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

NORWOOD, Mass., Jan. 25, 2017 (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 $3,998,000, or $0.17 per diluted share, for the fourth quarter of 2016 compared to net income of $1,630,000, or $0.07 per diluted share for the third quarter of 2016 and net income of $2,412,000, or $0.09 per diluted share, for the fourth quarter of 2015. For the year ended December 31, 2016, net income was $8,653,000, or $0.35 per diluted share compared to net income of $7,227,000, or $0.28 per diluted share, for the year ended December 31, 2015.

The Company also announced an increase to its quarterly dividend to $0.05 from $0.03 per share, payable on or about February 22, 2017, to the stockholders of record as of the close of business on February 8, 2017.

2016 HIGHLIGHTS

  • Loans grew 25% to $1.9 billion at December 31, 2016 from the end of 2015 as the Company continued to execute on its balance sheet diversification strategy through an expansion of the residential mortgage, commercial real estate and commercial business loan portfolios.
  • The Company continued to expand its mortgage banking capabilities, including opening new Massachusetts offices in Franklin, Cambridge, and Winchester during 2016. In addition, new offices will be opened in Concord and Hingham during the first quarter of 2017. Mortgage banking income grew to $2.5 million in 2016 from $282,000 in 2015 as mortgage originations totaled $539 million in 2016; approximately double the amount of originations in 2015. In 2016, 98% of mortgage originations were in-house compared to 87% in 2015.
  • Commercial loan originations (real estate and non-real estate combined) were $359 million in 2016, up $28 million, or 8%, from $331 million in 2015. The commercial banking business added an asset-based lending team during the year which contributed to the loan growth. In addition, during the fourth quarter the Company upgraded to a new cash management system for commercial customers and conversion of customers to the new platform should be completed in the first quarter of 2017.
  • The Company opened a new branch in the Seaport District of Boston in October, and by the end of 2016 the branch had taken in $30 million of deposits. The previous two branches opened by the Company also continued to have success in 2016. At the end of 2016, the Milton Branch, which was opened in the fourth quarter of 2014, had $59 million in deposits, while the Westwood branch, which was opened in the fourth quarter of 2015, had $91 million in deposits. The Brookline branch will close in the first quarter of 2017 as the Company focuses its resources on growing market share and deepening customer relationships at its other locations. Overall, total deposits increased 26% during 2016 while customer deposits were up 18%.
  • A new Business Banking team was added to expand the Company's small business customer base, including capitalizing on the attractive location of the new Seaport branch.
  • The Government Banking division added to the growth in deposits during the course of the year, as municipal deposits more than doubled during 2016 to $104 million at December 31, 2016.
  • The Company grew its quarterly dividend from $0.02 per share to $0.05 per share, an increase of 150%.
  • In late February, the Company announced the completion of its first stock repurchase program and at the same time a second program was announced. The second program was completed in October and a third program began upon completion of the second program. As of December 31, 2016, a total of 2,637,640 shares have been repurchased under these programs at an average price of $14.20 per share for a total cost of $37.4 million.
  • In October, the Company relocated to a new headquarters building at 500 River Ridge in Norwood to accommodate the additional space needed due to the Company's expansion over the past few years.
  • The Company and its foundations made donations in excess of $1 million in each of the last three years to various non-profits reflecting the Company's active involvement in the communities it serves. Most of the donations were made through the Blue Hills Bank charitable foundations which support non-profits in the fields of education and the arts, health and human services, affordable housing, financial literacy, and community services.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "We continued to make significant progress in 2016 in what was a very competitive environment. Through the efforts of our talented and dedicated employees, all three of our key businesses, retail banking, commercial banking and mortgage banking turned in strong performances, enabling the Company to drive bottom line improvement for our shareholders while continuing to make the necessary investments in our businesses and infrastructure that will allow for future growth. We also continued to return capital to our shareholders through our share repurchase program and increasing quarterly cash dividends. We look forward to 2017 with great anticipation as we continue to transform Blue Hills Bank into one of New England's premier diversified full-service community banks."

BALANCE SHEET
Compared to September 30, 2016, total assets grew $156 million, or 7%, to $2.5 billion at December 31, 2016. The increase was driven by loan growth as total loans increased $172 million, or 10%, to $1.9 billion at December 31, 2016. By category, residential mortgage loans grew $108 million, or 15%, commercial business loans increased $37 million, or 22%, and commercial real estate loans were up $26 million, or 4%.

Compared to December 31, 2015, total assets increased $355 million, or 17%. Loans also drove the growth in total assets in this comparison, increasing $391 million, or 25%. By category, the increase was driven by residential mortgages, which were up $252 million, or 42%, commercial real estate loans, which were up $127 million, or 23%, and commercial business loans, which were up $23 million, or 13%. Residential mortgage loan originations were $176 million in the fourth quarter of 2016, up 147% from the fourth quarter of 2015, as the expanded origination team continued to grow the business and gain market share. In the fourth quarter of 2016, commercial loans (real estate and non-real estate combined) totaling $93 million were added to the balance sheet compared to $82 million in the third quarter of 2016 and $149 million in the fourth quarter of 2015. The growth in loans was partially offset by a decline in securities available for sale, which were $205 million at December 31, 2016, down 12% from $232 million at December 31, 2015. The decline reflects lower levels of corporate and municipal bonds, mortgage backed securities and mutual funds.

