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Blue Hills Bancorp, Inc. Reports Third Quarter Earnings

NORWOOD, Mass., Oct. 26, 2016 (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 $1,630,000, or $0.07 per diluted share, for the third quarter of 2016 compared to net income of $1,358,000, or $0.05 per diluted share, for the second quarter of 2016 and net income of $1,810,000, or $0.07 per diluted share, for the third quarter of 2015. For the nine months ended September 30, 2016, net income was $4,655,000, or $0.19 per diluted share, versus net income of $4,815,000, or $0.18 per diluted share, for the nine months ended September 30, 2015.

As previously disclosed in a current report on Form 8-K as filed with the Securities and Exchange Commission on September 13, 2016, the Company recorded a charge-off of $3.3 million in the third quarter of 2016 related to problem loans to one commercial customer. This charge-off, when combined with the effect of a specific reserve of $558,000 ($366,000 after-tax) established against these loans during the second quarter of 2016, resulted in a pre-tax charge against third quarter income of $2.7 million ($1.8 million after-tax). Excluding these charges, net income for the third quarter of 2016 would have been $3.5 million, or $0.14 per diluted share, while net income for the second quarter would have been $1.7 million, or $0.07 per diluted share. For the nine months ended September 30, 2016, net income would have been $6.9 million, or $0.28 per diluted share.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "The strength in our core businesses is clearly visible in our third quarter results. Our commercial and residential lending units continue to drive net interest income improvement through loan originations and both businesses also contributed to the improvement in fee income seen this quarter. The mortgage business, in particular, had a strong quarter more than doubling the originations in the third quarter of last year. Our deposit business continues to be a valuable source of funding for our lending operations and we are excited by the recent opening of our newest branch in the Seaport District of Boston. Investment spending has been key to transforming the Company into a full service community bank, but at the same time achieving positive operating leverage is very important to us. This is evident when looking at the first nine months of 2016 as pre-tax income before the provision for loan losses (excluding securities gains and bank-owned life insurance death benefit gains) has grown 29% from the comparable period in 2015. As we move forward, we will continue to be vigilant on credit quality and will pursue all legal remedies to recover losses and costs related to the $3.3 million commercial loan charge-off we took in the third quarter. We will also continue to deploy our excess capital through share buybacks and other avenues."

BALANCE SHEET
Compared to June 30, 2016, total assets grew $73 million, or 3%, to $2.3 billion at September 30, 2016. The increase was due to loan growth as total loans increased $74 million, or 4%, to $1.8 billion at September 30, 2016 driven by higher levels of residential mortgage loans and commercial real estate loans, partially offset by declines in other categories. Aside from the increase in loans, there were no other material changes to the balance sheet compared to June 30, 2016.

Compared to September 30, 2015, total assets increased $379 million, or 20%. Loans also drove the growth in total assets in this comparison, increasing $392 million, or 29%. By category, the increase was driven by residential mortgages, which were up $205 million, or 38%, and commercial real estate loans, which were up $163 million, or 33%. All other loan categories had minor changes. Residential mortgage loan originations were $172 million in the third quarter of 2016, up 123% from the third quarter of 2015, as the expanded origination team continued to grow the business and gain market share. In the third quarter of 2016, commercial loans (real estate and non-real estate combined) totaling $82 million (of which 31% related to commercial business loans) were added to the balance sheet compared to $91 million in the third quarter of 2015 (of which 39% related to commercial business loans). The growth in loans was partially offset by a decline in securities available for sale, which were $210 million at September 30, 2016, down 9% from $232 million at September 30, 2015. The decline reflects a lower level of corporate and municipal bonds, as well as a lower level of mutual funds.

Compared to June 30, 2016, deposits grew $81 million, or 5%, to $1.7 billion at September 30, 2016. The increase from the second quarter of 2016 was driven by increases in consumer, commercial and brokered deposits. By category, the growth was mainly reflected in NOW & demand deposits, which were up $39 million and brokered certificates of deposit, which were up $34 million. Compared to September 30, 2015, deposits grew $336 million, or 25%, and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the most significant increase was seen in money market deposits, which were up $177 million. In addition, brokered certificates of deposit increased $85 million and NOW and demand deposits were up $53 million. Borrowings also grew $49 million from a year ago, which helped support the growth in the loan portfolio. A $60 million increase in long-term borrowings was partially offset by an $11 million decline in short-term borrowings.

Stockholders’ equity was $390 million at September 30, 2016 compared to $392 million at June 30, 2016 and $408 million at September 30, 2015. The decline in stockholders' equity from a year ago mainly reflects share repurchases, as well as the payment of common stock dividends. These declines were partially offset by $7.1 million of earnings over the past four quarters.

