services 653    
Bank-owned life insurance income256 276 277 268 261 
Gain on sale of property plant and equipment 271    
Miscellaneous872 1,041 206 534 6 
  Total noninterest income3,632 3,898 2,930 2,826 4,510 
Salaries and employee benefits8,264 8,382 7,755 7,979 7,664 
Pension settlement charges  317   
Occupancy and equipment2,050 2,083 2,224 2,024 2,030 
Data processing1,054 1,044 1,067 1,016 1,022 
Professional fees450 453 540 340 526 
Advertising499 304 503 563 489 
FDIC deposit insurance230 233 220 226 223 
Directors' fees362 409 382 382 428 
Amortization of core deposit intangible127 151 175 199 222 
Other general and administrative655 812 1,002 626 762 
  Total noninterest expense13,691 13,871 14,185 13,355 13,366 
Income before income taxes8,823 8,846 5,858 6,183 6,434 
Provision for income taxes2,366 2,263 4,565 2,342 2,566 
Net income$6,457 $6,583 $1,293 $3,841 $3,868 
      
Earnings per common share:     
  Basic$0.27 $0.27 $0.05 $0.16 $0.16 
  Diluted$0.26 $0.27 $0.05 $0.16 $0.16 
Weighted average shares outstanding:     
  Basic 24,230,098  24,172,237  24,104,329  23,973,116  23,952,443 
  Diluted 24,991,958  24,827,850  24,795,366  24,510,092  24,346,553 
  Regular dividends declared per share$0.15 $0.15 $0.15 $0.15 $0.05 
  Special dividends declared per share$ $0.30 $ $ $0.20 


 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)Quarters Ended
 June 30, 2018 March 31, 2018 June 30, 2017
 Average
balance
InterestYield/
Cost
 Average
balance
InterestYield/
Cost
 Average
balance
InterestYield/
Cost
Interest-earning assets           
Total loans (1)$2,209,618 $23,115 4.20% $2,207,895 $21,841 4.01% $2,046,288 $18,770 3.68%
Securities (1)311,183 1,832 2.36  313,212 1,902 2.46  309,909 1,621 2.10 
Other interest earning assets and FHLB stock28,181 234 3.33  33,533 237 2.87  36,768 243 2.65 
Total interest-earning assets2,548,982 25,181 3.96% 2,554,640 23,980 3.81% 2,392,965 20,634 3.46%
Non-interest-earning assets103,295     96,629     102,750    
Total assets$2,652,277     $2,651,269     $2,495,715    
               
Interest-bearing liabilities              
NOW$160,194 $16 0.04% $157,582 $16 0.04% $150,711 $17 0.05%
Regular savings214,116 156 0.29  219,834 165 0.30  255,255 208 0.33 
Money market721,329 2,066 1.15  742,035 1,972 1.08  688,600 1,669 0.97 
Certificates of deposit725,904 3,014 1.67  694,526 2,622 1.53  573,997 1,629 1.14 
Total interest-bearing deposits1,821,543 5,252 1.16  1,813,977 4,775 1.07  1,668,563 3,523 0.85 
Borrowings197,429 912 1.85  202,944 814 1.63  204,786 643 1.26 
Total interest-bearing liabilities2,018,972 6,164 1.22% 2,016,921 5,589 1.12% 1,873,349 4,166 0.89%
Non-interest-bearing deposits207,888     208,561     189,180    
Other non-interest-bearing liabilities25,349     26,063     33,664    
Total liabilities2,252,209     2,251,545     2,096,193    
Stockholders' equity400,068     399,724     399,522    
Total liabilities and stockholders' equity$2,652,277     $2,651,269     $2,495,715    
               
Net interest and dividend income (FTE) 19,017     18,391     16,468   
Less: FTE adjustment (34)    (32)    (60)  
Net interest and dividend income (GAAP) $18,983     $18,359     $16,408   
               
Net interest rate spread (FTE)  2.74%   2.69%   2.57%
Net interest margin (FTE)  2.99%   2.92%   2.76%
Total deposit cost  1.04%   0.96%   0.76%

(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 June 30 and March 31, 2018. A statutory rate of 35% was used in the second quarter of 2017.

