Blue Hills Bancorp, Inc. (the “Company” or "Blue Hills Bancorp") (NASDAQ: BHBK), the parent of Blue Hills Bank (the "Bank"), today announced net income, excluding certain nonrecurring items, of $2,563,000 for the fourth quarter of 2014 compared to net income of $836,000 for the third quarter of 2014 and net income of $844,000 for the fourth quarter of 2013. The fourth quarter of 2014 represents Blue Hills Bancorp's first full quarter as a publicly traded company and diluted earnings per share for the quarter on this basis was $0.10.

For the year ended December 31, 2014, net income excluding certain nonrecurring items, was $4,595,000 versus net income of $2,404,000 for the year ended December 31, 2013.

The following nonrecurring items were excluded from the results discussed above (see page 15 for more details):

  • Pre-tax gains of $182,000 for the year and quarter ended December 31, 2014 and $1,872,000 for the year ended December 31, 2013 related to death benefits received on bank-owned life insurance.
  • A pre-tax expense of $7,000,000 for the year ended December 31, 2014 and quarter ended September 30, 2014 related to the Company's funding of a new charitable foundation at the time of the mutual to stock conversion that was completed on July 21, 2014.
  • A pre-tax pension curtailment gain of $1,304,000 for the year ended December 31, 2014 and quarter ended September 30, 2014 related to the Company's decision to freeze its defined benefit pension plan as of October 31, 2014.
  • Pre-tax expenses of $869,000 for year ended December 31, 2014, $51,000 for the quarter ended September 30, 2014, and $184,000 for the year and quarter ended December 31, 2013 related to the Company's mutual to stock conversion.
  • Pre-tax expenses of $950,000 for the year ended December 31, 2014, $2,000 for the quarter ended September 30, 2014, $583,000 for the year ended December 31, 2013 and $350,000 for the quarter ended December 31, 2013 related to the January 2014 Nantucket Bank acquisition.
  • A pre-tax expense of $1,677,000 for the year and quarter ended December 31, 2013 related to the restructuring of incentive and benefit plans.

On a GAAP basis, which includes the nonrecurring items discussed above, the Company reported net income of $2,745,000 for the quarter ended December 31, 2014, a net loss of $2,958,000 for the quarter ended September 30, 2014, and a net loss of $615,000 for the quarter ended December 31, 2013. Diluted earnings per share on a GAAP basis for the fourth quarter of 2014 was $0.10. On a GAAP basis, the Company reported a net loss of $183,000 for the year ended December 31, 2014 and net income of $2,663,000 for the year ended December 31, 2013.

2014 HIGHLIGHTS

  • Successfully completed the mutual to stock conversion in July. The Company sold 27,772,500 shares of common stock, representing the adjusted maximum of the offering range, at $10.00 per share, for gross offering proceeds of $277,725,000, including the sale of 2,277,345 shares to the employee stock ownership plan. Additionally, 694,313 shares of Company common stock and $57,000 in cash were contributed to the Blue Hills Bank Foundation in connection with the conversion and offering.
  • Acquired Nantucket Bank in January and successfully completed the integration. Despite the normal seasonal decline experienced in the fourth quarter, Nantucket deposits were up slightly at the end of 2014 from $275 million on the acquisition date.
  • Loans grew 48% to $1.1 billion at December 31, 2014 from the end of 2013 as the Company continued to execute on its balance sheet diversification strategy through an expansion of the residential mortgage, commercial real estate and commercial business loan portfolios.
  • Continued to expand the geographic reach of the commercial lending business by hiring a new lending team to cover the South Shore and South Coast areas of Massachusetts (new loan production office was opened in Plymouth, Massachusetts in January 2015).
  • Over the past few years the company has expanded its residential mortgage capabilities and in 2014 originations totaled $235 million, representing increases of 34% from 2013.
  • Maintained strong asset quality with net chargeoffs for the year equal to 0.01% of average loans. The reserve/loans ratio was 1.13% and the reserve/non-performing assets ratio was 274 % at December 31, 2014.
  • Reduced the overall cost of funds to 0.59% for the year ended December 31, 2014 from 0.82% for the year ended December 31, 2013. This helped net interest margin improve to 2.78% for the year ended December 31, 2014 from 2.21% in the prior year.
  • In July, redeemed the $18.7 million of Series A Preferred Stock issued to the U.S. Treasury under the Small Business Lending Fund (SBLF) preferred stock program.
  • Continued the expansion of the Company's brand by obtaining the naming rights to the Blue Hills Bank Pavilion concert venue in the Seaport District of Boston.
  • Opened a new branch office in Milton, Massachusetts in October. Deposits at the branch rose to $15 million at December 31, 2014.
  • During the course of 2014, donations in excess of $1 million were made to various non-profits reflecting the Company's active involvement in the communities it serves. The bulk of the donations were made through the Blue Hills Bank foundations which support nonprofits in the fields of education and the arts, health and human services, affordable housing and community services.
  • The Company's stock was added to the Russell 2000 Index at the end of September and to the ABA NASDAQ Community Bank Index at the beginning of December.

Commenting on the Company's progress during 2014, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "In the years to come, we will all look back at 2014 as the most important and transformative year in the history of the Company. Our stock offering, which was completed in July and drew strong demand from depositors and employees, provides us with the capital needed to execute on our plan of becoming a diversified full service community bank."

