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Blue Hills Bancorp, Inc. Reports Third Quarter Earnings

Announces Completion of Second Stock Repurchase Program

NORWOOD, Mass., Oct. 26, 2016 (GLOBE NEWSWIRE) -- Blue Hills Bancorp, Inc. (the “Company” or "Blue Hills Bancorp") (NASDAQ:BHBK), the parent of Blue Hills Bank (the "Bank"), today announced net income of $1,630,000, or $0.07 per diluted share, for the third quarter of 2016 compared to net income of $1,358,000, or $0.05 per diluted share, for the second quarter of 2016 and net income of $1,810,000, or $0.07 per diluted share, for the third quarter of 2015. For the nine months ended September 30, 2016, net income was $4,655,000, or $0.19 per diluted share, versus net income of $4,815,000, or $0.18 per diluted share, for the nine months ended September 30, 2015.

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

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

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

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

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

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

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

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

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

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

(Unaudited, dollars in thousands) September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015
Net Interest Income          
Reported net interest and dividend income $ 14,495   $ 13,316   $ 13,201   $ 14,572   $ 13,205  
FTE adjustment 65   77   87   87   88  
Reported net interest and dividend income (FTE) 14,560   13,393   13,288   14,659   13,293  
Mutual fund dividends (96 )   (21 ) (2,066 ) (1,509 )
Purchase accounting accretion (115 ) (133 ) (127 ) (303 ) (142 )
Accelerated bond amortization/(accretion) on note redemptions (193 ) 203        
Adjusted net interest and dividend income (FTE) (1) $ 14,156   $ 13,463   $ 13,140   $ 12,290   $ 11,642  
           
Net Interest Margin          
Reported net interest margin 2.67 % 2.56 % 2.61 % 3.03 % 2.94 %
FTE adjustment 0.01   0.02   0.01   0.01   0.02  
Reported net interest margin (FTE) 2.68   2.58   2.62   3.04   2.96  
Mutual fund dividends (2) 0.03   0.05   0.06   (0.36 ) (0.27 )
Purchase accounting accretion (2) (0.02 ) (0.03 ) (0.03 ) (0.07 ) (0.03 )
Accelerated bond amortization/(accretion) on note redemptions (0.04 ) 0.04        
Adjusted net interest margin (FTE) (1) 2.65 % 2.64 % 2.65 % 2.61 % 2.66 %
           
(1) Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully taxable equivalent basis (FTE). Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.
(2) Note: In calculating the net interest margin impact of mutual fund dividends and purchase accounting accretion, average earning assets were adjusted to remove the average balances associated with each item. In quarters where mutual fund dividend income is low, the removal of the dividend and its related average balance has a positive impact on the adjusted net interest margin.  Management believes this adjusted net interest margin is useful because of the volatility or non-recurring nature of certain items from quarter to quarter.

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

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

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

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

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

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

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

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

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

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

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

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood MA, had assets of $2.3 billion at September 30, 2016 and operates 12 branch offices in Boston, Brookline, Dedham, Hyde Park, Milton, Nantucket, Norwood, West Roxbury, and Westwood, Massachusetts. Blue Hills Bank is a full service, community bank with its main office in Hyde Park, Massachusetts. The Bank's three branches in Nantucket, Massachusetts operate under the name, Nantucket Bank, a division of Blue Hills Bank. The Bank provides consumer and commercial deposit and loan products to Eastern Massachusetts through a growing branch network and eCommerce channels. The Bank offers commercial business and commercial real estate loans in addition to cash management services and commercial deposit accounts. The Bank also serves consumers through a full suite of consumer banking products including checking accounts, mortgage loans, equity lines of credit and traditional savings and certificate of deposit accounts. The Bank has invested substantially in online technology including online account opening and funding, online mortgage applications, online banking, mobile banking, bill pay and mobile deposits. Blue Hills Bank has been serving area residents for over 140 years. For more information about Blue Hills Bank, visit the Blue Hills web site at www.bluehillsbank.com.

