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Blue Hills Bancorp, Inc. Reports Third Quarter Earnings

NORWOOD, Mass., Oct. 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 $3.8 million, or $0.16 per diluted share, for the third quarter of 2017 compared to net income of $3.9 million, or $0.16 per diluted share, for the second quarter of 2017 and net income of $1.6 million, or $0.07 per diluted share, for the third quarter of 2016. The third quarter of 2017 included a pre-tax loss of $118,000 ($73,000 after tax, or less than a penny per diluted share) from the sale of a purchased home equity loan portfolio while the second quarter of 2017 included a pre-tax gain of $928,000 ($595,000 after tax, or $0.02 per diluted share) from the sale of the Company's remaining available-for-sale debt securities portfolio. Excluding these items, net income was $3.9 million, or $0.16 per diluted share for the third quarter of 2017 on a non-GAAP basis and $3.3 million, or $0.14 per diluted share, for the second quarter of 2017 on a non-GAAP basis.

For the nine months ended September 30, 2017, net income was $15.2 million, or $0.62 per diluted share compared to $4.7 million, or $0.19 per diluted share, for the nine months ended September 30, 2016. Excluding nonrecurring items, net income for the nine months ended September 30, 2017 on a non-GAAP basis was $9.8 million or $0.40 per share (see page 15 for a reconciliation of GAAP to non-GAAP measures).

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "A key theme for us this year has been improved operating leverage and for the first nine months of 2017 revenues, excluding securities gains and other nonrecurring items, have grown 20% from a year ago while noninterest expense has risen just 5% and has been flat in each of the last three quarters. While we will continue to invest in our businesses to lay the groundwork for future bottom line growth, we have the opportunity to generate continued operating leverage.”

Parent continued, “Adjusted net interest margin, which excludes volatile items, has improved in five straight quarters as our asset sensitive rate risk position has allowed us to benefit from the Fed’s rate hikes. Mortgage banking earnings are up over 50% from the prior year, commercial business loans are up over 40% from a year ago, and deposits at our Seaport Branch, which has been open for about a year, reached $85 million at the end of the third quarter. In September, we announced a tripling of our quarterly dividend to $0.15 per share, representing an over 90% payout of our second quarter earnings. Through dividend payments, buybacks and organic growth, we have brought our tangible common equity ratio down from approximately 24% three years ago to 15.35% at September 30, 2017 and we will continue to consider all options for further deployment of the remaining excess capital. We have come a long way during our three years as a public company and enter the next phase of our evolution to a full-service, diversified community bank with building momentum and optimism for what lies ahead.”

BALANCE SHEET
Compared to June 30, 2017, total assets grew $32 million, or 1%, to $2.5 billion at September 30, 2017. The increase was mainly driven by a $21 million, or 1%, increase in loans and a $19 million, or 7%, increase in held-to-maturity securities. The growth rate in loans during the third quarter was affected by (1) the sale of a $12 million home equity loan portfolio that had been purchased in 2012 and (2) timing issues related to loans that closed in October. Changes in individual loan categories compared to June 30, 2017 were relatively small with growth in commercial business, construction and residential mortgage loans more than offsetting declines in home equity, commercial real estate and consumer loans.

Compared to September 30, 2016, total assets increased $232 million, or 10%. Loans drove the growth in total assets in this comparison, increasing $328 million, or 19%. By category, the increase from September 30, 2016 was due to residential mortgage loans, which were up $159 million, or 21%; commercial real estate loans, which were up $91 million, or 14%; and commercial business loans, which were up $72 million, or 42%. Residential mortgage loan originations were $153 million in the third quarter of 2017 compared to $172 million in the third quarter of 2016 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $64 million in the third quarter of 2017 compared to $82 million in the third quarter of 2016. The growth in loans from September 30, 2016 was partially offset by a $95 million, or 23%, decline in the combination of securities available for sale and held to maturity, primarily due to the sales of the mutual fund investment portfolio and the remaining available-for-sale debt securities portfolio in the first half of 2017.

Compared to June 30, 2017, deposits grew $20 million, or 1%, to $2.0 billion at September 30, 2017; however, excluding brokered deposits, the increase was $65 million, or 4%. The growth excluding brokered deposits by customer segment was mainly due to increases in consumer and small business deposits while the growth by deposit category was primarily due to an increase in certificates of deposit. Borrowings were $130 million at September 30, 2017 and June 30, 2017.

Compared to September 30, 2016, deposits grew $304 million, or 18%, 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 $148 million, certificates of deposit, which were up $82 million, and brokered certificates of deposit, which were up $65 million. Borrowings declined $79 million, as an $84 million decline in short-term borrowings was partially offset by a $5 million increase in long-term borrowings.