During the third quarter of 2016, the Company repurchased 400,900 shares of stock at an average price of $14.32 for a total cost of $5.7 million. This brings total repurchases over the past five quarters to 2,447,140 shares at an average price of $14.15 for a total cost of $34.6 million. At September 30, 2016, the Company had repurchased 92% of the 1,119,000 shares authorized under its second share repurchase program, which was announced in February 2016. The second share repurchase program was completed in October and as previously announced on September 13, 2016, the Board of Directors authorized the Company’s third stock repurchase program pursuant to which the Company may purchase up to 1,345,087 shares of its issued and outstanding shares of common stock, which represents approximately 5% of the Company's issued and outstanding shares. The third repurchase program commenced upon the completion of the second program in October.

NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income was $14.5 million in the third quarter of 2016, up $1.2 million, or 9%, from $13.3 million in the second quarter of 2016. Net interest margin improved to 2.67% in the third quarter of 2016 from 2.56% in the second quarter of 2016.

Net interest and dividend income on a fully taxable equivalent basis was $14.6 million for the third quarter of 2016, up $1.2 million, or 9%, from $13.4 million for the second quarter of 2016. Net interest margin on a fully taxable equivalent basis improved to 2.68% for the third quarter of 2016 from 2.58% for the second quarter of 2016. Included in net interest income and margin is $193,000 of accelerated bond discount accretion in the third quarter of 2016 and $203,000 of accelerated bond premium amortization in the second quarter of 2016. The amounts in both quarters related to the redemption of bonds.

The table shown below provides a reconciliation of reported to adjusted net interest and dividend income and margin for the last five quarters. Commentary which follows the table will focus on changes in adjusted net interest income and margin.

(Unaudited, dollars in thousands)September 30, 2016June 30, 2016March 31, 2016December 31, 2015September 30, 2015
Net Interest Income
Reported net interest and dividend income$14,495 $13,316 $13,201 $14,572 $13,205
FTE adjustment65 77 87 87 88
Reported net interest and dividend income (FTE)14,560 13,393 13,288 14,659 13,293
Mutual fund dividends(96) (21)(2,066)(1,509)
Purchase accounting accretion(115)(133)(127)(303)(142)
Accelerated bond amortization/(accretion) on note redemptions(193)203
Adjusted net interest and dividend income (FTE) (1)$14,156 $13,463 $13,140 $12,290 $11,642
Net Interest Margin
Reported net interest margin2.67%2.56%2.61%3.03%2.94%
FTE adjustment0.01 0.02 0.01 0.01 0.02
Reported net interest margin (FTE)2.68 2.58 2.62 3.04 2.96
Mutual fund dividends (2)0.03 0.05 0.06 (0.36)(0.27)
Purchase accounting accretion (2)(0.02)(0.03)(0.03)(0.07)(0.03)
Accelerated bond amortization/(accretion) on note redemptions(0.04)0.04
Adjusted net interest margin (FTE) (1)2.65%2.64%2.65%2.61%2.66%
(1) Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis (FTE). Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.
(2) Note: In calculating the net interest margin impact of mutual fund dividends and purchase accounting accretion, average earning assets were adjusted to remove the average balances associated with each item. In quarters where mutual fund dividend income is low, the removal of the dividend and its related average balance has a positive impact on the adjusted net interest margin. Management believes this adjusted net interest margin is useful because of the volatility or non-recurring nature of certain items from quarter to quarter.

Adjusted net interest and dividend income on a fully tax equivalent basis increased $693,000, or 5%, to $14.2 million in the third quarter of 2016 compared to the second quarter of 2016. The increase was mainly driven by a $91 million, or 6%, increase in average loans due to higher levels of residential mortgages and commercial real estate loans. In addition, the improvement in adjusted net interest income was helped by a one basis point increase in adjusted net interest margin to 2.65% for the third quarter of 2016.

Compared to the third quarter of 2015, adjusted net interest and dividend income on a fully taxable equivalent basis increased $2.5 million, or 22%, while adjusted net interest margin declined by one basis point to 2.65%. As was the case in the comparison with the second quarter of 2016, the growth in adjusted net interest and dividend income was mainly due to a higher level of average loans which were up $410 million, or 31%, from the third quarter of last year driven mainly by increases in residential mortgages, commercial real estate loans, and construction loans.

The Company received mutual fund dividends in the second halves of 2015 and 2014 totaling $3.6 million and $3.5 million, respectively. As previously disclosed, the Company believes that total mutual fund dividends for the second half of 2016 will be meaningfully lower than in either of the past two years. Mutual fund dividends in the third quarter of 2016 were $96,000, compared to $1.5 million in the third quarter of 2015.

