NORWOOD, Mass., Jan. 29, 2018 (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 $1.3 million, or $0.05 per diluted share, for the fourth quarter of 2017 compared to net income of $3.8 million, or $0.16 per diluted share, for the third quarter of 2017 and net income of $4.0 million, or $0.17 per diluted share, for the fourth quarter of 2016. 

The fourth quarter of 2017 included an additional income tax expense of approximately $2.5 million, or $0.10 per diluted share, related to the Tax Cuts and Jobs Act (the “Tax Act”) which was enacted on December 22, 2017. The Tax Act provides for a reduction in the corporate income tax rate from 35% to 21% effective January 1, 2018 and this reduction in the corporate tax rate resulted in a downward revaluation to the Company's net deferred tax asset (DTA). The fourth quarter of 2017 also included a pre-tax charge of $317,000 ($188,000 after tax, or $0.01 per share) related to pension settlements. 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.  Excluding these items, net income was $4.0 million, or $0.16 per share, for the fourth quarter of 2017 on a non-GAAP basis and $3.9 million, or $0.16 per share for the third quarter of 2017 on a non-GAAP basis (see pages 15 and 16 for a reconciliation of GAAP to non-GAAP measures).

For the year ended December 31, 2017, net income was $16.5 million, or $0.67 per diluted share. Excluding nonrecurring items, net income for the year ended December 31, 2017 on a non-GAAP basis was $13.8 million or $0.56 per share. For the year ended December 31, 2016, net income was $8.7 million or $0.35 per diluted share.

2017 HIGHLIGHTS

• Revenue growth and expense discipline allowed the Company to generate strong operating leverage in 2017 which, in turn, resulted in improvements to the efficiency ratio and return on assets compared to 2016 (see page 18).
• Loans grew 14% to $2.2 billion at December 31, 2017 from the end of 2016. Over the past three years, loans have increased $1.1 billion, or 93%, as the Company continued to execute on its balance sheet diversification strategy through an expansion of the residential mortgage, commercial real estate and commercial business loan portfolios. Since the end of 2014, commercial real estate loans are up 116%, 1-4 family residential mortgages have increased 101% and commercial business loans have grown 67%.
• Mortgage banking capabilities have been expanded over the past few years, including the opening of several new loan offices in Eastern Massachusetts. Current plans call for opening additional offices in Marblehead and Dorchester during the first quarter of 2018. Mortgage banking income grew to $3.7 million in 2017, up $1.2 million, or 48%, from 2016. Mortgage banking revenue was just $282,000 in 2015. Mortgage originations have been strong the past two years, totaling $495 million in 2017 and $539 million in 2016 compared to $269 million in 2015.
• Commercial loan originations (real estate and non-real estate combined) were $412 million in 2017 compared to $359 million in 2016 and $331 million in 2015. The Company has continued to expand its asset-based lending and specialized lending businesses as well as its commercial deposit taking capabilities, including converting to a new cash management platform. The combination of commercial and small business deposits totaled $359 million at December 31, 2017, up 20% from the end of 2016 and up 65% from the end of 2015.
• Over the past few years, new retail branches were opened in Milton (fourth quarter of 2014), Westwood (fourth quarter of 2015), and the Seaport District of Boston (fourth quarter of 2016). These three branches had combined total deposits of $266 million at December 31, 2017. Deposits, excluding brokered deposits, increased 13% during 2017.
• The Government Banking division has added to the growth in deposits over the past two years, as municipal deposits were $137 million at the end of 2017, up 32% from the end of 2016 and up 188% from the end of 2015.
• During 2017, the Company completed the process of restructuring its securities portfolio by selling its mutual fund and corporate bond portfolios. The remaining portfolio was moved in-house saving annual investment management fees of approximately $400,000.
• Net interest margin has improved over the last several quarters as the Company has benefited from maintaining an asset sensitive interest rate risk position while the Federal Reserve has been raising interest rates.
• Capital deployment efforts continued as the Company has reduced its tangible common equity to tangible assets ratio to 14.6% at December 31, 2017 from 23.7% at September 30, 2014 (the Company's first quarter as a public company). During 2017, the Company paid a $0.20 per share special dividend and raised its regular quarterly dividend twice. The quarterly dividend is now $0.15 per share compared to $0.03 at the end of 2016.
• Credit quality was strong throughout 2017 and the Company had net loan recoveries of $29,000 during the year.
• The Company and its foundations made donations in excess of $1 million in each of the last four years to various nonprofits reflecting the Company's active involvement in the communities it serves. Most of the donations were made through the Blue Hills Bank charitable foundations which support non-profits in the fields of education and the arts, health and human services, affordable housing, financial literacy, and community services.

Commenting on the Company's results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, "We are very proud of the progress we have made since becoming a public company in the third quarter of 2014. Our investment spending over the past few years has allowed us to build out our retail, mortgage and commercial banking platforms while adding experienced and dedicated employees who have led the effort in improving our financial performance and customer experience. These efforts have resulted in significant improvement in earnings growth, operating leverage, revenue, return on assets and operating efficiency; however, we recognize that our work is far from done and we look forward to another year of progress in 2018."

BALANCE SHEET
Compared to September 30, 2017, total assets grew $123 million, or 5%, to $2.7 billion at December 31, 2017. The increase was mainly driven by a $119 million, or 6%, increase in loans to $2.2 billion at December 31, 2017. By category, commercial real estate loans increased $83 million, residential mortgage loans were up $21 million and commercial business loans grew $12 million.