Stockholders’ equity was $399 million at September 30, 2017 compared to $397 million at June 30, 2017 and $390 million at September 30, 2016. The increase from a year ago was mainly due to net income over the past four quarters, which added $19 million to stockholders' equity, partially offset by share repurchases that took place in the fourth quarter of 2016 and dividends, including a special dividend of $0.20 per common share in the second quarter of 2017. There were no share repurchases in the first nine months of 2017.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $17.0 million in the third quarter of 2017, up $546,000, or 3%, from $16.4 million in the second quarter of 2017 and up $2.5 million, or 17%, from $14.5 million in the third quarter of 2016. Reported net interest margin was 2.77% in the third quarter of 2017, up from 2.75% in the second quarter of 2017 and from 2.67% in the third 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 $17.0 million in the third quarter of 2017, up $544,000, or 3%, from $16.5 million in the second quarter of 2017, and up $2.5 million, or 17%, from $14.6 million in the third 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) improved to 2.78% in the third quarter of 2017 from 2.76% in the second quarter of 2017 and 2.68% in the third 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 (FTE) and Adjusted net interest margin (FTE).

(Unaudited, dollars in thousands)September 30, 2017June 30, 2017March 31, 2017December 31, 2016September 30, 2016
Net Interest and Dividend Income
Reported net interest and dividend income$16,954 $16,408 $15,881 $15,950 $14,495
FTE adjustment58 60 66 78 65
Reported net interest and dividend income (FTE)17,012 16,468 15,947 16,028 14,560
Mutual fund dividends (2) (844)(96)
Purchase accounting accretion (2)(103)(181)(107)(137)(115)
Accelerated bond accretion on note redemptions (193)
Adjusted net interest and dividend income (FTE) (1)$16,909 $16,287 $15,840 $15,047 $14,156
Net Interest Margin
Reported net interest margin2.77%2.75%2.70%2.81%2.67%
FTE adjustment0.01 0.01 0.01 0.01 0.01
Reported net interest margin (FTE)2.78 2.76 2.71 2.82 2.68
Mutual fund dividends (2) 0.03 (0.10)0.03
Purchase accounting accretion (2)(0.02)(0.03)(0.02)(0.03)(0.02)
Accelerated bond accretion on note redemptions (0.04)
Adjusted net interest margin (FTE) (1)2.76%2.73%2.72%2.69%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) 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 to investors 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 (FTE) increased $622,000, or 4%, to $16.9 million in the third quarter of 2017 from $16.3 million in the second quarter of 2017 and was up $2.8 million, or 19%, from $14.2 million in the third quarter of 2016. Adjusted net interest margin (FTE) improved to 2.76% in the third quarter of 2017 from 2.73% in the second quarter of 2017 and 2.65% in the third quarter of 2016. Adjusted net interest and dividend income (FTE) and adjusted net interest margin (FTE) benefited in both comparisons from higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank in June 2017, March 2017, and December 2016. The Company maintains an asset sensitive interest rate risk position. In addition, adjusted net interest and dividend income (FTE) was helped by loan growth, as average loans increased $50 million, or 2%, from the second quarter of this year and $370 million, or 21%, from the third quarter of last year. Compared to the second quarter of 2017, the increase was due to relatively small increases in several loan categories, while compared to the third quarter of 2016, average loan growth was mainly driven by higher levels of residential mortgages, commercial real estate loans, and commercial business loans. Partially offsetting the improvement in adjusted net interest and dividend income (FTE) from the third quarter of 2016, was a decline in average securities.

NONINTEREST INCOME
Noninterest income was $2.8 million in the third quarter of 2017, down from $4.5 million in the second quarter of 2017. The decline reflects (1) a $1.2 million drop in loan level derivative income, which is related to a lower volume of new commercial loan customer interest rate swap contracts. The amount of revenue in the loan level derivative income category can be volatile since it is a function of the amount of commercial loans that customers opt to convert from floating to fixed rate via interest rate swaps in any given quarter; (2) the absence of a $928,000 gain on the sale of the Company's remaining portfolio of available-for-sale debt securities recorded in the second quarter; and (3) a third quarter loss of $118,000 from the sale of the remaining $12 million of a home equity loan portfolio that had been purchased in 2012. These declines were partially offset by a $528,000 increase in miscellaneous income mainly reflecting income on CRA-qualified Small Business Investment Company ("SBIC") investments. Mortgage banking income exceeded $1 million in the second and third quarters, and continues to be a significant contributor to noninterest income.

Compared to the third quarter of 2016, noninterest income declined $1.3 million, or 32%. This was mainly due to the absence of $562,000 of securities gains and $297,000 of bank-owned life insurance death benefit gains recorded in the year ago quarter and the $118,000 loss on the sale of home equity loans recorded in the current quarter. In addition, loan level derivative income declined by $614,000. These declines were partially offset by a $320,000 increase in miscellaneous income, mainly reflecting income on CRA-qualified SBIC investments.