NONINTEREST INCOME
Noninterest income was $4.1 million in the third quarter of 2016, up $1.3 million, or 47%, from $2.8 million in the second quarter of 2016. The increase was mainly due to the following factors:

  • Mortgage banking revenue was $1.3 million in the third quarter, up $731,000, or 138%, from $531,000 for the second quarter. This reflects a significant increase in mortgage originations from the second quarter and the revenue improvement was mainly due to a higher level of gains on the sale of loans and the valuation of mortgage derivatives.
  • Loan level derivative fee income was $770,000 for the third quarter compared to $322,000 for the second quarter. Revenue in this 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.
  • Miscellaneous income improved to $214,000 in the third quarter from $128,000 in the second quarter. As has been the case in most quarters, miscellaneous income is impacted by the portfolio of commercial loan customer back-to-back interest rate swap contracts where customers opt to convert their loans from floating to fixed rate via interest rate swaps. While fee income from these contracts is recorded to loan level derivative fee income, GAAP requires that the Company must mark these contracts to fair value over the life of each swap and these valuation marks are reflected in miscellaneous income. The Company recorded positive credit valuation marks in the third quarter as interest rates increased and negative credit valuation marks in the second quarter as interest rates declined. While these interest rate marks create quarterly volatility in operating results, barring unforeseen credit-related circumstances there is no net impact to earnings over the life of each contract. The improvement in miscellaneous income related to the interest rate swap contracts was partially offset by the absence of income received in the second quarter on CRA-qualified SBIC investments.

Compared to the third quarter of 2015, noninterest income increased $2.4 million, or 144%. The increase was primarily due to higher mortgage banking revenue, securities gains, bank-owned life insurance death benefit gains, loan level derivative fee income and miscellaneous income. The latter was impacted by the Company recording positive credit valuation marks on commercial loan customer interest rate swap contracts in the third quarter of 2016 compared to negative marks in the third quarter of 2015.

NONINTEREST EXPENSE
Noninterest expense was $13.2 million in the third quarter of 2016, up $299,000, or 2%, from the second quarter. By category, the more significant increase was in salaries and benefits expense, which grew $458,000 from the second quarter. This was mainly due to a higher level of mortgage-related commissions reflecting an increase in originations as well as the recording of a $359,000 one-time adjustment in the third quarter to appropriately match the deferral and accrual of the mortgage-related commissions. The third quarter also included approximately $200,000 of expenses, the bulk of which is in professional fees, related, primarily, to litigation costs associated with the problem loans to one commercial customer that resulted in a $3.3 million charge-off in the third quarter. Several categories of noninterest expense were lower in the third quarter compared to the second quarter with the biggest decline seen in advertising expense, which was down $224,000, or 31%.

Compared to the third quarter of 2015, noninterest expense increased $2.4 million, or 22%. A major factor driving this increase was the recording of $1.2 million of expense in the third quarter of 2016 related to the vesting of stock awards and options under the Equity Incentive Plan. Approximately 80% of the expense related to the Equity Incentive Plan is included in salaries and benefits expense and the remainder is reflected in directors' fees. The comparison with the prior year was also impacted by higher mortgage-related commissions, including the one-time adjustment discussed above, and the costs associated with the problem loans to one commercial customer referred to above. In addition, franchise growth also contributed to the increase in noninterest expense, including the opening of a new branch in Westwood in the fourth quarter of 2015, as well as new loan and mortgage production offices and the onboarding of new asset-based lending and municipal banking businesses.

ASSET QUALITY
The provision for loan losses, which in all quarters reflects management’s assessment of risks inherent in the loan portfolio, was $2.9 million in the third quarter of 2016 compared to $1.1 million in the second quarter of 2016 and $1.3 million in the third quarter of 2015. The increase in the provision from the second quarter was mainly due to the previously discussed loans charged off to one commercial customer. During the third quarter of 2016, a provision of $2.7 million was recorded on these loans compared to a provision of $558,000 in the second quarter of 2016. Loan growth and loan mix impact the level of provision needed each quarter and a decline in loan growth to 4% in the third quarter from 6% in the second quarter coupled with a change in loan mix resulted in a lower provision, excluding the provision related to the charge-off.

The allowance for loan losses as a percentage of total loans was 1.01% at September 30, 2016 compared to 1.07% at June 30, 2016 and 1.10% at September 30, 2015. The Company had net loan charge-offs of $3.2 million in the third quarter of 2016 ($3.3 million related to the previously discussed problem loans to one commercial customer) compared to net charge-offs of $19,000 in the second quarter of 2016 and net charge-offs of $13,000 in the third quarter of 2015.

