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Section 1: 8-K (8-K EARNINGS RELEASE Q4 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): January 23, 2019

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 January 23, 2019, 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 December 31, 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: January 23, 2019
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 Q4 2018)

Exhibit
EXHIBIT 99.1
Blue Hills Bancorp, Inc. Reports Fourth Quarter and Annual Earnings

NORWOOD, Mass., January 23, 2019--(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 $5.7 million, or $0.23 per diluted share, for the fourth quarter of 2018 compared to net income of $5.8 million, or $0.23 per diluted share, for the third quarter of 2018 and net income of $1.3 million, or $0.05 per diluted share, for the fourth quarter of 2017. Net income on a non-GAAP basis, excluding unrealized loss on equity securities and certain nonrecurring items, was $7.1 million or $0.28 per diluted share for the fourth quarter of 2018 compared to net income on a non-GAAP basis, excluding unrealized loss on equity securities and certain nonrecurring items, of $6.8 million, or $0.27 per diluted share for the third quarter of 2018 and net income on a non-GAAP basis, excluding certain nonrecurring items, of $4.0 million, or $0.16 per diluted share for the fourth quarter of 2017 (see page 14 for a reconciliation of GAAP to non-GAAP measures).

For the year ended December 31, 2018, net income was $24.6 million, or $0.98 per diluted share, compared to net income of $16.5 million, or $0.67 per diluted share for the year ended December 31, 2017. Net income on a non-GAAP basis, excluding unrealized gain on equity securities and certain nonrecurring items, was $26.0 million, or $1.03 per diluted share, for the year ended December 31, 2018 compared to net income on a non-GAAP basis, excluding certain nonrecurring items, of $13.8 million, or $0.56 per diluted share for the year ended December 31, 2017 (see page 15 for a reconciliation of GAAP to non-GAAP measures).

On September 20, 2018, Blue Hills Bancorp announced it reached a definitive Agreement and Plan of Merger with Independent Bank Corp. ("Independent"), pursuant to which Blue Hills Bancorp will merge into Independent ("Merger"). Blue Hills Bancorp's shareholders approved the merger at a meeting held on January 16, 2019. Completion of the transaction is subject to other customary closing conditions, including receipt of regulatory approvals and the approval of Independent's shareholders. The transaction is expected to close later in the first quarter of 2019 or early in the second quarter of 2019.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "We finished the year with another solid quarter that included loan growth, net interest margin expansion and continued cost control. Earnings per share for the year on an operating (non-GAAP) basis improved 84% from 2017, reflecting the success of our various businesses, continued positive operating leverage, and the ongoing transformation of the Company into a full service community bank. We are excited to be joining Independent and becoming part of a larger organization, which will benefit all of our stakeholders. I want to thank our employees for their dedication and hard work during this time of transition. In addition to operating Blue Hills Bank in a business-as-usual manner for our customers, employees from around the bank have also been working hard to ensure that we have a seamless transition into Independent's organization."

BALANCE SHEET
Compared to September 30, 2018, total assets grew $23 million, or 1%, to $2.8 billion at December 31, 2018. The increase was mainly driven by a $29 million, or 1%, increase in loans to $2.3 billion at December 31, 2018. Quarterly growth was impacted by seasonality, lower residential lending demand due to the higher interest rate environment, and the announced merger with Independent. By category, the growth was due to a $17 million, or 2%, increase in residential mortgage loans and a $13 million, or 2%, increase in commercial real estate loans. Other loan categories had smaller changes.

Compared to December 31, 2017, total assets increased $137 million, or 5%. Loans drove the growth in total assets from December 31, 2017, increasing $128 million, or 6%. By category, the increase from December 31, 2017 was due to residential mortgage loans, which were up $98 million, or 11%; commercial business loans, which were up $34 million, or 14%; and commercial real estate loans, which were up $32 million, or 4%. These increases were partially offset by declines in home equity, construction and consumer loans. Residential mortgage originations were $98 million in the fourth quarter of 2018 compared to $112 million in the fourth quarter of 2017 with the decline reflecting the impact of higher interest rates. Commercial loans (real estate and non-real estate combined) added to the balance sheet were $49 million in the fourth quarter of 2018 compared to $156 million in the fourth quarter of 2017.


1



Deposit and borrowing activities reflect seasonality and a changing funding strategy to shorten duration and migrate away from certain types of high cost consumer deposits to borrowings. Compared to September 30, 2018, deposits declined $28 million, or 1%, to $2.1 billion at December 31, 2018. The decrease from the end of the third quarter was driven by a $51 million, or 8%, decline in money market deposits and a $16 million, or 4%, decline in NOW and demand accounts. These declines were partially offset by a $43 million, or 15%, increase in brokered certificates of deposit. The drop in deposits resulted in an increase in short-term borrowings, which were up $55 million, or 56%, to $153 million at December 31, 2018.

Compared to December 31, 2017, deposits grew $98 million, or 5%. By category, the growth mainly came from certificates of deposit, which were up $116 million, or 26%, and brokered certificates of deposit which increased $73 million, or 29%. These increases were partially offset by a $77 million, or 12%, decline in money market deposits. Short-term borrowings increased $53 million from a year ago while long-term debt declined $25 million.