NONINTEREST EXPENSE
Noninterest expense was $13.4 million in the third and second quarters of 2017 compared to $13.2 million in the third quarter of 2016. The $121,000, or 1%, increase from the third quarter of last year is mainly due to franchise growth, including the opening of the new Seaport branch in the fourth quarter of 2016, as well as the opening of new loan and mortgage production offices. The increases from franchise growth were partially offset by a lower level of professional fees.

ASSET QUALITY
The provision for loan losses reflects management’s assessment of risks inherent in the loan portfolio. The provision for loan losses was $242,000 in the third quarter of 2017 compared to $1.1 million in the second quarter of 2017 and $2.9 million in the third quarter of 2016. Loan growth and loan mix impact the level of provision needed each quarter and loan growth was lower in the third quarter of 2017 than in the second quarter. The provision for loan losses in the third quarter of 2016 included a $2.7 million provision related to problem loans associated with one commercial customer.

The allowance for loan losses as a percentage of total loans was 0.97% at September 30, 2017 and June 30, 2017, compared to 1.01% at September 30, 2016. The Company had net loan recoveries of $89,000 in the third quarter of 2017 compared to net loan charge-offs of $76,000 in the second quarter of 2017 and net loan charge-offs of $3.2 million in the third quarter of 2016. The third quarter of 2016 included $3.3 million of charge-offs related to problem loans associated with one commercial customer.

Nonperforming assets were $11.5 million at September 30, 2017 compared to $12.8 million at June 30, 2017 and $7.8 million at September 30, 2016. The decline in nonperforming assets from June 30, 2017 reflects a lower level of nonaccrual loans, mainly residential mortgages. The increase in nonperforming assets from the third quarter of last year was mainly due to loans secured by one income property that were placed back on nonaccrual in the first quarter of 2017. Nonperforming assets as a percentage of total assets was 0.45% at September 30, 2017 compared to 0.51% at June 30, 2017 and 0.34% at September 30, 2016.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.5 billion at September 30, 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 145 years. For more information about Blue Hills Bank, visit www.bluehillsbank.com.

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

The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: our ability to implement successfully our business strategy, which includes significant asset and liability growth; changes that could adversely affect the business in which the Company and the Bank are engaged; prevailing economic and geopolitical conditions; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services. 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
September 30, 2017June 30, 2017September 30, 2016September 30, 2017
vs.
June 30, 2017
September 30, 2017
vs.
September 30, 2016
Assets
Cash and due from banks$16,171 $17,292 $15,490 (6.5)%4.4%
Short term investments22,192 33,819 21,512 (34.4)%3.2%
Total cash and cash equivalents38,363 51,111 37,002 (24.9)%3.7%
Securities available-for-sale, at fair value9,943 10,437 210,273 (4.7)%(95.3)%
Securities held-to-maturity, at amortized cost302,833 283,672 197,863 6.8%53.1%
Federal Home Loan Bank stock, at cost9,410 11,943 13,505 (21.2)%(30.3)%
Loans held for sale12,268 6,789 2,134 80.7%474.9%
Loans:
1-4 family residential905,585 895,015 746,366 1.2%21.3%
Home equity77,819 84,615 80,604 (8.0)%(3.5)%
Commercial real estate751,209 756,093 660,458 (0.6)%13.7%
Construction88,979 78,062 71,281 14.0%24.8%
Total real estate loans1,823,592 1,813,785 1,558,709 0.5%17.0%
Commercial business240,801 227,262 169,076 6.0%42.4%
Consumer23,142 25,047 31,435 (7.6)%(26.4)%
Total loans2,087,535 2,066,094 1,759,220 1.0%18.7%
Allowance for loan losses(20,248)(19,917)(17,730)1.7%14.2%
Loans, net2,067,287 2,046,177 1,741,490 1.0%18.7%
Premises and equipment, net21,850 22,004 21,362 (0.7)%2.3%
Accrued interest receivable5,802 5,362 5,388 8.2%7.7%
Goodwill and core deposit intangible9,892 10,091 10,831 (2.0)%(8.7)%
Net deferred tax asset9,295 8,184 8,780 13.6%5.9%
Bank-owned life insurance32,800 32,533 31,743 0.8%3.3%
Other assets25,673 25,606 33,295 0.3%(22.9)%
Total assets$2,545,416 $2,513,909 $2,313,666 1.3%10.0%
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$376,864 $359,877 $337,225 4.7%11.8%
Regular savings244,662 246,484 270,067 (0.7)%(9.4)%
Money market666,388 674,593 518,360 (1.2)%28.6%
Certificates of deposit420,765 362,261 339,064 16.1%24.1%
Brokered money market41,768 44,728 46,235 (6.6)%(9.7)%
Brokered certificates of deposit235,106 277,320 170,506 (15.2)%37.9%
Total deposits1,985,553 1,965,263 1,681,457 1.0%18.1%
Short-term borrowings20,000 103,700 NM (80.7)%
Long-term debt110,000 130,000 105,000 (15.4)%4.8%
Other liabilities30,829 21,328 33,820 44.5%(8.8)%
Total liabilities2,146,382 2,116,591 1,923,977 1.4%11.6%
Common stock259 259 261 %(0.8)%
Additional paid-in capital254,034 252,504 251,341 0.6%1.1%
Unearned compensation- ESOP(19,927)(20,117)(20,686)(0.9)%(3.7)%
Retained earnings166,282 166,033 158,620 0.1%4.8%
Accumulated other comprehensive income (loss)(1,614)(1,361)153 18.6%(1,154.9)%
Total stockholders' equity399,034 397,318 389,689 0.4%2.4%
Total liabilities and stockholders' equity$2,545,416 $2,513,909 $2,313,666 1.3%10.0%

