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Blue Hills Bancorp, Inc. Reports First Quarter Earnings

NORWOOD, Mass., April 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 $7.5 million, or $0.31 per diluted share, for the first quarter of 2017, compared to net income of $4.0 million, or $0.17 per diluted share, for the fourth quarter of 2016 and net income of $1.7 million, or $0.07 per diluted share, for the first quarter of 2016.

The first quarter of 2017 included a pre-tax gain of $5.9 million ($3.8 million after-tax, or $0.16 per diluted share) from the Company's investment in Northeast Retirement Services, Inc., which was acquired by Community Bank System, Inc., a pre-tax loss of $1.1 million ($676,000 after-tax, or $0.03 per diluted share) from the sale of the Company's investments in mutual funds, and the reversal of a valuation allowance for state taxes of $1.7 million, or $0.07 per diluted share. Excluding these three items, net income was $2.7 million, or $0.11 per diluted share, for first quarter of 2017.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "We got off to a good start in 2017 with loan and deposit growth continuing at a solid pace. Compared to a year ago, loans are up 25% and deposits, excluding brokered deposits, are up 21% with deposit growth seen across all customer segments. Deposits at our newest branch in the Seaport District of Boston, which opened in October of last year, have grown to $51 million at the end of March. In-house mortgage originations in the first quarter increased compared to a year ago and this comes after in-house originations doubled in 2016 from 2015. During the first quarter, we also made a strategic decision to sell our portfolio of mutual fund investments, which allowed us to reduce wholesale funding and will help to alleviate some of the volatility we had experienced in our quarterly earnings with regard to mutual fund dividends. Finally, improving our operating leverage, returns and efficiency ratio continues to be a top priority for us. Progress this quarter is reflected in the improvement in our core net interest margin, which has benefited from Federal Reserve interest rate increases, and a linked-quarter decline in noninterest expense."

BALANCE SHEET
Compared to December 31, 2016, total assets grew $27 million, or 1%, to $2.5 billion at March 31, 2017. The increase was driven by loan growth as total loans increased $56 million, or 3%, to $2.0 billion at March 31, 2017. By category, the increase was mainly driven by residential mortgage loans, which were up $42 million, or 5%, and commercial real estate loans, which were up $15 million, or 2%. The increase in loans was partially offset by a $31 million, or 15%, decline in securities available for sale, primarily due to the aforementioned sale of the mutual fund portfolio.

Compared to March 31, 2016, total assets increased $334 million, or 15%. Total loans also drove the growth in total assets in this comparison, increasing $400 million, or 25%. By category, the increase from March 31, 2016 was due to residential mortgage loans, which were up $275 million, or 44%, commercial real estate loans, which were up $115 million, or 20%, and commercial business loans, which were up $41 million, or 24%. Residential mortgage loan originations were $91 million in the first quarter of 2017 compared to $65 million in the first quarter of 2016 as the expanded origination team continued to grow the business and gain market share. In the first quarter of 2017, commercial loans (real estate and non-real estate combined) totaling $55 million were added to the balance sheet compared to $74 million in the first quarter of 2016. The growth in loans was partially offset by a $64 million, or 27%, decline in securities available for sale, due to the previously discussed sale of the mutual fund portfolio and lower levels of fixed income securities.

Compared to December 31, 2016, deposits grew $48 million, or 3%, to $1.9 billion at March 31, 2017 reflective of growth in all customer segments (consumer, small business, commercial and municipal). The new Seaport branch contributed $21 million to the increase. By category, the increase was primarily driven by a $50 million increase in money market accounts and smaller increases in NOW and demand, regular savings and certificates of deposit. These increases were partially offset by a $19 million decline in brokered certificates of deposit, which along with a $28 million, or 19%, decrease in short-term borrowings to $118 million at March 31, 2017 contributed to a reduced reliance on wholesale funding.

Compared to March 31, 2016, deposits grew $372 million, or 25%, and included growth in all customer segments. By category, the most significant increases were seen in money market deposits, which were up $214 million, brokered certificates of deposit, which were up $97 million, and NOW and demand deposits, which were up $57 million. A $52 million decline in short-term borrowings was partially offset by a $20 million increase in long-term borrowings.