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

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

Blue Hills Bancorp, Inc.
Consolidated Balance Sheets
 
(Unaudited, dollars in thousands)       % Change
  September 30, 2016  June 30, 2016  September 30, 2015 September 30, 2016
vs. 
June 30, 2016
September 30, 2016
vs. 
September 30, 2015
Assets          
Cash and due from banks $ 15,490   $ 13,710   $ 9,447   13.0 % 64.0 %
Short term investments 21,512   29,485   11,533   (27.0 )% 86.5 %
Total cash and cash equivalents 37,002   43,195   20,980   (14.3 )% 76.4 %
Securities available for sale, at fair value 210,273   204,973   231,697   2.6 % (9.2 )%
Securities held to maturity, at amortized cost 197,863   196,454   197,632   0.7 % 0.1 %
Federal Home Loan Bank stock, at cost 13,505   12,833   11,702   5.2 % 15.4 %
Loans held for sale 2,134   6,097   21,423   (65.0 )% (90.0 )%
Loans:          
1-4 family residential 746,366   675,952   541,382   10.4 % 37.9 %
Home equity 80,604   81,649   73,494   (1.3 )% 9.7 %
Commercial real estate 660,458   608,669   497,217   8.5 % 32.8 %
Construction 71,281   107,049   54,283   (33.4 )% 31.3 %
Total real estate loans 1,558,709   1,473,319   1,166,376   5.8 % 33.6 %
Commercial business 169,076   178,112   163,971   (5.1 )% 3.1 %
Consumer 31,435   33,707   36,855   (6.7 )% (14.7 )%
Total loans 1,759,220   1,685,138   1,367,202   4.4 % 28.7 %
Allowance for loan losses (17,730 ) (18,079 ) (15,082 ) (1.9 )% 17.6 %
Loans, net 1,741,490   1,667,059   1,352,120   4.5 % 28.8 %
Premises and equipment, net 21,362   20,136   19,485   6.1 % 9.6 %
Accrued interest receivable 5,388   5,640   5,174   (4.5 )% 4.1 %
Goodwill and core deposit intangible 10,831   11,125   12,151   (2.6 )% (10.9 )%
Net deferred tax asset 8,780   8,958   8,368   (2.0 )% 4.9 %
Bank-owned life insurance 31,743   31,558   31,358   0.6 % 1.2 %
Other assets 33,295   32,733   22,348   1.7 % 49.0 %
Total assets $ 2,313,666   $ 2,240,761   $ 1,934,438   3.3 % 19.6 %
Liabilities and Stockholders' Equity          
Deposits:          
NOW and demand $ 337,225   $ 298,178   $ 284,720   13.1 % 18.4 %
Regular savings 270,067   274,866   288,597   (1.7 )% (6.4 )%
Money market 518,360   506,251   341,588   2.4 % 51.8 %
Certificates of deposit 339,064   339,415   310,424   (0.1 )% 9.2 %
Brokered money market 46,235   45,231   33,924   2.2 % 36.3 %
Brokered certificates of deposit 170,506   136,965   85,705   24.5 % 98.9 %
Total deposits 1,681,457   1,600,906   1,344,958   5.0 % 25.0 %
Short-term borrowings 103,700   130,000   115,000   (20.2 )% (9.8 )%
Long-term debt 105,000   85,000   45,000   23.5 % 133.3 %
Other liabilities 33,820   32,903   21,868   2.8 % 54.7 %
Total liabilities 1,923,977   1,848,809   1,526,826   4.1 % 26.0 %
Common stock 261   265   282   (1.5 )% (7.4 )%
Additional paid-in capital 251,341   255,781   276,730   (1.7 )% (9.2 )%
Unearned compensation- ESOP (20,686 ) (20,876 ) (21,445 ) (0.9 )% (3.5 )%
Retained earnings 158,620   157,714   153,969   0.6 % 3.0 %
Accumulated other comprehensive income (loss)   153   (932 ) (1,924 ) (116.4 )% (108.0 )%
Total stockholders' equity 389,689   391,952   407,612   (0.6 )% (4.4 )%
Total liabilities and stockholders' equity $ 2,313,666   $ 2,240,761   $ 1,934,438   3.3 % 19.6 %


Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
 
(Unaudited, dollars in thousands) September 30, 2016  June 30, 2016  March 31, 2016  December 31, 2015  September 30, 2015
Assets          
Cash and due from banks $ 15,490   $ 13,710   $ 13,852   $ 10,932   $ 9,447  
Short term investments 21,512   29,485   18,157   22,366   11,533  
Total cash and cash equivalents 37,002   43,195   32,009   33,298   20,980  
Securities available for sale, at fair value 210,273   204,973   237,669   231,690   231,697  
Securities held to maturity, at amortized cost 197,863   196,454   196,578   200,141   197,632  
Federal Home Loan Bank stock, at cost 13,505   12,833   16,137   13,567   11,702  
Loans held for sale 2,134   6,097   3,926   12,877   21,423  
Loans:          
1-4 family residential 746,366   675,952   621,801   602,138   541,382  
Home equity 80,604   81,649   80,571   77,633   73,494  
Commercial real estate 660,458   608,669   586,151   559,609   497,217  
Construction 71,281   107,049   92,481   79,386   54,283  
Total real estate loans 1,558,709   1,473,319   1,381,004   1,318,766   1,166,376  
Commercial business 169,076   178,112   168,976   182,536   163,971  
Consumer 31,435   33,707   36,977   39,075   36,855  
Total loans 1,759,220   1,685,138   1,586,957   1,540,377   1,367,202  
Allowance for loan losses (17,730 ) (18,079 ) (16,985 ) (17,102 ) (15,082 )
Loans, net 1,741,490   1,667,059   1,569,972   1,523,275   1,352,120  
Premises and equipment, net 21,362   20,136   20,099   20,015   19,485  
Accrued interest receivable 5,388   5,640   5,588   5,344   5,174  
Goodwill and core deposit intangible 10,831   11,125   11,443   11,785   12,151  
Net deferred tax asset 8,780   8,958   8,774   10,665   8,368  
Bank-owned life insurance 31,743   31,558   31,883   31,626   31,358  
Other assets 33,295   32,733   28,150   20,060   22,348  
Total assets $ 2,313,666   $ 2,240,761   $ 2,162,228   $ 2,114,343   $ 1,934,438  
Liabilities and Stockholders' Equity          
Deposits:          
NOW and demand $ 337,225   $ 298,178   $ 285,391   $ 288,143   $ 284,720  
Regular savings 270,067   274,866   283,586   287,344   288,597  
Money market 518,360   506,251   408,591   368,050   341,588  
Certificates of deposit 339,064   339,415   329,012   311,978   310,424  
Brokered money market 46,235   45,231   46,673   41,807   33,924  
Brokered certificates of deposit 170,506   136,965   131,352   136,527   85,705  
Total deposits 1,681,457   1,600,906   1,484,605   1,433,849   1,344,958  
Short-term borrowings 103,700   130,000   170,000   205,000   115,000  
Long-term debt 105,000   85,000   85,000   55,000   45,000  
Other liabilities 33,820   32,903   29,067   21,665   21,868  
Total liabilities 1,923,977   1,848,809   1,768,672   1,715,514   1,526,826  
Common stock 261   265   269   276   282  
Additional paid-in capital 251,341   255,781   260,041   269,078   276,730  
Unearned compensation- ESOP (20,686 ) (20,876 ) (21,065 ) (21,255 ) (21,445 )
Retained earnings 158,620   157,714   157,090   155,918   153,969  
Accumulated other comprehensive income (loss) 153   (932 ) (2,779 ) (5,188 ) (1,924 )
Total stockholders' equity 389,689   391,952   393,556   398,829   407,612  
Total liabilities and stockholders' equity $ 2,313,666   $ 2,240,761   $ 2,162,228   $ 2,114,343   $ 1,934,438  