Mr. Parent continued, "We enter 2015 with strong momentum in all of our business lines and are excited by the growth opportunities that lie ahead of us. As we embark on the next phase of our transformation, we remain committed to making the Blue Hills brand one that is synonymous with excellence in community banking and an institution of which our customers, employees, shareholders, communities, and all major stakeholders can be proud."

BALANCE SHEET

Total assets at December 31, 2014 and September 30, 2014 were $1.7 billion. Loans increased $20 million, or 2%, driven by higher levels of commercial real estate and commercial business loans. Originations continued to be strong in the fourth quarter and this drove the growth from the end of September. The growth rate, however, was lower than seen in prior quarters as the loan portfolio is gradually becoming more seasoned, which resulted in a higher level of loan paydowns in the fourth quarter than had been seen previously. In addition, $15 million of mortgage loans are included in loans held for sale at the end of the year.

Compared to December 31, 2013, total assets increased $414 million, or 32%. Loans accounted for $372 million of the growth in total assets reflecting a combination of originations, purchases and participations as the Company continued to execute on its strategy to diversify its balance sheet, particularly through an expansion of the residential mortgage, commercial real estate and commercial business loan portfolios. The January 2014 Nantucket Bank acquisition added approximately $100 million of primarily commercial real estate and home equity loans. By category, nearly two-thirds of the growth in loans since the end of 2013 came from the residential mortgage and commercial real estate categories.

During the final three months of 2014, total deposits increased $60 million, or 5%, to $1.2 billion at December 31, 2014. This was helped by promotional programs conducted during the fourth quarter that attracted new deposits to the Company and also resulted in some movement in deposits into the money market category from regular savings. The opening of a new branch in Milton, Massachusetts in October also contributed to the increase in deposits at the end of 2014 while normal seasonality in Nantucket resulted in a fourth quarter decline in deposits of $25 million. The growth in deposits during the fourth quarter enabled the Company to reduce short-term borrowings by $35 million compared to September 30, 2014.

Compared with December 31, 2013, deposits increased $297 million, or 33%. The increase was primarily due to deposits assumed in the Nantucket Bank acquisition, which totaled $275 million as of the acquisition date in January 2014 and have grown slightly since then. Approximately 10% of the deposits assumed in the Nantucket Bank acquisition were certificates of deposit and the remainder was demand, savings and money market deposits. In addition, the growth in deposits from a year ago reflects a higher level of commercial deposits due to the Company’s increased emphasis on leveraging commercial lending relationships, including those in Nantucket. The increase in deposits from the factors discussed above was partially offset by a decline in brokered CDs and the run-off of higher-yielding consumer deposits, which helped the Company lower the yield on interest bearing deposits to 0.56% in 2014 compared to 0.81% in 2013.

Stockholders’ equity was $412 million at December 31, 2014 compared to $410 million at September 30, 2014 and $172 million at December 31, 2013. The increase from the end of 2013 reflects the Company's mutual to stock conversion that was completed in July 2014. Proceeds from the stock offering were used to fund asset growth and to pay down debt and, as a result, short-term borrowings declined to $40 million at December 31, 2014 from $170 million at December 31, 2013. As part of the conversion, the Company also (1) redeemed $18.7 million of preferred stock that had been issued to the U. S. Treasury as part of the Small Business Lending Fund Program and (2) established an employee stock ownership plan ("ESOP") which acquired 8% of the shares issued in the conversion. The $22.0 million related to the ESOP is shown as a reduction to stockholders' equity on the balance sheet. The tangible common equity to tangible assets ratio increased to 23.22% at December 31, 2014 from 11.63% at December 31, 2013 as a result of the additional capital received from the mutual to stock conversion.

NET INTEREST INCOME

Net interest and dividend income was $12.6 million in the fourth quarter of 2014, up 10% from $11.4 million in the third quarter of 2014. Net interest margin improved to 3.07% in the fourth quarter of 2014 from 2.81% in the third quarter of 2014. The improvement in net interest income and margin from the third quarter was mainly driven by an $833,000 increase in dividend income reflecting a higher level of dividends received on mutual fund investments, partially offset by a higher cost of funds reflecting the impact of promotional deposit programs. The growth in net interest income from the third quarter was also helped by a $63 million, or 6%, increase in average loans. Net interest income and margin in both quarters were impacted by purchase accounting accretion related to the January 2014 Nantucket Bank acquisition. Accretion in the fourth quarter contributed $186,000 to net interest income compared to $179,000 in the third quarter and added between 4 and 5 basis points to net interest margin in each quarter. The $3.6 million remaining balance of accretable yield at December 31, 2014 is expected to be recorded to net interest income in future quarters. Loan yield was little changed from the third quarter, down 2 basis points to 3.53% in the fourth quarter.

Compared to the fourth quarter of 2013, net interest and dividend income increased $4.5 million, or 55%, while net interest margin improved 40 basis points. The improvement in both net interest income and margin reflects:

  • A $771,000 increase in dividend income due to a higher level of dividends received on mutual fund investments.
  • A significant increase in noninterest bearing funds as average equity increased $238 million due to the Company's mutual to stock conversion and average noninterest bearing deposits which more than tripled to $122 million.
  • A 4 basis point decline in the cost of interest bearing liabilities to 0.65% in the fourth quarter of 2014.
  • Purchase accounting accretion related to the January 2014 Nantucket Bank acquisition which contributed $186,000 to net interest income and between 4 and 5 basis points to net interest margin in the fourth quarter of 2014.

Net interest income was also helped by a $428 million, or 59%, increase in average loans driven by higher levels of loans in all categories, with the biggest growth seen in the residential mortgages and commercial real estate portfolios.