Stockholders’ equity was $404 million at December 31, 2018, compared to $403 million at September 30, 2018 and $398 million at December 31, 2017. The increase from the end of 2017 mainly reflects 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 $20.0 million in the fourth quarter of 2018, up $488,000, or 3%, from the third quarter of 2018 and up $2.2 million, or 12%, from the fourth quarter of 2017. Reported net interest margin was 2.97% in the fourth quarter of 2018, up from 2.92% in the third quarter of 2018 and 2.80% in the fourth quarter of 2017.

Net interest and dividend income on a fully taxable equivalent basis (FTE), a non-GAAP measure, was also $20.0 million in the fourth quarter of 2018, up $488,000, or 3%, from $19.5 million in the third quarter of 2018, and up $2.1 million, or 12%, from $17.9 million in the fourth quarter of 2017. Net interest margin on a fully taxable equivalent basis (FTE), a non-GAAP measure, was 2.98% in the fourth quarter of 2018 compared to 2.93% in the third quarter of 2018 and 2.81% in the fourth quarter of 2017. Purchase accounting accretion added $38,000, $74,000, and $100,000 to net interest and dividend income in the fourth quarter of 2018, third quarter of 2018, and fourth quarter of 2017, respectively. Purchase accounting accretion also added one basis point to net interest margin in the fourth quarter of 2018 and 2 basis points to net interest margin in the third quarter of 2018 and fourth quarter of 2017.

The improvement in net interest and dividend income (FTE) from the third quarter of 2018 was mainly due to the 5 basis point improvement in net interest margin discussed above. The margin expansion was due, in part, to higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank. The company has maintained an asset sensitive interest rate risk position throughout this interest rate hike cycle, which has generally resulted in earning asset yields increasing at a faster pace than interest-bearing liability costs. There have been nine rate increases announced by the Fed since December 2015 totaling 225 basis points. To a lesser extent, the linked-quarter improvement in net interest and dividend income (FTE) was helped by an increase in average loans, which were up 0.4% from the third quarter.

The increase in net interest and dividend income (FTE) over the fourth quarter of 2017 was helped by net interest margin expansion as well as loan growth. Average loans increased $133 million, or 6%, from the fourth quarter of 2017 driven by higher levels of residential mortgages, commercial real estate loans, and commercial business loans, partially offset by declines in construction, home equity and consumer loans.

NONINTEREST INCOME
Noninterest income was $2.2 million in the fourth quarter of 2018, down $1.6 million, or 42%, from the third quarter of 2018. The decline includes lower loan level derivative income, which dropped $849,000 from the third quarter due to a lower volume of new commercial loan customer back-to-back interest rate swap contracts. The amount of revenue in the loan level derivative income category can be volatile since it is a function of the amount of commercial loans that customers opt to convert from floating to fixed rate via interest rate swaps in any given quarter. In addition, there was a $360,000, or 53%, drop in miscellaneous income due mainly to lower income on Small Business Investment Community ("SBIC") investments, a $268,000, or 28%, decline in mortgage banking income due to seasonality and the impact of higher interest rates on loan originations and sales volume, and a $127,000 increase in unrealized losses on equity securities.



2



Compared to the fourth quarter of 2017, noninterest income declined $686,000, or 23%, mainly due to a $910,000 drop in loan level derivative income and a $188,000 unrealized loss on equity securities recognized in the fourth quarter of 2018. These declines were partially offset by increases in all other account categories, including mortgage banking income (up $154,000, or 28%), miscellaneous income (up $109,000, or 53%, mainly to higher income on SBIC investments), deposit account fees (up $100,000, or 27%) and interchange and ATM fees (up $36,000, or 9%).

NONINTEREST EXPENSE
Noninterest expense was $15.0 million in the fourth quarter of 2018, down $512,000, or 3%, from the third quarter of 2018 and up $826,000, or 6%, from the fourth quarter of 2017. The fourth quarter of 2018 and the third quarter of 2018 included charges of $1.7 million and $1.3 million, respectively, associated with the pending merger with Independent Bank Corp. as well as charges of $207,000 and $720,000, respectively, for a supplemental executive retirement agreement as previously disclosed in the Company's Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission. In addition, the fourth quarter of 2017 included a $317,000 charge related to pension settlements. Excluding these items, adjusted noninterest expense was $13.1 million in the fourth quarter of 2018, down $333,000, or 2%, from the third quarter of 2018 due mainly to a $204,000, or 40%, drop in advertising expense.

Compared to the fourth quarter of last year, adjusted noninterest expense declined $719,000, or 5%. The decline reflects lower levels of advertising, professional fees, and occupancy and equipment expense, as well as the absence of a charge for a settlement agreement that was reached a year ago between the Company and a former employee. These declines were partially offset by higher employee costs due, in part, to merit increases and higher benefits expenses.

INCOME TAXES
The effective income tax rate was 26% in the fourth quarter of 2018 compared to 27% in the third quarter of 2018 and 78% in the fourth quarter of 2017. The effective tax rates in 2018 were lower than historical rates 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. The Tax Act also resulted in a downward revaluation of approximately $2.5 million in the Company's net deferred tax asset in the fourth quarter of 2017. Excluding that charge, the Company's effective tax rate was 35% in the fourth quarter of 2017.