Compared to December 31, 2016, total assets increased $199 million, or 8%. Loans also drove the growth in total assets in this comparison, increasing $275 million, or 14%. By category, the increase from December 31, 2016 was due to commercial real estate loans, which were up $147 million, or 22%; residential mortgage loans, which were up $72 million, or 8%; and commercial business loans, which were up $47 million, or 23%. Residential mortgage loan originations were $112 million in the fourth quarter of 2017 compared to $176 million in the fourth quarter of 2016 while commercial loans (real estate and non-real estate combined) added to the balance sheet were $156 million in the fourth quarter of 2017 compared to $93 million in the fourth quarter of 2016. The growth in loans from December 31, 2016 was partially offset by a $92 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 corporate debt securities portfolio in the first half of 2017.

Compared to September 30, 2017, deposits grew $54 million, or 3%, to $2.0 billion at December 31, 2017. The growth from the end of the third quarter was driven by a $66 million increase in brokered deposits and a $10 million increase in deposits at the Seaport branch, partially offset by a seasonal decline of $33 million in deposits at the Nantucket Bank. Borrowings increased to $205 million at December 31, 2017 from $130 million at September 30, 2017.

Compared to December 31, 2016, deposits grew $231 million, or 13%, and included growth in all customer segments (consumer, small business, commercial and municipal). By category, the most significant increases were seen in certificates of deposit, which were up $108 million, money market deposits, which were up $73 million, and NOW and demand deposits, which were up $50 million. The growth in CDs lengthened the duration of customer deposits. These increases were partially offset by a $42 million decline in regular savings deposits. Nantucket Bank deposits increased $24 million from the end of 2016. Total brokered deposits increased $42 million from the end of 2016 while borrowings declined $46 million. 

Stockholders’ equity was $398 million at December 31, 2017 compared to $399 million at September 30, 2017 and $387 million at December 31, 2016. The increase from a year ago included net income during 2017, which added $16 million to stockholders' equity and the payment of $14 million in dividends, including a special dividend of $0.20 per common share in the second quarter of 2017. There were no share repurchases in 2017.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $17.8 million in the fourth quarter of 2017, up $840,000, or 5%, from $17.0 million in the third quarter of 2017 and up $1.8 million, or 12%, from $16.0 million in the fourth quarter of 2016. Reported net interest margin was 2.80% in the fourth quarter of 2017, up from 2.77% in the third quarter of 2017 but down from 2.81% in the fourth 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 $17.9 million in the fourth quarter of 2017, up $846,000, or 5%, from $17.0 million in the third quarter of 2017, and up $1.8 million, or 11%, from $16.0 million in the fourth 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) was 2.81% in the fourth quarter of 2017 compared to 2.78% in the third quarter of 2017 and 2.82% in the fourth 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 focuses on changes in adjusted net interest and dividend income (FTE) and adjusted net interest margin (FTE).

(Unaudited, dollars in thousands)	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Net Interest and Dividend Income
Reported net interest and dividend income	$	17,794		$	16,954		$	16,408		$	15,881		$	15,950
FTE adjustment	64			58			60			66			78
Reported net interest and dividend income (FTE)	17,858			17,012			16,468			15,947			16,028
Mutual fund dividends (1)	—			—			—			—			(844		)
Purchase accounting accretion (1)	(100		)	(103		)	(181		)	(107		)	(137		)
Adjusted net interest and dividend income (FTE) (2)	$	17,758		$	16,909		$	16,287		$	15,840		$	15,047
Net Interest Margin
Reported net interest margin	2.80		%	2.77		%	2.75		%	2.70		%	2.81		%
FTE adjustment	0.01			0.01			0.01			0.01			0.01
Reported net interest margin (FTE)	2.81			2.78			2.76			2.71			2.82
Mutual fund dividends (1)	—			—			—			0.03			(0.10		)
Purchase accounting accretion (1)	(0.02		)	(0.02		)	(0.03		)	(0.02		)	(0.03		)
Adjusted net interest margin (FTE) (2)	2.79		%	2.76		%	2.73		%	2.72		%	2.69		%
(1) 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 the first quarter of 2017 when the mutual fund dividend income was zero, the removal of the average balance had 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.
(2) 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%. Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.

Adjusted net interest and dividend income (FTE) increased $849,000, or 5%, to $17.8 million in the fourth quarter of 2017 from $16.9 million in the third quarter of 2017 and was up $2.7 million, or 18%, from $15.0 million in the fourth quarter of 2016. Adjusted net interest margin (FTE) improved to 2.79% in the fourth quarter of 2017 from 2.76% in the third quarter of 2017 and 2.69% in the fourth 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, December 2016 and, to a lesser extent, the rate hike that was announced in December 2017. 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 $82 million, or 4%, from the third quarter of this year and $355 million, or 19%, from the fourth quarter of last year. The increases in both comparisons were mainly driven by higher levels of commercial real estate loans, residential mortgages, and commercial business loans. Partially offsetting the improvement in adjusted net interest and dividend income (FTE) from the fourth quarter of 2016, was a $96 million, or 24%, decline in average securities reflecting the sales of the mutual fund and remaining available for sale corporate debt securities portfolios in the first half of 2017.

NONINTEREST INCOME
Noninterest income was $2.9 million in the fourth quarter of 2017, up $104,000, or 4%, from $2.8 million in the third quarter of 2017. The improvement reflects a $949,000 increase in loan level derivative income, which is related to a higher volume of new commercial loan customer back-to-back 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. This improvement was partially offset by a $594,000 drop in mortgage banking income due to seasonality and a $328,000 drop in miscellaneous income mainly reflecting lower income on CRA-qualified Small Business Investment Company investments.