Compared to September 30, 2016, deposits grew $127 million, or 8%, to $1.8 billion at December 31, 2016. The increase from the third quarter of 2016 was primarily driven by a $77 million increase in brokered certificates of deposit and a $55 million increase in money market accounts. Growth in deposits from the end of the third quarter was mitigated by a seasonal decline of $28 million at the Nantucket branches. Compared to December 31, 2015, deposits grew $375 million, or 26%, and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the most significant increases were seen in money market deposits, which were up $205 million, brokered certificates of deposit, which were up $111 million, and NOW and demand deposits, which were up $43 million. A $59 million decline in short-term borrowings was mostly offset by a $50 million increase in long-term borrowings.

Stockholders’ equity was $387 million at December 31, 2016 compared to $390 million at September 30, 2016 and $399 million at December 31, 2015. The decline in stockholders' equity from both prior periods reflects share repurchases, as well as the payment of common stock dividends, partially offset by earnings. The decline from September 30, 2016 was also impacted by a higher level of unrealized losses on available-for-sale securities reflecting a rise in interest rates during the fourth quarter.

During the fourth quarter of 2016, the Company repurchased 190,500 shares of stock at an average price of $14.80 for a total cost of $2.8 million. This brings total repurchases over the six quarters ending December 31, 2016 to 2,637,640 shares at an average price of $14.20 for a total cost of $37.4 million. At December 31, 2016, the Company had repurchased 7% of the 1,345,087 shares authorized under its third share repurchase program, which was announced in September 2016.

NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income was $16.0 million in the fourth quarter of 2016, up $1.5 million, or 10%, from $14.5 million in the third quarter of 2016 and up $1.4 million, or 9%, from $14.6 million in the fourth quarter of 2015. Net interest margin improved to 2.81% in the fourth quarter of 2016 from 2.67% in the third quarter of 2016, but was down from 3.03% in the fourth quarter of 2015.

Net interest and dividend income on a fully taxable equivalent basis (referred to herein as "net interest and dividend income (FTE)", a Non-GAAP measure) was $16.0 million for the fourth quarter of 2016, up $1.4 million, or 10%, from $14.6 million for the third quarter of 2016 and up $1.3 million, or 9%, from $14.7 million in the fourth quarter of 2015. Net interest margin on a fully taxable equivalent basis (referred to herein as "net interest margin (FTE)", a Non-GAAP measure) improved to 2.82% for the fourth quarter of 2016 from 2.68% for the third quarter of 2016, but was down from 3.04% in the fourth quarter of 2015.

The table shown below provides a reconciliation of reported to adjusted net interest and dividend income and margin for the last five quarters (referred to herein as "Adjusted net interest and dividend income (FTE)" and "Adjusted net interest margin (FTE)", which are Non-GAAP measures). Commentary which follows the table will focus on changes in Adjusted net interest and dividend income and Adjusted net interest margin.

(Unaudited, dollars in thousands) December 31, 2016September 30, 2016June 30, 2016March 31, 2016December 31, 2015
Net Interest and Dividend Income
Reported net interest and dividend income $15,950 $14,495 $13,316 $13,201 $14,572
FTE adjustment 78 65 77 87 87
Reported net interest and dividend income (FTE) 16,028 14,560 13,393 13,288 14,659
Mutual fund dividends (2) (844)(96) (21)(2,066)
Purchase accounting accretion (2) (137)(115)(133)(127)(303)
Accelerated bond amortization/(accretion) on note redemptions (193)203
Adjusted net interest and dividend income (FTE) (1) $15,047 $14,156 $13,463 $13,140 $12,290
Net Interest Margin
Reported net interest margin 2.81%2.67%2.56%2.61%3.03%
FTE adjustment 0.01 0.01 0.02 0.01 0.01
Reported net interest margin (FTE) 2.82 2.68 2.58 2.62 3.04
Mutual fund dividends (2) (0.10)0.03 0.05 0.06 (0.36)
Purchase accounting accretion (2) (0.03)(0.02)(0.03)(0.03)(0.07)
Accelerated bond amortization/(accretion) on note redemptions (0.04)0.04
Adjusted net interest margin (FTE) (1) 2.69%2.65%2.64%2.65%2.61%
(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), using a federal statutory tax rate of 35% (a statutory tax rate of 34% was used prior to the fourth quarter of 2016). 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 $891,000, or 6%, to $15.0 million in the fourth quarter of 2016 compared to the third quarter of 2016 while adjusted net interest margin improved to 2.69% in the fourth quarter from 2.65% in the third quarter. The increase was mainly driven by a $100 million, or 6%, increase in average loans due primarily to higher levels of residential mortgages. There were smaller increases in the average balances of commercial real estate and commercial business loans. The improvement in net interest income also reflects higher floating rate loan yields as the market anticipated the interest rate increase announced by the Federal Reserve Bank in mid-December. The Company maintains an asset sensitive interest rate risk position.