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Unaudited; dollars in thousands)September 30, 2017June 30, 2017March 31, 2017December 31, 2016September 30, 2016
Assets
Cash and due from banks$16,171 $17,292 $15,594 $14,752 $15,490
Short term investments22,192 33,819 19,555 15,744 21,512
Total cash and cash equivalents38,363 51,111 35,149 30,496 37,002
Securities available-for-sale, at fair value9,943 10,437 173,834 204,836 210,273
Securities held-to-maturity, at amortized cost302,833 283,672 201,684 201,027 197,863
Federal Home Loan Bank stock, at cost9,410 11,943 14,828 13,352 13,505
Loans held for sale12,268 6,789 1,675 2,761 2,134
Loans:
1-4 family residential905,585 895,015 896,951 854,478 746,366
Home equity77,819 84,615 80,427 79,132 80,604
Commercial real estate751,209 756,093 701,463 686,522 660,458
Construction88,979 78,062 70,855 75,950 71,281
Total real estate loans1,823,592 1,813,785 1,749,696 1,696,082 1,558,709
Commercial business240,801 227,262 210,328 205,832 169,076
Consumer23,142 25,047 27,325 29,707 31,435
Total loans2,087,535 2,066,094 1,987,349 1,931,621 1,759,220
Allowance for loan losses(20,248)(19,917)(18,875)(18,750)(17,730)
Loans, net2,067,287 2,046,177 1,968,474 1,912,871 1,741,490
Premises and equipment, net21,850 22,004 21,858 22,034 21,362
Accrued interest receivable5,802 5,362 5,994 6,057 5,388
Goodwill and core deposit intangible9,892 10,091 10,313 10,560 10,831
Net deferred tax asset9,295 8,184 8,751 10,146 8,780
Bank-owned life insurance32,800 32,533 32,271 32,015 31,743
Other assets25,673 25,606 21,779 23,537 33,295
Total assets$2,545,416 $2,513,909 $2,496,610 $2,469,692 $2,313,666
Liabilities and Stockholders' Equity
Deposits:
NOW and demand$376,864 $359,877 $342,118 $331,508 $337,225
Regular savings244,662 246,484 265,116 262,984 270,067
Money market666,388 674,593 622,852 573,204 518,360
Certificates of deposit420,765 362,261 348,042 340,114 339,064
Brokered money market41,768 44,728 50,129 53,357 46,235
Brokered certificates of deposit235,106 277,320 228,465 247,520 170,506
Total deposits1,985,553 1,965,263 1,856,722 1,808,687 1,681,457
Short-term borrowings20,000 118,000 146,000 103,700
Long-term debt110,000 130,000 105,000 105,000 105,000
Other liabilities30,829 21,328 19,944 23,098 33,820
Total liabilities2,146,382 2,116,591 2,099,666 2,082,785 1,923,977
Common stock259 259 259 259 261
Additional paid-in capital254,034 252,504 250,976 249,317 251,341
Unearned compensation- ESOP(19,927)(20,117)(20,306)(20,496)(20,686)
Retained earnings166,282 166,033 168,160 161,896 158,620
Accumulated other comprehensive income (loss)(1,614)(1,361)(2,145)(4,069)153
Total stockholders' equity399,034 397,318 396,944 386,907 389,689
Total liabilities and stockholders' equity$2,545,416 $2,513,909 $2,496,610 $2,469,692 $2,313,666