NONINTEREST INCOME

Noninterest income, excluding a $182,000 bank-owned life insurance death benefit recognized in the fourth quarter of 2014 and a $1.3 million pension curtailment gain recognized in the third quarter of 2014, was $2.1 million in each of the final two quarters of 2014. By category, higher levels of securities gains (net of impairment losses) and other income were mostly offset by a decline in loan level derivative income from fewer conversions of commercial loans from floating to fixed rate, lower interchange and ATM fees, and a lower gain from bulk sales of jumbo residential mortgages.

Compared to the fourth quarter of 2013, noninterest income, excluding a $182,000 bank-owned life insurance death benefit recognized in the fourth quarter of 2014, increased $1.4 million, or 178%. The fourth quarter of 2014 included securities gains (net of impairment losses) of $434,000 versus losses of $633,000 in the fourth quarter of 2013. The fourth quarter of 2014 also included a $200,000 gain from the bulk sale of jumbo residential mortgages. In addition, deposit fees increased $178,000 or 109% and interchange and ATM fees grew $142,000, or 68%, primarily driven by the Nantucket Bank acquisition, debit card activity and changes to the fee structure. These improvements were partially offset by a $350,000 or 69% decline in loan level derivative income from fewer conversions of commercial loans from floating to fixed rate.

NONINTEREST EXPENSE

Noninterest expense was $10.7 million in the fourth quarter of 2014 compared to $17.7 million in the third quarter of 2014. The third quarter included a $7.0 million expense related to the Company's funding of a new charitable foundation that was set up when the mutual-to-stock conversion was completed on July 21, 2014, $51,000 of costs associated with the Company’s mutual-to-stock conversion and $2,000 of one-time costs associated with the Nantucket Bank acquisition. Excluding those three items, noninterest expense increased $47,000, or less than 1%, from the third quarter.

Noninterest expense in the fourth quarter of 2013 was $9.0 million and included a $1.7 million charge related to the restructuring of incentive and benefit plans, $350,000 of one-time costs related to the January 2014 Nantucket Bank acquisition, and $184,000 related to the Company's mutual to stock conversion. Excluding these items, noninterest expense increased $4.0 million, or 59%, when comparing the fourth quarter of 2014 to the fourth quarter of 2013. The noninterest expense comparison with the prior year quarter was heavily impacted by ongoing expenses related to Nantucket Bank, which was acquired in January 2014. This caused noninterest expense to increase $1.8 million taking into account 2014 operating expenses and core deposit intangible amortization. In addition, operating expenses were boosted in 2014 by higher costs associated with becoming a diversified community bank, including new hires, infrastructure spending to meet the needs associated with the current business plan, an increase in advertising, the opening of the Milton branch in October and the establishment of the Plymouth loan production office. In addition, the fourth quarter of 2014 included employee stock ownership plan expenses of approximately $500,000. On a full time equivalent basis, total employees were 202 at December 31, 2014 compared to 147 at December 31, 2013.

ASSET QUALITY

The provision for loan losses was $270,000 in the fourth quarter of 2014 compared to $1.4 million in the third quarter of 2014 and $1.0 million in the fourth quarter of 2013. The provisions in all quarters reflect management’s assessment of the risks inherent in the loan portfolio and the lower level of provision in the fourth quarter of 2014 compared to prior periods is mainly due to (1) a decline in net loan growth and (2) the release of reserves related to a classified loan that was fully paid off.

The allowance for loan losses as a percentage of total loans was 1.13% at both December 31, 2014 and September 30, 2014 compared to 1.25% at December 31, 2013. The decline in the allowance coverage ratio from a year ago is due, in part, to placing the loans obtained in the Nantucket Bank acquisition on the balance sheet at estimated fair value. As a result, there was no associated allowance for loan losses established on the Nantucket Bank loans which resulted in an overall lower allowance coverage ratio for the Company.

The Company had net loan chargeoffs of $19,000 in the fourth quarter of 2014 compared to $9,000 in the third quarter of 2014 and $22,000 in the fourth quarter of 2013.

Nonperforming assets were $4.7 million at December 31, 2014 compared to $4.6 million at September 30, 2014 and $2.0 million at December 31, 2013. Nonperforming assets as a percentage of total assets were 0.27% at December 31, 2014 and September 30, 2014 and 0.23% at December 31, 2013.

ABOUT BLUE HILLS BANCORP

Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $1.7 billion at December 31, 2014 and operates 10 branch offices in Brookline, Dedham, Hyde Park, Milton, Nantucket, Norwood and West Roxbury, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, MA. The three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer and commercial deposit and loan products to Eastern Massachusetts through a growing branch network and eCommerce channels. The Bank offers commercial and industrial 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. Previously known as Hyde Park Savings Bank, Blue Hills Bank has been serving area residents for over 140 years. For more information about Blue Hills Bank, visit the Blue Hills web site at www.bluehillsbank.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by authorized officers of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our new 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 prospectus dated May 14, 2014, as filed with the Securities and Exchange Commission on May 23, 2014. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

 
Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
(Dollars in thousands)     % Change

December 31,
2014

 

September 30,
2014

 

December 31,
2013

 

December 31, 2014 vs.
September 30, 2014

 

