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Section 1: 8-K (8-K EANINGS RELEASE Q3 2018)

Document


    
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2018

BLUE HILLS BANCORP, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
001-36551
 
46-5429062
(State or Other Jurisdiction of Incorporation)
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)

500 River Ridge Drive, Norwood, Massachusetts
 
02062
(Address of Principal Executive Offices)
 
(Zip Code)


Registrant’s telephone number, including area code: (617) 361-6900

Not Applicable
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 


Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. [X]

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]








Item 2.02     Results of Operations and Financial Condition

On October 24, 2018, Blue Hills Bancorp, Inc. (the “Company”), the holding company for Blue Hills Bank, issued a press release announcing its financial results for the quarter ended September 30, 2018. The Company’s press release is included as Exhibit 99.1 to this report. The information included in Exhibit 99.1 to this report is considered to be “furnished” under the Securities Exchange Act of 1934.


Item 9.01     Financial Statements and Exhibits
Exhibit
 
Description
 
 
 
 
 
 
 
 
 
 
 








SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
 
BLUE HILLS BANCORP, INC.
DATE: October 24, 2018
By:
/s/ William M. Parent
 
 
William M. Parent
 
 
President and Chief Executive Officer




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE Q3 2018)

Exhibit
EXHIBIT 99.1
Blue Hills Bancorp, Inc. Reports Third Quarter Earnings


NORWOOD, Mass., October 24, 2018--(GLOBE NEWSWIRE)- Blue Hills Bancorp, Inc. (the “Company” or "Blue Hills Bancorp") (NASDAQ: BHBK), the parent of Blue Hills Bank (the "Bank"), today announced net income of $5.8 million, or $0.23 per diluted share, for the third quarter of 2018 compared to net income of $6.5 million, or $0.26 per diluted share, for the second quarter of 2018 and net income of $3.8 million, or $0.16 per diluted share, for the third quarter of 2017. Net income on a non-GAAP basis, excluding certain nonrecurring items, was $6.8 million, or $0.27 per diluted share, for the third quarter of 2018 compared to net income on a non-GAAP basis, excluding certain nonrecurring items, of $6.1 million, or $0.25 per diluted share, for the second quarter of 2018 and net income on a non-GAAP basis, excluding certain nonrecurring items, of $3.9 million, or $0.16 per diluted share for the third quarter of 2017 (see page 15 for a reconciliation of GAAP to non-GAAP measures).

For the nine months ended September 30, 2018, net income was $18.8 million, or $0.75 per diluted share, compared to net income of $15.2 million, or $0.62 per diluted share for the nine months ended September 30, 2017. Net income on a non-GAAP basis, excluding certain nonrecurring items, was $18.9 million, or $0.75 per diluted share, for the first nine months of 2018 compared to net income on a non-GAAP basis, excluding certain nonrecurring items, of $9.8 million, or $0.40 per diluted share for the first nine months of 2017 (see page 16 for a reconciliation of GAAP to non-GAAP measures).

On September 20, 2018, Blue Hills Bancorp announced its entry into a definitive Agreement and Plan of Merger with Independent Bank Corp. ("Independent"), pursuant to which Blue Hills Bancorp will merge into Independent ("Merger"). Completion of the transaction is subject to customary closing conditions, including receipt of regulatory approvals and the approvals of Blue Hills Bancorp's and Independent's shareholders. The transaction is expected to close in the first half of 2019.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "Our results for the third quarter and first nine months of the year continue to reflect strong contributions across all business lines. Growth in customer deposits from our retail banking group allowed us to reduce the level of wholesale funding, while deposit-related fee categories were at record quarterly levels. Mortgage banking revenues continued to make a significant contribution to earnings despite lower overall market volumes as in-house originations totaled $375 million for the first nine months of the year. On the commercial lending side, commercial business and real estate loans grew 5% and 4%, respectively, from the end of the second quarter and are up 17% and 14%, respectively, from a year ago. I want to thank all of our employees who continue to contribute to the ongoing improvement in our financial performance. We are excited by our recently announced merger with Independent Bank Corp. and look forward to the closing of that transaction in the first half of 2019."

BALANCE SHEET
Compared to June 30, 2018, total assets grew $41 million, or 2%, to $2.8 billion at September 30, 2018. The increase was mainly driven by a $45 million, or 2%, increase in loans to $2.3 billion at September 30, 2018. By category, the growth was due to a $29 million, or 4% increase in commercial real estate loans, an $18 million, or 2%, increase in residential mortgage loans, and a $14 million, or 5%, increase in commercial business loans. These increases were partially offset by a $13 million, or 15%, decline in construction loans as well as smaller declines in home equity and consumer loans.

Compared to September 30, 2017, total assets increased $237 million, or 9%. Loans drove the growth in total assets from September 30, 2017, increasing $219 million, or 10%. By category, the increase from September 30, 2017 was due to residential mortgage loans, which were up $102 million, or 11%; commercial real estate loans, which were up $102 million, or 14%; and commercial business loans, which were up $42 million, or 17%. Residential mortgage originations were $136 million in the third quarter of 2018 compared to $152 million in the third quarter of 2017 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $90 million in the third quarter of 2018 compared to $64 million in the third quarter of 2017.


1



Compared to June 30, 2018, deposits grew $54 million, or 3%, to $2.2 billion at September 30, 2018. The growth from the end of the second quarter was driven by a $40 million, or 11%, increase in NOW and demand accounts as well as a $37 million, or 7%, increase in certificates of deposit. These increases were partially offset by small declines in regular savings, money market deposits and total brokered deposits. The growth in deposits allowed for a reduction in borrowings as short-term borrowings declined $12 million, or 11%, to $98 million at September 30, 2018 and long-term borrowings dropped $10 million, or 11%, to $80 million at September 30, 2018.