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
(Unaudited; dollars in thousands, except share data)Quarters Ended% Change
September 30, 2017June 30, 2017September 30, 2016September 30, 2017
vs.
June 30, 2017
September 30, 2017
vs.
September 30, 2016
Interest and fees on loans$19,721 $18,715 $15,113 5.4%30.5%
Interest on securities1,565 1,572 2,238 (0.4)%(30.1)%
Dividends194 193 312 0.5%(37.8)%
Other65 94 22 (30.9)%195.5%
Total interest and dividend income21,545 20,574 17,685 4.7%21.8%
Interest on deposits4,089 3,523 2,732 16.1%49.7%
Interest on borrowings502 643 458 (21.9)%9.6%
Total interest expense4,591 4,166 3,190 10.2%43.9%
Net interest and dividend income16,954 16,408 14,495 3.3%17.0%
Provision for loan losses242 1,118 2,872 (78.4)%(91.6)%
Net interest and dividend income, after provision for loan losses16,712 15,290 11,623 9.3%43.8%
Deposit account fees385 341 347 12.9%11.0%
Interchange and ATM fees455 388 418 17.3%8.9%
Mortgage banking1,146 1,219 1,262 (6.0)%(9.2)%
Loss on sale of purchased home equity portfolio
(118) NM NM
Loan level derivative fee income156 1,367 770 (88.6)%(79.7)%
Realized securities gains, net 928 562 (100.0)%(100.0)%
Bank-owned life insurance income268 261 262 2.7%2.3%
Bank-owned life insurance death benefit gains 297 NM NM
Miscellaneous534 6 214 8,800.0%149.5%
Total noninterest income2,826 4,510 4,132 (37.3)%(31.6)%
Salaries and employee benefits7,979 7,664 7,596 4.1%5.0%
Occupancy and equipment2,024 2,030 1,807 (0.3)%12.0%
Data processing1,016 1,022 908 (0.6)%11.9%
Professional fees340 526 743 (35.4)%(54.2)%
Advertising563 489 495 15.1%13.7%
FDIC deposit insurance226 223 270 1.3%(16.3)%
Directors' fees382 428 344 (10.7)%11.0%
Amortization of core deposit intangible199 222 294 (10.4)%(32.3)%
Other general and administrative626 762 777 (17.8)%(19.4)%
Total noninterest expense13,355 13,366 13,234 (0.1)%0.9%
Income before income taxes6,183 6,434 2,521 (3.9)%145.3%
Provision for income taxes2,342 2,566 891 (8.7)%162.9%
Net income$3,841 $3,868 $1,630 (0.7)%135.6%
Earnings per common share:
Basic$0.16 $0.16 $0.07
Diluted$0.16 $0.16 $0.07
Weighted average shares outstanding:
Basic23,973,116 23,952,443 24,129,512
Diluted24,510,092 24,346,553 24,307,540
Dividends declared per share$0.15 $0.05 $0.03
Special dividends declared per share$ $0.20 $

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Year to Date
(Unaudited; dollars in thousands, except share data)Year to Date
September 30, 2017September 30, 2016% Change
Interest and fees on loans$55,818 $42,854 30.3%
Interest on securities5,347 6,570 (18.6)%
Dividends544 606 (10.2)%
Other191 74 158.1%
Total interest and dividend income61,900 50,104 23.5%
Interest on deposits10,866 7,508 44.7%
Interest on borrowings1,791 1,584 13.1%
Total interest expense12,657 9,092 39.2%
Net interest and dividend income49,243 41,012 20.1%
Provision for loan losses1,417 3,958 (64.2)%
Net interest and dividend income, after provision for loan losses47,826 37,054 29.1%
Deposit account fees1,046 971 7.7%
Interchange and ATM fees1,191 1,158 2.8%
Mortgage banking3,105 2,037 52.4%
Loss on sale of purchased home equity portfolio
(118) NM
Loan level derivative fee income1,687 1,731 (2.5)%
Realized securities gains (losses), net(94)982 (109.6)%
Gain on exchange of investment in Northeast Retirement Services5,947 NM
Bank-owned life insurance income786 776 1.3%
Bank-owned life insurance death benefit gains 506 NM
Miscellaneous602 159 278.6%
Total noninterest income14,152 8,320 70.1%
Salaries and employee benefits23,206 21,619 7.3%
Occupancy and equipment6,169 5,079 21.5%
Data processing3,082 2,472 24.7%
Professional fees1,735 1,902 (8.8)%
Advertising1,419 1,746 (18.7)%
FDIC deposit insurance661 968 (31.7)%
Directors' fees1,184 1,081 9.5%
Amortization of core deposit intangible668 954 (30.0)%
Other general and administrative1,997 2,416 (17.3)%
Total noninterest expense40,121 38,237 4.9%
Income before income taxes21,857 7,137 206.2%
Provision for income taxes6,661 2,482 168.4%
Net income$15,196 $4,655 226.4%
Earnings per common share:
Basic$0.63 $0.19
Diluted$0.62 $0.19
Weighted average shares outstanding:
Basic23,945,885 24,585,570
Diluted24,377,662 24,708,559
Dividends declared per share$0.25 $0.08
Special dividends declared per share$0.20 $