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 $577,000 in the fourth quarter of 2018 compared to a credit of $182,000 in the third quarter of 2018 and a provision of $681,000 in the fourth quarter of 2017. The level of the provision in all three quarters reflects the impact of the Company's continued migration from the use of historical loss rates based on national FDIC data to loss rates based on the Company's own experience.

The allowance for loan losses as a percentage of total loans was 0.83% at December 31, 2018 compared to 0.86% at September 30, 2018 and 0.95% at December 31, 2017. The Company had net loan charge-offs of $8,000 in the fourth quarter of 2018 compared to net loan charge-offs of $23,000 in the third quarter of 2018 and net loan chargeoffs of $52,000 in the fourth quarter of 2017.

Nonperforming assets were $14.2 million at December 31, 2018 compared to $15.4 million at September 30, 2018 and $11.5 million at December 31, 2017. The linked quarter decline in nonperforming assets reflects decreases in nonperforming residential mortgages and home equity loans. The increase in nonperforming assets from the end of 2017 is mainly due to the placement of loans to one commercial real estate customer on nonaccrual in 2018. Nonperforming assets as a percentage of total assets were 0.51% at December 31, 2018 compared to 0.55% at September 30, 2018 and 0.43% at December 31, 2017.


3



ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.8 billion at December 31, 2018 and operates 11 retail branch offices in Boston, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The Bank's three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer, commercial and municipal deposit and loan products in Eastern Massachusetts through its branch network, loan production offices and eCommerce channels. The Bank offers commercial business and commercial real estate loans in addition to cash management services and commercial deposit accounts. The Bank also serves consumers through a full suite of consumer banking products including checking accounts, mortgage loans, equity lines of credit and traditional savings and certificate of deposit accounts. The Bank has invested substantially in online technology including online account opening and funding, online mortgage applications, online banking, mobile banking, bill pay and mobile deposits. Blue Hills Bank has been serving area residents for over 145 years. For more information about Blue Hills Bank, visit www.bluehillsbank.com.

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

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our business strategy, which includes significant asset and liability growth; changes that could adversely affect the business in which the Company and the Bank are engaged; prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services. Additional factors relating to the Company’s proposed merger with Independent Bank Corp (“Independent”), include the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the risk that the necessary regulatory approvals may not be obtained, may be delayed, or may be obtained subject to conditions that are not anticipated; the risk that Independent is required to issue debt on terms that are less than attractive in order to raise cash to complete the merger; delays in closing the merger or other risks that any of the closing conditions to the merger may not be satisfied in a timely manner or at all; the diversion of management’s time from existing business operations due to time spent related to the merger or integration efforts; the risk that the businesses of Independent and the Company will not be integrated successfully or such integration may be more difficult, time consuming or costly than expected; expected revenue and other synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; revenues following the merger may be lower than expected; and expenses related to the merger and costs following the merger that are higher than expected.

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 (“SEC”), and “Risk Factors - Risks Related to the Merger” in the proxy statement/prospectus in the Company’s
DEFM14A relating to the merger as filed with the SEC. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

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

4


Blue Hills Bancorp, Inc.
Consolidated Balance Sheets

(Unaudited; dollars in thousands)
 
 
 
% Change
 
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
vs.
September 30, 2018
December 31, 2018
vs.
December 31, 2017
Assets
 
 
 
 
 
Cash and due from banks
$
15,170

$
15,459

$
16,149

(1.9
)%
(6.1
)%
Short-term investments
29,135

32,290

30,018

(9.8
)%
(2.9
)%
Total cash and cash equivalents
44,305

47,749

46,167

(7.2
)%
(4.0
)%
Equity securities, at fair value
5,082

5,270


(3.6
)%
NM

Securities available-for-sale, at fair value


9,720

 %
NM

Securities held-to-maturity, at amortized cost
307,763

305,935

303,716

0.6
 %
1.3
 %
Federal Home Loan Bank stock, at cost
13,565

11,815

12,105

14.8
 %
12.1
 %
Loans held for sale
4,368

5,035

8,992

(13.2
)%
(51.4
)%
Loans:
 
 
 




1-4 family residential
1,024,025

1,007,411

926,117

1.6
 %
10.6
 %
Home equity
67,844

70,955

81,358

(4.4
)%
(16.6
)%
Commercial real estate
866,254

853,679

833,978

1.5
 %
3.9
 %
Construction
74,533

75,037

90,712

(0.7
)%
(17.8
)%
Total real estate loans
2,032,656

2,007,082

1,932,165

1.3
 %
5.2
 %
Commercial business
287,352

282,680

253,001

1.7
 %
13.6
 %
Consumer
15,501

16,954

21,858

(8.6
)%
(29.1
)%
Total loans
2,335,509

2,306,716

2,207,024

1.2
 %
5.8
 %
Allowance for loan losses
(19,335
)
(19,920
)
(20,877
)
(2.9
)%
(7.4
)%
Loans, net
2,316,174

2,286,796

2,186,147

1.3
 %
5.9
 %
Premises and equipment, net
19,512

19,882

21,573

(1.9
)%
(9.6
)%
Other real estate owned
3,649

3,649


 %
NM

Accrued interest receivable
7,187

7,143

6,438

0.6
 %
11.6
 %
Goodwill and core deposit intangible
9,255

9,335

9,717

(0.9
)%
(4.8
)%
Net deferred tax asset
7,119

6,995

6,000

1.8
 %
18.7
 %
Bank-owned life insurance
34,179

33,889

33,078

0.9
 %
3.3
 %
Other assets
33,417

39,061

24,867

(14.4
)%
34.4
 %
Total assets
$
2,805,575

$
2,782,554

$
2,668,520

0.8
 %
5.1
 %
Liabilities and Stockholders' Equity
 
 
 




