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| 8-K - 8-K INVESTOR PRESENTATION 8-1-17 - Blue Hills Bancorp, Inc. | a8-kinvestorpresentation8x.htm |
Title
1 Footnote.
Keefe, Bruyette & Woods
2017 Community Bank Investor Conference
August 1, 2017
William Parent - Chief Executive Officer
Transformation. Diversification. Growth.
Forward-Looking Statements
This presentation, 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
statement 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 presentation, 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.
2
3
Building Franchise Value
Experienced leadership team
Upgraded leverageable infrastructure
Diversified business model
Strong direct lending capabilities
Strong asset quality
Attractive deposit mix with ongoing growth
Improving spread / fee revenue diversity
4
Attractive Footprint
5
Blue Hills Bank branch
Loan production office
Nantucket Bank branch
Loan Driven Growth
6
Total assets ($ million) Net loans ($ million)
2,500
2,000
1,500
1,000
500
0
12
/31
/20
10
12
/31
/20
11
12
/31
/20
12
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13
12
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14
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15
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16
6/3
0/2
01
7
$911 $971
$1,229
$1,314
$1,728
$2,114
$2,470 $2,514
2,500
2,000
1,500
1,000
500
0
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/31
/20
10
12
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11
12
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13
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16
6/3
0/2
01
7
$202 $277
$488
$765
$1,133
$1,523
$1,913
$2,046
Note: Securities are $294 million, or 12% of assets, at June 30, 2017, compared to 60% at December 31, 2010.
Well Diversified Portfolio
7
Loan composition at 6/30/2017 Loan composition at 12/31/10
$2.0 billion $204 million
Other Loans 6%
Residential
94%
Consumer
1%
Construction
4%
C&I
11%
CRE
37%
Home Equity
4%
Residential
43%
Valuable Origination Platform
8
Residential mortgages
($ million)
Commercial & construction loans
($ million)
Originations Purchases
600
500
400
300
200
100
0
2010 2011 2012 2013 2014 2015 2016 1H '17
$69
$134
$166 $176
$237
$272
$539
$230
Originations Purchases
600
500
400
300
200
100
0
2010 2011 2012 2013 2014 2015 2016 1H '17
$0 $2
$178
$305
$243
$325
$359
$193
56
13
88
46
89
77
104
72
66
236
171
36
13
526
108
70
186
119
72
171
295
30 85
274
5
225
62
131
Securities Restructuring
MBS / CMO
69%
GSE
11%
Treasury
8%
Asset Backed
8%
Equity
4%
• Securities reduced to 12% of total
assets at 6/30/17 from 60% at
12/31/10.
• All debt securities classified as Held
to Maturity (yield = 2.03%; duration =
3.33 years) at 6/30/17.
• Mutual fund portfolio sold Q1'17.
• Corporate bond portfolio sold Q2'17.
• Actions eliminate earnings volatility
from securities gains/losses and
mutual fund dividends.
• Portfolio now managed in-house,
eliminating annual investment fees of
$400,000.
Securities Portfolio as of 6/30/17
9
$294 million
Improved Deposit Mix
10
Deposits ($ million) Deposit composition
At 12/31/2010
At 6/30/2017
Cost of deposits:
1.60% in 2010 0.74% in 1H' 17
2,500
2,000
1,500
1,000
500
0
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10
12
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11
12
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12
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13
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0/2
01
7
$754 $756 $818
$915
$1,213
$1,434
$1,809
NOW &
Demand
10%
Savings
23%
Money
market
2%
CDs
65%
NOW &
Demand
18%
Savings
13%
Money
market
37%
CDs
32%
$1,965
Net Interest Income Growth
11
Net interest income ($ millions)
and net interest margin
(1) Adjusted net interest margin excludes the impact of volatile items: mutual fund dividends, purchase accounting accretion and accelerated
bond amortization/accretion.
70
60
50
40
30
20
10
0
2013 2014 2015 2016
$25.1
$42.4
$49.6
$57.0
Net Interest Margin
Reported Adjusted (1)
1H '17 2.74% 2.72%
2016 2.68% 2.66%
2015 2.83% 2.64%
2014 2.81% 2.57%
2013 2.24% 2.23%
Net Interest Income ($ millions)
40
30
20
10
0
1H '16 1H '17
$26.5
$32.3
Improving Core Fee Income
Note: Core fee income includes deposit account fees, interchange & ATM fees, mortgage
banking revenue, and loan level derivative income (CRE loan swaps)
12
Core fee income ($ millions)
10
9
8
7
6
5
4
3
2
1
0
2012 2013 2014 2015 2016 1H '16 1H '17
$2.7
$4.1 $4.2
$5.2
$7.7
$3.1
$4.9
Leverageable Infrastructure
13
Core noninterest expense* ($ millions)
and employees at period end (#)
*Core noninterest expense excludes one-time costs related to the charitable foundation, mutual-to-stock conversion,
Nantucket acquisition and restructuring of incentive and benefit plans.