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,
20172017201720162016
Interest and fees on loans$19,721 $18,715 $17,382 $16,099 $15,113
Interest on securities1,565 1,572 2,210 2,325 2,238
Dividends194 193 157 990 312
Other65 94 32 20 22
Total interest and dividend income21,545 20,574 19,781 19,434 17,685
Interest on deposits4,089 3,523 3,254 2,980 2,732
Interest on borrowings502 643 646 504 458
Total interest expense4,591 4,166 3,900 3,484 3,190
Net interest and dividend income16,954 16,408 15,881 15,950 14,495
Provision for loan losses242 1,118 57 927 2,872
Net interest and dividend income, after provision for loan losses16,712 15,290 15,824 15,023 11,623
Deposit account fees385 341 320 356 347
Interchange and ATM fees455 388 348 388 418
Mortgage banking1,146 1,219 740 436 1,262
Loss on sale of purchased home equity portfolio
(118)
Loan level derivative fee income156 1,367 164 640 770
Realized securities gains (losses), net 928 (1,022)298 562
Gain on exchange of investment in Northeast Retirement Services 5,947
Bank-owned life insurance income268 261 257 272 262
Bank-owned life insurance death benefit gains 297
Miscellaneous534 6 62 1,417 214
Total noninterest income2,826 4,510 6,816 3,807 4,132
Salaries and employee benefits7,979 7,664 7,563 7,234 7,596
Occupancy and equipment2,024 2,030 2,115 2,291 1,807
Data processing1,016 1,022 1,044 988 908
Professional fees340 526 869 736 743
Advertising563 489 367 677 495
FDIC deposit insurance226 223 212 157 270
Directors' fees382 428 374 377 344
Amortization of core deposit intangible199 222 247 271 294
Other general and administrative626 762 609 778 777
Total noninterest expense13,355 13,366 13,400 13,509 13,234
Income before income taxes6,183 6,434 9,240 5,321 2,521
Provision for income taxes2,342 2,566 1,753 1,323 891
Net income$3,841 $3,868 $7,487 $3,998 $1,630
Earnings per common share:
Basic$0.16 $0.16 $0.31 $0.17 $0.07
Diluted$0.16 $0.16 $0.31 $0.17 $0.07
Weighted average shares outstanding:
Basic23,973,116 23,952,443 23,911,419 23,919,483 24,129,512
Diluted24,510,092 24,346,553 24,275,665 24,032,613 24,307,540
Dividends declared per share$0.15 $0.05 $0.05 $0.03 $0.03
Special dividends declared per share$ $0.20 $ $ $