December 31, 2014 vs.
December 31, 2013

Assets      
Cash and due from banks $ 15,345 $ 14,632 $ 8,151 4.9 % 88.3 %
Short term investments 44,801     39,229     32,165     14.2     39.3  
Total cash and cash equivalents 60,146 53,861 40,316 11.7 49.2
Trading assets — — 750 — (100.0 )
Securities available for sale, at fair value 416,447 417,164 441,306 (0.2 ) (5.6 )
Federal Home Loan Bank stock, at cost 11,702 11,702 10,766 — 8.7
Loans held for sale 14,591 2,465 765 491.9 1,807.3
Loans 1,145,887 1,125,496 774,253 1.8 48.0
Allowance for loan losses (12,973 )   (12,721 )   (9,671 )   2.0     34.1  
Loans, net of allowance for loan losses 1,132,914 1,112,775 764,582 1.8 48.2
Premises and equipment, net 18,788 18,616 7,478 0.9 151.2
Accrued interest receivable 4,433 4,367 4,290 1.5 3.3
Goodwill 9,160 9,160 — — 100.0
Core deposit intangible 4,232 4,694 — (9.8 ) 100.0
Net deferred tax asset 6,233 4,456 2,831 39.9 120.2
Bank-owned life insurance 30,595 30,576 29,831 0.1 2.6
Other assets 18,907     16,775     11,372     12.7     66.3  
Total assets $ 1,728,148     $ 1,686,611     $ 1,314,287     2.5 %   31.5 %
Liabilities and Stockholders' Equity
NOW and demand $ 245,117 $ 252,439 $ 118,648 (2.9 )% 106.6 %
Regular savings 303,834 318,557 332,518 (4.6 ) (8.6 )
Money market 280,139 233,392 75,716 20.0 270.0
Certificates of deposit 301,755 289,384 296,718 4.3 1.7
Brokered money market 23,166 — — 100.0 100.0
Brokered certificates of deposit 58,705     58,705     91,623     —     (35.9 )
Total deposits 1,212,716 1,152,477 915,223 5.2 32.5
Short-term borrowings 40,000 75,000 170,000 (46.7 ) (76.5 )
Long-term debt 35,000 35,000 45,000 — (22.2 )
Other liabilities 28,826     14,068     12,530     104.9     130.1  
Total liabilities 1,316,542     1,276,545     1,142,753     3.1     15.2  
Preferred stock — — 18,724 — (100.0 )
Common stock 285 285 — — 100.0
Additional paid-in capital 281,035 280,926 — — 100.0
Unearned compensation- ESOP (22,014 ) (22,393 ) — (1.7 ) 100.0
Retained earnings 149,723 146,979 150,345 1.9 (0.4 )
Accumulated other comprehensive income 2,577     4,269     2,465     (39.6 )   4.5  
Total stockholders' equity 411,606     410,066     171,534     0.4 %   140.0 %
Total liabilities and stockholders' equity $ 1,728,148     $ 1,686,611     $ 1,314,287     2.5 %   31.5 %
 
 
Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Dollars in thousands)   December 31,   September 30,   June 30,   March 31,   December 31,
2014     2014     2014     2014     2013  
Assets
Cash and due from banks $ 15,345 $ 14,632 $ 15,308 $ 17,811 $ 8,151
Short term investments 44,801     39,229     281,618     29,402     32,165  
Total cash and cash equivalents 60,146 53,861 296,926 47,213 40,316
Trading assets — — — — 750
Securities available for sale, at fair value 416,447 417,164 417,581 444,959 441,306
Federal Home Loan Bank stock, at cost 11,702 11,702 11,702 11,246 10,766
Loans held for sale 14,591 2,465 22,398 874 765
Loans 1,145,887 1,125,496 1,001,645 923,769 774,253
Allowance for loan losses (12,973 )   (12,721 )   (11,292 )   (10,346 )   (9,671 )
Loans, net of allowance for loan losses 1,132,914 1,112,775 990,353 913,423 764,582
Premises and equipment, net 18,788 18,616 18,209 18,281 7,478
Accrued interest receivable 4,433 4,367 4,127 3,906 4,290
Goodwill 9,160 9,160 9,182 9,182 —
Core deposit intangible 4,232 4,694 5,179 5,688 —
Net deferred tax asset 6,233 4,456 1,020 1,859 2,831
Bank-owned life insurance 30,595 30,576 30,326 30,080 29,831
Other assets 18,907     16,775     16,102     12,816     11,372  
Total assets $ 1,728,148     $ 1,686,611     $ 1,823,105     $ 1,499,527     $ 1,314,287  
Liabilities and Stockholders' Equity
NOW and demand $ 245,117 $ 252,439 $ 237,586 $ 242,544 $ 118,648
Regular savings 303,834 318,557 343,697 351,040 332,518
Money market 280,139 233,392 195,264 195,713 75,716
Certificates of deposit 301,755 289,384 293,516 306,759 296,718
Brokered money market 23,166 — — — —
Brokered certificates of deposit 58,705     58,705     81,205     20,705     91,623  
Total deposits 1,212,716 1,152,477 1,151,268 1,116,761 915,223
Stock subscriptions — — 283,958 — —
Short-term borrowings 40,000 75,000 160,000 150,000 170,000
Long-term debt 35,000 35,000 35,000 45,000 45,000
Other liabilities 28,826     14,068     16,724     14,601     12,530  
Total liabilities 1,316,542     1,276,545     1,646,950     1,326,362     1,142,753  
Preferred stock — — 18,724 18,724 18,724
Common stock 285 285 — — —
Additional paid-in capital 281,035 280,926 — — —
Unearned compensation- ESOP (22,014 ) (22,393 ) — — —
Retained earnings 149,723 146,979 149,959 149,742 150,345
Accumulated other comprehensive income 2,577     4,269     7,472     4,699     2,465  
Total stockholders' equity 411,606     410,066     176,155     173,165     171,534  
Total liabilities and stockholders' equity $ 1,728,148     $ 1,686,611     $ 1,823,105     $ 1,499,527     $ 1,314,287  
 