Deposits:
 
 
 
 
 
NOW and demand
$
400,361

$
415,993

$
381,316

(3.8
)%
5.0
 %
Regular savings
198,871

206,726

221,004

(3.8
)%
(10.0
)%
Money market
569,433

620,529

646,603

(8.2
)%
(11.9
)%
Certificates of deposit
564,455

562,610

448,382

0.3
 %
25.9
 %
Brokered money market
81,366

80,143

92,798

1.5
 %
(12.3
)%
Brokered certificates of deposit
323,071

280,006

249,766

15.4
 %
29.3
 %
Total deposits
2,137,557

2,166,007

2,039,869

(1.3
)%
4.8
 %
Short-term borrowings
153,000

98,000

100,000

56.1
 %
53.0
 %
Long-term debt
80,000

80,000

105,000

 %
(23.8
)%
Other liabilities
30,897

35,471

25,845

(12.9
)%
19.5
 %
Total liabilities
2,401,454

2,379,478

2,270,714

0.9
 %
5.8
 %
Common stock
269

269

268

 %
0.4
 %
Additional paid-in capital
261,063

259,892

254,750

0.5
 %
2.5
 %
Unearned compensation- ESOP
(18,978
)
(19,168
)
(19,737
)
(1.0
)%
(3.8
)%
Retained earnings
164,364

163,892

163,978

0.3
 %
0.2
 %
Accumulated other comprehensive loss
(2,597
)
(1,809
)
(1,453
)
43.6
 %
78.7
 %
Total stockholders' equity
404,121

403,076

397,806

0.3
 %
1.6
 %
Total liabilities and stockholders' equity
$
2,805,575

$
2,782,554

$
2,668,520

0.8
 %
5.1
 %

5


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

(Unaudited; dollars in thousands)
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
December 31, 2017
Assets
 
 
 
 
 
Cash and due from banks
$
15,170

$
15,459

$
17,566

$
18,194

$
16,149

Short-term investments
29,135

32,290

34,383

26,878

30,018

Total cash and cash equivalents
44,305

47,749

51,949

45,072

46,167

Equity securities, at fair value
5,082

5,270

5,331

9,651


Securities available for sale, at fair value




9,720

Securities held-to-maturity, at amortized cost
307,763

305,935

303,137

304,036

303,716

Federal Home Loan Bank stock, at cost
13,565

11,815

14,375

10,730

12,105

Loans held for sale
4,368

5,035

10,005

5,865

8,992

Loans:
 
 
 
 
 
1-4 family residential
1,024,025

1,007,411

989,598

938,030

926,117

Home equity
67,844

70,955

72,813

75,737

81,358

Commercial real estate
866,254

853,679

824,541

849,040

833,978

Construction
74,533

75,037

88,132

73,113

90,712

Total real estate loans
2,032,656

2,007,082

1,975,084

1,935,920

1,932,165

Commercial business
287,352

282,680

268,435

248,521

253,001

Consumer
15,501

16,954

18,352

20,034

21,858

Total loans
2,335,509

2,306,716

2,261,871

2,204,475

2,207,024

Allowance for loan losses
(19,335
)
(19,920
)
(20,125
)
(20,185
)
(20,877
)
Loans, net
2,316,174

2,286,796

2,241,746

2,184,290

2,186,147

Premises and equipment, net
19,512

19,882

20,192

20,685

21,573

Other real estate owned
3,649

3,649

3,649

3,649


Accrued interest receivable
7,187

7,143

6,531

6,120

6,438

Goodwill and core deposit intangible
9,255

9,335

9,438

9,566

9,717

Net deferred tax asset
7,119

6,995

6,480

5,197

6,000

Bank-owned life insurance
34,179

33,889

33,610

33,354

33,078

Other assets
33,417

39,061

34,719

30,936

24,867

Total assets
$
2,805,575

$
2,782,554

$
2,741,162

$
2,669,151

$
2,668,520

Liabilities and Stockholders' Equity
 
 
 
 
 
Deposits:
 
 
 
 
 
NOW and demand
$
400,361

$
415,993

$
375,934

$
382,406

$
381,316

Regular savings
198,871

206,726

213,205

216,894

221,004

Money market
569,433

620,529

628,718

643,336

646,603

Certificates of deposit
564,455

562,610

525,587

504,996

448,382

Brokered money market
81,366

80,143

85,951

90,369

92,798

Brokered certificates of deposit
323,071

280,006

282,672

239,837

249,766

Total deposits
2,137,557

2,166,007

2,112,067

2,077,838

2,039,869

Short-term borrowings
153,000

98,000

110,000

65,000

100,000

Long-term debt
80,000

80,000

90,000

105,000

105,000

Other liabilities
30,897

35,471

28,850

25,869

25,845

Total liabilities
2,401,454

2,379,478

2,340,917

2,273,707

2,270,714

Common stock
269

269

268

268

268

Additional paid-in capital
261,063

259,892

258,225

256,470

254,750

Unearned compensation- ESOP
(18,978
)
(19,168
)
(19,357
)
(19,547
)
(19,737
)
Retained earnings
164,364