 

 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)Year to Date
 June 30, 2018 June 30, 2017
 Average
balance
InterestYield/
Cost
 Average
balance
InterestYield/
Cost
Interest-earning assets       
Total loans (1)$2,208,761 $44,956 4.10% $2,002,710 $36,206 3.65%
Securities (1)312,192 3,734 2.41  352,212 3,861 2.21 
Other interest earning assets and FHLB stock30,842 471 3.08  34,318 414 2.43 
Total interest-earning assets2,551,795 49,161 3.88% 2,389,240 40,481 3.42%
Non-interest-earning assets99,981     99,698    
Total assets$2,651,776     $2,488,938    
          
Interest-bearing liabilities         
NOW$158,896 $32 0.04% $148,068 $33 0.04%
Regular savings216,959 321 0.30  258,896 426 0.33 
Money market731,625 4,038 1.11  670,980 3,188 0.96 
Certificates of deposit710,301 5,636 1.60  570,837 3,130 1.11 
Total interest-bearing deposits1,817,781 10,027 1.11  1,648,781 6,777 0.83 
Borrowings200,171 1,726 1.74  230,500 1,289 1.13 
Total interest-bearing liabilities2,017,952 11,753 1.17% 1,879,281 8,066 0.87%
Non-interest-bearing deposits208,223    186,366   
Other non-interest-bearing liabilities25,704    27,385   
Total liabilities2,251,879    2,093,032   
Stockholders' equity399,897    395,906   
Total liabilities and stockholders' equity$2,651,776    $2,488,938   
        
Net interest and dividend income (FTE) 37,408    32,415  
Less: FTE adjustment (66)   (126) 
Net interest and dividend income (GAAP) $37,342    $32,289  
        
Net interest rate spread (FTE)  2.71%   2.55%
Net interest margin (FTE)  2.96%   2.74%
Total deposit cost  1.00%   0.74%

(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% in 2018. A statutory rate of 35% was used in 2017.


 
Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands)Quarters Ended
 June 30,March 31,December 31,September 30,June 30,
 20182018201720172017
Interest-earning assets     
Total loans$2,209,618 $2,207,895 $2,178,388 $2,096,034 $2,046,288 
Securities311,183 313,212 312,313 301,484 309,909 
Other interest earning assets and FHLB stock28,181 33,533 28,842 32,051 36,768 
Total interest-earning assets2,548,982 2,554,640 2,519,543 2,429,569 2,392,965 
Non-interest-earning assets103,295 96,629 96,781 101,188 102,750 
Total assets$2,652,277 $2,651,269 $2,616,324 $2,530,757 $2,495,715 
      
Interest-bearing liabilities     
NOW$160,194 $157,582 $160,371 $153,224 $150,711 
Regular savings214,116 219,834 235,864 243,680 255,255 
Money market721,329 742,035 718,489 708,748 688,600 
Certificates of deposit725,904 694,526 653,573 653,339 573,997 
Total interest-bearing deposits1,821,543 1,813,977 1,768,297 1,758,991 1,668,563 
Borrowings197,429 202,944 202,255 133,788 204,786 
Total interest-bearing liabilities2,018,972 2,016,921 1,970,552 1,892,779 1,873,349 
Non-interest-bearing deposits207,888 208,561 220,167 213,459 189,180 
Other non-interest-bearing liabilities25,349 26,063 23,602 23,603 33,664 
Total liabilities2,252,209 2,251,545 2,214,321 2,129,841 2,096,193 
Stockholders' equity400,068 399,724 402,003 400,916 399,522 
Total liabilities and stockholders' equity$2,652,277 $2,651,269 $2,616,324 $2,530,757 $2,495,715 
                


 
Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited)Quarters Ended
 June 30,March 31,December 31,September 30,June 30,
 2018 2018 2017 2017 2017 
Interest-earning assets     
Total loans (1)4.20%4.01%3.81%3.74%3.68%
Securities (1)2.36%2.46%2.33%2.12%2.10%
Other interest earning assets and FHLB stock3.33%2.87%2.15%2.66%2.65%
Total interest-earning assets3.96%3.81%3.61%3.53%3.46%
      
Interest-bearing liabilities     
NOW0.04%0.04%0.04%0.04%0.05%
Regular savings0.29%0.30%0.31%0.31%0.33%
Money market1.15%1.08%1.01%0.99%0.97%
Certificates of deposit1.67%1.53%1.41%1.28%1.14%
Total interest-bearing deposits1.16%1.07%0.98%0.92%0.85%
Borrowings1.85%1.63%1.44%1.49%1.26%
Total interest-bearing liabilities1.22%1.12%1.02%0.96%0.89%
      
Net interest rate spread (FTE) (1)2.74%2.69%2.59%2.57%2.57%
Net interest margin (FTE) (1)2.99%2.92%2.81%2.78%2.76%
Total deposit cost1.04%0.96%0.87%0.82%0.76%

(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 June 30, 2018 and March 31, 2018. A statutory rate of 35% was used in 2017.