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
 
(Unaudited, dollars in thousands, except share data) Quarters Ended % Change
  September 30, 2016  June 30, 2016  September 30, 2015 September 30, 2016
vs. 
June 30, 2016
September 30, 2016
vs. 
September 30, 2015
Interest and fees on loans $ 15,113   $ 14,138   $ 11,509   6.9 % 31.3 %
Interest on securities 2,238   2,037   2,227   9.9 % 0.5 %
Dividends 312   155   1,673   101.3 % (81.4 )%
Other 22   26   9   (15.4 )% 144.4 %
Total interest and dividend income 17,685   16,356   15,418   8.1 % 14.7 %
Interest on deposits 2,732   2,484   1,926   10.0 % 41.8 %
Interest on borrowings 458   556   287   (17.6 )% 59.6 %
Total interest expense 3,190   3,040   2,213   4.9 % 44.1 %
Net interest and dividend income 14,495   13,316   13,205   8.9 % 9.8 %
Provision for loan losses 2,872   1,113   1,318   158.0 % 117.9 %
Net interest and dividend income, after provision for loan losses   11,623   12,203   11,887   (4.8 )% (2.2 )%
Deposit account fees 347   307   319   13.0 % 8.8 %
Interchange and ATM fees 418   393   430   6.4 % (2.8 )%
Mortgage banking 1,262   531   52   137.7 % 2,326.9 %
Loan level derivative fee income 770   322   513   139.1 % 50.1 %
Realized securities gains, net 562   664   238   (15.4 )% 136.1 %
Bank-owned life insurance income 262   257   258   1.9 % 1.6 %
Bank-owned life insurance death benefit gains 297   209     42.1 % NM  
Miscellaneous 214   128   (116 ) 67.2 % (284.5 )%
Total noninterest income 4,132   2,811   1,694   47.0 % 143.9 %
Salaries and employee benefits 7,596   7,138   5,591   6.4 % 35.9 %
Occupancy and equipment 1,807   1,653   1,617   9.3 % 11.8 %
Data processing 908   803   939   13.1 % (3.3 )%
Professional fees 743   678   610   9.6 % 21.8 %
Advertising 495   719   620   (31.2 )% (20.2 )%
FDIC deposit insurance 270   352   262   (23.3 )% 3.1 %
Directors' fees 344   399   112   (13.8 )% 207.1 %
Amortization of core deposit intangible 294   318   390   (7.5 )% (24.6 )%
Other general and administrative 777   875   707   (11.2 )% 9.9 %
Total noninterest expense 13,234   12,935   10,848   2.3 % 22.0 %
Income before income taxes 2,521   2,079   2,733   21.3 % (7.8 )%
Provision for income taxes 891   721   923   23.6 % (3.5 )%
Net income $ 1,630   $ 1,358   $ 1,810   20.0 % (9.9 )%
           
Earnings per common share:          
Basic $ 0.07   $ 0.06   $ 0.07      
Diluted $ 0.07   $ 0.05   $ 0.07      
Weighted average shares outstanding:          
Basic 24,129,512   24,575,211   26,183,381      
Diluted 24,307,540   24,699,794   26,183,381      


Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date
 
(Unaudited, dollars in thousands, except share data) Year to Date
  September 30, 2016  September 30, 2015  % Change
Interest and fees on loans $ 42,854   $ 32,695   31.1 %
Interest on securities 6,570   6,600   (0.5 )%
Dividends 606   1,885   (67.9 )%
Other 74   50   48.0 %
Total interest and dividend income 50,104   41,230   21.5 %
Interest on deposits 7,508   5,434   38.2 %
Interest on borrowings 1,584   811   95.3 %
Total interest expense 9,092   6,245   45.6 %
Net interest and dividend income 41,012   34,985   17.2 %
Provision for loan losses 3,958   2,141   84.9 %
Net interest and dividend income, after provision for loan losses   37,054   32,844   12.8 %
Deposit account fees 971   987   (1.6 )%
Interchange and ATM fees 1,158   1,133   2.2 %
Mortgage banking 2,037   236   763.1 %
Loan level derivative fee income 1,731   1,287   34.5 %
Realized securities gains, net 982   1,823   (46.1 )%
Bank-owned life insurance income 776   763   1.7 %
Bank-owned life insurance death benefit gains 506     NM  
Miscellaneous 159   126   26.2 %
Total noninterest income 8,320   6,355   30.9 %
Salaries and employee benefits 21,619   16,721   29.3 %
Occupancy and equipment 5,079   4,579   10.9 %
Data processing 2,472   2,601   (5.0 )%
Professional fees 1,902   1,909   (0.4 )%
Advertising 1,746   1,682   3.8 %
FDIC deposit insurance 968   807   20.0 %
Directors' fees 1,081   329   228.6 %
Amortization of core deposit intangible 954   1,241   (23.1 )%
Other general and administrative 2,416   2,265   6.7 %
Total noninterest expense 38,237   32,134   19.0 %
Income before income taxes 7,137   7,065   1.0 %
Provision for income taxes 2,482   2,250   10.3 %
Net income $ 4,655   $ 4,815   (3.3 )%
       