Compared to the fourth quarter of 2015, adjusted net interest and dividend income on a fully taxable equivalent basis increased $2.8 million, or 22%, while adjusted net interest margin improved by eight basis points to 2.69%. As was the case in the comparison with the third 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 $374 million, or 26%, from the fourth quarter of last year driven mainly by increases in residential mortgages, commercial real estate loans, and construction loans. Net interest margin benefited from rate hikes announced by the Federal Reserve in both December 2015 and December 2016.

NONINTEREST INCOME
Noninterest income was $3.8 million in the fourth quarter of 2016, down $325,000, or 8%, from $4.1 million in the third quarter of 2016. This was mainly due to mortgage banking revenue, which declined $826,000, or 66%, to $436,000 in the fourth quarter from $1.3 million in the third quarter. This decline mainly reflects a lower volume of loan sales in the fourth quarter. In addition, securities gains declined $264,000, or 47%, to $298,000 in the fourth quarter, and the third quarter included $297,000 of bank-owned life insurance death benefit gains compared to none in the fourth quarter. Loan level derivative fee income also declined $130,000, or 17%, to $640,000 in the fourth 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.

The declines in noninterest income from the third quarter as discussed above were partially offset by $1.2 million improvement in miscellaneous income to $1.4 million in the fourth 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 records positive credit valuation marks in quarters when rates increase and negative marks in quarters when rates declined. Rates increased in both the fourth and third quarters but the magnitude of the rate increases was higher in the fourth quarter resulting in positive adjustments to credit marks. 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.

Compared to the fourth quarter of 2015, noninterest income increased $1.5 million, or 64%. The increase was primarily due to higher miscellaneous income which was impacted by the Company recording higher positive credit marks on commercial loan customer interest rate swap contracts in 2016. In addition, mortgage banking revenue and securities gains increased and these improvements were partially offset by a decline in loan level derivative fee income.

NONINTEREST EXPENSE
Noninterest expense was $13.5 million in the fourth quarter of 2016, up $275,000, or 2%, from the third quarter. By category, the most significant increase was in occupancy and equipment expense which grew $484,000, or 27%, from the third quarter mainly due to the opening of the new Seaport branch in October. In addition, advertising expense, which is seasonal, increased $182,000, or 37%. Partially offsetting these increases was a $362,000, or 5%, decline in salaries and benefits expense. This was mainly due to the absence of a $359,000 one-time adjustment to mortgage commissions that was recorded in the third quarter to appropriately match the deferral and accrual of the mortgage-related commissions.

Compared to the fourth quarter of 2015, noninterest expense increased $1.6 million, or 13%. Franchise growth was the major factor causing the increase in expenses from the prior year period and this can mainly be seen in the salaries and benefits as well as the occupancy and equipment expense categories. The new Seaport branch as well as the opening of new loan and mortgage production offices, contributed to the growth in both salaries and benefits expense and occupancy and equipment expense, and the onboarding of new asset-based lending and municipal banking businesses also contributed to the growth in salaries and benefits expense. Other factors driving the increase in salaries and benefits expense were the absence of a fourth quarter 2015 downward adjustment made to non-equity related incentive compensation expense, higher net mortgage commissions due to an increase in originations, and merit increases.

ASSET QUALITY
The provision for loan losses, which in all quarters reflects management’s assessment of risks inherent in the loan portfolio, was $927,000 in the fourth quarter of 2016 compared to $2.9 million in the third quarter of 2016 and $1.9 million in the fourth quarter of 2015. The decline in the provision from the third quarter was mainly due to the absence of a $2.7 million provision recorded in the third quarter on loans to one commercial customer. This was partially offset by the impact to the provision of higher loan growth. Loan growth and loan mix impact the level of provision needed each quarter and an increase in loan growth to 10% in the fourth quarter from 4% in the third quarter resulted in a higher provision. The allowance for loan losses as a percentage of total loans was 0.97% at December 31, 2016 compared to 1.01% at September 30, 2016 and 1.11% at December 31, 2015. The comparison of the provision with both prior quarters and the decline in the allowance for loan losses as a percentage of total loans were impacted by the migration of historical loss rates from national FDIC data to the Company's own loan loss experience during 2016.

The Company had net loan recoveries of $93,000 in the fourth quarter of 2016 ($101,000 of recoveries related to the previously discussed problem loans to one commercial customer) compared to net loan charge-offs of $3.2 million in the third quarter of 2016 ($3.3 million of which related to the previously discussed problem loans to one commercial customer). Net recoveries were $71,000 in the fourth quarter of 2015.