Stockholders’ equity was $397 million at March 31, 2017 compared to $387 million at December 31, 2016 and $394 million at March 31, 2016. The increase in stockholders' equity from the end of 2016 was mainly due to first quarter 2017 net income of $7.5 million coupled with a $1.9 million decline in the accumulated other comprehensive loss. The major factors impacting the change in stockholders' equity from March 31, 2016 were net income over the past four quarters, which added $14.5 million to stockholders' equity, and repurchases of 978,300 shares of stock, which reduced stockholders' equity by $14.1 million.

Total share repurchases for the seven quarters ending March 31, 2017 were 2,637,640 shares at an average price of $14.20 for a total cost of $37.4 million. At March 31, 2017, the Company had repurchased 7% of the 1,345,087 shares authorized under its third share repurchase program, which was announced in September 2016. There were no share repurchases during the first quarter of 2017.

NET INTEREST AND DIVIDEND INCOME
Net interest and dividend income was $15.9 million in the first quarter of 2017, down $69,000, or 0.4%, from $16.0 million in the fourth quarter of 2016 and up $2.7 million, or 20%, from $13.2 million in the first quarter of 2016. Net interest margin was 2.70% in the first quarter of 2017, down from 2.81% in the fourth quarter of 2016, but up from 2.61% in the first quarter of 2016.

Net interest and dividend income on a fully taxable equivalent basis (referred to herein as "Reported net interest and dividend income (FTE)", a Non-GAAP measure) was $15.9 million in the first quarter of 2017, down $81,000, or 0.5%, from $16.0 million in the fourth quarter of 2016, but up $2.7 million, or 20%, from $13.3 million in the first quarter of 2016. Net interest margin on a fully taxable equivalent basis (referred to herein as "Reported net interest margin (FTE)", a Non-GAAP measure) declined to 2.71% in the first quarter of 2017 from 2.82% for the fourth quarter of 2016, but was up from 2.62% in the first quarter of 2016.

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)March 31, 2017December 31, 2016September 30, 2016June 30, 2016March 31, 2016
Net Interest and Dividend Income
Reported net interest and dividend income$15,881 $15,950 $14,495 $13,316 $13,201
FTE adjustment66 78 65 77 87
Reported net interest and dividend income (FTE)15,947 16,028 14,560 13,393 13,288
Mutual fund dividends (2) (844)(96) (21)
Purchase accounting accretion (2)(107)(137)(115)(133)(127)
Accelerated bond amortization/(accretion) on note redemptions (193)203
Adjusted net interest and dividend income (FTE) (1)$15,840 $15,047 $14,156 $13,463 $13,140
Net Interest Margin
Reported net interest margin2.70%2.81%2.67%2.56%2.61%
FTE adjustment0.01 0.01 0.01 0.02 0.01
Reported net interest margin (FTE)2.71 2.82 2.68 2.58 2.62
Mutual fund dividends (2)0.03 (0.10)0.03 0.05 0.06
Purchase accounting accretion (2)(0.02)(0.03)(0.02)(0.03)(0.03)
Accelerated bond amortization/(accretion) on note redemptions (0.04)0.04
Adjusted net interest margin (FTE) (1)2.72%2.69%2.65%2.64%2.65%
(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. The Company sold its investments in mutual funds during the first quarter of 2017.

Adjusted net interest and dividend income on a fully tax equivalent basis increased $793,000, or 5%, to $15.8 million in the first quarter of 2017 compared to $15.0 million in the fourth quarter of 2016 while adjusted net interest margin improved to 2.72% in the first quarter of 2017 from 2.69% in the fourth quarter of 2016. The increase was mainly driven by a $136 million, or 7%, increase in average loans due to higher levels of residential mortgages, and, to a lesser extent, increases in commercial real estate loans and commercial business loans.