 
Blue Hills Bancorp, Inc.
Consolidated Statements of Operations – Quarters
(Dollars in thousands, except share data)   Quarters Ended   % Change

December 31,
2014

 

September 30,
2014

 

December 31,
2013

 

December 31, 2014 vs.
September 30, 2014

 

December 31, 2014 vs.
December 31, 2013

Interest and fees on loans $ 10,207   $ 9,725   $ 6,453   5.0 %   58.2 %
Interest on securities 2,027 1,892 1,994 7.1 % 1.7 %
Dividends 2,221 1,388 1,450 60.0 % 53.2 %
Other 30     65     10     (53.8 )%   200.0 %
Total interest and dividend income 14,485     13,070     9,907     10.8 %   46.2 %
Interest on deposits 1,675 1,376 1,490 21.7 % 12.4 %
Interest on borrowings 243     275     305     (11.6 )%   (20.3 )%
Total interest expense 1,918     1,651     1,795     16.2 %   6.9 %
Net interest and dividend income 12,567 11,419 8,112 10.1 % 54.9 %
Provision for loan losses 270     1,438     1,001     (81.2 )%   (73.0 )%
Net interest and dividend income, after provision for loan losses 12,297 9,981 7,111 23.2 % 72.9 %
Deposit account fees 342 337 164 1.5 % 108.5 %
Interchange and ATM fees 351 390 209 (10.0 )% 67.9 %
Mortgage banking 100 101 86 (1.0 )% 16.3 %
Gain on sale of jumbo residential mortgage portfolio loans 200 240 — (16.7 )% 100.0 %
Loan level derivative income 157 296 507 (47.0 )% (69.0 )%
Realized securities gains and impairment losses, net 434 349 (633 ) 24.4 % 168.6 %
Loss on trading assets, net — — (55 ) — % (100.0 )%
Bank-owned life insurance income 261 250 260 4.4 % 0.4 %
Bank-owned life insurance death benefit gains 182 — — 100.0 % 100.0 %
Pension curtailment gain — 1,304 — (100.0 )% — %
Miscellaneous 267     107     223     149.5 %   19.7 %
Total noninterest income 2,294     3,374     761     (32.0 )%   201.4 %
Salaries and employee benefits 5,543 5,424 5,159 2.2 % 7.4 %
Occupancy and equipment 1,256 1,150 1,110 9.2 % 13.2 %
Data processing 878 805 646 9.1 % 35.9 %
Professional fees 575 694 700 (17.1 )% (17.9 )%
Advertising 653 815 269 (19.9 )% 142.8 %
FDIC deposit insurance 532 360 95 47.8 % 460.0 %
Directors' fees 30 150 312 (80.0 )% (90.4 )%
Amortization of core deposit intangible 461 485 — (4.9 )% 100.0 %
Charitable Foundation contribution — 7,000 — (100.0 )% — %
Other general and administrative 814     865     664     (5.9 )%   22.6 %
Total noninterest expense 10,742 17,748 8,955 (39.5 )% 20.0 %
Income (loss) before income taxes 3,849 (4,393 ) (1,083 ) 187.6 % 455.4 %
Provision (benefit) for income taxes 1,104     (1,435 )   (468 )   176.9 %   335.9 %
Net income (loss) $ 2,745     $ (2,958 )   $ (615 )   192.8 %   546.3 %
 
Earnings per common share:
Basic $ 0.10 n/a n/a n/a n/a
Diluted $ 0.10 n/a n/a n/a n/a
Weighted average shares outstanding:
Basic 26,243,957 n/a n/a n/a n/a
Diluted 26,243,957 n/a n/a n/a n/a
 
 
Blue Hills Bancorp, Inc.
Consolidated Statements of Operations - Year to Date
(Dollars in thousands)   Year to Date

December 31,
2014

 

December 31,
2013

  % Change
Interest and fees on loans $ 37,382   $ 21,876   70.9 %
Interest on securities 7,859 8,821 (10.9 )%
Dividends 3,894 2,329 67.2 %
Other 140     66     112.1 %
Total interest and dividend income 49,275     33,092     48.9 %
Interest on deposits 5,750 6,803 (15.5 )%
Interest on borrowings 1,148     1,168     (1.7 )%
Total interest expense 6,898     7,971     (13.5 )%
Net interest and dividend income 42,377     25,121     68.7 %
Provision for loan losses 3,381     4,094     (17.4 )%
Net interest and dividend income, after provision for loan losses 38,996 21,027 85.5 %
Deposit account fees 1,313 579 126.8 %
Interchange and ATM fees 1,397 821 70.2 %
Mortgage banking 344 754 (54.4 )%
Gain on sale of jumbo residential mortgage portfolio loans 440 536 (17.9 )%
Loan level derivative income 660 1,392 (52.6 )%
Realized securities gains and impairment losses, net 2,515 4,999 (49.7 )%
Gains on trading assets, net 25 505 (95.0 )%
Bank-owned life insurance income 1,006 1,023 (1.7 )%
Bank-owned life insurance death benefit gains 182 1,872 (90.3 )%
Pension curtailment gain 1,304 — 100.0 %
Miscellaneous 421     530     (20.6 )%
Total noninterest income 9,607 13,011 (26.2 )%
Salaries and employee benefits 21,308 16,903 26.1 %
Occupancy and equipment 5,305 3,996 32.8 %
Data processing 2,989 1,934 54.6 %
Professional fees 3,551 3,348 6.1 %
Advertising 2,427 1,823 33.1 %
FDIC deposit insurance 1,266 520 143.5 %
Directors' fees 486 688 (29.4 )%
Amortization of core deposit intangible 1,808 — 100.0 %
Charitable Foundation contribution 7,000 — 100.0 %
Other general and administrative 3,268     2,447     33.6 %
Total noninterest expense 49,408 31,659 56.1 %
Income (loss) before income taxes (805 ) 2,379 (133.8 )%
Provision (benefit) for income taxes (622 )   (284 )   119.0 %
Net income (loss) $ (183 )   $ 2,663     (106.9 )%
 