Compared to the fourth quarter of 2016, noninterest income declined $877,000, or 23%. This was mainly due to a $1.2 million decline in miscellaneous income which reflects the absence of large positive valuation adjustments recorded in 2016 on the portfolio of commercial loan customer back-to-back interest rate swap contracts and the absence of $298,000 of securities gains recorded a year ago. These declines were partially offset by a $465,000 increase in loan level derivative income and smaller increases in mortgage banking income, deposit account fees and interchange and ATM fees.

NONINTEREST EXPENSE
Noninterest expense was $14.2 million in the fourth quarter of 2017, up $830,000, or 6%, from $13.4 million in the third quarter of 2017 and up $676,000, or 5%, from $13.5 million in the fourth quarter of 2016. The fourth quarter of 2017 includes a $317,000 charge related to pension settlements and excluding such item, noninterest expense was up $513,000, or 4%, from the third quarter of 2017 and up $359,000, or 3%, from the fourth quarter of 2016. In addition, and as a result of the Tax Act, the Company recorded an expense of $70,000 in the fourth quarter of 2017 related to awarding a $1,000 bonus to each employee with a functional title below the Assistant Vice President level. The Company also took action to raise the hourly pay rate to $15 for a small number of hourly employees not already at that pay level. The linked quarter comparison also reflects a $200,000 increase in occupancy and equipment expense due mainly to non-capitalized equipment purchases made in the fourth quarter.

The fourth quarter of 2017 also includes a charge related to a settlement agreement that was reached between the Company and a former employee from a previously disclosed complaint filed by the former employee on December 30, 2014. Both parties provided mutual releases of all claims and executed a confidentiality agreement.

INCOME TAXES
The Company's effective tax rate in the fourth quarter of 2017 was 78% and included a charge of approximately $2.5 million charge related to the Tax Act which was enacted on December 22, 2017. The Tax Act provides for a reduction in the corporate income tax rate from 35% to 21% effective January 1, 2018 and this reduction in the corporate tax rate resulted in a downward revaluation of the Company's net deferred tax asset which has an adjusted balance of $6.0 million at December 31, 2017. Excluding this charge, the Company's effective tax rate was 35% in the fourth quarter of 2017 compared to 38% in the third quarter of 2017. The decline in the effective tax rate in the fourth quarter was due to the tax effect associated with equity-based compensation transactions. As a result of the Tax Act, the Company expects its effective tax rate to be approximately 25% in 2018.

ASSET QUALITY
The provision for loan losses reflects management’s assessment of risks inherent in the loan portfolio. The provision for loan losses was $681,000 in the fourth quarter of 2017 compared to $242,000 in the third quarter of 2017 and $927,000 in the fourth quarter of 2016.  Loan growth and loan mix impact the level of provision needed each quarter and the linked quarter increase in the provision reflects loan growth of 6% in the fourth quarter of 2017 compared to growth of 1% in the third quarter.

The allowance for loan losses as a percentage of total loans was 0.95% at December 31, 2017 compared to 0.97% at September 30, 2017 and December 31, 2016. The Company had net loan charge-offs of $52,000 in the fourth quarter of 2017 compared to net loan recoveries of $89,000 in the third quarter of 2017 and net loan recoveries of $93,000 in the fourth quarter of 2016. Net loan recoveries for the year ended December 31, 2017 were $29,000 compared to net charge-offs of $3.2 million in 2016, which included a $3.2 million net charge-off related to one commercial customer.