Earnings per common share:      
Basic $ 0.19   $ 0.18    
Diluted $ 0.19   $ 0.18    
Weighted average shares outstanding:      
Basic 24,585,570   26,250,065    
Diluted 24,708,559   26,250,065    


Blue Hills Bancorp Inc.
Consolidated Statements of Net Income - Trend
  Quarters Ended
(Unaudited, dollars in thousands, except share data) September 30,  June 30, March 31,  December 31,  September 30,
  2016 2016 2016 2015 2015
Interest and fees on loans $ 15,113   $ 14,138   $ 13,603   $ 12,647   $ 11,509  
Interest on securities 2,238   2,037   2,295   2,228   2,227  
Dividends 312   155   139   2,183   1,673  
Other 22   26   26   13   9  
Total interest and dividend income 17,685   16,356   16,063   17,071   15,418  
Interest on deposits 2,732   2,484   2,292   2,093   1,926  
Interest on borrowings 458   556   570   406   287  
Total interest expense 3,190   3,040   2,862   2,499   2,213  
Net interest and dividend income 14,495   13,316   13,201   14,572   13,205  
Provision (credit) for loan losses 2,872   1,113   (27 ) 1,949   1,318  
Net interest and dividend income, after provision (credit) for loan losses   11,623   12,203   13,228   12,623   11,887  
Deposit account fees 347   307   317   327   319  
Interchange and ATM fees 418   393   347   378   430  
Mortgage banking 1,262   531   244   46   52  
Loan level derivative fee income 770   322   639   833   513  
Realized securities gains (losses), net 562   664   (244 ) 145   238  
Bank-owned life insurance income 262   257   257   268   258  
Bank-owned life insurance death benefit gains 297   209        
Miscellaneous 214   128   (183 ) 327   (116 )
Total noninterest income 4,132   2,811   1,377   2,324   1,694  
Salaries and employee benefits 7,596   7,138   6,885   5,849   5,591  
Occupancy and equipment 1,807   1,653   1,619   1,688   1,617  
Data processing 908   803   761   909   939  
Professional fees 743   678   481   780   610  
Advertising 495   719   532   776   620  
FDIC deposit insurance 270   352   346   192   262  
Directors' fees 344   399   338   315   112  
Amortization of core deposit intangible 294   318   342   366   390  
Other general and administrative 777   875   764   1,073   707  
Total noninterest expense 13,234   12,935   12,068   11,948   10,848  
Income before income taxes 2,521   2,079   2,537   2,999   2,733  
Provision for income taxes 891   721   870   587   923  
Net income $ 1,630   $ 1,358   $ 1,667   $ 2,412   $ 1,810  
           
Earnings per common share:          
Basic $ 0.07   $ 0.06   $ 0.07   $ 0.09   $ 0.07  
Diluted $ 0.07   $ 0.05   $ 0.07   $ 0.09   $ 0.07  
Weighted average shares outstanding:          
Basic 24,129,512   24,575,211   25,066,086   25,500,755   26,183,381  
Diluted 24,307,540   24,699,794   25,132,441   25,554,961   26,183,381  


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands) Quarters Ended
  September 30, 2016   June 30, 2016   September 30, 2015
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets                      
Total loans (1) $ 1,726,088   $ 15,166   3.50 %   $ 1,635,256   $ 14,191   3.49 %   $ 1,316,514   $ 11,562   3.48 %
Securities (1) 403,038   2,414   2.38     419,685   2,080   1.99     429,667   3,838   3.54  
Other interest earning assets and FHLB stock   31,236   170   2.17     36,584   162   1.78     34,061   106   1.23  
Total interest-earning assets 2,160,362   17,750   3.27 %   2,091,525   16,433   3.16 %   1,780,242   15,506   3.46 %
Non-interest-earning assets 106,589         100,104         89,085      
Total assets $ 2,266,951         $ 2,191,629         $ 1,869,327      
                       