 
Blue Hills Bancorp Inc.
Consolidated Statements of Operations – Trend
  Quarters Ended
(Dollars in thousands, except share data) December 31,   September 30,   June 30,   March 31,   December 31,
2014     2014     2014     2014     2013  
Interest and fees on loans $ 10,207 $ 9,725 $ 9,399 $ 8,051 $ 6,453
Interest on securities 2,027 1,892 2,003 1,937 1,994
Dividends 2,221 1,388 119 166 1,450
Other 30     65     30     15     10  
Total interest and dividend income 14,485     13,070     11,551     10,169     9,907  
Interest on deposits 1,675 1,376 1,348 1,351 1,490
Interest on borrowings 243     275     326     304     305  
Total interest expense 1,918     1,651     1,674     1,655     1,795  
Net interest and dividend income 12,567     11,419     9,877     8,514     8,112  
Provision for loan losses 270     1,438     959     714     1,001  
Net interest and dividend income, after provision for loan losses 12,297 9,981 8,918 7,800 7,111
Deposit account fees 342 337 343 291 164
Interchange and ATM fees 351 390 371 285 209
Mortgage banking 100 101 75 68 86
Gain on sale of jumbo residential mortgage portfolio loans 200 240 — — —
Loan level derivative income 157 296 57 150 507
Realized securities gains and impairment losses, net 434 349 1,191 541 (633 )
Gains (losses) on trading assets, net — — — 25 (55 )
Bank-owned life insurance income 261 250 246 249 260
Bank-owned life insurance death benefit gains 182 — — — —
Pension curtailment gain — 1,304 — — —
Miscellaneous 267     107     27     20     223  
Total noninterest income 2,294     3,374     2,310     1,629     761  
Salaries and employee benefits 5,543 5,424 5,212 5,129 5,159
Occupancy and equipment 1,256 1,150 1,298 1,601 1,110
Data processing 878 805 701 605 646
Professional fees 575 694 1,123 1,159 700
Advertising 653 815 658 301 269
FDIC deposit insurance 532 360 196 178 95
Directors' fees 30 150 156 150 312
Amortization of core deposit intangible 461 485 509 353 —
Charitable Foundation contribution — 7,000 — — —
Other general and administrative 814     865     809     780     664  
Total noninterest expense 10,742     17,748     10,662     10,256     8,955  
Income (loss) before income taxes 3,849 (4,393 ) 566 (827 ) (1,083 )
Provision (benefit) for income taxes 1,104     (1,435 )   137     (428 )   (468 )
Net income (loss) $ 2,745     $ (2,958 )   $ 429     $ (399 )   $ (615 )
 
Earnings per common share:
Basic $ 0.10 n/a n/a n/a n/a
Diluted $ 0.10 n/a n/a n/a n/a
Weighted average shares outstanding:
Basic 26,243,957 n/a n/a n/a n/a
Diluted 26,243,957 n/a n/a n/a n/a
 
 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Dollars in thousands)   Quarters Ended
December 31, 2014   September 30, 2014   December 31, 2013

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

 

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets            
Total loans $ 1,148,744 $ 10,207 3.53 % $ 1,085,951 $ 9,725 3.55 % $ 720,615 $ 6,453 3.55 %
Securities 416,867 4,205 4.00 414,864 3,237 3.10 445,584 3,436 3.06
Other interest earning assets and FHLB stock 59,028     73     0.49   113,163     108     0.38   38,191     18     0.19  
Total interest-earning assets 1,624,639 14,485 3.54 % 1,613,978 13,070 3.21 % 1,204,390 9,907 3.26 %
Non-interest-earning assets 92,241   91,717   49,358  
Total assets $ 1,716,880   $ 1,705,695   $ 1,253,748  
 
Interest-bearing liabilities
NOW $ 136,210 $ 31 0.09 % $ 124,846 $ 19 0.06 % $ 74,777 $ 15 0.08 %
Regular savings 310,591 342 0.44 336,151 360 0.42 337,315 450 0.53
Money market 279,622 469 0.67 197,500 270 0.54 79,398 96 0.49
Certificates of deposit 356,255     833     0.93   346,807     727     0.83   385,674     929     0.96  
Total interest-bearing deposits 1,082,678 1,675 0.61 1,005,304 1,376 0.54 % 877,164 1,490 0.67
Borrowings 83,054     243     1.16   145,848     275     0.75   153,728     305     0.79  
Total interest-bearing liabilities 1,165,732 1,918   0.65 % 1,151,152 1,651   0.57 % 1,030,892 1,795   0.69 %
Non-interest-bearing deposits 122,263 117,393 36,980
Other non-interest-bearing liabilities 16,876   78,377   12,162  
Total liabilities 1,304,871 1,346,922 1,080,034
Stockholders' Equity 412,009   358,773   173,714  
Total liabilities and stockholders' equity $ 1,716,880   $ 1,705,695   $ 1,253,748  
 
Net interest and dividend income $ 12,567   $ 11,419   $ 8,112  
Net interest rate spread 2.89 % 2.64 % 2.57 %
Net interest margin 3.07 % 2.81 % 2.67 %
Total deposit cost 0.55 % 0.49 % 0.65 %

No tax equivalent yield adjustments have been made as the effect of such adjustments would not be material.