Compared to September 30, 2017, deposits grew $180 million, or 9%, and included growth in consumer, small business, and commercial segments. By category, the growth mainly came from certificates of deposit, which were up $142 million, or 34%. In addition, total brokered deposits were up $83 million, or 30%, and NOW and demand deposits increased $39 million, or 10%. These increases were partially offset by a $46 million, or 7%, decline in money market deposits and a $38 million, or 16%, decline in regular savings deposits. Short-term borrowings increased $78 million from a year ago while long-term debt declined $30 million.

Stockholders’ equity was $403 million at September 30, 2018 compared to $400 million at June 30, 2018 and $399 million at September 30, 2017. The increases in both periods mainly reflect net income and share based compensation, partially offset by the payment of dividends.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $19.5 million in the third quarter of 2018, up $480,000, or 3%, from the second quarter of 2018 and up $2.5 million, or 15%, from the third quarter of 2017. Reported net interest margin was 2.92% in the third quarter of 2018, down from 2.98% in the second quarter of 2018, but up from 2.77% in the third quarter of 2017.

Net interest and dividend income on a fully taxable equivalent basis (FTE), a Non-GAAP measure, was also $19.5 million in the third quarter of 2018, up $481,000, or 3%, from $19.0 million in the second quarter of 2018, and up $2.5 million, or 15%, from $17.0 million in the third quarter of 2017. Net interest margin on a fully taxable equivalent basis (FTE), a Non-GAAP measure, was 2.93% in the third quarter of 2018 compared to 2.99% in the second quarter of 2018 and 2.78% in the third quarter of 2017. Purchase accounting accretion added $74,000, $171,000, and $103,000 to net interest and dividend income in the third quarter of 2018, second quarter of 2018, and third quarter of 2017, respectively. Purchase accounting accretion also added 2 basis points to net interest margin in the third quarter of 2018 and third quarter of 2017 and 3 basis points to net interest margin in the second quarter of 2018. In addition, net interest income in the second quarter of 2018 included $285,000 of fees related to loans that were paid off, which added 4 basis points to net interest margin in that quarter.

The improvement in net interest and dividend income (FTE) in both comparisons was helped by loan growth. Average loans increased $92 million, or 4%, from the second quarter of 2018 and were up $206 million, or 10%, from the third quarter of 2017. In both comparisons, the increase was driven by higher levels of commercial real estate loans, residential mortgages, and commercial business loans, partially offset by declines in construction, home equity and consumer loans.

The improvement in net interest margin (FTE) from the third quarter of 2017 was mainly due to higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank. There have been eight rate increases announced by the Fed since December 2015 totaling 200 basis points. The Company has maintained and continues to maintain an asset sensitive interest rate risk position, which has generally resulted in earning asset yields increasing at a faster pace than interest bearing liability costs. In the third quarter of 2018, however, the increase to net interest income from repricing floating rate loans tied to LIBOR was much lower than in the second quarter and this, along with higher funding costs, a lower contribution from purchase accounting accretion, and the absence of the aforementioned fees related to loans that were paid off contributed to the linked quarter decline in net interest margin (FTE).


2



NONINTEREST INCOME
Noninterest income was $3.9 million in the third quarter of 2018, up $223,000, or 6%, from the second quarter of 2018. The increase reflects higher loan level derivative income, which was up $901,000 from the second quarter due to a higher volume of new commercial loan customer back-to-back interest rate swap contracts. The amount of revenue in the loan level derivative income category can be volatile since it is a function of the amount of commercial loans that customers opt to convert from floating to fixed rate via interest rate swaps in any given quarter. In addition, the Company also had increases of $51,000, or 12%, in deposit account fees and $17,000, or 4%, in interchange and ATM fees reflecting higher transaction volumes and pricing changes. Both categories posted record quarterly highs in the third quarter. Partially offsetting these improvements was a $61,000 unrealized loss on equity securities in the third quarter compared to an unrealized gain of $452,000 recorded in the second quarter, a $197,000, or 23%, drop in miscellaneous income due mainly to lower commercial loan fees and lower income on Small Business Investment Community ("SBIC") investments, and a $59,000, or 6%, decline in mortgage banking income.

Compared to the third quarter of 2017, noninterest income increased $1.0 million, or 36%, mainly due to an $888,000 increase in loan level derivative income. Also contributing to the increase were higher levels of deposit account fees, interchange and ATM fees, and miscellaneous income. Partially offsetting the increases were a $172,000, or 15%, decline in mortgage banking income and a $61,000 unrealized loss on equity securities recognized in the third quarter of 2018.

NONINTEREST EXPENSE
Noninterest expense was $15.5 million in the third quarter of 2018, up $1.8 million, or 13%, from the second quarter of 2018 and up $2.2 million, or 16%, from the third quarter of 2017. The third quarter of 2018 included $1.3 million of charges related to the pending merger with Independent Bank Corp. as well as a $720,000 charge for a supplemental executive retirement agreement as previously disclosed in the Company's second quarter 2018 report on Form 10-Q as filed with the Securities and Exchange Commission. Excluding these two items, noninterest expense was $13.5 million in the third quarter of 2018, down $209,000, or 2%, from the second quarter of 2018 and up $127,000, or 1%, from the third quarter of 2017. The linked quarter decline was mainly due to a $148,000, or 33%, drop in professional fees due to lower legal and consulting fees and a $110,000, or 1%, decline in salaries and benefits expense, excluding the aforementioned charge for a supplemental executive retirement agreement. Compared to the third quarter of 2017, salaries and benefits expense increased $175,000, or 2%, excluding the aforementioned charge for a supplemental executive retirement agreement.

INCOME TAXES
The effective income tax rate was 27.4% in the third quarter of 2018 compared to 26.8% in the second quarter of 2018 and 37.9% in the third quarter of 2017. The lower effective tax rates in 2018 are mainly due to the Tax Act, which was enacted on December 22, 2017 and provided for a reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018.