163,892

162,948

160,124

163,978

Accumulated other comprehensive loss
(2,597
)
(1,809
)
(1,839
)
(1,871
)
(1,453
)
Total stockholders' equity
404,121

403,076

400,245

395,444

397,806

Total liabilities and stockholders' equity
$
2,805,575

$
2,782,554

$
2,741,162

$
2,669,151

$
2,668,520


6


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



(Unaudited; dollars in thousands, except share data)
Quarters Ended
% Change
 
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
vs.
September 30, 2018
December 31, 2018
vs.
December 31, 2017
Interest and fees on loans
$
25,309

$
24,455

$
20,883

3.5
 %
21.2
 %
Interest on securities
2,089

1,854

1,763

12.7
 %
18.5
 %
Dividends
194

210

189

(7.6
)%
2.6
 %
Other
125

92

40

35.9
 %
212.5
 %
Total interest and dividend income
27,717

26,611

22,875

4.2
 %
21.2
 %
Interest on deposits
6,846

6,357

4,349

7.7
 %
57.4
 %
Interest on borrowings
920

791

732

16.3
 %
25.7
 %
Total interest expense
7,766

7,148

5,081

8.6
 %
52.8
 %
Net interest and dividend income
19,951

19,463

17,794

2.5
 %
12.1
 %
Provision (credit) for loan losses
(577
)
(182
)
681

217.0
 %
(184.7
)%
Net interest and dividend income, after provision for loan losses
20,528

19,645

17,113

4.5
 %
20.0
 %
Deposit account fees
472

473

372

(0.2
)%
26.9
 %
Interchange and ATM fees
454

471

418

(3.6
)%
8.6
 %
Mortgage banking
706

974

552

(27.5
)%
27.9
 %
Loan level derivative fee income
195

1,044

1,105

(81.3
)%
(82.4
)%
Unrealized losses on equity securities
(188
)
(61
)

208.2
 %
NM

Bank-owned life insurance income
290

279

277

3.9
 %
4.7
 %
Miscellaneous
315

675

206

(53.3
)%
52.9
 %
Total noninterest income
2,244

3,855

2,930

(41.8
)%
(23.4
)%
Salaries and employee benefits
8,353

8,874

7,755

(5.9
)%
7.7
 %
Pension settlement charges


317

 %
NM

Occupancy and equipment
2,047

2,071

2,224

(1.2
)%
(8.0
)%
Data processing
1,023

1,062

1,067

(3.7
)%
(4.1
)%
Professional fees
354

302

540

17.2
 %
(34.4
)%
Advertising
305

509

503

(40.1
)%
(39.4
)%
FDIC deposit insurance
230

221

220

4.1
 %
4.5
 %
Directors' fees
373

383

382

(2.6
)%
(2.4
)%
Amortization of core deposit intangible
81

103

175

(21.4
)%
(53.7
)%
Merger expenses
1,655

1,321


25.3
 %
NM

Other general and administrative
590

677

1,002

(12.9
)%
(41.1
)%
Total noninterest expense
15,011

15,523

14,185

(3.3
)%
5.8
 %
Income before income taxes
7,761

7,977

5,858

(2.7
)%
32.5
 %
Provision for income taxes
2,034

2,188

4,565

(7.0
)%
(55.4
)%
Net income
$
5,727

$
5,789

$
1,293

(1.1
)%
342.9
 %
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Basic
$
0.23

$
0.24

$
0.05

 
 
Diluted
$
0.23

$
0.23

$
0.05

 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
24,395,005

24,256,902

24,104,329

 
 
Diluted
25,308,794

25,242,737

24,795,366

 
 
 
 
 
 
 
 
Regular dividends declared per share
$
0.20

$
0.20

$
0.15

 
 
Special dividends declared per share
$

$

$

 
 

7


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

(Unaudited; dollars in thousands, except share data)
Year to Date
 
December 31, 2018
December 31, 2017
% Change
Interest and fees on loans
$
94,654

$
76,701

23.4
 %
Interest on securities
7,609

7,110

7.0
 %
Dividends
803

733

9.5
 %
Other
357

231

54.5
 %
Total interest and dividend income
103,423

84,775

22.0
 %
Interest on deposits
23,230

15,215

52.7
 %
Interest on borrowings
3,437

2,523

36.2
 %
Total interest expense
26,667

17,738

50.3
 %
Net interest and dividend income
76,756

67,037

14.5
 %
Provision (credit) for loan losses
(1,118
)
2,098

(153.3
)%
Net interest and dividend income, after provision for loan losses
77,874