Nonperforming assets were $9.0 million at December 31, 2016 compared to $7.8 million at September 30, 2016 and $10.7 million at December 31, 2015. The increase from September 30, 2016 was due, in part to a higher level of home equity nonaccrual loans. The decline from the end of 2015 reflects a drop in commercial real estate loans on nonaccrual, partially offset by increases in home equity and residential mortgage nonaccrual loans. Nonperforming assets as a percentage of total assets were 0.36% at December 31, 2016, 0.34% at September 30, 2016, and 0.51% at December 31, 2015.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.5 billion at December 31, 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, commercial and municipal deposit and loan products in Eastern Massachusetts through a growing 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 140 years. For more information about Blue Hills Bank, visit www.bluehillsbank.com.

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

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

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

Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited, dollars in thousands) % Change
December 31, 2016 September 30, 2016 December 31, 2015 December 31, 2016
vs.
September 30, 2016
December 31, 2016
vs.
December 31, 2015
Assets
Cash and due from banks $14,752 $15,490 $10,932 (4.8)% 34.9%
Short term investments 15,744 21,512 22,366 (26.8)% (29.6)%
Total cash and cash equivalents 30,496 37,002 33,298 (17.6)% (8.4)%
Securities available for sale, at fair value 204,836 210,273 231,690 (2.6)% (11.6)%
Securities held to maturity, at amortized cost 201,027 197,863 200,141 1.6% 0.4%
Federal Home Loan Bank stock, at cost 13,352 13,505 13,567 (1.1)% (1.6)%
Loans held for sale 2,761 2,134 12,877 29.4% (78.6)%
Loans:
1-4 family residential 854,478 746,366 602,138 14.5% 41.9%
Home equity 79,132 80,604 77,633 (1.8)% 1.9%
Commercial real estate 686,522 660,458 559,609 3.9% 22.7%
Construction 75,950 71,281 79,386 6.6% (4.3)%
Total real estate loans 1,696,082 1,558,709 1,318,766 8.8% 28.6%
Commercial business 205,832 169,076 182,536 21.7% 12.8%
Consumer 29,707 31,435 39,075 (5.5)% (24.0)%
Total loans 1,931,621 1,759,220 1,540,377 9.8% 25.4%
Allowance for loan losses (18,750)(17,730)(17,102)5.8% 9.6%
Loans, net 1,912,871 1,741,490 1,523,275 9.8% 25.6%
Premises and equipment, net 22,034 21,362 20,015 3.1% 10.1%
Accrued interest receivable 6,057 5,388 5,344 12.4% 13.3%
Goodwill and core deposit intangible 10,560 10,831 11,785 (2.5)% (10.4)%
Net deferred tax asset 10,146 8,780 10,665 15.6% (4.9)%
Bank-owned life insurance 32,015 31,743 31,626 0.9% 1.2%
Other assets 23,537 33,295 20,060 (29.3)% 17.3%
Total assets $2,469,692 $2,313,666 $2,114,343 6.7% 16.8%
Liabilities and Stockholders' Equity
Deposits:
NOW and demand $331,508 $337,225 $288,143 (1.7)% 15.0%
Regular savings 262,984 270,067 287,344 (2.6)% (8.5)%
Money market 573,204 518,360 368,050 10.6% 55.7%
Certificates of deposit 340,114 339,064 311,978 0.3% 9.0%
Brokered money market 53,357 46,235 41,807 15.4% 27.6%
Brokered certificates of deposit 247,520 170,506 136,527 45.2% 81.3%
Total deposits 1,808,687 1,681,457 1,433,849 7.6% 26.1%
Short-term borrowings 146,000 103,700 205,000 40.8% (28.8)%
Long-term debt 105,000 105,000 55,000 % 90.9%
Other liabilities 23,098 33,820 21,665 (31.7)% 6.6%
Total liabilities 2,082,785 1,923,977 1,715,514 8.3% 21.4%
Common stock 259 261 276 (0.8)% (6.2)%
Additional paid-in capital 249,317 251,341 269,078 (0.8)% (7.3)%
Unearned compensation- ESOP (20,496)(20,686)(21,255)(0.9)% (3.6)%
Retained earnings 161,896 158,620 155,918 2.1% 3.8%
Accumulated other comprehensive income (loss) (4,069)153 (5,188)(2,759.5)% (21.6)%
Total stockholders' equity 386,907 389,689 398,829 (0.7)% (3.0)%
Total liabilities and stockholders' equity $2,469,692 $2,313,666 $2,114,343 6.7% 16.8%