ASSET QUALITY
The provision for loan losses reflects management’s assessment of risks inherent in the loan portfolio. The provision for loan losses was a credit of $182,000 in the third quarter of 2018 compared to provisions of $101,000 in the second quarter of 2018 and $242,000 in the third quarter of 2017. The level of the provision in all three quarters reflects the Company's continued migration from the use of historical loss rates based on national FDIC data to loss rates based on the Company's own experience.

The allowance for loan losses as a percentage of total loans was 0.86% at September 30, 2018 compared to 0.89% at June 30, 2018 and 0.97% at September 30, 2017. The Company had net loan charge-offs of $23,000 in the third quarter of 2018 compared to net loan charge-offs of $161,000 in the second quarter of 2018 and net loan recoveries of $89,000 in the third quarter of 2017.

Nonperforming assets were $15.4 million at September 30, 2018 compared to $13.9 million at June 30, 2018 and $11.5 million at September 30, 2017. The linked quarter growth in nonperforming assets reflects increases in nonperforming commercial real estate loans and residential mortgages, partially offset by a decline in nonperforming home equity loans. Nonperforming assets as a percentage of total assets were 0.55% at September 30, 2018 compared to 0.51% at June 30, 2018 and 0.45% at September 30, 2017.


3



ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.8 billion at September 30, 2018 and operates 11 retail branch offices in Boston, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The Bank's three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer, commercial and municipal deposit and loan products in Eastern Massachusetts through its branch network, loan production offices and eCommerce channels. The Bank offers commercial business and commercial real estate loans in addition to cash management services and commercial deposit accounts. The Bank also serves consumers through a full suite of consumer banking products including checking accounts, mortgage loans, equity lines of credit and traditional savings and certificate of deposit accounts. The Bank has invested substantially in online technology including online account opening and funding, online mortgage applications, online banking, mobile banking, bill pay and mobile deposits. Blue Hills Bank has been serving area residents for over 145 years. For more information about Blue Hills Bank, visit www.bluehillsbank.com.

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

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our business strategy, which includes significant asset and liability growth; changes that could adversely affect the business in which the Company and the Bank are engaged; prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services. For additional information on some of the risks and important factors that could affect the Company’s future results and financial condition, see “Risk Factors” in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed Merger with Independent Bank Corp. (“Independent”), Independent intends to file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement of Blue Hills Bancorp and Independent and a prospectus of Independent. Investors and security holders are advised to read the Registration Statement and the joint proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. Investors and security holders may obtain a free copy of the Registration Statement (when available), including the joint proxy statement/prospectus and other documents filed by Blue Hills Bancorp and Independent with the SEC at the SEC’s website at www.sec.gov. These documents may be accessed and downloaded, free of charge, at Blue Hills Bancorp’s website at www.bluehillsbancorp.com under the section “SEC Filings-Documents” or by directing a request to the Corporate Secretary, Blue Hills Bancorp, Inc., 500 River Ridge Drive, Norwood, Massachusetts 02062, telephone (617) 361-6900. You will also be able to obtain these documents free of charge at Independent’s website at www.rocklandtrust.com under the tab “Investor Relations” and then under the heading “SEC Filings” or by directing a request to Investor Relations, Independent Bank Corp., 288 Union Street, Rockland, Massachusetts 02370, telephone (781) 982-6737.


4



PARTICIPANTS IN THE SOLICITATION
This filing is not a solicitation of a proxy from any security holder of Blue Hills Bancorp or Independent. However, Blue Hills Bancorp, Independent, their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies from stockholders of Blue Hills Bancorp and Independent with respect to the proposed Merger. Information regarding the directors and executive officers of Blue Hills Bancorp may be found in its definitive proxy statement relating to its 2018 Annual Meeting of Stockholders, which was filed with the SEC on April 11, 2018. Information regarding the directors and executive officers of Independent may be found in its definitive proxy statement relating to its 2018 Annual Meeting of Shareholders, which was filed with the SEC on March 29, 2018, and its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 27, 2018. Additional information regarding the participants in the proxy solicitation and a description of their direct and indirect interests in the Merger will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. You may obtain free copies of the documents described in this paragraph in the manner described in the preceding paragraph.

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

5


Blue Hills Bancorp, Inc.
Consolidated Balance Sheets

(Unaudited; dollars in thousands)
 
 
 
% Change
 
September 30, 2018
June 30, 2018
September 30, 2017
September 30, 2018
vs.
June 30, 2018
September 30, 2018
vs.
September 30, 2017
Assets
 
 
 
 
 
Cash and due from banks
$
15,459

$
17,566

$
16,171

(12.0
)%
(4.4
)%
Short term investments
32,290

34,383

22,192

(6.1
)%
45.5
 %
Total cash and cash equivalents
47,749

51,949

38,363

(8.1
)%
24.5
 %
Equity securities, at fair value
5,270

5,331


(1.1
)%
 %
Securities available-for-sale, at fair value


9,943

 %
(100.0
)%
Securities held-to-maturity, at amortized cost
305,935

303,137

302,833

0.9
 %
1.0
 %
Federal Home Loan Bank stock, at cost
11,815

14,375

9,410

(17.8
)%
25.6
 %
Loans held for sale
5,035

10,005

12,268

(49.7
)%
(59.0
)%
Loans:
 
 
 