64,939

19.9
 %
Deposit account fees
1,722

1,418

21.4
 %
Interchange and ATM fees
1,770

1,609

10.0
 %
Mortgage banking
3,453

3,657

(5.6
)%
Loss on sale of purchased home equity portfolio

(118
)
NM

Loan level derivative fee income
1,622

2,792

(41.9
)%
Unrealized gains on equity securities
134


NM

Realized securities losses, net

(94
)
NM

Gain on exchange of investment in Northeast Retirement Services
653

5,947

(89.0
)%
Bank-owned life insurance income
1,101

1,063

3.6
 %
Gain on sale of premises and equipment
271


NM

Miscellaneous
2,903

808

259.3
 %
Total noninterest income
13,629

17,082

(20.2
)%
Salaries and employee benefits
33,873

30,961

9.4
 %
Pension settlement charges

317

NM

Occupancy and equipment
8,251

8,393

(1.7
)%
Data processing
4,183

4,149

0.8
 %
Professional fees
1,559

2,275

(31.5
)%
Advertising
1,617

1,922

(15.9
)%
FDIC deposit insurance
914

881

3.7
 %
Directors' fees
1,527

1,566

(2.5
)%
Amortization of core deposit intangible
462

843

(45.2
)%
Merger expenses
2,976


NM

Other general and administrative
2,734

2,999

(8.8
)%
Total noninterest expense
58,096

54,306

7.0
 %
Income before income taxes
33,407

27,715

20.5
 %
Provision for income taxes
8,851

11,226

(21.2
)%
Net income
$
24,556

$
16,489

48.9
 %
 
 
 
 
Earnings per common share:
 
 
 
Basic
$
1.01

$
0.69

 
Diluted
$
0.98

$
0.67

 
Weighted average shares outstanding:
 
 
 
Basic
24,264,204

23,985,822

 
Diluted
25,093,479

24,482,414

 
 
 
 
 
Regular dividends declared per share
$
0.70

$
0.40

 
Special dividends declared per share
$
0.30

$
0.20

 

8



Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
 
Quarters Ended
(Unaudited; dollars in thousands, except share data)
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Interest and fees on loans
$
25,309

$
24,455

$
23,081

$
21,809

$
20,883

Interest on securities
2,089

1,854

1,809

1,857

1,763

Dividends
194

210

195

204

189

Other
125

92

62

78

40

Total interest and dividend income
27,717

26,611

25,147

23,948

22,875

Interest on deposits
6,846

6,357

5,252

4,775

4,349

Interest on borrowings
920

791

912

814

732

Total interest expense
7,766

7,148

6,164

5,589

5,081

Net interest and dividend income
19,951

19,463

18,983

18,359

17,794

Provision (credit) for loan losses
(577
)
(182
)
101

(460
)
681

Net interest and dividend income, after provision for loan losses
20,528

19,645

18,882

18,819

17,113

Deposit account fees
472

473

422

355

372

Interchange and ATM fees
454

471

454

391

418

Mortgage banking
706

974

1,033

740

552

Loan level derivative fee income
195

1,044

143

240

1,105

Unrealized gains (losses) on equity securities
(188
)
(61
)
452

(69
)

Gain on exchange of investment in Northeast Retirement Services



653


Bank-owned life insurance income
290

279

256

276

277

Gain on sale of property plant and equipment



271


Miscellaneous
315

675

872

1,041

206

Total noninterest income
2,244

3,855

3,632

3,898

2,930

Salaries and employee benefits
8,353

8,874

8,264

8,382

7,755

Pension settlement charges




317

Occupancy and equipment
2,047

2,071

2,050

2,083

2,224

Data processing
1,023

1,062

1,054

1,044

1,067

Professional fees
354

302

450

453

540

Advertising
305

509

499

304

503

FDIC deposit insurance
230

221

230

233

220

Directors' fees
373

383

362

409

382

Amortization of core deposit intangible
81

103

127

151

175

Merger expenses
1,655

1,321




Other general and administrative
590

677

655

812

1,002

Total noninterest expense
15,011

15,523

13,691

13,871

14,185

Income before income taxes
7,761

7,977

8,823

8,846

5,858

Provision for income taxes
2,034

2,188

2,366

2,263

4,565

Net income
$
5,727

$
5,789

$
6,457

$
6,583

$
1,293

 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
Basic
$
0.23

$
0.24

$
0.27

$
0.27

$
0.05

Diluted
$
0.23

$
0.23

$
0.26

$
0.27

$
0.05

Weighted average shares outstanding:
 
 
 
 
 
Basic
24,395,005

24,256,902

24,230,098

24,172,237

24,104,329

Diluted
25,308,794

25,242,737

24,991,958

24,827,850

24,795,366

 
 
 
 
 
 
Regular dividends declared per share
$
0.20

$
0.20

$
0.15

$
0.15

$
0.15

Special dividends declared per share
$

$

$

$
0.30

$


9



Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)
Quarters Ended
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
Interest-earning assets
 
 
 
 
 
 
 
 
 
 
 
Total loans (1)
$
2,311,424

$
25,344

4.35
%
 
$
2,301,946

$
24,490

4.22
%
 
$
2,178,388

$
20,947

3.81
%
Securities (1)
311,024

2,108

2.69

 
310,557

1,873

2.39

 
312,313

1,836

2.33

Other interest earning assets and FHLB stock
38,717

300

3.07

 
30,522

283

3.68

 
28,842

156

2.15

Total interest-earning assets
2,661,165

27,752

4.14
%
 
2,643,025

26,646

4.00
%
 
2,519,543

22,939

3.61
%
Non-interest-earning assets
112,819

 
 
 
109,429

 
 
 
96,781

 
 
Total assets
$
2,773,984

 
 
 
$
2,752,454

 
 