 
Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)Quarter Ended
 June 30, 2018
 Income Before
Income Taxes
 Provision for
Income Taxes
 Net Income Earnings per
Common Share
(diluted)
GAAP basis$8,823  $2,366  $6,457  $0.26 
Less unrealized gain on equity securities(452) (121) (331) (0.01)
Non-GAAP basis$8,371  $2,245  $6,126  $0.25 
 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 premises 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 deferred tax asset 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 
 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 

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
(Unaudited; dollars in thousands, except share data)Year to Date
 June 30, 2018
 Income Before
Income Taxes
 Provision for
Income Taxes
 Net Income Earnings per
Common Share
(diluted)
GAAP basis$17,669  $4,629  $13,040  $0.52 
Less unrealized gain on equity securities(383) (103) (280) (0.01)
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$16,362  $4,287  $12,075  $0.48 
 Year to Date
 June 30, 2017
 Income Before
Income Taxes
 Provision for
Income Taxes
 Net Income Earnings per
Common Share
(diluted)
GAAP basis$15,674  $4,319  $11,355  $0.47 
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 funds1,054  378  676  0.03 
Add reversal of state tax valuation allowance  1,697  (1,697) (0.07)
Non-GAAP basis$9,853  $3,928  $5,925  $0.25 

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
 June 30,March 31,December 31,September 30,June 30,
 20182018201720172017
Performance Ratios (annualized)     
      
Diluted EPS:     
GAAP$0.26 $0.27 $0.05 $0.16 $0.16 
Non-GAAP$0.25 $0.24 $0.16 $0.16 $0.14 
                
Return on average assets (ROAA):               
GAAP0.98%1.01%0.20%0.60%0.62%
Non-GAAP0.93%0.91%0.60%0.61%0.53%
                
Return on average equity (ROAE):               
GAAP6.47%6.68%1.28%3.80%3.88%
Non-GAAP6.14%6.04%3.93%3.87%3.29%
                
Return on average tangible common equity (ROATCE) (1) (3):               
GAAP6.63%6.84%1.31%3.90%3.99%
Non-GAAP6.29%6.19%4.03%3.97%3.37%
                
Efficiency ratio (2) (3):               
GAAP61%62%68%68%64%
Non-GAAP62%65%67%67%67%

(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 14 for reconciliation of Non-GAAP financial measures.

 

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)Year to Date
 June 30, 2018June 30, 2017
Performance Ratios (annualized)      
       
Diluted EPS      
GAAP$0.52 $0.47 
Non-GAAP0.48 0.25 
       
Return on average assets (ROAA)      
GAAP0.99%0.92%
Non-GAAP0.92%0.48%
       
Return on average equity (ROAE)      
GAAP6.58%5.78%
Non-GAAP6.09%3.02%
       
Return on average tangible common equity (ROATCE) (1) (3)      
GAAP6.74%5.94%
Non-GAAP6.24%3.10%
       
Efficiency ratio (2) (3)      
GAAP61%61%
Non-GAAP63%71%

(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 EndedAt or for the Year Ended
 June 30,March 31,June 30,June 30,June 30,
 20182018201720182017
Asset Quality     
Non-performing Assets$13,898 $13,319 $12,779 $13,898 $12,779 
Non-performing Assets/ Total Assets0.51%0.50%0.51%0.51%0.51%
Allowance for Loan Losses/ Total Loans0.89%0.92%0.97%0.89%0.97%
Net Charge-offs (Recoveries)$161 $232 $76 $393 $8 
Annualized Net Charge-offs (Recoveries)/ Average Loans0.03%0.04%0.01%0.04%%
Allowance for Loan Losses/ Nonperforming Loans196%209%158%196%158%
                
Capital/Other               
Common shares outstanding26,874,071 26,861,521 26,860,988   
Book value per share$14.90 $14.72 $14.79   
Tangible book value per share$14.54 $14.37 $14.42   
Tangible Common Equity/Tangible Assets (1) (2)14.31%14.51%15.47%  
Full-time Equivalent Employees245 246 230   

(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