1-4 family residential
1,007,411

989,598

905,585

1.8
 %
11.2
 %
Home equity
70,955

72,813

77,819

(2.6
)%
(8.8
)%
Commercial real estate
853,679

824,541

751,209

3.5
 %
13.6
 %
Construction
75,037

88,132

88,979

(14.9
)%
(15.7
)%
Total real estate loans
2,007,082

1,975,084

1,823,592

1.6
 %
10.1
 %
Commercial business
282,680

268,435

240,801

5.3
 %
17.4
 %
Consumer
16,954

18,352

23,142

(7.6
)%
(26.7
)%
Total loans
2,306,716

2,261,871

2,087,535

2.0
 %
10.5
 %
Allowance for loan losses
(19,920
)
(20,125
)
(20,248
)
(1.0
)%
(1.6
)%
Loans, net
2,286,796

2,241,746

2,067,287

2.0
 %
10.6
 %
Premises and equipment, net
19,882

20,192

21,850

(1.5
)%
(9.0
)%
Other real estate owned
3,649

3,649

202

 %
NM

Accrued interest receivable
7,143

6,531

5,802

9.4
 %
23.1
 %
Goodwill and core deposit intangible
9,335

9,438

9,892

(1.1
)%
(5.6
)%
Net deferred tax asset
6,995

6,480

9,295

7.9
 %
(24.7
)%
Bank-owned life insurance
33,889

33,610

32,800

0.8
 %
3.3
 %
Other assets
39,061

34,719

25,471

12.5
 %
53.4
 %
Total assets
$
2,782,554

$
2,741,162

$
2,545,416

1.5
 %
9.3
 %
Liabilities and Stockholders' Equity
 
 
 




Deposits:
 
 
 
 
 
NOW and demand
$
415,993

$
375,934

$
376,864

10.7
 %
10.4
 %
Regular savings
206,726

213,205

244,662

(3.0
)%
(15.5
)%
Money market
620,529

628,718

666,388

(1.3
)%
(6.9
)%
Certificates of deposit
562,610

525,587

420,765

7.0
 %
33.7
 %
Brokered money market
80,143

85,951

41,768

(6.8
)%
91.9
 %
Brokered certificates of deposit
280,006

282,672

235,106

(0.9
)%
19.1
 %
Total deposits
2,166,007

2,112,067

1,985,553

2.6
 %
9.1
 %
Short-term borrowings
98,000

110,000

20,000

(10.9
)%
390.0
 %
Long-term debt
80,000

90,000

110,000

(11.1
)%
(27.3
)%
Other liabilities
35,471

28,850

30,829

22.9
 %
15.1
 %
Total liabilities
2,379,478

2,340,917

2,146,382

1.6
 %
10.9
 %
Common stock
269

268

268

0.4
 %
0.4
 %
Additional paid-in capital
259,892

258,225

254,025

0.6
 %
2.3
 %
Unearned compensation- ESOP
(19,168
)
(19,357
)
(19,927
)
(1.0
)%
(3.8
)%
Retained earnings
163,892

162,948

166,282

0.6
 %
(1.4
)%
Accumulated other comprehensive loss
(1,809
)
(1,839
)
(1,614
)
(1.6
)%
12.1
 %
Total stockholders' equity
403,076

400,245

399,034

0.7
 %
1.0
 %
Total liabilities and stockholders' equity
$
2,782,554

$
2,741,162

$
2,545,416

1.5
 %
9.3
 %

6


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

(Unaudited; dollars in thousands)
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
September 30, 2017
Assets
 
 
 
 
 
Cash and due from banks
$
15,459

$
17,566

$
18,194

$
16,149

$
16,171

Short term investments
32,290

34,383

26,878

30,018

22,192

Total cash and cash equivalents
47,749

51,949

45,072

46,167

38,363

Equity securities, at fair value
5,270

5,331

9,651



Securities available for sale, at fair value



9,720

9,943

Securities held-to-maturity, at amortized cost
305,935

303,137

304,036

303,716

302,833

Federal Home Loan Bank stock, at cost
11,815

14,375

10,730

12,105

9,410

Loans held for sale
5,035

10,005

5,865

8,992

12,268

Loans:
 
 
 
 
 
1-4 family residential
1,007,411

989,598

938,030

926,117

905,585

Home equity
70,955

72,813

75,737

81,358

77,819

Commercial real estate
853,679

824,541

849,040

833,978

751,209

Construction
75,037

88,132

73,113

90,712

88,979

Total real estate loans
2,007,082

1,975,084

1,935,920

1,932,165

1,823,592

Commercial business
282,680

268,435

248,521

253,001

240,801

Consumer
16,954

18,352

20,034

21,858

23,142

Total loans
2,306,716

2,261,871

2,204,475

2,207,024

2,087,535

Allowance for loan losses
(19,920
)
(20,125
)
(20,185
)
(20,877
)
(20,248
)
Loans, net
2,286,796

2,241,746

2,184,290

2,186,147

2,067,287

Premises and equipment, net
19,882

20,192

20,685

21,573

21,850

Other real estate owned
3,649

3,649

3,649


202

Accrued interest receivable
7,143

6,531

6,120

6,438

5,802

Goodwill and core deposit intangible
9,335

9,438

9,566

9,717

9,892

Net deferred tax asset
6,995

6,480

5,197

6,000

9,295

Bank-owned life insurance
33,889

33,610

33,354

33,078

32,800

Other assets
39,061

34,719

30,936

24,867

25,471

Total assets
$
2,782,554

$
2,741,162

$
2,669,151

$
2,668,520

$
2,545,416

Liabilities and Stockholders' Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
NOW and demand
$
415,993

