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

NORWOOD, Mass., Jan. 23, 2019 (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 $5.7 million, or $0.23 per diluted share, for the fourth quarter of 2018 compared to net income of $5.8 million, or $0.23 per diluted share, for the third quarter of 2018 and net income of $1.3 million, or $0.05 per diluted share, for the fourth quarter of 2017.  Net income on a non-GAAP basis, excluding unrealized loss on equity securities and certain nonrecurring items, was $7.1 million or $0.28 per diluted share for the fourth quarter of 2018 compared to net income on a non-GAAP basis, excluding unrealized loss on equity securities and certain nonrecurring items, of $6.8 million, or $0.27 per diluted share for the third quarter of 2018 and net income on a non-GAAP basis, excluding certain nonrecurring items, of $4.0 million, or $0.16 per diluted share for the fourth quarter of 2017 (see page 14 for a reconciliation of GAAP to non-GAAP measures).

For the year ended December 31, 2018, net income was $24.6 million, or $0.98 per diluted share, compared to net income of $16.5 million, or $0.67 per diluted share for the year ended December 31, 2017. Net income on a non-GAAP basis, excluding unrealized gain on equity securities and certain nonrecurring items, was $26.0 million, or $1.03 per diluted share, for the year ended December 31, 2018 compared to net income on a non-GAAP basis, excluding certain nonrecurring items, of $13.8 million, or $0.56 per diluted share for the year ended December 31, 2017 (see page 15 for a reconciliation of GAAP to non-GAAP measures).

On September 20, 2018, Blue Hills Bancorp announced it reached a definitive Agreement and Plan of Merger with Independent Bank Corp. (“Independent”), pursuant to which Blue Hills Bancorp will merge into Independent (“Merger”). Blue Hills Bancorp’s shareholders approved the merger at a meeting held on January 16, 2019.  Completion of the transaction is subject to other customary closing conditions, including receipt of regulatory approvals and the approval of Independent’s shareholders. The transaction is expected to close later in the first quarter of 2019 or early in the second quarter of 2019.

Commenting on the Company’s results, William Parent, President and Chief Executive Officer of Blue Hills Bancorp, said, “We finished the year with another solid quarter that included loan growth, net interest margin expansion and continued cost control. Earnings per share for the year on an operating (non-GAAP) basis improved 84% from 2017, reflecting the success of our various businesses, continued positive operating leverage, and the ongoing transformation of the Company into a full service community bank.  We are excited to be joining Independent and becoming part of a larger organization, which will benefit all of our stakeholders.  I want to thank our employees for their dedication and hard work during this time of transition.  In addition to operating Blue Hills Bank in a business-as-usual manner for our customers, employees from around the bank have also been working hard to ensure that we have a seamless transition into Independent’s organization.”

BALANCE SHEET
Compared to September 30, 2018, total assets grew $23 million, or 1%, to $2.8 billion at December 31, 2018. The increase was mainly driven by a $29 million, or 1%, increase in loans to $2.3 billion at December 31, 2018. Quarterly growth was impacted by seasonality, lower residential lending demand due to the higher interest rate environment, and the announced merger with Independent.  By category, the growth was due to a $17 million, or 2%, increase in residential mortgage loans and a $13 million, or 2%, increase in commercial real estate loans.  Other loan categories had smaller changes.

Compared to December 31, 2017, total assets increased $137 million, or 5%. Loans drove the growth in total assets from December 31, 2017, increasing $128 million, or 6%. By category, the increase from December 31, 2017 was due to residential mortgage loans, which were up $98 million, or 11%; commercial business loans, which were up $34 million, or 14%; and commercial real estate loans, which were up $32 million, or 4%.  These increases were partially offset by declines in home equity, construction and consumer loans.  Residential mortgage originations were $98 million in the fourth quarter of 2018 compared to $112 million in the fourth quarter of 2017 with the decline reflecting the impact of higher interest rates.  Commercial loans (real estate and non-real estate combined) added to the balance sheet were $49 million in the fourth quarter of 2018 compared to $156 million in the fourth quarter of 2017.

Deposit and borrowing activities reflect seasonality and a changing funding strategy to shorten duration and migrate away from certain types of high cost consumer deposits to borrowings.  Compared to September 30, 2018, deposits declined $28 million, or 1%, to $2.1 billion at December 31, 2018. The decrease from the end of the third quarter was driven by a $51 million, or 8%, decline in money market deposits and a $16 million, or 4%, decline in NOW and demand accounts.  These declines were partially offset by a $43 million, or 15%, increase in brokered certificates of deposit.  The drop in deposits resulted in an increase in short-term borrowings, which were up $55 million, or 56%, to $153 million at December 31, 2018.