 
$
2,616,324

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
NOW
$
168,594

$
23

0.05
%
 
$
166,144

$
21

0.05
%
 
$
160,371

$
17

0.04
%
Regular savings
202,123

140

0.27

 
209,797

152

0.29

 
235,864

183

0.31

Money market
688,701

2,310

1.33

 
714,539

2,244

1.25

 
718,489

1,823

1.01

Certificates of deposit
868,883

4,373

2.00

 
836,584

3,940

1.87

 
653,573

2,326

1.41

Total interest-bearing deposits
1,928,301

6,846

1.41

 
1,927,064

6,357

1.31

 
1,768,297

4,349

0.98

Borrowings
171,283

920

2.13

 
162,641

791

1.93

 
202,255

732

1.44

Total interest-bearing liabilities
2,099,584

7,766

1.47
%
 
2,089,705

7,148

1.36
%
 
1,970,552

5,081

1.02
%
Non-interest-bearing deposits
234,535

 
 
 
229,293

 
 
 
220,167

 
 
Other non-interest-bearing liabilities
33,310

 
 
 
30,545

 
 
 
23,602

 
 
Total liabilities
2,367,429

 
 
 
2,349,543

 
 
 
2,214,321

 
 
Stockholders' equity
406,555

 
 
 
402,911

 
 
 
402,003

 
 
Total liabilities and stockholders' equity
$
2,773,984

 
 
 
$
2,752,454

 
 
 
$
2,616,324

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest and dividend income (FTE)
 
19,986

 
 
 
19,498

 
 
 
17,858

 
Less: FTE adjustment
 
(35
)
 
 
 
(35
)
 
 
 
(64
)
 
Net interest and dividend income (GAAP)
 
$
19,951

 
 
 
$
19,463

 
 
 
$
17,794

 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest rate spread (FTE)
 
 
2.67
%
 
 
 
2.64
%
 
 
 
2.59
%
Net interest margin (FTE)
 
 
2.98
%
 
 
 
2.93
%
 
 
 
2.81
%
Total deposit cost
 
 
1.26
%
 
 
 
1.17
%
 
 
 
0.87
%

(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 December 31, and September 30, 2018. A statutory rate of 35% was used in the fourth quarter of 2017.


10



Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)
Year to Date
 
December 31, 2018
 
December 31, 2017
 
Average balance
Interest
Yield/Cost
 
Average balance
Interest
Yield/Cost
Interest-earning assets
 
 
 
 
 
 
 
Total loans (1)
$
2,258,126

$
94,790

4.20
%
 
$
2,070,513

$
76,932

3.72
%
Securities (1)
311,485

7,715

2.48

 
329,369

7,306

2.22

Other interest earning assets and FHLB stock
32,746

1,054

3.22

 
32,345

785

2.43

Total interest-earning assets
2,602,357

103,559

3.98
%
 
2,432,227

85,023

3.50
%
Non-interest-earning assets
105,598

 
 
 
99,333

 
 
Total assets
$
2,707,955

 
 
 
$
2,531,560

 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
NOW
$
163,167

$
76

0.05
%
 
$
152,469

$
67

0.04
%
Regular savings
211,414

613

0.29

 
249,256

800

0.32

Money market
716,499

8,592

1.20

 
692,474

6,780

0.98

Certificates of deposit
782,103

13,949

1.78

 
612,486

7,568

1.24

Total interest-bearing deposits
1,873,183

23,230

1.24

 
1,706,685

15,215

0.89

Borrowings
183,430

3,437

1.87

 
199,004

2,523

1.27

Total interest-bearing liabilities
2,056,613

26,667

1.30
%
 
1,905,689

17,738

0.93
%
Non-interest-bearing deposits
220,166

 
 
 
201,715

 
 
Other non-interest-bearing liabilities
28,841

 
 
 
25,477

 
 
Total liabilities
2,305,620

 
 
 
2,132,881

 
 
Stockholders' equity
402,335

 
 
 
398,679

 
 
Total liabilities and stockholders' equity
$
2,707,955

 
 
 
$
2,531,560

 
 
 
 
 
 
 
 
 
 
Net interest and dividend income (FTE)
 
76,892

 
 
 
67,285

 
Less: FTE adjustment
 
(136
)
 
 
 
(248
)
 
Net interest and dividend income (GAAP)
 
$
76,756

 
 
 
$
67,037

 
 
 
 
 
 
 
 
 
Net interest rate spread (FTE)
 
 
2.68
%
 
 
 
2.57
%
Net interest margin (FTE)
 
 
2.95
%
 
 
 
2.77
%
Total deposit cost
 
 
1.11
%
 
 
 
0.80
%

(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.



11



Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands)
Quarters Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Interest-earning assets
 
 
 
 
 