$
375,934

$
382,406

$
381,316

$
376,864

Regular savings
206,726

213,205

216,894

221,004

244,662

Money market
620,529

628,718

643,336

646,603

666,388

Certificates of deposit
562,610

525,587

504,996

448,382

420,765

Brokered money market
80,143

85,951

90,369

92,798

41,768

Brokered certificates of deposit
280,006

282,672

239,837

249,766

235,106

Total deposits
2,166,007

2,112,067

2,077,838

2,039,869

1,985,553

Short-term borrowings
98,000

110,000

65,000

100,000

20,000

Long-term debt
80,000

90,000

105,000

105,000

110,000

Other liabilities
35,471

28,850

25,869

25,845

30,829

Total liabilities
2,379,478

2,340,917

2,273,707

2,270,714

2,146,382

Common stock
269

268

268

268

268

Additional paid-in capital
259,892

258,225

256,470

254,750

254,025

Unearned compensation- ESOP
(19,168
)
(19,357
)
(19,547
)
(19,737
)
(19,927
)
Retained earnings
163,892

162,948

160,124

163,978

166,282

Accumulated other comprehensive loss
(1,809
)
(1,839
)
(1,871
)
(1,453
)
(1,614
)
Total stockholders' equity
403,076

400,245

395,444

397,806

399,034

Total liabilities and stockholders' equity
$
2,782,554

$
2,741,162

$
2,669,151

$
2,668,520

$
2,545,416


7


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



(Unaudited; dollars in thousands, except share data)
Quarters Ended
% Change
 
September 30, 2018
June 30, 2018
September 30, 2017
September 30, 2018
vs.
June 30, 2018
September 30, 2018
vs.
September 30, 2017
Interest and fees on loans
$
24,455

$
23,081

$
19,721

6.0
 %
24.0
 %
Interest on securities
1,854

1,809

1,565

2.5
 %
18.5
 %
Dividends
210

195

194

7.7
 %
8.2
 %
Other
92

62

65

48.4
 %
41.5
 %
Total interest and dividend income
26,611

25,147

21,545

5.8
 %
23.5
 %
Interest on deposits
6,357

5,252

4,089

21.0
 %
55.5
 %
Interest on borrowings
791

912

502

(13.3
)%
57.6
 %
Total interest expense
7,148

6,164

4,591

16.0
 %
55.7
 %
Net interest and dividend income
19,463

18,983

16,954

2.5
 %
14.8
 %
Provision (credit) for loan losses
(182
)
101

242

(280.2
)%
(175.2
)%
Net interest and dividend income, after provision for loan losses
19,645

18,882

16,712

4.0
 %
17.6
 %
Deposit account fees
473

422

385

12.1
 %
22.9
 %
Interchange and ATM fees
471

454

455

3.7
 %
3.5
 %
Mortgage banking
974

1,033

1,146

(5.7
)%
(15.0
)%
Loss on sale of purchased home equity portfolio


(118
)
NM

NM

Loan level derivative fee income
1,044

143

156

630.1
 %
569.2
 %
Unrealized gains (losses) on equity securities
(61
)
452


(113.5
)%
NM

Bank-owned life insurance income
279

256

268

9.0
 %
4.1
 %
Miscellaneous
675

872

534

(22.6
)%
26.4
 %
Total noninterest income
3,855

3,632

2,826

6.1
 %
36.4
 %
Salaries and employee benefits
8,874

8,264

7,979

7.4
 %
11.2
 %
Occupancy and equipment
2,071

2,050

2,024

1.0
 %
2.3
 %
Data processing
1,062

1,054

1,016

0.8
 %
4.5
 %
Professional fees
302

450

340

(32.9
)%
(11.2
)%
Advertising
509

499

563

2.0
 %
(9.6
)%
FDIC deposit insurance
221

230

226

(3.9
)%
(2.2
)%
Directors' fees
383

362

382

5.8
 %
0.3
 %
Amortization of core deposit intangible
103

127

199

(18.9
)%
(48.2
)%
Merger expenses
1,321



NM

NM

Other general and administrative
677

655

626

3.4
 %
8.1
 %
Total noninterest expense
15,523

13,691

13,355

13.4
 %
16.2
 %
Income before income taxes
7,977

8,823

6,183

(9.6
)%
29.0
 %
Provision for income taxes
2,188

2,366

2,342

(7.5
)%
(6.6
)%
Net income
$
5,789

$
6,457

$
3,841

(10.3
)%
50.7
 %
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Basic
$
0.24

$
0.27

$
0.16

 
 
Diluted
$
0.23

$
0.26

$
0.16

 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
24,256,902

24,230,098

23,973,116

 
 
Diluted
25,242,737

24,991,958

24,510,092

 
 
 
 
 
 
 
 
Regular dividends declared per share
$
0.20

$
0.15

$
0.15

 
 
Special dividends declared per share
$

$

$

 
 

8


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date

(Unaudited; dollars in thousands, except share data)
Year to Date
 
September 30, 2018
September 30, 2017
% Change
Interest and fees on loans
$
69,345

$
55,818

24.2
 %
Interest on securities
5,520

5,347

3.2
 %
Dividends
609

544

11.9
 %
Other
232

191

21.5
 %
Total interest and dividend income
75,706

61,900

22.3
 %
Interest on deposits
16,384

10,866

50.8
 %
Interest on borrowings
2,517

1,791

40.5
 %
Total interest expense
18,901

12,657

49.3
 %
Net interest and dividend income
56,805

49,243

15.4
 %
Provision (credit) for loan losses
(541
)
1,417

(138.2
)%
Net interest and dividend income, after provision for loan losses
57,346

47,826

19.9
 %
Deposit account fees
1,250

1,046

19.5
 %
Interchange and ATM fees
1,316

1,191

10.5
 %
Mortgage banking
2,747

3,105

(11.5
)%
Loss on sale of purchased home equity portfolio

(118
)
NM

Loan level derivative fee income
1,427

1,687

(15.4
)%
Unrealized gains on equity securities
322


NM

Realized securities gains (losses), net

(94
)
(100.0
)%
Gain on exchange of investment in Northeast Retirement Services
653