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Unaudited, dollars in thousands) December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015
Assets
Cash and due from banks $14,752 $15,490 $13,710 $13,852 $10,932
Short term investments 15,744 21,512 29,485 18,157 22,366
Total cash and cash equivalents 30,496 37,002 43,195 32,009 33,298
Securities available for sale, at fair value 204,836 210,273 204,973 237,669 231,690
Securities held to maturity, at amortized cost 201,027 197,863 196,454 196,578 200,141
Federal Home Loan Bank stock, at cost 13,352 13,505 12,833 16,137 13,567
Loans held for sale 2,761 2,134 6,097 3,926 12,877
Loans:
1-4 family residential 854,478 746,366 675,952 621,801 602,138
Home equity 79,132 80,604 81,649 80,571 77,633
Commercial real estate 686,522 660,458 608,669 586,151 559,609
Construction 75,950 71,281 107,049 92,481 79,386
Total real estate loans 1,696,082 1,558,709 1,473,319 1,381,004 1,318,766
Commercial business 205,832 169,076 178,112 168,976 182,536
Consumer 29,707 31,435 33,707 36,977 39,075
Total loans 1,931,621 1,759,220 1,685,138 1,586,957 1,540,377
Allowance for loan losses (18,750)(17,730)(18,079)(16,985)(17,102)
Loans, net 1,912,871 1,741,490 1,667,059 1,569,972 1,523,275
Premises and equipment, net 22,034 21,362 20,136 20,099 20,015
Accrued interest receivable 6,057 5,388 5,640 5,588 5,344
Goodwill and core deposit intangible 10,560 10,831 11,125 11,443 11,785
Net deferred tax asset 10,146 8,780 8,958 8,774 10,665
Bank-owned life insurance 32,015 31,743 31,558 31,883 31,626
Other assets 23,537 33,295 32,733 28,150 20,060
Total assets $2,469,692 $2,313,666 $2,240,761 $2,162,228 $2,114,343
Liabilities and Stockholders' Equity
Deposits:
NOW and demand $331,508 $337,225 $298,178 $285,391 $288,143
Regular savings 262,984 270,067 274,866 283,586 287,344
Money market 573,204 518,360 506,251 408,591 368,050
Certificates of deposit 340,114 339,064 339,415 329,012 311,978
Brokered money market 53,357 46,235 45,231 46,673 41,807
Brokered certificates of deposit 247,520 170,506 136,965 131,352 136,527
Total deposits 1,808,687 1,681,457 1,600,906 1,484,605 1,433,849
Short-term borrowings 146,000 103,700 130,000 170,000 205,000
Long-term debt 105,000 105,000 85,000 85,000 55,000
Other liabilities 23,098 33,820 32,903 29,067 21,665
Total liabilities 2,082,785 1,923,977 1,848,809 1,768,672 1,715,514
Common stock 259 261 265 269 276
Additional paid-in capital 249,317 251,341 255,781 260,041 269,078
Unearned compensation- ESOP (20,496)(20,686)(20,876)(21,065)(21,255)
Retained earnings 161,896 158,620 157,714 157,090 155,918
Accumulated other comprehensive income (loss) (4,069)153 (932)(2,779)(5,188)
Total stockholders' equity 386,907 389,689 391,952 393,556 398,829
Total liabilities and stockholders' equity $2,469,692 $2,313,666 $2,240,761 $2,162,228 $2,114,343

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
(Unaudited, dollars in thousands, except share data) Quarters Ended% Change
December 31, 2016 September 30, 2016 December 31, 2015 December 31, 2016
vs.
September 30, 2016
December 31, 2016
vs.
December 31, 2015
Interest and fees on loans $16,099 $15,113 $12,647 6.5% 27.3%
Interest on securities 2,325 2,238 2,228 3.9% 4.4%
Dividends 990 312 2,183 217.3% (54.6)%
Other 20 22 13 (9.1)% 53.8%
Total interest and dividend income 19,434 17,685 17,071 9.9% 13.8%
Interest on deposits 2,980 2,732 2,093 9.1% 42.4%
Interest on borrowings 504 458 406 10.0% 24.1%
Total interest expense 3,484 3,190 2,499 9.2% 39.4%
Net interest and dividend income 15,950 14,495 14,572 10.0% 9.5%
Provision for loan losses 927 2,872 1,949 (67.7)% (52.4)%
Net interest and dividend income, after provision for loan losses 15,023 11,623 12,623 29.3% 19.0%
Deposit account fees 356 347 327 2.6% 8.9%
Interchange and ATM fees 388 418 378 (7.2)% 2.6%
Mortgage banking 436 1,262 46 (65.5)% 847.8%
Loan level derivative fee income 640 770 833 (16.9)% (23.2)%
Realized securities gains, net 298 562 145 (47.0)% 105.5%
Bank-owned life insurance income 272 262 268 3.8% 1.5%
Bank-owned life insurance death benefit gains 297 NM NM
Miscellaneous 1,417 214 327 562.1% 333.3%
Total noninterest income 3,807 4,132 2,324 (7.9)% 63.8%
Salaries and employee benefits 7,234 7,596 5,849 (4.8)% 23.7%
Occupancy and equipment 2,291 1,807 1,688 26.8% 35.7%
Data processing 988 908 909 8.8% 8.7%
Professional fees 736 743 780 (0.9)% (5.6)%
Advertising 677 495 776 36.8% (12.8)%
FDIC deposit insurance 157 270 192 (41.9)% (18.2)%
Directors' fees 377 344 315 9.6% 19.7%
Amortization of core deposit intangible 271 294 366 (7.8)% (26.0)%
Other general and administrative 778 777 1,073 0.1% (27.5)%
Total noninterest expense 13,509 13,234 11,948 2.1% 13.1%
Income before income taxes 5,321 2,521 2,999 111.1% 77.4%
Provision for income taxes 1,323 891 587 48.5% 125.4%
Net income $3,998 $1,630 $2,412 145.3% 65.8%
Earnings per common share:
Basic $0.17 $0.07 $0.09
Diluted $0.17 $0.07 $0.09
Weighted average shares outstanding:
Basic 23,919,48324,129,51225,500,755
Diluted 24,032,61324,307,54025,554,961