Nonperforming assets were $11.5 million at December 31, 2017 and September 30, 2017 compared to $9.0 million at December 31, 2016. The increase in nonperforming assets from the fourth 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 were 0.43% at December 31, 2017 compared to 0.45% at September 30, 2017 and 0.36% at December 31, 2016.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.7 billion at December 31, 2017 and operates 11 retail 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
	December 31, 2017			September 30, 2017			December 31, 2016			December 31, 2017 vs. September 30, 2017		December 31, 2017 vs. December 31, 2016
Assets
Cash and due from banks	$	16,149		$	16,171		$	14,752		(0.1	)%	9.5	%
Short term investments	30,018			22,192			15,744			35.3	%	90.7	%
Total cash and cash equivalents	46,167			38,363			30,496			20.3	%	51.4	%
Securities available-for-sale, at fair value	9,720			9,943			204,836			(2.2	)%	(95.3	)%
Securities held-to-maturity, at amortized cost	303,716			302,833			201,027			0.3	%	51.1	%
Federal Home Loan Bank stock, at cost	12,105			9,410			13,352			28.6	%	(9.3	)%
Loans held for sale	8,992			12,268			2,761			(26.7	)%	225.7	%
Loans:
1-4 family residential	926,117			905,585			854,478			2.3	%	8.4	%
Home equity	81,358			77,819			79,132			4.5	%	2.8	%
Commercial real estate	833,978			751,209			686,522			11.0	%	21.5	%
Construction	90,712			88,979			75,950			1.9	%	19.4	%
Total real estate loans	1,932,165			1,823,592			1,696,082			6.0	%	13.9	%
Commercial business	253,001			240,801			205,832			5.1	%	22.9	%
Consumer	21,858			23,142			29,707			(5.5	)%	(26.4	)%
Total loans	2,207,024			2,087,535			1,931,621			5.7	%	14.3	%
Allowance for loan losses	(20,877		)	(20,248		)	(18,750		)	3.1	%	11.3	%
Loans, net	2,186,147			2,067,287			1,912,871			5.7	%	14.3	%
Premises and equipment, net	21,573			21,850			22,034			(1.3	)%	(2.1	)%
Accrued interest receivable	6,438			5,802			6,057			11.0	%	6.3	%
Goodwill and core deposit intangible	9,717			9,892			10,560			(1.8	)%	(8.0	)%
Net deferred tax asset	6,000			9,295			10,146			(35.4	)%	(40.9	)%
Bank-owned life insurance	33,078			32,800			32,015			0.8	%	3.3	%
Other assets	24,867			25,673			23,537			(3.1	)%	5.7	%
Total assets	$	2,668,520		$	2,545,416		$	2,469,692		4.8	%	8.1	%
Liabilities and Stockholders' Equity
Deposits:
NOW and demand	$	381,316		$	376,864		$	331,508		1.2	%	15.0	%
Regular savings	221,004			244,662			262,984			(9.7	)%	(16.0	)%
Money market	646,603			666,388			573,204			(3.0	)%	12.8	%
Certificates of deposit	448,382			420,765			340,114			6.6	%	31.8	%
Brokered money market	92,798			41,768			53,357			122.2	%	73.9	%
Brokered certificates of deposit	249,766			235,106			247,520			6.2	%	0.9	%
Total deposits	2,039,869			1,985,553			1,808,687			2.7	%	12.8	%
Short-term borrowings	100,000			20,000			146,000			NM		(31.5	)%
Long-term debt	105,000			110,000			105,000			(4.5	)%	—	%
Other liabilities	25,845			30,829			23,098			(16.2	)%	11.9	%
Total liabilities	2,270,714			2,146,382			2,082,785			5.8	%	9.0	%
Common stock	259			259			259			—	%	—	%
Additional paid-in capital	254,759			254,034			249,317			0.3	%	2.2	%
Unearned compensation- ESOP	(19,737		)	(19,927		)	(20,496		)	(1.0	)%	(3.7	)%
Retained earnings	163,978			166,282			161,896			(1.4	)%	1.3	%
Accumulated other comprehensive loss	(1,453		)	(1,614		)	(4,069		)	(10.0	)%	(64.3	)%
Total stockholders' equity	397,806			399,034			386,907			(0.3	)%	2.8	%
Total liabilities and stockholders' equity	$	2,668,520		$	2,545,416		$	2,469,692		4.8	%	8.1	%

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend
(Unaudited; dollars in thousands)	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
Assets
Cash and due from banks	$	16,149		$	16,171		$	17,292		$	15,594		$	14,752
Short term investments	30,018			22,192			33,819			19,555			15,744
Total cash and cash equivalents	46,167			38,363			51,111			35,149			30,496
Securities available-for-sale, at fair value	9,720			9,943			10,437			173,834			204,836
Securities held-to-maturity, at amortized cost	303,716			302,833			283,672			201,684			201,027
Federal Home Loan Bank stock, at cost	12,105			9,410			11,943			14,828			13,352
Loans held for sale	8,992			12,268			6,789			1,675			2,761
Loans:
1-4 family residential	926,117			905,585			895,015			896,951			854,478
Home equity	81,358			77,819			84,615			80,427			79,132
Commercial real estate	833,978			751,209			756,093			701,463			686,522
Construction	90,712			88,979			78,062			70,855			75,950
Total real estate loans	1,932,165			1,823,592			1,813,785			1,749,696			1,696,082
Commercial business	253,001			240,801			227,262			210,328			205,832
Consumer	21,858			23,142			25,047			27,325			29,707
Total loans	2,207,024			2,087,535			2,066,094			1,987,349			1,931,621
Allowance for loan losses	(20,877		)	(20,248		)	(19,917		)	(18,875		)	(18,750		)
Loans, net	2,186,147			2,067,287			2,046,177			1,968,474			1,912,871
Premises and equipment, net	21,573			21,850			22,004			21,858			22,034
Accrued interest receivable	6,438			5,802			5,362			5,994			6,057
Goodwill and core deposit intangible	9,717			9,892			10,091			10,313			10,560
Net deferred tax asset	6,000			9,295			8,184			8,751			10,146
Bank-owned life insurance	33,078			32,800			32,533			32,271			32,015
Other assets	24,867			25,673			25,606			21,779			23,537
Total assets	$	2,668,520		$	2,545,416		$	2,513,909		$	2,496,610		$	2,469,692
Liabilities and Stockholders' Equity
Deposits:
NOW and demand	$	381,316		$	376,864		$	359,877		$	342,118		$	331,508
Regular savings	221,004			244,662			246,484			265,116			262,984
Money market	646,603			666,388			674,593			622,852			573,204
Certificates of deposit	448,382			420,765			362,261			348,042			340,114
Brokered money market	92,798			41,768			44,728			50,129			53,357
Brokered certificates of deposit	249,766			235,106			277,320			228,465			247,520
Total deposits	2,039,869			1,985,553			1,965,263			1,856,722			1,808,687
Short-term borrowings	100,000			20,000			—			118,000			146,000
Long-term debt	105,000			110,000			130,000			105,000			105,000
Other liabilities	25,845			30,829			21,328			19,944			23,098
Total liabilities	2,270,714			2,146,382			2,116,591			2,099,666			2,082,785
Common stock	259			259			259			259			259
Additional paid-in capital	254,759			254,034			252,504			250,976			249,317
Unearned compensation- ESOP	(19,737		)	(19,927		)	(20,117		)	(20,306		)	(20,496		)
Retained earnings	163,978			166,282			166,033			168,160			161,896
Accumulated other comprehensive loss	(1,453		)	(1,614		)	(1,361		)	(2,145		)	(4,069		)
Total stockholders' equity	397,806			399,034			397,318			396,944			386,907
Total liabilities and stockholders' equity	$	2,668,520		$	2,545,416		$	2,513,909		$	2,496,610		$	2,469,692