5,947

(89.0
)%
Bank-owned life insurance income
811

786

3.2
 %
Gain on sale of premises and equipment
271


NM

Miscellaneous
2,588

602

329.9
 %
Total noninterest income
11,385

14,152

(19.6
)%
Salaries and employee benefits
25,520

23,206

10.0
 %
Occupancy and equipment
6,204

6,169

0.6
 %
Data processing
3,160

3,082

2.5
 %
Professional fees
1,205

1,735

(30.5
)%
Advertising
1,312

1,419

(7.5
)%
FDIC deposit insurance
684

661

3.5
 %
Directors' fees
1,154

1,184

(2.5
)%
Amortization of core deposit intangible
381

668

(43.0
)%
Merger expenses
1,321


NM

Other general and administrative
2,144

1,997

7.4
 %
Total noninterest expense
43,085

40,121

7.4
 %
Income before income taxes
25,646

21,857

17.3
 %
Provision for income taxes
6,817

6,661

2.3
 %
Net income
$
18,829

$
15,196

23.9
 %
 
 
 
 
Earnings per common share:
 
 
 
Basic
$
0.78

$
0.63

 
Diluted
$
0.75

$
0.62

 
Weighted average shares outstanding:
 
 
 
Basic
24,220,055

23,945,885

 
Diluted
25,021,158

24,377,662

 
 
 
 
 
Regular dividends declared per share
$
0.50

$
0.25

 
Special dividends declared per share
$
0.30

$
0.20

 


9



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,
 
2018
2018
2018
2017
2017
Interest and fees on loans
$
24,455

$
23,081

$
21,809

$
20,883

$
19,721

Interest on securities
1,854

1,809

1,857

1,763

1,565

Dividends
210

195

204

189

194

Other
92

62

78

40

65

Total interest and dividend income
26,611

25,147

23,948

22,875

21,545

Interest on deposits
6,357

5,252

4,775

4,349

4,089

Interest on borrowings
791

912

814

732

502

Total interest expense
7,148

6,164

5,589

5,081

4,591

Net interest and dividend income
19,463

18,983

18,359

17,794

16,954

Provision (credit) for loan losses
(182
)
101

(460
)
681

242

Net interest and dividend income, after provision for loan losses
19,645

18,882

18,819

17,113

16,712

Deposit account fees
473

422

355

372

385

Interchange and ATM fees
471

454

391

418

455

Mortgage banking
974

1,033

740

552

1,146

Loss on sale of purchased home equity portfolio




(118
)
Loan level derivative fee income
1,044

143

240

1,105

156

Unrealized gains (losses) on equity securities
(61
)
452

(69
)


Gain on exchange of investment in Northeast Retirement Services


653



Bank-owned life insurance income
279

256

276

277

268

Gain on sale of property plant and equipment


271



Miscellaneous
675

872

1,041

206

534

Total noninterest income
3,855

3,632

3,898

2,930

2,826

Salaries and employee benefits
8,874

8,264

8,382

7,755

7,979

Pension settlement charges



317


Occupancy and equipment
2,071

2,050

2,083

2,224

2,024

Data processing
1,062

1,054

1,044

1,067

1,016

Professional fees
302

450

453

540

340

Advertising
509

499

304

503

563

FDIC deposit insurance
221

230

233

220

226

Directors' fees
383

362

409

382

382

Amortization of core deposit intangible
103

127

151

175

199

Merger expenses
1,321





Other general and administrative
677

655

812

1,002

626

Total noninterest expense
15,523

13,691

13,871

14,185

13,355

Income before income taxes
7,977

8,823

8,846

5,858

6,183

Provision for income taxes
2,188

2,366

2,263

4,565

2,342

Net income
$
5,789

$
6,457

$
6,583

$
1,293

$
3,841

 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Basic
$
0.24

$
0.27

$
0.27

$
0.05

$
0.16

Diluted
$
0.23

$
0.26

$
0.27

$
0.05

$
0.16

Weighted average shares outstanding:
 
 
 
 
 
Basic
24,256,902

24,230,098

24,172,237

24,104,329

23,973,116

Diluted
25,242,737

24,991,958

24,827,850

24,795,366

24,510,092

 
 
 
 
 
 
Regular dividends declared per share
$
0.20

$
0.15

$
0.15

$
0.15

$
0.15

Special dividends declared per share
$

$

$
0.30

$

$


10



Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)
Quarters Ended
 
September 30, 2018
 
June 30, 2018
 
September 30, 2017
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
Interest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Total loans (1)
$
2,301,946

$
24,490

4.22
%
 
$
2,209,618

$
23,115

4.20
%
 
$
2,096,034

$
19,779

3.74
%
Securities (1)
310,557

1,873

2.39

 
311,183

1,832

2.36

 
301,484

1,609

2.12

Other interest earning assets and FHLB stock
30,522

283

3.68

 
28,181

234

3.33

 
32,051

215

2.66

Total interest-earning assets
2,643,025

26,646

4.00
%
 
2,548,982

25,181

3.96
%
 
2,429,569

21,603

3.53
%
Non-interest-earning assets
109,429

 
 
 
103,295

 
 
 
101,188

 
 
Total assets
$
2,752,454

 
 
 
$
2,652,277

 
 
 
$
2,530,757

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
NOW
$
166,144

$
21

0.05
%
 
$
160,194

$
16

0.04
%
 
$
153,224

$
17

0.04
%
Regular savings
209,797

152

0.29

 
214,116

156

0.29

 
243,680

191

0.31

Money market
714,539

2,244

1.25

 
721,329

2,066

1.15

 
708,748

1,769

0.99

Certificates of deposit
836,584

3,940

1.87

 
725,904

3,014

1.67

 
653,339

2,112

1.28

Total interest-bearing deposits
1,927,064

6,357

1.31

 
1,821,543

5,252

1.16

 
1,758,991

4,089

0.92

Borrowings
162,641

791

1.93

 
197,429

912

1.85

 
133,788

502

1.49

Total interest-bearing liabilities
2,089,705

7,148

1.36
%
 
2,018,972

6,164

1.22
%
 
1,892,779

4,591

0.96
%
Non-interest-bearing deposits
229,293

 
 