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date
(Unaudited, dollars in thousands, except share data) Year to Date
December 31, 2016 December 31, 2015 % Change
Interest and fees on loans $58,953 $45,342 30.0%
Interest on securities 8,895 8,828 0.8%
Dividends 1,596 4,068 (60.8)%
Other 94 63 49.2%
Total interest and dividend income 69,538 58,301 19.3%
Interest on deposits 10,488 7,527 39.3%
Interest on borrowings 2,088 1,217 71.6%
Total interest expense 12,576 8,744 43.8%
Net interest and dividend income 56,962 49,557 14.9%
Provision for loan losses 4,885 4,090 19.4%
Net interest and dividend income, after provision for loan losses 52,077 45,467 14.5%
Deposit account fees 1,327 1,314 1.0%
Interchange and ATM fees 1,546 1,511 2.3%
Mortgage banking 2,473 282 777.0%
Loan level derivative fee income 2,371 2,120 11.8%
Realized securities gains, net 1,280 1,968 (35.0)%
Bank-owned life insurance income 1,048 1,031 1.6%
Bank-owned life insurance death benefit gains 506 NM
Miscellaneous 1,576 453 247.9%
Total noninterest income 12,127 8,679 39.7%
Salaries and employee benefits 28,853 22,570 27.8%
Occupancy and equipment 7,370 6,267 17.6%
Data processing 3,460 3,510 (1.4)%
Professional fees 2,638 2,689 (1.9)%
Advertising 2,423 2,458 (1.4)%
FDIC deposit insurance 1,125 999 12.6%
Directors' fees 1,458 644 126.4%
Amortization of core deposit intangible 1,225 1,607 (23.8)%
Other general and administrative 3,194 3,338 (4.3)%
Total noninterest expense 51,746 44,082 17.4%
Income before income taxes 12,458 10,064 23.8%
Provision for income taxes 3,805 2,837 34.1%
Net income $8,653 $7,227 19.7%
Earnings per common share:
Basic $0.35 $0.28
Diluted $0.35 $0.28
Weighted average shares outstanding:
Basic 24,420,40526,064,947
Diluted 24,540,92926,069,589


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,
2016 2016 2016 2016 2015
Interest and fees on loans $16,099 $15,113 $14,138 $13,603 $12,647
Interest on securities 2,325 2,238 2,037 2,295 2,228
Dividends 990 312 155 139 2,183
Other 20 22 26 26 13
Total interest and dividend income 19,434 17,685 16,356 16,063 17,071
Interest on deposits 2,980 2,732 2,484 2,292 2,093
Interest on borrowings 504 458 556 570 406
Total interest expense 3,484 3,190 3,040 2,862 2,499
Net interest and dividend income 15,950 14,495 13,316 13,201 14,572
Provision (credit) for loan losses 927 2,872 1,113 (27) 1,949
Net interest and dividend income, after provision (credit) for loan losses 15,023 11,623 12,203 13,228 12,623
Deposit account fees 356 347 307 317 327
Interchange and ATM fees 388 418 393 347 378
Mortgage banking 436 1,262 531 244 46
Loan level derivative fee income 640 770 322 639 833
Realized securities gains (losses), net 298 562 664 (244) 145
Bank-owned life insurance income 272 262 257 257 268
Bank-owned life insurance death benefit gains 297 209
Miscellaneous 1,417 214 128 (183) 327
Total noninterest income 3,807 4,132 2,811 1,377 2,324
Salaries and employee benefits 7,234 7,596 7,138 6,885 5,849
Occupancy and equipment 2,291 1,807 1,653 1,619 1,688
Data processing 988 908 803 761 909
Professional fees 736 743 678 481 780
Advertising 677 495 719 532 776
FDIC deposit insurance 157 270 352 346 192
Directors' fees 377 344 399 338 315
Amortization of core deposit intangible 271 294 318 342 366
Other general and administrative 778 777 875 764 1,073
Total noninterest expense 13,509 13,234 12,935 12,068 11,948
Income before income taxes 5,321 2,521 2,079 2,537 2,999
Provision for income taxes 1,323 891 721 870 587
Net income $3,998 $1,630 $1,358 $1,667 $2,412
Earnings per common share:
Basic $0.17 $0.07 $0.06 $0.07 $0.09
Diluted $0.17 $0.07 $0.05 $0.07 $0.09
Weighted average shares outstanding:
Basic 23,919,483 24,129,512 24,575,211 25,066,086 25,500,755
Diluted 24,032,613 24,307,540 24,699,794 25,132,441 25,554,961