Compared to the first quarter of 2016, adjusted net interest and dividend income on a fully taxable equivalent basis increased $2.7 million, or 21%, while adjusted net interest margin improved by seven basis points to 2.72%. As was the case in the comparison with the fourth 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 $389 million, or 25%, from the first quarter of last year driven by increases in residential mortgages and commercial real estate loans.

Adjusted net interest income and net interest margin benefited in both comparisons from higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank in March 2017, December 2016 and December 2015. The Company maintains a nominal asset sensitive interest rate risk position.

NONINTEREST INCOME
Noninterest income was $6.8 million in the first quarter of 2017, up $3.0 million, or 79%, from $3.8 million in the fourth quarter of 2016. The increase was mainly due to a gain of $5.9 million from the Company's investment in Northeast Retirement Services, Inc., which was acquired by Community Bank System, Inc., and a $304,000 or 70%, increase in mortgage banking revenue due to a higher level of loan sale gains in the first quarter. These improvements were partially offset by a first quarter loss of $1.1 million from the sale of the Company's investments in mutual funds, a $476,000 decline in loan level derivative fee income, and a $1.4 million decline in miscellaneous income. The latter reflects the absence of large positive valuation adjustments recorded in the fourth quarter on the portfolio of commercial loan customer back-to-back interest rate swap contracts due to an increase in interest rates.

Compared to the first quarter of 2016, noninterest income increased $5.4 million, or 395%. The increase was primarily due to the $5.9 million gain from the Company's investment in Northeast Retirement Services, Inc., and a $496,000, or 203%, increase in mortgage banking revenue. The improvements were partially offset by the loss of $1.1 million from the sale of the Company's investments in mutual funds during the first quarter of 2017 and a $475,000, or 74%, decline in loan level derivative fee income.

NONINTEREST EXPENSE
Noninterest expense was $13.4 million in the first quarter of 2017, down $109,000, or 1%, from the fourth quarter of 2016. By category, the most significant declines were in advertising, which was high in the fourth quarter due to seasonality and promotions related to the new Seaport branch, in occupancy and equipment expense, and in other general and administrative expenses. These declines were partially offset by an increase in salaries and benefits expense due, in part, to higher health insurance costs, equity compensation, a seasonal increase in payroll taxes, and merit increases.

Compared to the first quarter of 2016, noninterest expense increased $1.3 million, or 11%. 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.

ASSET QUALITY
The provision for loan losses, which in all quarters reflects management’s assessment of risks inherent in the loan portfolio, was $57,000 in the first quarter of 2017 compared to $927,000 in the fourth quarter of 2016 and a credit of $27,000 in the first quarter of 2016. Loan growth and loan mix impact the level of provision needed each quarter and a decline in loan growth to 3% in the first quarter of 2017 from 10% in the fourth quarter of 2016 was a major contributor to the lower provision.

The allowance for loan losses as a percentage of total loans was 0.95% at March 31, 2017 compared to 0.97% at December 31, 2016 and 1.07% at March 31, 2016. The decline in the allowance for loan losses as a percentage of total loans from a year ago was impacted by the general improvement in historical loss rates from national FDIC data, as well as the planned migration of loss rates to those more reflective of the Company's own loan loss experience. The Company had net loan recoveries of $68,000 in the first quarter of 2017 compared to net loan recoveries of $93,000 in the fourth quarter of 2016 and net loan charge-offs of $90,000 in the first quarter of 2016.

Nonperforming assets were $13.1 million at March 31, 2017 compared to $9.0 million at December 31, 2016 and $10.9 million at March 31, 2016. The increase from December 31, 2016 was mainly due to loans secured by one income property which were placed back on nonaccrual in the first quarter of 2017. These loans were also on nonaccrual at March 31, 2016. The increase from March 31, 2016 was mainly due to increases in home equity and commercial real estate nonaccrual loans. Nonperforming assets as a percentage of total assets was 0.53% at March 31, 2017, 0.36% at December 31, 2016, and 0.51% at March 31, 2016.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.5 billion at March 31, 2017 and operates 11 branch offices in Boston, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The Bank's three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer, commercial and municipal deposit and loan products in Eastern Massachusetts through its branch network, loan production offices and eCommerce channels. The Bank offers commercial business and commercial real estate loans in addition to cash management services and commercial deposit accounts. The Bank also serves consumers through a full suite of consumer banking products including checking accounts, mortgage loans, equity lines of credit and traditional savings and certificate of deposit accounts. The Bank has invested substantially in online technology including online account opening and funding, online mortgage applications, online banking, mobile banking, bill pay and mobile deposits. Blue Hills Bank has been serving area residents for over 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.

Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
(Unaudited, dollars in thousands) % Change
March 31, 2017 December 31, 2016 March 31, 2016March 31, 2017
vs.
December 31, 2016
March 31, 2017
vs.
March 31, 2016
Assets
Cash and due from banks$15,594 $14,752 $13,852 5.7%12.6%
Short term investments19,555 15,744 18,157 24.2%7.7%
Total cash and cash equivalents35,149 30,496 32,009 15.3%9.8%
Securities available for sale, at fair value173,834 204,836 237,669 (15.1)%(26.9)%
Securities held to maturity, at amortized cost201,684 201,027 196,578 0.3%2.6%
Federal Home Loan Bank stock, at cost14,828 13,352 16,137 11.1%(8.1)%
Loans held for sale1,675 2,761 3,926 (39.3)%(57.3)%
Loans:
1-4 family residential896,951 854,478 621,801 5.0%44.3%
Home equity80,427 79,132 80,571 1.6%(0.2)%
Commercial real estate701,463 686,522 586,151 2.2%19.7%
Construction70,855 75,950 92,481 (6.7)%(23.4)%
Total real estate loans1,749,696 1,696,082 1,381,004 3.2%26.7%
Commercial business210,328 205,832 168,976 2.2%24.5%
Consumer27,325 29,707 36,977 (8.0)%(26.1)%
Total loans1,987,349 1,931,621 1,586,957 2.9%25.2%
Allowance for loan losses(18,875)(18,750)(16,985)0.7%11.1%
Loans, net1,968,474 1,912,871 1,569,972 2.9%25.4%
Premises and equipment, net21,858 22,034 20,099 (0.8)%8.8%
Accrued interest receivable5,994 6,057 5,588 (1.0)%7.3%
Goodwill and core deposit intangible10,313 10,560 11,443 (2.3)%(9.9)%
Net deferred tax asset8,751 10,146 8,774 (13.7)%(0.3)%
Bank-owned life insurance32,271 32,015 31,883 0.8%1.2%
Other assets21,779 23,537 28,150 (7.5)%(22.6)%
Total assets$2,496,610 $2,469,692 $2,162,228 1.1%15.5%
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$342,118 $331,508 $285,391 3.2%19.9%
Regular savings265,116 262,984 283,586 0.8%(6.5)%
Money market622,852 573,204 408,591 8.7%52.4%
Certificates of deposit348,042 340,114 329,012 2.3%5.8%
Brokered money market50,129 53,357 46,673 (6.0)%7.4%
Brokered certificates of deposit228,465 247,520 131,352 (7.7)%73.9%
Total deposits1,856,722 1,808,687 1,484,605 2.7%25.1%
Short-term borrowings118,000 146,000 170,000 (19.2)%(30.6)%
Long-term debt105,000 105,000 85,000 %23.5%
Other liabilities19,944 23,098 29,067 (13.7)%(31.4)%
Total liabilities2,099,666 2,082,785 1,768,672 0.8%18.7%
Common stock259 259 269 %(3.7)%
Additional paid-in capital250,976 249,317 260,041 0.7%(3.5)%
Unearned compensation- ESOP(20,306)(20,496)(21,065)(0.9)%(3.6)%
Retained earnings168,160 161,896 157,090 3.9%7.0%
Accumulated other comprehensive loss(2,145)(4,069)(2,779)(47.3)%(22.8)%
Total stockholders' equity396,944 386,907 393,556 2.6%0.9%
Total liabilities and stockholders' equity$2,496,610 $2,469,692 $2,162,228 1.1%15.5%