 
 
Blue Hills Bancorp Inc.
Average Balances/Yields
(Dollars in thousands)   Year to Date
December 31, 2014   December 31,2013

Average
balance

  Interest  

Yield/
Cost

Average
balance

  Interest  

Yield/
Cost

Interest-earning assets        

 

Total loans $ 1,022,128 $ 37,382 3.66 % $ 591,990 $ 21,876 3.70 %
Securities 424,190 11,589 2.73 500,499 11,114 2.22
Other interest earning assets and FHLB stock 78,260     304   0.39 45,828     102   0.22
Total interest-earning assets 1,524,578 49,275 3.23 1,138,317 33,092 2.91
Non-interest-earning assets 87,137   55,958  
Total assets $ 1,611,715   $ 1,194,275  
 
Interest-bearing liabilities
NOW $ 124,372 $ 103 0.08 % $ 66,580 $ 68 0.10 %
Regular savings 335,631 1,372 0.41 344,783 2,420 0.70
Money market 210,110 1,199 0.57 81,225 531 0.65
Certificates of deposit 354,529     3,076   0.87 350,861     3,784   1.08
Total interest-bearing deposits 1,024,642 5,750 0.56 843,449 6,803 0.81
Borrowings 149,841     1,148   0.77 127,501     1,168   0.92
Total interest-bearing liabilities 1,174,483 6,898   0.59 970,950 7,971   0.82
Non-interest-bearing deposits 112,260 29,716
Other non-interest-bearing liabilities 44,354   18,279  
Total liabilities 1,331,097 1,018,945
Stockholders' equity 280,618   175,330  
Total liabilities and stockholders' equity $ 1,611,715   $ 1,194,275  
 
Net interest and dividend income $ 42,377   $ 25,121  
Net interest rate spread 2.64 % 2.09 %
Net interest margin 2.78 % 2.21 %
Total deposit cost 0.51 % 0.78 %

No tax equivalent yield adjustments have been made as the effect of such adjustments would not be material.

 
 
Blue Hills Bancorp, Inc.
Average Balances – Trend
  Quarters ended
(Dollars in thousands) December 31,   September 30,   June 30,   March 31,   December 31,
2014     2014     2014     2014     2013
Interest-earning assets
Total loans $ 1,148,744 $ 1,085,951 $ 969,417 $ 880,754 $ 720,615
Securities 416,867 414,864 422,335 443,084 445,584
Other interest earning assets and FHLB stock 59,028     113,163     94,149     46,176     38,191
Total interest-earning assets 1,624,639 1,613,978 1,485,901 1,370,014 1,204,390
Non-interest-earning assets 92,241     91,717     90,026     71,684     49,358
Total assets $ 1,716,880     $ 1,705,695     $ 1,575,927     $ 1,441,698     $ 1,253,748
 
Interest-bearing liabilities
NOW $ 136,210 $ 124,846 $ 121,263 $ 114,927 $ 74,777
Regular savings 310,591 336,151 345,837 350,377 337,315
Money market 279,622 197,500 191,972 170,283 79,398
Certificates of deposit 356,255     346,807     359,668     355,463     385,674
Total interest-bearing deposits 1,082,678 1,005,304 1,018,740 991,050 877,164
Borrowings 83,054     145,848     206,077     165,333     153,728
Total interest-bearing liabilities 1,165,732 1,151,152 1,224,817 1,156,383 1,030,892
Non-interest-bearing deposits 122,263 117,393 112,849 96,193 36,980
Other non-interest-bearing liabilities 16,876     78,377     63,496     15,682     12,162
Total liabilities 1,304,871 1,346,922 1,401,162 1,268,258 1,080,034
Stockholders' Equity 412,009     358,773     174,765     173,440     173,714
Total liabilities and stockholders' equity $ 1,716,880     $ 1,705,695     $ 1,575,927     $ 1,441,698     $ 1,253,748
 
 
Blue Hills Bancorp, Inc.
Yield Trend
  Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2014   2014   2014   2014   2013
Interest-earning assets
Total loans 3.53% 3.55% 3.89% 3.71% 3.55%
Securities 4.00% 3.10% 1.98% 1.89% 3.06%
Other interest earning assets and FHLB stock 0.49%   0.38%   0.30%   0.46%   0.19%
Total interest-earning assets 3.54%   3.21%   3.12%   3.01%   3.26%
 
Interest-bearing liabilities
NOW 0.09% 0.06% 0.06% 0.07% 0.08%
Regular savings 0.44% 0.42% 0.38% 0.41% 0.53%
Money market 0.67% 0.54% 0.52% 0.50% 0.49%
Certificates of deposit 0.93%   0.83%   0.84%   0.88%   0.96%
Total interest-bearing deposits 0.61% 0.54% 0.53% 0.55% 0.67%
Borrowings 1.16%   0.75%   0.63%   0.75%   0.79%
Total interest-bearing liabilities 0.65%   0.57%   0.55%   0.58%   0.69%
 
Net interest rate spread 2.89% 2.64% 2.57% 2.43% 2.57%
Net interest margin 3.07% 2.81% 2.67% 2.52% 2.67%
Total deposit cost 0.55% 0.49% 0.48% 0.50% 0.65%
 
No tax equivalent yield adjustments have been made as the effect of such adjustments would not be material.
 
