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.