Nonperforming assets declined to $7.8 million at September 30, 2016 from $15.0 million at June 30, 2016. Nonperforming assets were $5.0 million at September 30, 2015. The $7.1 million decline in nonperforming assets from the end of the second quarter of this year reflects the aforementioned $3.3 million charge-off related to problem loans to one commercial customer. Loans to this customer on nonaccrual at September 30, 2016 totaled $771,000. In addition, loans to another borrower totaling $4.2 million, which were originally placed on nonaccrual in the fourth quarter of 2015, were removed from nonaccrual in the third quarter of 2016 as the credit situation improved and the loans have been performing in accordance with the terms. Nonperforming assets as a percentage of total assets were 0.34% at September 30, 2016, 0.67% at June 30, 2016 and 0.26% at September 30, 2015.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $2.3 billion at September 30, 2016 and operates 12 branch offices in Boston, Brookline, 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 and commercial deposit and loan products to Eastern Massachusetts through a growing branch network 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 140 years. For more information about Blue Hills Bank, visit the Blue Hills web site at www.bluehillsbank.com.

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

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our 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.

Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited, dollars in thousands) % Change
September 30, 2016 June 30, 2016 September 30, 2015September 30, 2016
vs.
June 30, 2016
September 30, 2016
vs.
September 30, 2015
Assets
Cash and due from banks$15,490 $13,710 $9,447 13.0%64.0%
Short term investments21,512 29,485 11,533 (27.0)%86.5%
Total cash and cash equivalents37,002 43,195 20,980 (14.3)%76.4%
Securities available for sale, at fair value210,273 204,973 231,697 2.6%(9.2)%
Securities held to maturity, at amortized cost197,863 196,454 197,632 0.7%0.1%
Federal Home Loan Bank stock, at cost13,505 12,833 11,702 5.2%15.4%
Loans held for sale2,134 6,097 21,423 (65.0)%(90.0)%
Loans:
1-4 family residential746,366 675,952 541,382 10.4%37.9%
Home equity80,604 81,649 73,494 (1.3)%9.7%
Commercial real estate660,458 608,669 497,217 8.5%32.8%
Construction71,281 107,049 54,283 (33.4)%31.3%
Total real estate loans1,558,709 1,473,319 1,166,376 5.8%33.6%
Commercial business169,076 178,112 163,971 (5.1)%3.1%
Consumer31,435 33,707 36,855 (6.7)%(14.7)%
Total loans1,759,220 1,685,138 1,367,202 4.4%28.7%
Allowance for loan losses(17,730)(18,079)(15,082)(1.9)%17.6%
Loans, net1,741,490 1,667,059 1,352,120 4.5%28.8%
Premises and equipment, net21,362 20,136 19,485 6.1%9.6%
Accrued interest receivable5,388 5,640 5,174 (4.5)%4.1%
Goodwill and core deposit intangible10,831 11,125 12,151 (2.6)%(10.9)%
Net deferred tax asset8,780 8,958 8,368 (2.0)%4.9%
Bank-owned life insurance31,743 31,558 31,358 0.6%1.2%
Other assets33,295 32,733 22,348 1.7%49.0%
Total assets$2,313,666 $2,240,761 $1,934,438 3.3%19.6%
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$337,225 $298,178 $284,720 13.1%18.4%
Regular savings270,067 274,866 288,597 (1.7)%(6.4)%
Money market518,360 506,251 341,588 2.4%51.8%
Certificates of deposit339,064 339,415 310,424 (0.1)%9.2%
Brokered money market46,235 45,231 33,924 2.2%36.3%
Brokered certificates of deposit170,506 136,965 85,705 24.5%98.9%
Total deposits1,681,457 1,600,906 1,344,958 5.0%25.0%
Short-term borrowings103,700 130,000 115,000 (20.2)%(9.8)%
Long-term debt105,000 85,000 45,000 23.5%133.3%
Other liabilities33,820 32,903 21,868 2.8%54.7%
Total liabilities1,923,977 1,848,809 1,526,826 4.1%26.0%
Common stock261 265 282 (1.5)%(7.4)%
Additional paid-in capital251,341 255,781 276,730 (1.7)%(9.2)%
Unearned compensation- ESOP(20,686)(20,876)(21,445)(0.9)%(3.5)%
Retained earnings158,620 157,714 153,969 0.6%3.0%
Accumulated other comprehensive income (loss) 153 (932)(1,924)(116.4)%(108.0)%
Total stockholders' equity389,689 391,952 407,612 (0.6)%(4.4)%
Total liabilities and stockholders' equity$2,313,666 $2,240,761 $1,934,438 3.3%19.6%