 
Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income (Loss)
  Quarters Ended
(Dollars in thousands) December 31,   September 30,   June 30,   March 31,   December 31,
2014     2014     2014     2014     2013  
 
Net income (loss)-GAAP basis $ 2,745 $ (2,958 ) $ 429 $ (399 ) $ (615 )
Noninterest income adjustments:
Less gain on bank-owned life insurance death benefits (182 ) — — — —
Less pension curtailment gain — (1,304 ) — — —
Noninterest expense adjustments:
Add Nantucket Bank acquisition expenses — 2 173 775 350
Add expenses related to mutual to stock conversion — 51 330 488 184
Add expenses related to restructuring incentive and benefit plans — — — — 1,677
Add Charitable Foundation contribution —     7,000     —     —     —  
Income tax effects —     (1,955 )   (171 )   (429 )   (752 )
Net income-Non-GAAP basis $ 2,563     $ 836     $ 761     $ 435     $ 844  
 
 
Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income (Loss)
  Year to Date
December 31, 2014   December 31, 2013
 
Net income (loss)-GAAP basis $ (183 ) $ 2,663
Noninterest income adjustments:
Less gain on bank-owned life insurance death benefits (182 ) (1,872 )
Less pension curtailment gain (1,304 ) —
Noninterest expense adjustments:
Add Nantucket Bank acquisition expenses 950 583
Add expenses related to mutual to stock conversion 869 184
Add expenses related to restructuring incentive and benefit plans — 1,677
Add Charitable Foundation contribution 7,000     —  
Income tax effects (2,555 )   (831 )
Net income Non-GAAP basis $ 4,595     $ 2,404  

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
  Quarters Ended
December 31,   September 30,   June 30,   March 31,   December 31,
2014     2014     2014     2014     2013  

Performance Ratios (annualized)

Basic and diluted EPS
GAAP $ 0.10 n/a n/a n/a n/a
Non-GAAP(1) $ 0.10 n/a n/a n/a n/a
Return (loss) on average assets (ROAA):
GAAP 0.63 % (0.69 )% 0.11 % (0.11 )% (0.19 )%
Non-GAAP(1) 0.59 % 0.19 % 0.19 % 0.12 % 0.27 %
Return (loss) on average equity (ROAE):
GAAP 2.64 % (3.27 )% 0.98 % (0.93 )% (1.40 )%
Non-GAAP(1) 2.47 % 0.92 % 1.75 % 1.02 % 1.93 %
Return (loss) on average tangible common equity (ROATCE):
GAAP 2.73 % (3.53 )% 1.21 % (1.12 )% (1.57 )%
Non-GAAP(1) 2.55 % 1.00 % 2.14 % 1.22 % 2.16 %
Efficiency Ratio:
GAAP 72 % 120 % 87 % 101 % 101 %
Non-GAAP(1) 73 % 79 % 83 % 89 % 76 %
 
 
Year to Date
December 31, 2014   December 31, 2013

Performance Ratios

  
Return (loss) on average assets (ROAA):
GAAP (0.01 )% 0.22 %
Non-GAAP(1) 0.29 % 0.20 %
Return (loss) on average equity (ROAE):
GAAP (0.07 )% 1.52 %
Non-GAAP(1) 1.64 % 1.37 %
Return (loss) on average tangible common equity (ROATCE):
GAAP (0.07 )% 1.70 %
Non-GAAP(1) 1.78 % 1.54 %
Efficiency Ratio:
GAAP 95 % 83 %
Non-GAAP(1) 80 % 81 %
 

(1) See page 15 for a reconciliation of Non-GAAP financial measures

 
Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Dollars in thousands, except share data)   At or for the Quarters Ended   At or for the Year ended
December 31,   September 30,   December 31,   December 31,   December 31,
2014     2014     2013     2014     2013  

Asset Quality

Nonperforming Assets $ 4,736 $ 4,566 $ 2,021 $ 4,736 $ 2,021
Nonperforming Assets/Total Assets 0.27 % 0.27 % 0.23 % 0.27 % 0.23 %
Allowance for Loan Losses/Total Loans 1.13 % 1.13 % 1.25 % 1.13 % 1.25 %
Net Chargeoffs (Recoveries) $ 19 $ 9 $ 22 $ 80 $ (27 )
Annualized Chargeoffs Net (Recoveries)/Average Loans 0.01 % — % 0.01 % 0.01 % — %
Allowance for Loan Losses/ Nonperforming Assets 274 % 279 % 479 % 274 % 479 %
 

Capital/Other

Common shares outstanding 28,466,813 28,466,813 n/a 28,466,813 n/a
Book value per share $ 14.46 $ 14.41 n/a $ 14.46 n/a
Tangible book value per share $ 13.99 $ 13.92 n/a $ 13.99 n/a
Tangible Common Equity/Tangible Assets 23.22 % 23.69 % 11.63 % 23.22 % 11.63 %
Full-time Equivalent Employees 202 198 147 202 147