Core noninterest expense Full-time equivalent employees
70
60
50
40
30
20
10
0
2010 2011 2012 2013 2014 2015 2016 1H '17
$17.4
$21.0
$26.3
$29.2
$40.6
$44.1
$51.7 $53.6
103
122
141 147
202 209
228 230
annualized
Noninterest Expense Growth
(dollars in thousands)
14
Q2 '17 LTM 2016 2015
Reported Noninterest Expense $ 53,509 $ 51,746 $ 44,082
Less: Equity Plans (5,126) (4,868) (1,124) effective Q4'15
Less: Seaport Branch (1,238) (476) (17) opened in Q4‘16
Less: Westwood Branch (957) (982) (484) opened in Q4'15
Adjusted Noninterest Expense $ 46,188 $ 45,420 $ 42,457
Note: Growth in adjusted noninterest expense includes costs related to the expansion of the
mortgage business, the onboarding of new asset-based lending and municipal banking businesses,
and relocating to a new headquarters.
Improvement in Earnings
(dollars in thousands)
15
1H '17 2016 2015 2014(1)
Pre-Tax Income $ 15,674 $ 12,458 $ 10,064 $ 8,014
Less: NRS Gain (5,947) — — —
Less: Pension Curtailment Gain — — — (1,304)
Less: Securities (Gains) & Losses 94 (1,280) (1,968) (2,515)
Less: BOLI Death Benefits — (506) — (182)
Less: Mutual Fund Dividends — (961) (3,647) (3,603)
Adjusted Pre-tax income $ 9,821 $ 9,711 $ 4,449 $ 410
(1) Pre-tax income for 2014 excludes Nantucket acquisition expenses, mutual-to-stock conversion expenses, and the Charitable
Foundation contribution.
Note: Equity plan expense of $2,745, $4,868 and $1,124 included in 1H '17, 2016 and 2015, respectively; no comparable expense in
2014.
Positive Operating Leverage
(dollars in thousands)
16
1H '17 1H '16 % Change
Net Interest Income $ 32,289 $ 26,517
Noninterest Income 11,326 4,188
Less: NRS gain (5,947) —
Less: Securities (Gains) / Losses 94 (420)
Less: BOLI Death Benefit Gains — (209)
Adjusted Revenue 37,762 30,076 26%
Noninterest Expense 26,766 25,003 7%
Adjusted pre-tax, pre-loan loss
provision earnings $ 10,996 $ 5,073 117%
Adjusted Efficiency Ratio (1) 71% 83%
(1) Excluded from the calculation of adjusted efficiency ratio are the NRS gain, securities gains/losses, and BOLI death benefit gains.
Note: Efficiency ratio was 67% in Q2 '17
Reserve Coverage
17
Loan loss reserve, % of total loans
Note: Trend reflects the migration from using national FDIC historical loss rates to the Company's own loss experience.
2.0%
1.5%
1.0%
0.5%
0.0%
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11
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7
1.21% 1.25%
1.13%
1.25%
1.13% 1.11%
0.97% 0.97%
Nonperforming Assets
18
NPAs, % of assets
1.00%
0.75%
0.50%
0.25%
0.00%
12
/31
/20
10
12
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11
12
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0.18%
0.28%
0.18%
0.13%
0.26%
0.51%
0.36%
0.51%
Note: Approximately one-third of NPAs at 6/30/2017 relates to loans secured by one income property.