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Unaudited, dollars in thousands)September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015
Assets
Cash and due from banks$15,490 $13,710 $13,852 $10,932 $9,447
Short term investments21,512 29,485 18,157 22,366 11,533
Total cash and cash equivalents37,002 43,195 32,009 33,298 20,980
Securities available for sale, at fair value210,273 204,973 237,669 231,690 231,697
Securities held to maturity, at amortized cost197,863 196,454 196,578 200,141 197,632
Federal Home Loan Bank stock, at cost13,505 12,833 16,137 13,567 11,702
Loans held for sale2,134 6,097 3,926 12,877 21,423
Loans:
1-4 family residential746,366 675,952 621,801 602,138 541,382
Home equity80,604 81,649 80,571 77,633 73,494
Commercial real estate660,458 608,669 586,151 559,609 497,217
Construction71,281 107,049 92,481 79,386 54,283
Total real estate loans1,558,709 1,473,319 1,381,004 1,318,766 1,166,376
Commercial business169,076 178,112 168,976 182,536 163,971
Consumer31,435 33,707 36,977 39,075 36,855
Total loans1,759,220 1,685,138 1,586,957 1,540,377 1,367,202
Allowance for loan losses(17,730)(18,079)(16,985)(17,102)(15,082)
Loans, net1,741,490 1,667,059 1,569,972 1,523,275 1,352,120
Premises and equipment, net21,362 20,136 20,099 20,015 19,485
Accrued interest receivable5,388 5,640 5,588 5,344 5,174
Goodwill and core deposit intangible10,831 11,125 11,443 11,785 12,151
Net deferred tax asset8,780 8,958 8,774 10,665 8,368
Bank-owned life insurance31,743 31,558 31,883 31,626 31,358
Other assets33,295 32,733 28,150 20,060 22,348
Total assets$2,313,666 $2,240,761 $2,162,228 $2,114,343 $1,934,438
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$337,225 $298,178 $285,391 $288,143 $284,720
Regular savings270,067 274,866 283,586 287,344 288,597
Money market518,360 506,251 408,591 368,050 341,588
Certificates of deposit339,064 339,415 329,012 311,978 310,424
Brokered money market46,235 45,231 46,673 41,807 33,924
Brokered certificates of deposit170,506 136,965 131,352 136,527 85,705
Total deposits1,681,457 1,600,906 1,484,605 1,433,849 1,344,958
Short-term borrowings103,700 130,000 170,000 205,000 115,000
Long-term debt105,000 85,000 85,000 55,000 45,000
Other liabilities33,820 32,903 29,067 21,665 21,868
Total liabilities1,923,977 1,848,809 1,768,672 1,715,514 1,526,826
Common stock261 265 269 276 282
Additional paid-in capital251,341 255,781 260,041 269,078 276,730
Unearned compensation- ESOP(20,686)(20,876)(21,065)(21,255)(21,445)
Retained earnings158,620 157,714 157,090 155,918 153,969
Accumulated other comprehensive income (loss)153 (932)(2,779)(5,188)(1,924)
Total stockholders' equity389,689 391,952 393,556 398,829 407,612
Total liabilities and stockholders' equity$2,313,666 $2,240,761 $2,162,228 $2,114,343 $1,934,438


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
(Unaudited, dollars in thousands, except share data)Quarters Ended% Change
September 30, 2016 June 30, 2016 September 30, 2015September 30, 2016
vs.
June 30, 2016
September 30, 2016
vs.
September 30, 2015
Interest and fees on loans$15,113 $14,138 $11,509 6.9%31.3%
Interest on securities2,238 2,037 2,227 9.9%0.5%
Dividends312 155 1,673 101.3%(81.4)%
Other22 26 9 (15.4)%144.4%
Total interest and dividend income17,685 16,356 15,418 8.1%14.7%
Interest on deposits2,732 2,484 1,926 10.0%41.8%
Interest on borrowings458 556 287 (17.6)%59.6%
Total interest expense3,190 3,040 2,213 4.9%44.1%
Net interest and dividend income14,495 13,316 13,205 8.9%9.8%
Provision for loan losses2,872 1,113 1,318 158.0%117.9%
Net interest and dividend income, after provision for loan losses 11,623 12,203 11,887 (4.8)%(2.2)%
Deposit account fees347 307 319 13.0%8.8%
Interchange and ATM fees418 393 430 6.4%(2.8)%
Mortgage banking1,262 531 52 137.7%2,326.9%
Loan level derivative fee income770 322 513 139.1%50.1%
Realized securities gains, net562 664 238 (15.4)%136.1%
Bank-owned life insurance income262 257 258 1.9%1.6%
Bank-owned life insurance death benefit gains297 209 42.1%NM
Miscellaneous214 128 (116)67.2%(284.5)%
Total noninterest income4,132 2,811 1,694 47.0%143.9%
Salaries and employee benefits7,596 7,138 5,591 6.4%35.9%
Occupancy and equipment1,807 1,653 1,617 9.3%11.8%
Data processing908 803 939 13.1%(3.3)%
Professional fees743 678 610 9.6%21.8%
Advertising495 719 620 (31.2)%(20.2)%
FDIC deposit insurance270 352 262 (23.3)%3.1%
Directors' fees344 399 112 (13.8)%207.1%
Amortization of core deposit intangible294 318 390 (7.5)%(24.6)%
Other general and administrative777 875 707 (11.2)%9.9%
Total noninterest expense13,234 12,935 10,848 2.3%22.0%
Income before income taxes2,521 2,079 2,733 21.3%(7.8)%
Provision for income taxes891 721 923 23.6%(3.5)%
Net income$1,630 $1,358 $1,810 20.0%(9.9)%
Earnings per common share:
Basic$0.07 $0.06 $0.07
Diluted$0.07 $0.05 $0.07
Weighted average shares outstanding:
Basic24,129,512 24,575,211 26,183,381
Diluted24,307,540 24,699,794 26,183,381