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Unaudited, dollars in thousands)March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016
Assets
Cash and due from banks$15,594 $14,752 $15,490 $13,710 $13,852
Short term investments19,555 15,744 21,512 29,485 18,157
Total cash and cash equivalents35,149 30,496 37,002 43,195 32,009
Securities available for sale, at fair value173,834 204,836 210,273 204,973 237,669
Securities held to maturity, at amortized cost201,684 201,027 197,863 196,454 196,578
Federal Home Loan Bank stock, at cost14,828 13,352 13,505 12,833 16,137
Loans held for sale1,675 2,761 2,134 6,097 3,926
Loans:
1-4 family residential896,951 854,478 746,366 675,952 621,801
Home equity80,427 79,132 80,604 81,649 80,571
Commercial real estate701,463 686,522 660,458 608,669 586,151
Construction70,855 75,950 71,281 107,049 92,481
Total real estate loans1,749,696 1,696,082 1,558,709 1,473,319 1,381,004
Commercial business210,328 205,832 169,076 178,112 168,976
Consumer27,325 29,707 31,435 33,707 36,977
Total loans1,987,349 1,931,621 1,759,220 1,685,138 1,586,957
Allowance for loan losses(18,875)(18,750)(17,730)(18,079)(16,985)
Loans, net1,968,474 1,912,871 1,741,490 1,667,059 1,569,972
Premises and equipment, net21,858 22,034 21,362 20,136 20,099
Accrued interest receivable5,994 6,057 5,388 5,640 5,588
Goodwill and core deposit intangible10,313 10,560 10,831 11,125 11,443
Net deferred tax asset8,751 10,146 8,780 8,958 8,774
Bank-owned life insurance32,271 32,015 31,743 31,558 31,883
Other assets21,779 23,537 33,295 32,733 28,150
Total assets$2,496,610 $2,469,692 $2,313,666 $2,240,761 $2,162,228
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$342,118 $331,508 $337,225 $298,178 $285,391
Regular savings265,116 262,984 270,067 274,866 283,586
Money market622,852 573,204 518,360 506,251 408,591
Certificates of deposit348,042 340,114 339,064 339,415 329,012
Brokered money market50,129 53,357 46,235 45,231 46,673
Brokered certificates of deposit228,465 247,520 170,506 136,965 131,352
Total deposits1,856,722 1,808,687 1,681,457 1,600,906 1,484,605
Short-term borrowings118,000 146,000 103,700 130,000 170,000
Long-term debt105,000 105,000 105,000 85,000 85,000
Other liabilities19,944 23,098 33,820 32,903 29,067
Total liabilities2,099,666 2,082,785 1,923,977 1,848,809 1,768,672
Common stock259 259 261 265 269
Additional paid-in capital250,976 249,317 251,341 255,781 260,041
Unearned compensation- ESOP(20,306)(20,496)(20,686)(20,876)(21,065)
Retained earnings168,160 161,896 158,620 157,714 157,090
Accumulated other comprehensive income (loss)(2,145)(4,069)153 (932)(2,779)
Total stockholders' equity396,944 386,907 389,689 391,952 393,556
Total liabilities and stockholders' equity$2,496,610 $2,469,692 $2,313,666 $2,240,761 $2,162,228



Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
(Unaudited, dollars in thousands, except share data)Quarters Ended% Change
March 31, 2017 December 31, 2016 March 31, 2016March 31, 2017
vs.
December 31, 2016
March 31, 2017
vs.
March 31, 2016
Interest and fees on loans$17,382 $16,099 $13,603 8.0%27.8%
Interest on securities2,210 2,325 2,295 (4.9)%(3.7)%
Dividends157 990 139 (84.1)%12.9%
Other32 20 26 60.0%23.1%
Total interest and dividend income19,781 19,434 16,063 1.8%23.1%
Interest on deposits3,254 2,980 2,292 9.2%42.0%
Interest on borrowings646 504 570 28.2%13.3%
Total interest expense3,900 3,484 2,862 11.9%36.3%
Net interest and dividend income15,881 15,950 13,201 (0.4)%20.3%
Provision for loan losses57 927 (27)(93.9)%(311.1)%
Net interest and dividend income, after provision for loan losses15,824 15,023 13,228 5.3%19.6%
Deposit account fees320 356 317 (10.1)%0.9%
Interchange and ATM fees348 388 347 (10.3)%0.3%
Mortgage banking740 436 244 69.7%203.3%
Loan level derivative fee income164 640 639 (74.4)%(74.3)%
Realized securities gains (losses), net(1,022)298 (244)(443.0)%318.9%
Gain on exchange of investment in Northeast Retirement Services5,947 %%
Bank-owned life insurance income257 272 257 (5.5)%%
Miscellaneous62 1,417 (183)(95.6)%(133.9)%
Total noninterest income6,816 3,807 1,377 79.0%395.0%
Salaries and employee benefits7,563 7,234 6,885 4.5%9.8%
Occupancy and equipment2,115 2,291 1,619 (7.7)%30.6%
Data processing1,044 988 761 5.7%37.2%
Professional fees869 736 481 18.1%80.7%
Advertising367 677 532 (45.8)%(31.0)%
FDIC deposit insurance212 157 346 35.0%(38.7)%
Directors' fees374 377 338 (0.8)%10.7%
Amortization of core deposit intangible247 271 342 (8.9)%(27.8)%
Other general and administrative609 778 764 (21.7)%(20.3)%
Total noninterest expense13,400 13,509 12,068 (0.8)%11.0%
Income before income taxes9,240 5,321 2,537 73.7%264.2%
Provision for income taxes1,753 1,323 870 32.5%101.5%
Net income$7,487 $3,998 $1,667 87.3%349.1%
Earnings per common share:
Basic$0.31 $0.17 $0.07
Diluted$0.31 $0.17 $0.07
Weighted average shares outstanding:
Basic23,911,41923,919,48325,066,086
Diluted24,275,66524,032,61325,132,441


Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
Quarters Ended
(Unaudited, dollars in thousands, except share data)March 31, December 31, September 30, June 30,March 31,
20172016201620162016
Interest and fees on loans$17,382 $16,099 $15,113 $14,138 $13,603
Interest on securities2,210 2,325 2,238 2,037 2,295
Dividends157 990 312 155 139
Other32 20 22 26 26
Total interest and dividend income19,781 19,434 17,685 16,356 16,063
Interest on deposits3,254 2,980 2,732 2,484 2,292
Interest on borrowings646 504 458 556 570
Total interest expense3,900 3,484 3,190 3,040 2,862
Net interest and dividend income15,881 15,950 14,495 13,316 13,201
Provision (credit) for loan losses57 927 2,872 1,113 (27)
Net interest and dividend income, after provision (credit) for loan losses15,824 15,023 11,623 12,203 13,228
Deposit account fees320 356 347 307 317
Interchange and ATM fees348 388 418 393 347
Mortgage banking740 436 1,262 531 244
Loan level derivative fee income164 640 770 322 639
Realized securities gains (losses), net(1,022)298 562 664 (244)
Gain on exchange of investment in Northeast Retirement Services5,947
Bank-owned life insurance income257 272 262 257 257
Bank-owned life insurance death benefit gains 297 209
Miscellaneous62 1,417 214 128 (183)
Total noninterest income6,816 3,807 4,132 2,811 1,377
Salaries and employee benefits7,563 7,234 7,596 7,138 6,885
Occupancy and equipment2,115 2,291 1,807 1,653 1,619
Data processing1,044 988 908 803 761
Professional fees869 736 743 678 481
Advertising367 677 495 719 532
FDIC deposit insurance212 157 270 352 346
Directors' fees374 377 344 399 338
Amortization of core deposit intangible247 271 294 318 342
Other general and administrative609 778 777 875 764
Total noninterest expense13,400 13,509 13,234 12,935 12,068
Income before income taxes9,240 5,321 2,521 2,079 2,537
Provision for income taxes1,753 1,323 891 721 870
Net income$7,487 $3,998 $1,630 $1,358 $1,667
Earnings per common share:
Basic$0.31 $0.17 $0.07 $0.06 $0.07
Diluted$0.31 $0.17 $0.07 $0.05 $0.07
Weighted average shares outstanding:
Basic23,911,41923,919,48324,129,51224,575,21125,066,086
Diluted24,275,66524,032,61324,307,54024,699,79425,132,441