 

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income - Quarters
(Unaudited; dollars in thousands, except share data)	Quarters Ended									% Change
	December 31, 2017			September 30, 2017			December 31, 2016			December 31, 2017 vs. September 30, 2017		December 31, 2017 vs. December 31, 2016
Interest and fees on loans	$	20,883		$	19,721		$	16,099		5.9	%	29.7	%
Interest on securities	1,763			1,565			2,325			12.7	%	(24.2	)%
Dividends	189			194			990			(2.6	)%	(80.9	)%
Other	40			65			20			(38.5	)%	100.0	%
Total interest and dividend income	22,875			21,545			19,434			6.2	%	17.7	%
Interest on deposits	4,349			4,089			2,980			6.4	%	45.9	%
Interest on borrowings	732			502			504			45.8	%	45.2	%
Total interest expense	5,081			4,591			3,484			10.7	%	45.8	%
Net interest and dividend income	17,794			16,954			15,950			5.0	%	11.6	%
Provision for loan losses	681			242			927			181.4	%	(26.5	)%
Net interest and dividend income, after provision for loan losses	17,113			16,712			15,023			2.4	%	13.9	%
Deposit account fees	372			385			356			(3.4	)%	4.5	%
Interchange and ATM fees	418			455			388			(8.1	)%	7.7	%
Mortgage banking	552			1,146			436			(51.8	)%	26.6	%
Loss on sale of purchased home equity portfolio	—			(118		)	—			NM		NM
Loan level derivative fee income	1,105			156			640			608.3	%	72.7	%
Realized securities gains, net	—			—			298			NM		NM
Bank-owned life insurance income	277			268			272			3.4	%	1.8	%
Miscellaneous	206			534			1,417			(61.4	)%	(85.5	)%
Total noninterest income	2,930			2,826			3,807			3.7	%	(23.0	)%
Salaries and employee benefits	7,755			7,979			7,234			(2.8	)%	7.2	%
Pension settlement charges	317			—			—			NM		NM
Occupancy and equipment	2,224			2,024			2,291			9.9	%	(2.9	)%
Data processing	1,067			1,016			988			5.0	%	8.0	%
Professional fees	540			340			736			58.8	%	(26.6	)%
Advertising	503			563			677			(10.7	)%	(25.7	)%
FDIC deposit insurance	220			226			157			(2.7	)%	40.1	%
Directors' fees	382			382			377			—	%	1.3	%
Amortization of core deposit intangible	175			199			271			(12.1	)%	(35.4	)%
Other general and administrative	1,002			626			778			60.1	%	28.8	%
Total noninterest expense	14,185			13,355			13,509			6.2	%	5.0	%
Income before income taxes	5,858			6,183			5,321			(5.3	)%	10.1	%
Provision for income taxes	4,565			2,342			1,323			94.9	%	245.0	%
Net income	$	1,293		$	3,841		$	3,998		(66.3	)%	(67.7	)%
Earnings per common share:
Basic	$	0.05		$	0.16		$	0.17
Diluted	$	0.05		$	0.16		$	0.17
Weighted average shares outstanding:
Basic	24,104,329			23,973,116			23,919,483
Diluted	24,795,366			24,510,092			24,032,613
Regular dividends declared per share	$	0.15		$	0.15		$	0.03
Special dividends declared per share	$	—		$	—		$	—