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands) Quarters Ended
December 31, 2016 September 30, 2016 December 31, 2015
Average
balance
Interest Yield/
Cost
Average
balance
Interest Yield/
Cost
Average
balance
Interest Yield/
Cost
Interest-earning assets
Total loans (1) $1,823,046 $16,161 3.53% $1,726,088 $15,166 3.50% $1,449,494 $12,700 3.48%
Securities (1) 408,351 3,206 3.12 403,038 2,414 2.38 427,752 4,347 4.03
Other interest earning assets and FHLB stock 29,235 145 1.97 31,236 170 2.17 33,222 111 1.33
Total interest-earning assets 2,260,632 19,512 3.43% 2,160,362 17,750 3.27% 1,910,468 17,158 3.56%
Non-interest-earning assets 104,188 106,589 91,732
Total assets $2,364,820 $2,266,951 $2,002,200
Interest-bearing liabilities
NOW $144,520 $18 0.05% $140,273 $17 0.05% $134,162 $19 0.06%
Regular savings 265,589 225 0.34 272,950 229 0.33 287,003 264 0.36
Money market 597,891 1,319 0.88 560,098 1,173 0.83 397,998 729 0.73
Certificates of deposit 526,433 1,418 1.07 471,040 1,313 1.11 396,552 1,081 1.08
Total interest-bearing deposits 1,534,433 2,980 0.77 1,444,361 2,732 0.75 1,215,715 2,093 0.68
Borrowings 223,693 504 0.90 224,660 458 0.81 207,446 406 0.78
Total interest-bearing liabilities 1,758,126 3,484 0.79% 1,669,021 3,190 0.76% 1,423,161 2,499 0.70%
Non-interest-bearing deposits 188,797 171,317 154,872
Other non-interest-bearing liabilities 29,861 33,936 21,878
Total liabilities 1,976,784 1,874,274 1,599,911
Stockholders' equity 388,036 392,677 402,289
Total liabilities and stockholders' equity $2,364,820 $2,266,951 $2,002,200
Net interest and dividend income (FTE) 16,028 14,560 14,659
Less: FTE adjustment (78) (65) (87)
Net interest and dividend income (GAAP) $15,950 $14,495 $14,572
Net interest rate spread (FTE) 2.64% 2.51% 2.86%
Net interest margin (FTE) 2.82% 2.68% 3.04%
Total deposit cost 0.69% 0.67% 0.61%
(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 35%. A statutory tax rate of 34% was used prior to the fourth quarter of 2016.


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands) Year to Date
December 31, 2016 December 31, 2015
Average
balance
Interest Yield/Cost Average
balance
Interest Yield/Cost
Interest-earning assets
Total loans (1) $1,688,878 $59,174 3.50% $1,292,909 $45,544 3.52%
Securities (1) 415,220 10,068 2.42 427,237 12,738 2.98
Other interest earning assets and FHLB stock 33,427 603 1.80 40,115 360 0.90
Total interest-earning assets 2,137,525 69,845 3.27% 1,760,261 58,642 3.33%
Non-interest-earning assets 102,868 92,634
Total assets $2,240,393 $1,852,895
Interest-bearing liabilities
NOW $139,829 $67 0.05% $127,183 $62 0.05%
Regular savings 275,347 938 0.34 294,004 1,144 0.39
Money market 517,474 4,321 0.84 335,791 2,314 0.69
Certificates of deposit 472,985 5,162 1.09 378,494 4,007 1.06
Total interest-bearing deposits 1,405,635 10,488 0.75 1,135,472 7,527 0.66
Borrowings 249,226 2,088 0.84 146,720 1,217 0.83
Total interest-bearing liabilities 1,654,861 12,576 0.76% 1,282,192 8,744 0.68%
Non-interest-bearing deposits 163,403 138,438
Other non-interest-bearing liabilities 29,459 20,993
Total liabilities 1,847,723 1,441,623
Stockholders' equity 392,670 411,272
Total liabilities and stockholders' equity $2,240,393 $1,852,895
Net interest and dividend income (FTE) 57,269 49,898
Less: FTE adjustment (307) (341)
Net interest and dividend income (GAAP) $56,962 $49,557
Net interest rate spread (FTE) 2.51% 2.65%
Net interest margin (FTE) 2.68% 2.83%
Total deposit cost 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 35%. A statutory tax rate of 34% was used for 2015.


Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited, dollars in thousands) Quarters Ended
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Interest-earning assets
Total loans $1,823,046 $1,726,088 $1,635,256 $1,569,240 $1,449,494
Securities 408,351 403,038 419,685 430,015 427,752
Other interest earning assets and FHLB stock 29,235 31,236 36,584 36,723 33,222
Total interest-earning assets 2,260,632 2,160,362 2,091,525 2,035,978 1,910,468
Non-interest-earning assets 104,188 106,589 100,104 100,534 91,732
Total assets $2,364,820 $2,266,951 $2,191,629 $2,136,512 $2,002,200
Interest-bearing liabilities
NOW $144,520 $140,273 $139,100 $135,367 $134,162
Regular savings 265,589 272,950 276,451 286,533 287,003
Money market 597,891 560,098 479,564 430,989 397,998
Certificates of deposit 526,433 471,040 458,328 435,574 396,552
Total interest-bearing deposits 1,534,433 1,444,361 1,353,443 1,288,463 1,215,715
Borrowings 223,693 224,660 271,242 277,857 207,446
Total interest-bearing liabilities 1,758,126 1,669,021 1,624,685 1,566,320 1,423,161
Non-interest-bearing deposits 188,797 171,317 145,171 147,961 154,872
Other non-interest-bearing liabilities 29,861 33,936 27,513 26,471 21,878
Total liabilities 1,976,784 1,874,274 1,797,369 1,740,752 1,599,911
Stockholders' equity 388,036 392,677 394,260 395,760 402,289
Total liabilities and stockholders' equity $2,364,820 $2,266,951 $2,191,629 $2,136,512 $2,002,200


Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands) Quarters Ended
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Interest-earning assets
Total loans (1) 3.53% 3.50% 3.49% 3.50% 3.48%
Securities (1) 3.12% 2.38% 1.99% 2.21% 4.03%
Other interest earning assets and FHLB stock 1.97% 2.17% 1.78% 1.38% 1.33%
Total interest-earning assets 3.43% 3.27% 3.16% 3.19% 3.56%
Interest-bearing liabilities
NOW 0.05% 0.05% 0.05% 0.05% 0.06%
Regular savings 0.34% 0.33% 0.34% 0.35% 0.36%
Money market 0.88% 0.83% 0.82% 0.79% 0.73%
Certificates of deposit 1.07% 1.11% 1.10% 1.09% 1.08%
Total interest-bearing deposits 0.77% 0.75% 0.74% 0.72% 0.68%
Borrowings 0.90% 0.81% 0.82% 0.83% 0.78%
Total interest-bearing liabilities 0.79% 0.76% 0.75% 0.73% 0.70%
Net interest rate spread (FTE) (1) 2.64% 2.51% 2.41% 2.46% 2.86%
Net interest margin (FTE) (1) 2.82% 2.68% 2.58% 2.62% 3.04%
Total deposit cost 0.69% 0.67% 0.67% 0.64% 0.61%
(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 35%. A statutory tax rate of 34% was used prior to the fourth quarter of 2016.


Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data) Quarters Ended
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Performance Ratios (annualized)
Basic EPS $0.17 $0.07 $0.06 $0.07 $0.09
Diluted EPS $0.17 $0.07 $0.05 $0.07 $0.09
Return on average assets (ROAA) 0.67% 0.29% 0.25% 0.31% 0.48%
Return on average equity (ROAE) 4.10% 1.65% 1.39% 1.69% 2.38%
Return on average tangible common equity (ROATCE) (1) (3) 4.22% 1.70% 1.43% 1.75% 2.45%
Efficiency ratio (2) (3) 68% 71% 80% 83% 70%
(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.


Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data) Year to Date
December 31, 2016 December 31, 2015
Performance Ratios (annualized)
Basic and diluted EPS $0.35 $0.28
Return on average assets (ROAA) 0.39% 0.39%
Return on average equity (ROAE) 2.20% 1.76%
Return on average tangible common equity (ROATCE) (1) (3) 2.27% 1.81%
Efficiency ratio (2) 75% 76%
(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.


Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data) At or for the Quarters Ended At or for the Year Ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Asset Quality
Non-performing Assets $8,982 $7,849 $10,744 $8,982 $10,744
Non-performing Assets/Total Assets 0.36% 0.34% 0.51% 0.36% 0.51%
Allowance for Loan Losses/Total Loans 0.97% 1.01% 1.11% 0.97% 1.11%
Net Charge-offs (Recoveries) $(93) $3,221 $(71) $3,237 $(39)
Annualized Net Charge-offs/Average Loans (0.02)% 0.74% (0.02)% 0.19% %
Allowance for Loan Losses/ Nonperforming Loans 209% 226% 159% 209% 159%
Capital/Other
Common shares outstanding 26,759,953 26,996,942 28,492,732
Book value per share $14.46 $14.43 $14.00
Tangible book value per share $14.06 $14.03 $13.58
Tangible Common Equity/Tangible Assets (1) (2) 15.30% 16.45% 18.41%
Full-time Equivalent Employees 228 223 209
(1) Tangible common equity equals total equity less goodwill and intangibles, Tangible assets equals total assets less goodwill and intangibles.
(2) Tangible common equity/tangible assets is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Management believes that this non-GAAP measure is meaningful because it is standard practice for companies in the banking industry to disclose this measure. Therefore, management believes this measure provides useful information to investors by allowing them to make peer comparisons.

Source:Blue Hills Bank