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands)Quarters Ended
March 31, 2017 December 31, 2016 March 31, 2016
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Interest-earning assets
Total loans (1)$1,958,647 $17,436 3.61% $1,823,046 $16,161 3.53% $1,569,240 $13,656 3.50%
Securities (1)398,201 2,240 2.28 408,351 3,206 3.12 430,015 2,368 2.21
Other interest earning assets and FHLB stock31,842 171 2.18 29,235 145 1.97 36,723 126 1.38
Total interest-earning assets2,388,690 19,847 3.37% 2,260,632 19,512 3.43% 2,035,978 16,150 3.19%
Non-interest-earning assets93,397 104,188 100,534
Total assets$2,482,087 $2,364,820 $2,136,512
Interest-bearing liabilities
NOW$145,396 $16 0.04% $144,520 $18 0.05% $135,367 $16 0.05%
Regular savings262,578 218 0.34 265,589 225 0.34 286,533 251 0.35
Money market653,165 1,519 0.94 597,891 1,319 0.88 430,989 846 0.79
Certificates of deposit567,642 1,501 1.07 526,433 1,418 1.07 435,574 1,179 1.09
Total interest-bearing deposits1,628,781 3,254 0.81 1,534,433 2,980 0.77 1,288,463 2,292 0.72
Borrowings256,500 646 1.02 223,693 504 0.90 277,857 570 0.83
Total interest-bearing liabilities1,885,281 3,900 0.84% 1,758,126 3,484 0.79% 1,566,320 2,862 0.73%
Non-interest-bearing deposits183,520 188,797 147,961
Other non-interest-bearing liabilities21,035 29,861 26,471
Total liabilities2,089,836 1,976,784 1,740,752
Stockholders' equity392,251 388,036 395,760
Total liabilities and stockholders' equity$2,482,087 $2,364,820 $2,136,512
Net interest and dividend income (FTE) 15,947 16,028 13,288
Less: FTE adjustment (66) (78) (87)
Net interest and dividend income (GAAP) $15,881 $15,950 $13,201
Net interest rate spread (FTE) 2.53% 2.64% 2.46%
Net interest margin (FTE) 2.71% 2.82% 2.62%
Total deposit cost 0.73% 0.69% 0.64%

(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 - Trend
(Unaudited, dollars in thousands)Quarters Ended
March 31, December 31, September 30,June 30,March 31,
20172016201620162016
Interest-earning assets
Total loans$1,958,647 $1,823,046 $1,726,088 $1,635,256 $1,569,240
Securities398,201 408,351 403,038 419,685 430,015
Other interest earning assets and FHLB stock31,842 29,235 31,236 36,584 36,723
Total interest-earning assets2,388,690 2,260,632 2,160,362 2,091,525 2,035,978
Non-interest-earning assets93,397 104,188 106,589 100,104 100,534
Total assets$2,482,087 $2,364,820 $2,266,951 $2,191,629 $2,136,512
Interest-bearing liabilities
NOW$145,396 $144,520 $140,273 $139,100 $135,367
Regular savings262,578 265,589 272,950 276,451 286,533
Money market653,165 597,891 560,098 479,564 430,989
Certificates of deposit567,642 526,433 471,040 458,328 435,574
Total interest-bearing deposits1,628,781 1,534,433 1,444,361 1,353,443 1,288,463
Borrowings256,500 223,693 224,660 271,242 277,857
Total interest-bearing liabilities1,885,281 1,758,126 1,669,021 1,624,685 1,566,320
Non-interest-bearing deposits183,520 188,797 171,317 145,171 147,961
Other non-interest-bearing liabilities21,035 29,861 33,936 27,513 26,471
Total liabilities2,089,836 1,976,784 1,874,274 1,797,369 1,740,752
Stockholders' equity392,251 388,036 392,677 394,260 395,760
Total liabilities and stockholders' equity$2,482,087 $2,364,820 $2,266,951 $2,191,629 $2,136,512


Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited, dollars in thousands)Quarters Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Interest-earning assets
Total loans (1)3.61%3.53%3.50%3.49%3.50%
Securities (1)2.28%3.12%2.38%1.99%2.21%
Other interest earning assets and FHLB stock2.18%1.97%2.17%1.78%1.38%
Total interest-earning assets3.37%3.43%3.27%3.16%3.19%
Interest-bearing liabilities
NOW0.04%0.05%0.05%0.05%0.05%
Regular savings0.34%0.34%0.33%0.34%0.35%
Money market0.94%0.88%0.83%0.82%0.79%
Certificates of deposit1.07%1.07%1.11%1.10%1.09%
Total interest-bearing deposits0.81%0.77%0.75%0.74%0.72%
Borrowings1.02%0.90%0.81%0.82%0.83%
Total interest-bearing liabilities0.84%0.79%0.76%0.75%0.73%
Net interest rate spread (FTE) (1)2.53%2.64%2.51%2.41%2.46%
Net interest margin (FTE) (1)2.71%2.82%2.68%2.58%2.62%
Total deposit cost0.73%0.69%0.67%0.67%0.64%

(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.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited, dollars in thousands, except share data)Quarter Ended
March 31, 2017
Income Before
Income Taxes
Provision for
Income Taxes
Net Income Earnings per
Common Share
(diluted)
GAAP basis$9,240 $1,753 $7,487 $0.31
Less gain on exchange of investment in Northeast Retirement Services(5,947) (2,133) (3,814) (0.16)
Add realized loss on sale of mutual funds1,054 378 676 0.03
Add reversal of state tax valuation allowance 1,697 (1,697) (0.07)
Non-GAAP basis$4,347 $1,695 $2,652 $0.11

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

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)Quarters Ended
March 31, December 31, September 30, June 30, March 31,
20172016201620162016
Performance Ratios (annualized)
Diluted EPS
GAAP$0.31 $0.17 $0.07 $0.05 $0.07
Non-GAAP$0.11 n/a n/a n/a n/a
Return on average assets (ROAA)
GAAP1.22%0.67%0.29%0.25%0.31%
Non-GAAP0.43% n/a n/a n/a n/a
Return on average equity (ROAE)
GAAP7.74%4.10%1.65%1.39%1.69%
Non-GAAP2.74% n/a n/a n/a n/a
Return on average tangible common equity (ROATCE) (1) (3)
GAAP7.95%4.22%1.70%1.43%1.75%
Non-GAAP2.82% n/a n/a n/a n/a
Efficiency ratio (2) (3)
GAAP59%68%71%80%83%
Non-GAAP75% n/a n/a n/a n/a

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

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

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

See page 11 for Non-GAAP financial measures.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)At or for the Quarters Ended
March 31,December 31,March 31,
201720162016
Asset Quality
Non-performing Assets$13,109 $8,983 $10,941
Non-performing Assets/ Total Assets0.53%0.36%0.51%
Allowance for Loan Losses/ Total Loans0.95%0.97%1.07%
Net Charge-offs (Recoveries)$(68)$(93)$90
Annualized Net Charge-offs (Recoveries)/ Average Loans(0.01)%(0.02)%0.02%
Allowance for Loan Losses/ Nonperforming Loans144%209%155%
Capital/Other
Common shares outstanding26,858,328 26,759,953 27,786,642
Book value per share$14.78 $14.46 $14.16
Tangible book value per share$14.40 $14.06 $13.75
Tangible Common Equity/Tangible Assets (1) (2)15.55%15.30%17.77%
Full-time Equivalent Employees227 228 219

(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.

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

Source:Blue Hills Bank