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date
(Unaudited, dollars in thousands, except share data)Year to Date
September 30, 2016 September 30, 2015 % Change
Interest and fees on loans$42,854 $32,695 31.1%
Interest on securities6,570 6,600 (0.5)%
Dividends606 1,885 (67.9)%
Other74 50 48.0%
Total interest and dividend income50,104 41,230 21.5%
Interest on deposits7,508 5,434 38.2%
Interest on borrowings1,584 811 95.3%
Total interest expense9,092 6,245 45.6%
Net interest and dividend income41,012 34,985 17.2%
Provision for loan losses3,958 2,141 84.9%
Net interest and dividend income, after provision for loan losses 37,054 32,844 12.8%
Deposit account fees971 987 (1.6)%
Interchange and ATM fees1,158 1,133 2.2%
Mortgage banking2,037 236 763.1%
Loan level derivative fee income1,731 1,287 34.5%
Realized securities gains, net982 1,823 (46.1)%
Bank-owned life insurance income776 763 1.7%
Bank-owned life insurance death benefit gains506 NM
Miscellaneous159 126 26.2%
Total noninterest income8,320 6,355 30.9%
Salaries and employee benefits21,619 16,721 29.3%
Occupancy and equipment5,079 4,579 10.9%
Data processing2,472 2,601 (5.0)%
Professional fees1,902 1,909 (0.4)%
Advertising1,746 1,682 3.8%
FDIC deposit insurance968 807 20.0%
Directors' fees1,081 329 228.6%
Amortization of core deposit intangible954 1,241 (23.1)%
Other general and administrative2,416 2,265 6.7%
Total noninterest expense38,237 32,134 19.0%
Income before income taxes7,137 7,065 1.0%
Provision for income taxes2,482 2,250 10.3%
Net income$4,655 $4,815 (3.3)%
Earnings per common share:
Basic$0.19 $0.18
Diluted$0.19 $0.18
Weighted average shares outstanding:
Basic24,585,570 26,250,065
Diluted24,708,559 26,250,065


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,
20162016201620152015
Interest and fees on loans$15,113 $14,138 $13,603 $12,647 $11,509
Interest on securities2,238 2,037 2,295 2,228 2,227
Dividends312 155 139 2,183 1,673
Other22 26 26 13 9
Total interest and dividend income17,685 16,356 16,063 17,071 15,418
Interest on deposits2,732 2,484 2,292 2,093 1,926
Interest on borrowings458 556 570 406 287
Total interest expense3,190 3,040 2,862 2,499 2,213
Net interest and dividend income14,495 13,316 13,201 14,572 13,205
Provision (credit) for loan losses2,872 1,113 (27)1,949 1,318
Net interest and dividend income, after provision (credit) for loan losses 11,623 12,203 13,228 12,623 11,887
Deposit account fees347 307 317 327 319
Interchange and ATM fees418 393 347 378 430
Mortgage banking1,262 531 244 46 52
Loan level derivative fee income770 322 639 833 513
Realized securities gains (losses), net562 664 (244)145 238
Bank-owned life insurance income262 257 257 268 258
Bank-owned life insurance death benefit gains297 209
Miscellaneous214 128 (183)327 (116)
Total noninterest income4,132 2,811 1,377 2,324 1,694
Salaries and employee benefits7,596 7,138 6,885 5,849 5,591
Occupancy and equipment1,807 1,653 1,619 1,688 1,617
Data processing908 803 761 909 939
Professional fees743 678 481 780 610
Advertising495 719 532 776 620
FDIC deposit insurance270 352 346 192 262
Directors' fees344 399 338 315 112
Amortization of core deposit intangible294 318 342 366 390
Other general and administrative777 875 764 1,073 707
Total noninterest expense13,234 12,935 12,068 11,948 10,848
Income before income taxes2,521 2,079 2,537 2,999 2,733
Provision for income taxes891 721 870 587 923
Net income$1,630 $1,358 $1,667 $2,412 $1,810
Earnings per common share:
Basic$0.07 $0.06 $0.07 $0.09 $0.07
Diluted$0.07 $0.05 $0.07 $0.09 $0.07
Weighted average shares outstanding:
Basic24,129,512 24,575,211 25,066,086 25,500,755 26,183,381
Diluted24,307,540 24,699,794 25,132,441 25,554,961 26,183,381