 
207,888

 
 
 
213,459

 
 
Other non-interest-bearing liabilities
30,545

 
 
 
25,349

 
 
 
23,603

 
 
Total liabilities
2,349,543

 
 
 
2,252,209

 
 
 
2,129,841

 
 
Stockholders' equity
402,911

 
 
 
400,068

 
 
 
400,916

 
 
Total liabilities and stockholders' equity
$
2,752,454

 
 
 
$
2,652,277

 
 
 
$
2,530,757

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest and dividend income (FTE)
 
19,498

 
 
 
19,017

 
 
 
17,012

 
Less: FTE adjustment
 
(35
)
 
 
 
(34
)
 
 
 
(58
)
 
Net interest and dividend income (GAAP)
 
$
19,463

 
 
 
$
18,983

 
 
 
$
16,954

 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest rate spread (FTE)
 
 
2.64
%
 
 
 
2.74
%
 
 
 
2.57
%
Net interest margin (FTE)
 
 
2.93
%
 
 
 
2.99
%
 
 
 
2.78
%
Total deposit cost
 
 
1.17
%
 
 
 
1.04
%
 
 
 
0.82
%

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 21% for the three months ended September 30 and June 30, 2018. A statutory rate of 35% was used in the third quarter of 2017.


11



Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)
Year to Date
 
September 30, 2018
 
September 30, 2017
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
Interest-earning assets
 
 
 
 
 
 
 
Total loans (1)
$
2,240,164

$
69,446

4.14
%
 
$
2,034,160

$
55,985

3.68
%
Securities (1)
311,641

5,607

2.41

 
335,117

5,470

2.18

Other interest earning assets and FHLB stock
30,734

754

3.28

 
33,554

629

2.51

Total interest-earning assets
2,582,539

75,807

3.92
%
 
2,402,831

62,084

3.45
%
Non-interest-earning assets
103,165

 
 
 
100,200

 
 
Total assets
$
2,685,704

 
 
 
$
2,503,031

 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
NOW
$
161,338

$
53

0.04
%
 
$
149,806

$
50

0.04
%
Regular savings
214,546

473

0.29

 
253,768

617

0.33

Money market
725,867

6,282

1.16

 
683,708

4,957

0.97

Certificates of deposit
752,858

9,576

1.70

 
598,640

5,242

1.17

Total interest-bearing deposits
1,854,609

16,384

1.18

 
1,685,922

10,866

0.86

Borrowings
187,524

2,517

1.79

 
197,908

1,791

1.21

Total interest-bearing liabilities
2,042,133

18,901

1.24
%
 
1,883,830

12,657

0.90
%
Non-interest-bearing deposits
215,323

 
 
 
195,496

 
 
Other non-interest-bearing liabilities
27,335

 
 
 
26,110

 
 
Total liabilities
2,284,791

 
 
 
2,105,436

 
 
Stockholders' equity
400,913

 
 
 
397,595

 
 
Total liabilities and stockholders' equity
$
2,685,704

 
 
 
$
2,503,031

 
 
 
 
 
 
 
 
 
 
Net interest and dividend income (FTE)
 
56,906

 
 
 
49,427

 
Less: FTE adjustment
 
(101
)
 
 
 
(184
)
 
Net interest and dividend income (GAAP)
 
$
56,805

 
 
 
$
49,243

 
 
 
 
 
 
 
 
 
Net interest rate spread (FTE)
 
 
2.68
%
 
 
 
2.55
%
Net interest margin (FTE)
 
 
2.95
%
 
 
 
2.75
%
Total deposit cost
 
 
1.06
%
 
 
 
0.77
%

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 21% in 2018. A statutory rate of 35% was used in 2017.



12



Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands)
Quarters Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Interest-earning assets
 
 
 
 
 
Total loans
$
2,301,946

$
2,209,618

$
2,207,895

$
2,178,388

$
2,096,034

Securities
310,557

311,183

313,212

312,313

301,484

Other interest earning assets and FHLB stock
30,522

28,181

33,533

28,842

32,051

Total interest-earning assets
2,643,025

2,548,982

2,554,640

2,519,543

2,429,569

Non-interest-earning assets
109,429

103,295

96,629

96,781

101,188

Total assets
$
2,752,454

$
2,652,277

$
2,651,269

$
2,616,324

$
2,530,757

 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
NOW
$
166,144

$
160,194

$
157,582

$
160,371

$
153,224

Regular savings
209,797

214,116

219,834

235,864

243,680

Money market
714,539

721,329

742,035

718,489

708,748

Certificates of deposit
836,584

725,904

694,526

653,573

653,339

Total interest-bearing deposits
1,927,064

1,821,543

1,813,977

1,768,297

1,758,991

Borrowings
162,641

197,429

202,944

202,255

133,788

Total interest-bearing liabilities
2,089,705

2,018,972

2,016,921

1,970,552

1,892,779

Non-interest-bearing deposits
229,293

207,888

208,561

220,167

213,459

Other non-interest-bearing liabilities
30,545

25,349

26,063

23,602

23,603

Total liabilities
2,349,543

2,252,209

2,251,545

2,214,321

2,129,841

Stockholders' equity
402,911

400,068

399,724

402,003

400,916

Total liabilities and stockholders' equity
$
2,752,454

$
2,652,277

$
2,651,269

$
2,616,324

$
2,530,757



13



Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited)
Quarters Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Interest-earning assets
 
 
 
 
 