Challenges and Opportunities Ahead
19
Improve returns and
financial ratios
Generate operating leverage
Closely manage rate risk position
Grow core deposit
funding
Grow small business, commercial and municipal deposits
Explore opening de novo branches in select markets (none planned for 2017)
Disciplined acquisitions
Diversify asset
generation
capabilities
Maintain credit focus
Diversify portfolio risk parameters
Expand mortgage banking capabilities
Deploy excess
capital
TCE ratio was 23.7% at 9/30/14; 15.5% at 6/30/17
Organic growth
Buybacks and Dividends (Buybacks through 6/30/17 = $37.4 million)
M&A opportunities
Enhance franchise
value
Continue brand awareness progress
Broaden customer relationships
Manage talent development and retention
Appendix
20
21
$000 June 30, 2017 Dec. 31, 2016 Dec. 31, 2015
Cash and equivalents $51,111 $30,496 $33,298
Securities available for sale, at fair value 10,437 204,836 231,690
Securities held to maturity, at amortized cost 283,672 201,027 200,141
FHLB Stock, at cost 11,943 13,352 13,567
Loans held for sale 6,789 2,761 12,877
Total loans 2,066,094 1,931,621 1,540,377
Allowance for loan losses (19,917) (18,750) (17,102)
Loans, net 2,046,177 1,912,871 1,523,275
Premises and equipment, net 22,004 22,034 20,015
Accrued interest receivable 5,362 6,057 5,344
Goodwill and core deposit intangible 10,091 10,560 11,785
Net deferred tax asset 8,184 10,146 10,665
Bank-owned life insurance 32,533 32,015 31,626
Other assets 25,606 23,537 20,060
Total assets $2,513,909 $2,469,692 $2,114,343
Deposits $1,965,263 $1,808,687 $1,433,849
Short-term borrowings — 146,000 205,000
Long-term debt 130,000 105,000 55,000
Other liabilities 21,328 23,098 21,665
Stockholders' equity 397,318 386,907 398,829
Total liabilities and stockholders' equity $2,513,909 $2,469,692 $2,114,343
Balance Sheet
22
Quarters ended
$000 except per share data June 30,2017
Mar. 31,
2017
June 30,
2016
Net interest and dividend income $16,408 $15,881 $13,316
Provision for loan losses 1,118 57 1,113
Net interest and dividend income, after provision 15,290 15,824 12,203
Noninterest income 4,510 6,816 2,811
Noninterest expense 13,366 13,400 12,935
Income before income taxes 6,434 9,240 2,079
Provision for income taxes 2,566 1,753 721
Net income $3,868 $7,487 $1,358
Earnings per common share:
Basic $0.16 $0.31 $0.06
Diluted $0.16 $0.31 $0.05
Income Statement
Note: Excluding a gain on the sale of the remaining available for sale debt securities portfolio, Q2 '17 net income was $3,273, or $0.14 per
diluted share. Excluding the NRS gain, loss on sale of mutual funds, and the reversal of a state tax valuation allowance, Q1 '17 net income
was $2,652, or $0.11 per diluted share.
23
Loans and Deposits
$000 June 30, 2017 Dec. 31, 2016 Dec. 31, 2015
Loans
1-4 family residential $895,015 $854,478 $602,138
Home equity 84,615 79,132 77,633
Commercial real estate 756,093 686,522 559,609
Construction 78,062 75,950 79,386
Total real estate loans 1,813,785 1,696,082 1,318,766
Commercial business 227,262 205,832 182,536
Consumer 25,047 29,707 39,075
Total loans $2,066,094 $1,931,621 $1,540,377
Deposits
NOW and demand $359,877 $331,508 $288,143
Regular savings 246,484 262,984 287,344
Money market 674,593 573,204 368,050
Certificates of deposit 362,261 340,114 311,978
Brokered money market 44,728 53,357 41,807
Brokered certificates of deposit 277,320 247,520 136,527
Total deposits $1,965,263 $1,808,687 $1,433,849
Loans / total deposits 105% 107% 107%
Loans / customer deposits 126% 128% 123%
24
Financial Highlights
Quarters ended
$000 except per share data June 30, 2017 Mar. 31, 2017 June 30, 2016
Performance ratios (1)
ROA 0.53% 0.43 % 0.25%
ROE 3.29% 2.74 % 1.39%
Efficiency ratio 67% 75 % 80%
Asset Quality
Nonperforming assets $12,811 $13,109 $14,983
Nonperforming assets / total assets 0.51% 0.53 % 0.67%
Allowance for loan losses / total loans 0.97% 0.95 % 1.07%
Allowance for loan losses / nonperforming loans 155% 144 % 121%
Net charge-offs (recoveries) $76 $(68) $19
Net charge-offs (recoveries) / average loans, annualized 0.01% (0.01)% —%
Capital metrics
Common shares outstanding 26,860,988 26,858,328 27,397,842
Book value per share $14.79 $14.78 $14.31
Tangible book value per share $14.42 $14.40 $13.90
Tangible common equity / tangible assets 15.47% 15.55 % 17.08%
(1) Q2 '17 excludes gain on sale of remaining available for sale debt securities portfolio. Q1 '17 excludes NRS gain, loss on sale of mutual
funds and the reversal of a state tax valuation allowance.