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)Quarters Ended
September 30, 2016 June 30, 2016 September 30, 2015
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Interest-earning assets
Total loans (1)$1,726,088 $15,166 3.50% $1,635,256 $14,191 3.49% $1,316,514 $11,562 3.48%
Securities (1)403,038 2,414 2.38 419,685 2,080 1.99 429,667 3,838 3.54
Other interest earning assets and FHLB stock 31,236 170 2.17 36,584 162 1.78 34,061 106 1.23
Total interest-earning assets2,160,362 17,750 3.27% 2,091,525 16,433 3.16% 1,780,242 15,506 3.46%
Non-interest-earning assets106,589 100,104 89,085
Total assets$2,266,951 $2,191,629 $1,869,327
Interest-bearing liabilities
NOW$140,273 $17 0.05% $139,100 $16 0.05% $128,298 $15 0.05%
Regular savings272,950 229 0.33 276,451 233 0.34 289,236 269 0.37
Money market560,098 1,173 0.83 479,564 983 0.82 348,658 606 0.69
Certificates of deposit471,040 1,313 1.11 458,328 1,252 1.10 392,170 1,036 1.05
Total interest-bearing deposits1,444,361 2,732 0.75 1,353,443 2,484 0.74 1,158,362 1,926 0.66
Borrowings224,660 458 0.81 271,242 556 0.82 135,554 287 0.84
Total interest-bearing liabilities1,669,021 3,190 0.76% 1,624,685 3,040 0.75% 1,293,916 2,213 0.68%
Non-interest-bearing deposits171,317 145,171 142,328
Other non-interest-bearing liabilities33,936 27,513 20,368
Total liabilities1,874,274 1,797,369 1,456,612
Stockholders' equity392,677 394,260 412,715
Total liabilities and stockholders' equity$2,266,951 $2,191,629 $1,869,327
Net interest and dividend income (FTE) 14,560 13,393 13,293
Less: FTE adjustment (65) (77) (88)
Net interest and dividend income (GAAP) $14,495 $13,316 $13,205
Net interest rate spread (FTE) 2.51% 2.41% 2.78%
Net interest margin (FTE) 2.68% 2.58% 2.96%
Total deposit cost 0.67% 0.67% 0.59%

(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 34%.


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)Year to Date
September 30, 2016 September 30, 2015
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Interest-earning assets
Total loans (1)$1,643,829 $43,013 3.50% $1,240,142 $32,844 3.54%
Securities (1)417,526 6,862 2.20 427,064 8,391 2.63
Other interest earning assets and FHLB stock 34,835 458 1.76 42,438 249 0.78
Total interest-earning assets2,096,190 50,333 3.21% 1,709,644 41,484 3.24%
Non-interest-earning assets102,425 92,937
Total assets$2,198,615 $1,802,581
Interest-bearing liabilities
NOW$138,254 $49 0.05% $124,832 $43 0.05%
Regular savings278,624 713 0.34 296,364 880 0.40
Money market490,472 3,002 0.82 314,828 1,585 0.67
Certificates of deposit455,039 3,744 1.10 372,408 2,926 1.05
Total interest-bearing deposits1,362,389 7,508 0.74 1,108,432 5,434 0.66
Borrowings257,798 1,584 0.82 126,256 811 0.86
Total interest-bearing liabilities1,620,187 9,092 0.75% 1,234,688 6,245 0.68%
Non-interest-bearing deposits154,877 132,900
Other non-interest-bearing liabilities29,324 20,694
Total liabilities1,804,388 1,388,282
Stockholders' equity394,227 414,299
Total liabilities and stockholders' equity$2,198,615 $1,802,581
Net interest and dividend income (FTE) 41,241 35,239
Less: FTE adjustment (229) (254)
Net interest and dividend income (GAAP) $41,012 $34,985
Net interest rate spread (FTE) 2.46% 2.56%
Net interest margin (FTE) 2.63% 2.76%
Total deposit cost 0.66% 0.59%

(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 34%.

Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited, dollars in thousands)Quarters Ended
September 30,June 30,March 31,December 31, September 30,
20162016201620152015
Interest-earning assets
Total loans$1,726,088 $1,635,256 $1,569,240 $1,449,494 $1,316,514
Securities403,038 419,685 430,015 427,752 429,667
Other interest earning assets and FHLB stock 31,236 36,584 36,723 33,222 34,061
Total interest-earning assets2,160,362 2,091,525 2,035,978 1,910,468 1,780,242
Non-interest-earning assets106,589 100,104 100,534 91,732 89,085
Total assets$2,266,951 $2,191,629 $2,136,512 $2,002,200 $1,869,327
Interest-bearing liabilities
NOW$140,273 $139,100 $135,367 $134,162 $128,298
Regular savings272,950 276,451 286,533 287,003 289,236
Money market560,098 479,564 430,989 397,998 348,658
Certificates of deposit471,040 458,328 435,574 396,552 392,170
Total interest-bearing deposits1,444,361 1,353,443 1,288,463 1,215,715 1,158,362
Borrowings224,660 271,242 277,857 207,446 135,554
Total interest-bearing liabilities1,669,021 1,624,685 1,566,320 1,423,161 1,293,916
Non-interest-bearing deposits171,317 145,171 147,961 154,872 142,328
Other non-interest-bearing liabilities33,936 27,513 26,471 21,878 20,368
Total liabilities1,874,274 1,797,369 1,740,752 1,599,911 1,456,612
Stockholders' equity392,677 394,260 395,760 402,289 412,715
Total liabilities and stockholders' equity$2,266,951 $2,191,629 $2,136,512 $2,002,200 $1,869,327


Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands)Quarters Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Interest-earning assets
Total loans (1) 3.50% 3.49% 3.50% 3.48% 3.48%
Securities (1) 2.38% 1.99% 2.21% 4.03% 3.54%
Other interest earning assets and FHLB stock 2.17% 1.78% 1.38% 1.33% 1.23%
Total interest-earning assets 3.27% 3.16% 3.19% 3.56% 3.46%
Interest-bearing liabilities
NOW 0.05% 0.05% 0.05% 0.06% 0.05%
Regular savings 0.33% 0.34% 0.35% 0.36% 0.37%
Money market 0.83% 0.82% 0.79% 0.73% 0.69%
Certificates of deposit 1.11% 1.10% 1.09% 1.08% 1.05%
Total interest-bearing deposits 0.75% 0.74% 0.72% 0.68% 0.66%
Borrowings 0.81% 0.82% 0.83% 0.78% 0.84%
Total interest-bearing liabilities 0.76% 0.75% 0.73% 0.70% 0.68%
Net interest rate spread (FTE) 2.51% 2.41% 2.46% 2.86% 2.78%
Net interest margin (FTE) 2.68% 2.58% 2.62% 3.04% 2.96%
Total deposit cost 0.67% 0.67% 0.64% 0.61% 0.59%

(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 34%.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)Quarters Ended
September 30, June 30, March 31, December 31, September 30,
20162016201620152015
Performance Ratios (annualized)
Basic EPS$0.07 $0.06 $0.07 $0.09 $0.07
Diluted EPS$0.07 $0.05 $0.07 $0.09 $0.07
Return on average assets (ROAA)0.29%0.25%0.31%0.48%0.38%
Return on average equity (ROAE)1.65%1.39%1.69%2.38%1.74%
Return on average tangible common equity (ROATCE) (1) (2) 1.70%1.43%1.75%2.45%1.79%
Efficiency Ratio71%72%83%70%73%

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

(2) ROATCE, average tangible common equity, tangible common equity, and tangible assets 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.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)Year to Date
September 30, 2016 September 30, 2015
Performance Ratios (annualized)
Basic and diluted EPS$0.19 $0.18
Return on average assets (ROAA)0.28%0.36%
Return on average equity (ROAE)1.58%1.55%
Return on average tangible common equity (ROATCE) (1) (2) 1.62%1.60%
Efficiency Ratio78%78%

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

(2) ROATCE, average tangible common equity, tangible common equity, and tangible assets 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.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data) At or for the Quarters Ended At or for the Nine Months Ended
September 30,June 30,September 30, September 30,September 30,
201620162015 20162015
Asset Quality
Nonperforming Assets$7,849 $14,983 $4,999 $7,849 $4,999
Nonperforming Assets/Total Assets0.34%0.67%0.26% 0.34%0.26%
Allowance for Loan Losses/Total Loans1.01%1.07%1.10% 1.01%1.10%
Net Charge-offs$3,221 $19 $13 $3,330 $32
Annualized Net Charge-offs/Average Loans0.74%%% 0.41%%
Allowance for Loan Losses/ Nonperforming Loans226%121%302% 226%302%
Capital/Other
Common shares outstanding26,966,942 27,397,842 28,150,313
Book value per share$14.45 $14.31 $14.48
Tangible book value per share$14.05 $13.90 $14.05
Tangible Common Equity/Tangible Assets (2) (3)16.45%17.08%20.57%
Full-time Equivalent Employees223 231 204

(2) ROATCE, average tangible common equity, tangible common equity, and tangible assets 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.

(3) Tangible common equity equals total equity less goodwill and intangibles, Tangible assets equals total assets less goodwill and intangibles.

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

Source:Blue Hills Bank