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income-Year to Date
(Unaudited; dollars in thousands, except share data)	Year to Date
	December 31, 2017			December 31, 2016			% Change
Interest and fees on loans	$	76,701		$	58,953		30.1	%
Interest on securities	7,110			8,895			(20.1	)%
Dividends	733			1,596			(54.1	)%
Other	231			94			145.7	%
Total interest and dividend income	84,775			69,538			21.9	%
Interest on deposits	15,215			10,488			45.1	%
Interest on borrowings	2,523			2,088			20.8	%
Total interest expense	17,738			12,576			41.0	%
Net interest and dividend income	67,037			56,962			17.7	%
Provision for loan losses	2,098			4,885			(57.1	)%
Net interest and dividend income, after provision for loan losses	64,939			52,077			24.7	%
Deposit account fees	1,418			1,327			6.9	%
Interchange and ATM fees	1,609			1,546			4.1	%
Mortgage banking	3,657			2,473			47.9	%
Loss on sale of purchased home equity portfolio	(118		)	—			NM
Loan level derivative fee income	2,792			2,371			17.8	%
Realized securities gains (losses), net	(94		)	1,280			(107.3	)%
Gain on exchange of investment in Northeast Retirement Services	5,947			—			NM
Bank-owned life insurance income	1,063			1,048			1.4	%
Bank-owned life insurance death benefit gains	—			506			NM
Miscellaneous	808			1,576			(48.7	)%
Total noninterest income	17,082			12,127			40.9	%
Salaries and employee benefits	30,961			28,853			7.3	%
Pension settlement charges	317			—			NM
Occupancy and equipment	8,393			7,370			13.9	%
Data processing	4,149			3,460			19.9	%
Professional fees	2,275			2,638			(13.8	)%
Advertising	1,922			2,423			(20.7	)%
FDIC deposit insurance	881			1,125			(21.7	)%
Directors' fees	1,566			1,458			7.4	%
Amortization of core deposit intangible	843			1,225			(31.2	)%
Other general and administrative	2,999			3,194			(6.1	)%
Total noninterest expense	54,306			51,746			4.9	%
Income before income taxes	27,715			12,458			122.5	%
Provision for income taxes	11,226			3,805			195.0	%
Net income	$	16,489		$	8,653		90.6	%
Earnings per common share:
Basic	$	0.69		$	0.35
Diluted	$	0.67		$	0.35
Weighted average shares outstanding:
Basic	23,985,822			24,420,405
Diluted	24,482,414			24,540,929
Regular dividends declared per share	$	0.40		$	0.11
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)	December 31,			September 30,			June 30,			March 31,			December 31,
	2017			2017			2017			2017			2016
Interest and fees on loans	$	20,883		$	19,721		$	18,715		$	17,382		$	16,099
Interest on securities	1,763			1,565			1,572			2,210			2,325
Dividends	189			194			193			157			990
Other	40			65			94			32			20
Total interest and dividend income	22,875			21,545			20,574			19,781			19,434
Interest on deposits	4,349			4,089			3,523			3,254			2,980
Interest on borrowings	732			502			643			646			504
Total interest expense	5,081			4,591			4,166			3,900			3,484
Net interest and dividend income	17,794			16,954			16,408			15,881			15,950
Provision for loan losses	681			242			1,118			57			927
Net interest and dividend income, after provision for loan losses	17,113			16,712			15,290			15,824			15,023
Deposit account fees	372			385			341			320			356
Interchange and ATM fees	418			455			388			348			388
Mortgage banking	552			1,146			1,219			740			436
Loss on sale of purchased home equity portfolio	—			(118		)	—			—			—
Loan level derivative fee income	1,105			156			1,367			164			640
Realized securities gains (losses), net	—			—			928			(1,022		)	298
Gain on exchange of investment in Northeast Retirement Services	—			—			—			5,947			—
Bank-owned life insurance income	277			268			261			257			272
Miscellaneous	206			534			6			62			1,417
Total noninterest income	2,930			2,826			4,510			6,816			3,807
Salaries and employee benefits	7,755			7,979			7,664			7,563			7,234
Pension settlement charges	317			—			—			—			—
Occupancy and equipment	2,224			2,024			2,030			2,115			2,291
Data processing	1,067			1,016			1,022			1,044			988
Professional fees	540			340			526			869			736
Advertising	503			563			489			367			677
FDIC deposit insurance	220			226			223			212			157
Directors' fees	382			382			428			374			377
Amortization of core deposit intangible	175			199			222			247			271
Other general and administrative	1,002			626			762			609			778
Total noninterest expense	14,185			13,355			13,366			13,400			13,509
Income before income taxes	5,858			6,183			6,434			9,240			5,321
Provision for income taxes	4,565			2,342			2,566			1,753			1,323
Net income	$	1,293		$	3,841		$	3,868		$	7,487		$	3,998
Earnings per common share:
Basic	$	0.05		$	0.16		$	0.16		$	0.31		$	0.17
Diluted	$	0.05		$	0.16		$	0.16		$	0.31		$	0.17
Weighted average shares outstanding:
Basic	24,104,329			23,973,116			23,952,443			23,911,419			23,919,483
Diluted	24,795,366			24,510,092			24,346,553			24,275,665			24,032,613
Regular dividends declared per share	$	0.15		$	0.15		$	0.05		$	0.05		$	0.03
Special dividends declared per share	$	—		$	—		$	0.20		$	—		$	—

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)	Quarters Ended
	December 31, 2017									September 30, 2017									December 31, 2016
	Average balance			Interest			Yield/ Cost			Average balance			Interest			Yield/ Cost			Average balance			Interest			Yield/ Cost
Interest-earning assets
Total loans (1)	$	2,178,388		$	20,947		3.81	%		$	2,096,034		$	19,779		3.74	%		$	1,823,046		$	16,161		3.53	%
Securities (1)	312,313			1,836			2.33			301,484			1,609			2.12			408,351			3,206			3.12
Other interest earning assets and FHLB stock	28,842			156			2.15			32,051			215			2.66			29,235			145			1.97
Total interest-earning assets	2,519,543			22,939			3.61	%		2,429,569			21,603			3.53	%		2,260,632			19,512			3.43	%
Non-interest-earning assets	96,781									101,188									104,188
Total assets	$	2,616,324								$	2,530,757								$	2,364,820
Interest-bearing liabilities
NOW	$	160,371		$	17		0.04	%		$	153,224		$	17		0.04	%		$	144,520		$	18		0.05	%
Regular savings	235,864			183			0.31			243,680			191			0.31			265,589			225			0.34
Money market	718,489			1,823			1.01			708,748			1,769			0.99			597,891			1,319			0.88
Certificates of deposit	653,573			2,326			1.41			653,339			2,112			1.28			526,433			1,418			1.07
Total interest-bearing deposits	1,768,297			4,349			0.98			1,758,991			4,089			0.92			1,534,433			2,980			0.77
Borrowings	202,255			732			1.44			133,788			502			1.49			223,693			504			0.90
Total interest-bearing liabilities	1,970,552			5,081			1.02	%		1,892,779			4,591			0.96	%		1,758,126			3,484			0.79	%
Non-interest-bearing deposits	220,167									213,459									188,797
Other non-interest-bearing liabilities	23,602									23,603									29,861
Total liabilities	2,214,321									2,129,841									1,976,784
Stockholders' equity	402,003									400,916									388,036
Total liabilities and stockholders' equity	$	2,616,324								$	2,530,757								$	2,364,820
Net interest and dividend income (FTE)				17,858									17,012									16,028
Less: FTE adjustment				(64		)							(58		)							(78		)
Net interest and dividend income (GAAP)				$	17,794								$	16,954								$	15,950
Net interest rate spread (FTE)							2.59	%								2.57	%								2.64	%
Net interest margin (FTE)							2.81	%								2.78	%								2.82	%
Total deposit cost							0.87	%								0.82	%								0.69	%