Interest-bearing liabilities                      
NOW $ 140,273   $ 17   0.05 %   $ 139,100   $ 16   0.05 %   $ 128,298   $ 15   0.05 %
Regular savings 272,950   229   0.33     276,451   233   0.34     289,236   269   0.37  
Money market 560,098   1,173   0.83     479,564   983   0.82     348,658   606   0.69  
Certificates of deposit 471,040   1,313   1.11     458,328   1,252   1.10     392,170   1,036   1.05  
Total interest-bearing deposits 1,444,361   2,732   0.75     1,353,443   2,484   0.74     1,158,362   1,926   0.66  
Borrowings 224,660   458   0.81     271,242   556   0.82     135,554   287   0.84  
Total interest-bearing liabilities 1,669,021   3,190   0.76 %   1,624,685   3,040   0.75 %   1,293,916   2,213   0.68 %
Non-interest-bearing deposits 171,317         145,171         142,328      
Other non-interest-bearing liabilities 33,936         27,513         20,368      
Total liabilities 1,874,274         1,797,369         1,456,612      
Stockholders' equity 392,677         394,260         412,715      
Total liabilities and stockholders' equity $ 2,266,951         $ 2,191,629         $ 1,869,327      
                       
Net interest and dividend income (FTE)   14,560         13,393         13,293    
Less: FTE adjustment   (65 )       (77 )       (88 )  
Net interest and dividend income (GAAP)   $ 14,495         $ 13,316         $ 13,205    
                       
Net interest rate spread (FTE)     2.51 %       2.41 %       2.78 %
Net interest margin (FTE)     2.68 %       2.58 %       2.96 %
Total deposit cost     0.67 %       0.67 %       0.59 %

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.


Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited, dollars in thousands) Year to Date
  September 30, 2016   September 30, 2015
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets              
Total loans (1) $ 1,643,829   $ 43,013   3.50 %   $ 1,240,142   $ 32,844   3.54 %
Securities (1) 417,526   6,862   2.20     427,064   8,391   2.63  
Other interest earning assets and FHLB stock   34,835   458   1.76     42,438   249   0.78  
Total interest-earning assets 2,096,190   50,333   3.21 %   1,709,644   41,484   3.24 %
Non-interest-earning assets 102,425         92,937      
Total assets $ 2,198,615         $ 1,802,581      
               
Interest-bearing liabilities              
NOW $ 138,254   $ 49   0.05 %   $ 124,832   $ 43   0.05 %
Regular savings 278,624   713   0.34     296,364   880   0.40  
Money market 490,472   3,002   0.82     314,828   1,585   0.67  
Certificates of deposit 455,039   3,744   1.10     372,408   2,926   1.05  
Total interest-bearing deposits 1,362,389   7,508   0.74     1,108,432   5,434   0.66  
Borrowings 257,798   1,584   0.82     126,256   811   0.86  
Total interest-bearing liabilities 1,620,187   9,092   0.75 %   1,234,688   6,245   0.68 %
Non-interest-bearing deposits 154,877         132,900      
Other non-interest-bearing liabilities 29,324         20,694      
Total liabilities 1,804,388         1,388,282      
Stockholders' equity 394,227         414,299      
Total liabilities and stockholders' equity $ 2,198,615         $ 1,802,581      
               
Net interest and dividend income (FTE)   41,241         35,239    
Less: FTE adjustment   (229 )       (254 )  
Net interest and dividend income (GAAP)   $ 41,012         $ 34,985    
               
Net interest rate spread (FTE)     2.46 %       2.56 %
Net interest margin (FTE)     2.63 %       2.76 %
Total deposit cost     0.66 %       0.59 %

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.

Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited, dollars in thousands) Quarters Ended
  September 30, June 30, March 31, December 31,   September 30,
  2016 2016 2016 2015 2015
Interest-earning assets          
Total loans $ 1,726,088   $ 1,635,256   $ 1,569,240   $ 1,449,494   $ 1,316,514  
Securities 403,038   419,685   430,015   427,752   429,667  
Other interest earning assets and FHLB stock   31,236   36,584   36,723   33,222   34,061  
Total interest-earning assets 2,160,362   2,091,525   2,035,978   1,910,468   1,780,242  
Non-interest-earning assets 106,589   100,104   100,534   91,732   89,085  
Total assets $ 2,266,951   $ 2,191,629   $ 2,136,512   $ 2,002,200   $ 1,869,327  
           
Interest-bearing liabilities          
NOW $ 140,273   $ 139,100   $ 135,367   $ 134,162   $ 128,298  
Regular savings 272,950   276,451   286,533   287,003   289,236  
Money market 560,098   479,564   430,989   397,998   348,658  
Certificates of deposit 471,040   458,328   435,574   396,552   392,170  
Total interest-bearing deposits 1,444,361   1,353,443   1,288,463   1,215,715   1,158,362  
Borrowings 224,660   271,242   277,857   207,446   135,554  
Total interest-bearing liabilities 1,669,021   1,624,685   1,566,320   1,423,161   1,293,916  
Non-interest-bearing deposits 171,317   145,171   147,961   154,872   142,328  
Other non-interest-bearing liabilities 33,936   27,513   26,471   21,878   20,368  
Total liabilities 1,874,274   1,797,369   1,740,752   1,599,911   1,456,612  
Stockholders' equity 392,677   394,260   395,760   402,289   412,715  
Total liabilities and stockholders' equity $ 2,266,951   $ 2,191,629   $ 2,136,512   $ 2,002,200   $ 1,869,327  


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

(1) Interest income on tax-exempt securities and loans was adjusted to a fully taxable-equivalent (FTE) basis using a federal statutory tax rate of 34%.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data) Quarters Ended
  September 30,   June 30,  March 31,  December 31,   September 30,
  2016 2016 2016 2015 2015
Performance Ratios (annualized)          
           
Basic EPS $ 0.07   $ 0.06   $ 0.07   $ 0.09   $ 0.07  
Diluted EPS $ 0.07   $ 0.05   $ 0.07   $ 0.09   $ 0.07  
           
Return on average assets (ROAA) 0.29 % 0.25 % 0.31 % 0.48 % 0.38 %
           
Return on average equity (ROAE) 1.65 % 1.39 % 1.69 % 2.38 % 1.74 %
           
Return on average tangible common equity (ROATCE) (1) (2)   1.70 % 1.43 % 1.75 % 2.45 % 1.79 %
           
Efficiency Ratio 71 % 72 % 83 % 70 % 73 %

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

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

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

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

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

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited, dollars in thousands, except share data)   At or for the Quarters Ended   At or for the Nine Months Ended
  September 30, June 30, September 30,   September 30, September 30,
  2016 2016 2015   2016 2015
Asset Quality            
Nonperforming Assets $ 7,849   $ 14,983   $ 4,999     $ 7,849   $ 4,999  
Nonperforming Assets/Total Assets 0.34 % 0.67 % 0.26 %   0.34 % 0.26 %
Allowance for Loan Losses/Total Loans 1.01 % 1.07 % 1.10 %   1.01 % 1.10 %
Net Charge-offs $ 3,221   $ 19   $ 13     $ 3,330   $ 32  
Annualized Net Charge-offs/Average Loans 0.74 % % %   0.41 % %
Allowance for Loan Losses/ Nonperforming Loans 226 % 121 % 302 %   226 % 302 %
             
Capital/Other            
Common shares outstanding 26,966,942   27,397,842   28,150,313        
Book value per share $ 14.45   $ 14.31   $ 14.48        
Tangible book value per share $ 14.05   $ 13.90   $ 14.05        
Tangible Common Equity/Tangible Assets (2) (3) 16.45 % 17.08 % 20.57 %      
Full-time Equivalent Employees 223   231   204        

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

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

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