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)Quarters Ended
September 30, 2017 June 30, 2017 September 30, 2016
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Interest-earning assets
Total loans (1)$2,096,034 $19,779 3.74% $2,046,288 $18,770 3.68% $1,726,088 $15,166 3.50%
Securities (1)301,484 1,609 2.12 309,909 1,621 2.10 403,038 2,414 2.38
Other interest earning assets and FHLB stock32,051 215 2.66 36,768 243 2.65 31,236 170 2.17
Total interest-earning assets2,429,569 21,603 3.53% 2,392,965 20,634 3.46% 2,160,362 17,750 3.27%
Non-interest-earning assets101,188 102,750 106,589
Total assets$2,530,757 $2,495,715 $2,266,951
Interest-bearing liabilities
NOW$153,224 $17 0.04% $150,711 $17 0.05% $140,273 $17 0.05%
Regular savings243,680 191 0.31 255,255 208 0.33 272,950 229 0.33
Money market708,748 1,769 0.99 688,600 1,669 0.97 560,098 1,173 0.83
Certificates of deposit653,339 2,112 1.28 573,997 1,629 1.14 471,040 1,313 1.11
Total interest-bearing deposits1,758,991 4,089 0.92 1,668,563 3,523 0.85 1,444,361 2,732 0.75
Borrowings133,788 502 1.49 204,786 643 1.26 224,660 458 0.81
Total interest-bearing liabilities1,892,779 4,591 0.96% 1,873,349 4,166 0.89% 1,669,021 3,190 0.76%
Non-interest-bearing deposits213,459 189,180 171,317
Other non-interest-bearing liabilities23,603 33,664 33,936
Total liabilities2,129,841 2,096,193 1,874,274
Stockholders' equity400,916 399,522 392,677
Total liabilities and stockholders' equity$2,530,757 $2,495,715 $2,266,951
Net interest and dividend income (FTE) 17,012 16,468 14,560
Less: FTE adjustment (58) (60) (65)
Net interest and dividend income (GAAP) $16,954 $16,408 $14,495
Net interest rate spread (FTE) 2.57% 2.57% 2.51%
Net interest margin (FTE) 2.78% 2.76% 2.68%
Total deposit cost 0.82% 0.76% 0.67%
(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
September 30, 2017 September 30, 2016
Average
balance
InterestYield/
Cost
Average
balance
InterestYield/
Cost
Interest-earning assets
Total loans (1)$2,034,160 $55,985 3.68% $1,643,829 $43,013 3.50%
Securities (1)335,117 5,470 2.18 417,526 6,862 2.20
Other interest earning assets and FHLB stock33,554 629 2.51 34,835 458 1.76
Total interest-earning assets2,402,831 62,084 3.45% 2,096,190 50,333 3.21%
Non-interest-earning assets100,200 102,425
Total assets$2,503,031 $2,198,615
Interest-bearing liabilities
NOW$149,806 $50 0.04% $138,254 $49 0.05%
Regular savings253,768 617 0.33 278,624 713 0.34
Money market683,708 4,957 0.97 490,472 3,002 0.82
Certificates of deposit598,640 5,242 1.17 455,039 3,744 1.10
Total interest-bearing deposits1,685,922 10,866 0.86 1,362,389 7,508 0.74
Borrowings197,908 1,791 1.21 257,798 1,584 0.82
Total interest-bearing liabilities1,883,830 12,657 0.90% 1,620,187 9,092 0.75%
Non-interest-bearing deposits195,496 154,877
Other non-interest-bearing liabilities26,110 29,324
Total liabilities2,105,436 1,804,388
Stockholders' equity397,595 394,227
Total liabilities and stockholders' equity$2,503,031 $2,198,615
Net interest and dividend income (FTE) 49,427 41,241
Less: FTE adjustment (184) (229)
Net interest and dividend income (GAAP) $49,243 $41,012
Net interest rate spread (FTE) 2.55% 2.46%
Net interest margin (FTE) 2.75% 2.63%
Total deposit cost 0.77% 0.66%
(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 2016.


Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands)Quarters Ended
September 30,June 30,March 31,December 31,September 30,
20172017201720162016
Interest-earning assets
Total loans$2,096,034 $2,046,288 $1,958,647 $1,823,046 $1,726,088
Securities301,484 309,909 398,201 408,351 403,038
Other interest earning assets and FHLB stock32,051 36,768 31,842 29,235 31,236
Total interest-earning assets2,429,569 2,392,965 2,388,690 2,260,632 2,160,362
Non-interest-earning assets101,188 102,750 93,397 104,188 106,589
Total assets$2,530,757 $2,495,715 $2,482,087 $2,364,820 $2,266,951
Interest-bearing liabilities
NOW$153,224 $150,711 $145,396 $144,520 $140,273
Regular savings243,680 255,255 262,578 265,589 272,950
Money market708,748 688,600 653,165 597,891 560,098
Certificates of deposit653,339 573,997 567,642 526,433 471,040
Total interest-bearing deposits1,758,991 1,668,563 1,628,781 1,534,433 1,444,361
Borrowings133,788 204,786 256,500 223,693 224,660
Total interest-bearing liabilities1,892,779 1,873,349 1,885,281 1,758,126 1,669,021
Non-interest-bearing deposits213,459 189,180 183,520 188,797 171,317
Other non-interest-bearing liabilities23,603 33,664 21,035 29,861 33,936
Total liabilities2,129,841 2,096,193 2,089,836 1,976,784 1,874,274
Stockholders' equity400,916 399,522 392,251 388,036 392,677
Total liabilities and stockholders' equity$2,530,757 $2,495,715 $2,482,087 $2,364,820 $2,266,951

Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited; dollars in thousands)Quarters Ended
September 30,June 30,March 31,December 31,September 30,
2017
2017
2017
2016
2016
Interest-earning assets
Total loans (1)3.74%3.68%3.61%3.53%3.50%
Securities (1)2.12%2.10%2.28%3.12%2.38%
Other interest earning assets and FHLB stock2.66%2.65%2.18%1.97%2.17%
Total interest-earning assets3.53%3.46%3.37%3.43%3.27%
Interest-bearing liabilities
NOW0.04%0.05%0.04%0.05%0.05%
Regular savings0.31%0.33%0.34%0.34%0.33%
Money market0.99%0.97%0.94%0.88%0.83%
Certificates of deposit1.28%1.14%1.07%1.07%1.11%
Total interest-bearing deposits0.92%0.85%0.81%0.77%0.75%
Borrowings1.49%1.26%1.02%0.90%0.81%
Total interest-bearing liabilities0.96%0.89%0.84%0.79%0.76%
Net interest rate spread (FTE) (1)2.57%2.57%2.53%2.64%2.51%
Net interest margin (FTE) (1)2.78%2.76%2.71%2.82%2.68%
Total deposit cost0.82%0.76%0.73%0.69%0.67%
(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
September 30, 2017
Income Before
Income Taxes
Provision for
Income Taxes
Net Income Earnings per
Common Share
(diluted)
GAAP basis$6,183 $2,342 $3,841 $0.16
Add loss on sale of purchased home equity portfolio118 45 73
Non-GAAP basis$6,301 $2,387 $3,914 $0.16
Quarter Ended
June 30, 2017
Income Before
Income Taxes
Provision for
Income Taxes
Net Income Earnings per
Common Share
(diluted)
GAAP basis$6,434 $2,566 $3,868 $0.16
Less gain on sale of remaining available-for-sale debt securities portfolio(928) (333) (595) (0.02)
Non-GAAP basis$5,506 $2,233 $3,273 $0.14
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
Less reversal of state tax valuation allowance 1,697 (1,697) (0.07)
Non-GAAP basis$4,347 $1,695 $2,652 $0.11
Year to Date
September 30, 2017
Income Before
Income Taxes
Provision for
Income Taxes
Net Income Earnings per
Common Share (diluted)
GAAP basis$21,857 $6,661 $15,196 $0.62
Less gain on exchange of investment in Northeast Retirement Services(5,947) (2,133) (3,814) (0.16)
Less gain on sale of remaining available-for-sale debt securities portfolio(928) (333) (595) (0.02)
Add realized loss on sale of mutual funds1,054 378 676 0.03
Add loss on sale of purchased home equity portfolio118 45 73
Less reversal of state tax valuation allowance 1,697 (1,697) (0.07)
Non-GAAP basis$16,154 $6,315 $9,839 $0.40


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
September 30,June 30,March 31,December 31,September 30,
20172017201720162016
Performance Ratios (annualized)
Diluted EPS
GAAP$0.16 $0.16 $0.31 $0.17 $0.07
Non-GAAP0.16 0.14 0.11 n/a n/a
Return on average assets (ROAA)
GAAP0.60%0.62%1.22%0.67%0.29%
Non-GAAP0.61%0.53%0.43%n/a n/a
Return on average equity (ROAE)
GAAP3.80%3.88%7.74%4.10%1.65%
Non-GAAP3.87%3.29%2.74%n/a n/a
Return on average tangible common equity (ROATCE) (1) (3)
GAAP3.90%3.99%7.95%4.22%1.70%
Non-GAAP3.97%3.37%2.82%n/a n/a
Efficiency ratio (2) (3)
GAAP68%64%59%68%71%
Non-GAAP67%67%75%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 15 for Non-GAAP financial measures.


Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited; dollars in thousands, except share data)Year to Date
September 30, 2017September 30, 2016
Performance Ratios (annualized)
Diluted EPS
GAAP$0.62 $0.19
Non-GAAP0.40 n/a
Return on average assets (ROAA)
GAAP0.81%0.28%
Non-GAAP0.53%n/a
Return on average equity (ROAE)
GAAP5.11%1.58%
Non-GAAP3.31%n/a
Return on average tangible common equity (ROATCE) (1) (3)
GAAP5.24%1.62%
Non-GAAP3.40%n/a
Efficiency ratio (2) (3)63%78%
GAAP70%n/a
Non-GAAP


(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 15 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 At or for the Nine Months
Ended
September 30,June 30,September 30, September 30,September 30,
201720172016 20172016
Asset Quality
Non-performing Assets$11,540 $12,779 $7,849 $11,540 $7,849
Non-performing Assets/ Total Assets0.45%0.51%0.34% 0.45%0.34%
Allowance for Loan Losses/ Total Loans0.97%0.97%1.01% 0.97%1.01%
Net Charge-offs (Recoveries)$(89)$76 $3,221 $(81)$3,330
Annualized Net Charge-offs (Recoveries)/ Average Loans(0.02)%0.01%0.74% (0.01)%0.27%
Allowance for Loan Losses/ Nonperforming Loans175%156%226% 175%226%
Capital/Other
Common shares outstanding26,869,088 26,860,988 26,996,942
Book value per share$14.85 $14.79 $14.43
Tangible book value per share$14.48 $14.42 $14.03
Tangible Common Equity/Tangible Assets (1) (2)15.35%15.47%16.45%
Full-time Equivalent Employees232 230 223
(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