Total loans
$
2,311,424

$
2,301,946

$
2,209,618

$
2,207,895

$
2,178,388

Securities
311,024

310,557

311,183

313,212

312,313

Other interest earning assets and FHLB stock
38,717

30,522

28,181

33,533

28,842

Total interest-earning assets
2,661,165

2,643,025

2,548,982

2,554,640

2,519,543

Non-interest-earning assets
112,819

109,429

103,295

96,629

96,781

Total assets
$
2,773,984

$
2,752,454

$
2,652,277

$
2,651,269

$
2,616,324

 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
NOW
$
168,594

$
166,144

$
160,194

$
157,582

$
160,371

Regular savings
202,123

209,797

214,116

219,834

235,864

Money market
688,701

714,539

721,329

742,035

718,489

Certificates of deposit
868,883

836,584

725,904

694,526

653,573

Total interest-bearing deposits
1,928,301

1,927,064

1,821,543

1,813,977

1,768,297

Borrowings
171,283

162,641

197,429

202,944

202,255

Total interest-bearing liabilities
2,099,584

2,089,705

2,018,972

2,016,921

1,970,552

Non-interest-bearing deposits
234,535

229,293

207,888

208,561

220,167

Other non-interest-bearing liabilities
33,310

30,545

25,349

26,063

23,602

Total liabilities
2,367,429

2,349,543

2,252,209

2,251,545

2,214,321

Stockholders' equity
406,555

402,911

400,068

399,724

402,003

Total liabilities and stockholders' equity
$
2,773,984

$
2,752,454

$
2,652,277

$
2,651,269

$
2,616,324



12



Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited)
Quarters Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Interest-earning assets
 
 
 
 
 
Total loans (1)
4.35%
4.22%
4.20%
4.01%
3.81%
Securities (1)
2.69%
2.39%
2.36%
2.46%
2.33%
Other interest earning assets and FHLB stock
3.07%
3.68%
3.33%
2.87%
2.15%
Total interest-earning assets
4.14%
4.00%
3.96%
3.81%
3.61%
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
NOW
0.05%
0.05%
0.04%
0.04%
0.04%
Regular savings
0.27%
0.29%
0.29%
0.30%
0.31%
Money market
1.33%
1.25%
1.15%
1.08%
1.01%
Certificates of deposit
2.00%
1.87%
1.67%
1.53%
1.41%
Total interest-bearing deposits
1.41%
1.31%
1.16%
1.07%
0.98%
Borrowings
2.13%
1.93%
1.85%
1.63%
1.44%
Total interest-bearing liabilities
1.47%
1.36%
1.22%
1.12%
1.02%
 
 
 
 
 
 
Net interest rate spread (FTE) (1)
2.67%
2.64%
2.74%
2.69%
2.59%
Net interest margin (FTE) (1)
2.98%
2.93%
2.99%
2.92%
2.81%
Total deposit cost
1.26%
1.17%
1.04%
0.96%
0.87%
(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 December 31, September 30, June 30, and March 31, 2018. A statutory rate of 35% was used for the three months ended December 31, 2017.
 


13



Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)
Quarter Ended
 
December 31, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
7,761

 
$
2,034

 
$
5,727

 
$
0.23

Add unrealized loss on equity securities
188

 
49

 
139

 
0.01

Add merger expenses
1,655

 
434

 
1,221

 
0.04

Non-GAAP basis
$
9,604

 
$
2,517

 
$
7,087

 
$
0.28

 
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

The Company's management believes that the presentation of net income on a non-GAAP basis, excluding unrealized gains and losses on equity securities and 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.

14



Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)
Year to Date
 
December 31, 2018
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
33,407

 
$
8,851

 
$
24,556

 
$
0.98

Less unrealized gain on equity securities
(134
)
 
(37
)
 
(97
)
 

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
2,976

 
796

 
2,180

 
0.08

Non-GAAP basis
$
35,325

 
$
9,371

 
$
25,954

 
$
1.03

 
Year to Date
 
December 31, 2017
 
Income Before Income Taxes
 
Provision for Income Taxes
 
Net Income
 
Earnings per Common Share (diluted)
GAAP basis
$
27,715

 
$
11,226

 
$
16,489

 
$
0.67

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 pension settlement charges
317

 
129

 
188

 
0.01

Less reversal of state tax valuation allowance

 
1,697

 
(1,697
)
 
(0.07
)
Add impact of tax reform on DTA valuation

 
(2,500
)
 
2,500

 
0.10

Non-GAAP basis
$
22,329

 
$
8,509

 
$
13,820

 
$
0.56


The Company's management believes that the presentation of net income on a non-GAAP basis, excluding unrealized gains and losses on equity securities and 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.
Selected Financial Highlights
(Unaudited)
Quarters Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2018
2018
2018
2018
2017
Performance Ratios (annualized)
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS:
 
 
 
 
 
GAAP
$
0.23

$
0.23

$
0.26

$
0.27

$
0.05

Non-GAAP
$
0.28

$
0.27

$
0.25

$
0.24

$
0.16

 
 
 
 
 
 
Return on average assets (ROAA):
 
 
 
 
 
GAAP
0.82
%
0.83
%
0.98
%
1.01
%
0.20
%
Non-GAAP
1.01
%
0.98
%
0.93
%
0.91
%
0.60
%
 
 
 
 
 
 
Return on average equity (ROAE):
 
 
 
 
 
GAAP
5.59
%
5.70
%
6.47
%
6.68
%
1.28
%
Non-GAAP
6.92
%
6.69
%
6.14
%
6.04
%
3.93
%
 
 
 
 
 
 
Return on average tangible common equity (ROATCE) (1) (3):
 
 
 
 
 
GAAP
5.72
%
5.84
%
6.63
%
6.84
%
1.31
%
Non-GAAP
7.08
%
6.85
%
6.29
%
6.19
%
4.03
%
 
 
 
 
 
 
Efficiency ratio (2) (3):
 
 
 
 
 
GAAP
68
%
67
%
61
%
62
%
68
%
Non-GAAP
60
%
61
%
62
%
65
%
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 14 for reconciliation of Non-GAAP financial measures.























16