(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%.

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands)	Year to Date
	December 31, 2017									December 31, 2016
	Average balance			Interest			Yield/ Cost			Average balance			Interest			Yield/ Cost
Interest-earning assets
Total loans (1)	$	2,070,513		$	76,932		3.72	%		$	1,688,878		$	59,174		3.50	%
Securities (1)	329,369			7,306			2.22			415,220			10,068			2.42
Other interest earning assets and FHLB stock	32,345			785			2.43			33,427			603			1.80
Total interest-earning assets	2,432,227			85,023			3.50	%		2,137,525			69,845			3.27	%
Non-interest-earning assets	99,333									102,868
Total assets	$	2,531,560								$	2,240,393
Interest-bearing liabilities
NOW	$	152,469		$	67		0.04	%		$	139,829		$	67		0.05	%
Regular savings	249,256			800			0.32			275,347			938			0.34
Money market	692,474			6,780			0.98			517,474			4,321			0.84
Certificates of deposit	612,486			7,568			1.24			472,985			5,162			1.09
Total interest-bearing deposits	1,706,685			15,215			0.89			1,405,635			10,488			0.75
Borrowings	199,004			2,523			1.27			249,226			2,088			0.84
Total interest-bearing liabilities	1,905,689			17,738			0.93	%		1,654,861			12,576			0.76	%
Non-interest-bearing deposits	201,715									163,403
Other non-interest-bearing liabilities	25,477									29,459
Total liabilities	2,132,881									1,847,723
Stockholders' equity	398,679									392,670
Total liabilities and stockholders' equity	$	2,531,560								$	2,240,393
Net interest and dividend income (FTE)				67,285									57,269
Less: FTE adjustment				(248		)							(307		)
Net interest and dividend income (GAAP)				$	67,037								$	56,962
Net interest rate spread (FTE)							2.57	%								2.51	%
Net interest margin (FTE)							2.77	%								2.68	%
Total deposit cost							0.80	%								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%.

Blue Hills Bancorp, Inc.
Average Balances - Trend
(Unaudited; dollars in thousands)	Quarters Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2017			2017			2017			2017			2016
Interest-earning assets
Total loans	$	2,178,388		$	2,096,034		$	2,046,288		$	1,958,647		$	1,823,046
Securities	312,313			301,484			309,909			398,201			408,351
Other interest earning assets and FHLB stock	28,842			32,051			36,768			31,842			29,235
Total interest-earning assets	2,519,543			2,429,569			2,392,965			2,388,690			2,260,632
Non-interest-earning assets	96,781			101,188			102,750			93,397			104,188
Total assets	$	2,616,324		$	2,530,757		$	2,495,715		$	2,482,087		$	2,364,820
Interest-bearing liabilities
NOW	$	160,371		$	153,224		$	150,711		$	145,396		$	144,520
Regular savings	235,864			243,680			255,255			262,578			265,589
Money market	718,489			708,748			688,600			653,165			597,891
Certificates of deposit	653,573			653,339			573,997			567,642			526,433
Total interest-bearing deposits	1,768,297			1,758,991			1,668,563			1,628,781			1,534,433
Borrowings	202,255			133,788			204,786			256,500			223,693
Total interest-bearing liabilities	1,970,552			1,892,779			1,873,349			1,885,281			1,758,126
Non-interest-bearing deposits	220,167			213,459			189,180			183,520			188,797
Other non-interest-bearing liabilities	23,602			23,603			33,664			21,035			29,861
Total liabilities	2,214,321			2,129,841			2,096,193			2,089,836			1,976,784
Stockholders' equity	402,003			400,916			399,522			392,251			388,036
Total liabilities and stockholders' equity	$	2,616,324		$	2,530,757		$	2,495,715		$	2,482,087		$	2,364,820

Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited; dollars in thousands)	Quarters Ended
	December 31,		September 30,		June 30,		March 31,		December 31,
	2017		2017		2017		2017		2016
Interest-earning assets
Total loans (1)	3.81	%	3.74	%	3.68	%	3.61	%	3.53	%
Securities (1)	2.33	%	2.12	%	2.10	%	2.28	%	3.12	%
Other interest earning assets and FHLB stock	2.15	%	2.66	%	2.65	%	2.18	%	1.97	%
Total interest-earning assets	3.61	%	3.53	%	3.46	%	3.37	%	3.43	%
Interest-bearing liabilities
NOW	0.04	%	0.04	%	0.05	%	0.04	%	0.05	%
Regular savings	0.31	%	0.31	%	0.33	%	0.34	%	0.34	%
Money market	1.01	%	0.99	%	0.97	%	0.94	%	0.88	%
Certificates of deposit	1.41	%	1.28	%	1.14	%	1.07	%	1.07	%
Total interest-bearing deposits	0.98	%	0.92	%	0.85	%	0.81	%	0.77	%
Borrowings	1.44	%	1.49	%	1.26	%	1.02	%	0.90	%
Total interest-bearing liabilities	1.02	%	0.96	%	0.89	%	0.84	%	0.79	%
Net interest rate spread (FTE) (1)	2.59	%	2.57	%	2.57	%	2.53	%	2.64	%
Net interest margin (FTE) (1)	2.81	%	2.78	%	2.76	%	2.71	%	2.82	%
Total deposit cost	0.87	%	0.82	%	0.76	%	0.73	%	0.69	%

(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%.

Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)	Quarter Ended
	December 31, 2017
	Income Before Income Taxes				Provision for Income Taxes				Net Income				Earnings per Common Share (diluted)
GAAP basis	$	5,858			$	4,565			$	1,293			$	0.05
Add pension settlement charges	317				129				188				0.01
Add impact of tax reform on DTA valuation	—				(2,500		)		2,500				0.10
Non-GAAP basis	$	6,175			$	2,194			$	3,981			$	0.16
	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 portfolio	118				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  realized 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 funds	1,054				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

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.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data)	Year to Date
	December 31, 2017
	Income Before Income Taxes				Provision for Income Taxes				Net Income				Earnings per Common Share (diluted)
GAAP basis	$	27,715			$	11,226			$	16,489			$	0.67
Less gain on exchange of investment in Northeast Retirement Services	(5,947		)		(2,133		)		(3,814		)		(0.16		)
Less realized gain on sale of remaining available- for-sale debt securities portfolio	(928		)		(333		)		(595		)		(0.02		)
Add realized loss on sale of mutual funds	1,054				378				676				0.03
Add loss on sale of purchased home equity portfolio	118				45				73				—
Add pension settlement charges	317				129				188				0.01
Less reversal of state tax valuation allowance	—				1,697				(1,697		)		(0.07		)
Add impact of tax reform on DTA valuation	—				(2,500		)		2,500				0.10
Non-GAAP basis	$	22,329			$	8,509			$	13,820			$	0.56

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. There we no nonrecurring items in the year ended December 31, 2016.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited; dollars in thousands, except share data)	Quarters Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2017			2017			2017			2017			2016
Performance Ratios (annualized)
Diluted EPS
GAAP	$	0.05		$	0.16		$	0.16		$	0.31		$	0.17
Non-GAAP	$	0.16		$	0.16		$	0.14		$	0.11		n/a
Return on average assets (ROAA)
GAAP	0.20		%	0.60		%	0.62		%	1.22		%	0.67		%
Non-GAAP	0.60		%	0.61		%	0.53		%	0.43		%	n/a
Return on average equity (ROAE)
GAAP	1.28		%	3.80		%	3.88		%	7.74		%	4.10		%
Non-GAAP	3.93		%	3.87		%	3.29		%	2.74		%	n/a
Return on average tangible common equity (ROATCE) (1) (3)
GAAP	1.31		%	3.90		%	3.99		%	7.95		%	4.22		%
Non-GAAP	4.03		%	3.97		%	3.37		%	2.82		%	n/a
Efficiency ratio (2) (3)
GAAP	68		%	68		%	64		%	59		%	68		%
Non-GAAP	67		%	67		%	67		%	75		%	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
	December 31, 2017			December 31, 2016
Performance Ratios
Diluted EPS
GAAP	$	0.67		$	0.35
Non-GAAP	0.56			n/a
Return on average assets (ROAA)
GAAP	0.65		%	0.39		%
Non-GAAP	0.55		%	n/a
Return on average equity (ROAE)
GAAP	4.14		%	2.20		%
Non-GAAP	3.47		%	n/a
Return on average tangible common equity (ROATCE) (1) (3)
GAAP	4.24		%	2.27		%
Non-GAAP	3.56		%	n/a
Efficiency ratio (2) (3)	65		%	75		%
GAAP	69		%	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 16 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 Year Ended
	December 31,			September 30,			December 31,				December 31,			December 31,
	2017			2017			2016				2017			2016
Asset Quality
Non-performing Assets	$	11,523		$	11,540		$	8,983			$	11,523		$	8,983
Non-performing Assets/ Total Assets	0.43		%	0.45		%	0.36		%		0.43		%	0.36		%
Allowance for Loan Losses/ Total Loans	0.95		%	0.97		%	0.97		%		0.95		%	0.97		%
Net Charge-offs (Recoveries)	$	52		$	(89	)	$	(93	)		$	(29	)	$	3,237
Annualized Net Charge-offs (Recoveries)/ Average Loans	0.01		%	(0.02		)%	(0.02		)%		—		%	0.19		%
Allowance for Loan Losses/ Nonperforming Loans	181		%	175		%	209		%		181		%	209		%
Capital/Other
Common shares outstanding	26,827,660			26,869,088			26,759,953
Book value per share	$	14.83		$	14.85		$	14.46
Tangible book value per share	$	14.47		$	14.48		$	14.06
Tangible Common Equity/Tangible Assets (1) (2)	14.60		%	15.35		%	15.30		%
Full-time Equivalent Employees	237			232			228

(1) Tangible common equity equals total equity less goodwill and core deposit intangibles, Tangible assets equals total assets less goodwill and core deposit 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.

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