Total loans (1)
4.22%
4.20%
4.01%
3.81%
3.74%
Securities (1)
2.39%
2.36%
2.46%
2.33%
2.12%
Other interest earning assets and FHLB stock
3.68%
3.33%
2.87%
2.15%
2.66%
Total interest-earning assets
4.00%
3.96%
3.81%
3.61%
3.53%
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
NOW
0.05%
0.04%
0.04%
0.04%
0.04%
Regular savings
0.29%
0.29%
0.30%
0.31%
0.31%
Money market
1.25%
1.15%
1.08%
1.01%
0.99%
Certificates of deposit
1.87%
1.67%
1.53%
1.41%
1.28%
Total interest-bearing deposits
1.31%
1.16%
1.07%
0.98%
0.92%
Borrowings
1.93%
1.85%
1.63%
1.44%
1.49%
Total interest-bearing liabilities
1.36%
1.22%
1.12%
1.02%
0.96%
 
 
 
 
 
 
Net interest rate spread (FTE) (1)
2.64%
2.74%
2.69%
2.59%
2.57%
Net interest margin (FTE) (1)
2.93%
2.99%
2.92%
2.81%
2.78%
Total deposit cost
1.17%
1.04%
0.96%
0.87%
0.82%
(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 21% for the three months ended September 30, 2018, June 30, 2018 and March 31, 2018. A statutory rate of 35% was used in 2017.
 


14



Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)
Quarter Ended
 
September 30, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
7,977

 
$
2,188

 
$
5,789

 
$
0.23

Add unrealized loss on equity securities
61

 
17

 
44

 

Add merger expenses
1,321

 
362

 
959

 
0.04

Non-GAAP basis
$
9,359

 
$
2,567

 
$
6,792

 
$
0.27

 
Quarter Ended
 
June 30, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
8,823

 
$
2,366

 
$
6,457

 
$
0.26

Less unrealized gain on equity securities
(452
)
 
(121
)
 
(331
)
 
(0.01
)
Non-GAAP basis
$
8,371

 
$
2,245

 
$
6,126

 
$
0.25

 
Quarter Ended
 
March 31, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
8,846

 
$
2,263

 
$
6,583

 
$
0.27

Add unrealized loss on equity securities
69

 
18

 
51

 

Less gain on exchange of investment in Northeast Retirement Service
(653
)
 
(169
)
 
(484
)
 
(0.02
)
Less gain on sale of premises and equipment
(271
)
 
(70
)
 
(201
)
 
(0.01
)
Non-GAAP basis
$
7,991

 
$
2,042

 
$
5,949

 
$
0.24

 
Quarter Ended
 
December 31, 2017
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
5,858

 
$
4,565

 
$
1,293

 
$
0.05

Add pension settlement charges
317

 
129

 
188

 
0.01

Add impact of tax reform on deferred tax asset valuation

 
(2,500
)
 
2,500

 
0.10

Non-GAAP basis
$
6,175

 
$
2,194

 
$
3,981

 
$
0.16

 
Quarter Ended
 
September 30, 2017
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
6,183

 
$
2,342

 
$
3,841

 
$
0.16

Add loss on sale of purchased home equity portfolio
118

 
45

 
73

 

Non-GAAP basis
$
6,301

 
$
2,387

 
$
3,914

 
$
0.16


The Company's management believes that the presentation of net income on a non-GAAP basis, excluding nonrecurring items, provides useful information for evaluating the Company's operating results and any related trends that may be affecting the Company's business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.


15



Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)
Year to Date
 
September 30, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
25,646

 
$
6,817

 
$
18,829

 
$
0.75

Less unrealized gain on equity securities
(322
)
 
(86
)
 
(236
)
 
(0.01
)
Less gain on exchange of investment in Northeast Retirement Service
(653
)
 
(169
)
 
(484
)
 
(0.02
)
Less gain on sale of property, plant and equipment
(271
)
 
(70
)
 
(201
)
 
(0.01
)
Add merger expenses
1,321

 
362

 
959

 
0.04

Non-GAAP basis
$
25,721

 
$
6,854

 
$
18,867

 
$
0.75

 
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

 

Add 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.




16



Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited)
Quarters Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS:
 
 
 
 
 
GAAP
$
0.23

$
0.26

$
0.27

$
0.05

$
0.16

Non-GAAP
$
0.27

$
0.25

$
0.24

$
0.16

$
0.16

 
 
 
 
 
 
Return on average assets (ROAA):
 
 
 
 
 
GAAP
0.83
%
0.98
%
1.01
%
0.20
%
0.60
%
Non-GAAP
0.98
%
0.93
%
0.91
%
0.60
%
0.61
%
 
 
 
 
 
 
Return on average equity (ROAE):
 
 
 
 
 
GAAP
5.70
%
6.47
%
6.68
%
1.28
%
3.80
%
Non-GAAP
6.69
%
6.14
%
6.04
%
3.93
%
3.87
%
 
 
 
 
 
 
Return on average tangible common equity (ROATCE) (1) (3):
 
 
 
 
 
GAAP
5.84
%
6.63
%
6.84
%
1.31
%
3.90
%
Non-GAAP
6.85
%
6.29
%
6.19
%
4.03
%
3.97
%
 
 
 
 
 
 
Efficiency ratio (2) (3):
 
 
 
 
 
GAAP
67
%
61
%
62
%
68
%
68
%
Non-GAAP
61
%
62
%
65
%
67
%
67
%

(1) Average tangible common equity equals average total equity less goodwill and intangibles.

(2) Efficiency ratio equals noninterest expense divided by net interest and dividend income and noninterest income.

(3) ROATCE and the efficiency ratio are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. Management believes that these non-GAAP measures are meaningful because it is standard practice for companies in the banking industry to disclose these measures. Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons.

See page 15 for reconciliation of Non-GAAP financial measures.























17



Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited)
Year to Date
 
September 30, 2018
September 30, 2017