Compared to December 31, 2017, deposits grew $98 million, or 5%. By category, the growth mainly came from certificates of deposit, which were up $116 million, or 26%, and brokered certificates of deposit which increased $73 million, or 29%. These increases were partially offset by a $77 million, or 12%, decline in money market deposits. Short-term borrowings increased $53 million from a year ago while long-term debt declined $25 million.

Stockholders’ equity was $404 million at December 31, 2018, compared to $403 million at September 30, 2018 and $398 million at December 31, 2017. The increase from the end of 2017 mainly reflects net income and share-based compensation, partially offset by the payment of dividends.

NET INTEREST AND DIVIDEND INCOME
Reported net interest and dividend income was $20.0 million in the fourth quarter of 2018, up $488,000, or 3%, from the third quarter of 2018 and up $2.2 million, or 12%, from the fourth quarter of 2017. Reported net interest margin was 2.97% in the fourth quarter of 2018, up from 2.92% in the third quarter of 2018 and 2.80% in the fourth quarter of 2017.

Net interest and dividend income on a fully taxable equivalent basis (FTE), a non-GAAP measure, was also $20.0 million in the fourth quarter of 2018, up $488,000, or 3%, from $19.5 million in the third quarter of 2018, and up $2.1 million, or 12%, from $17.9 million in the fourth quarter of 2017. Net interest margin on a fully taxable equivalent basis (FTE), a non-GAAP measure, was 2.98% in the fourth quarter of 2018 compared to 2.93% in the third quarter of 2018 and 2.81% in the fourth quarter of 2017. Purchase accounting accretion added $38,000, $74,000, and $100,000 to net interest and dividend income in the fourth quarter of 2018, third quarter of 2018, and fourth quarter of 2017, respectively. Purchase accounting accretion also added one basis point to net interest margin in the fourth quarter of 2018 and 2 basis points to net interest margin in the third quarter of 2018 and fourth quarter of 2017.

The improvement in net interest and dividend income (FTE) from the third quarter of 2018 was mainly due to the 5 basis point improvement in net interest margin discussed above.  The margin expansion was due, in part, to higher floating rate loan yields related to the interest rate increases announced by the Federal Reserve Bank.  The company has maintained an asset sensitive interest rate risk position throughout this interest rate hike cycle, which has generally resulted in earning asset yields increasing at a faster pace than interest-bearing liability costs. There have been nine rate increases announced by the Fed since December 2015 totaling 225 basis points. To a lesser extent, the linked-quarter improvement in net interest and dividend income (FTE) was helped by an increase in average loans, which were up 0.4% from the third quarter.

The increase in net interest and dividend income (FTE) over the fourth quarter of 2017 was helped by net interest margin expansion as well as loan growth. Average loans increased $133 million, or 6%, from the fourth quarter of 2017 driven by higher levels of residential mortgages, commercial real estate loans, and commercial business loans, partially offset by declines in construction, home equity and consumer loans.

NONINTEREST INCOME
Noninterest income was $2.2 million in the fourth quarter of 2018, down $1.6 million, or 42%, from the third quarter of 2018. The decline includes lower loan level derivative income, which dropped $849,000 from the third quarter due to a lower 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. In addition, there was a $360,000, or 53%, drop in miscellaneous income due mainly to lower income on Small Business Investment Community (“SBIC”) investments, a $268,000, or 28%, decline in mortgage banking income due to seasonality and the impact of higher interest rates on loan originations and sales volume, and a $127,000 increase in unrealized losses on equity securities.

Compared to the fourth quarter of 2017, noninterest income declined $686,000, or 23%, mainly due to a $910,000 drop in loan level derivative income and a $188,000 unrealized loss on equity securities recognized in the fourth quarter of 2018.  These declines were partially offset by increases in all other account categories, including mortgage banking income (up $154,000, or 28%), miscellaneous income (up $109,000, or 53%, mainly to higher income on SBIC investments), deposit account fees (up $100,000, or 27%) and interchange and ATM fees (up $36,000, or 9%).

NONINTEREST EXPENSE
Noninterest expense was $15.0 million in the fourth quarter of 2018, down $512,000, or 3%, from the third quarter of 2018 and up $826,000, or 6%, from the fourth quarter of 2017.  The fourth quarter of 2018 and the third quarter of 2018 included charges of $1.7 million and $1.3 million, respectively, associated with the pending merger with Independent Bank Corp. as well as charges of $207,000 and $720,000, respectively, for a supplemental executive retirement agreement as previously disclosed in the Company’s Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission. In addition, the fourth quarter of 2017 included a $317,000 charge related to pension settlements. Excluding these items, adjusted noninterest expense was $13.1 million in the fourth quarter of 2018, down $333,000, or 2%, from the third quarter of 2018 due mainly to a $204,000, or 40%, drop in advertising expense.

Compared to the fourth quarter of last year, adjusted noninterest expense declined $719,000, or 5%.  The decline reflects lower levels of advertising, professional fees, and occupancy and equipment expense, as well as the absence of a charge for a settlement agreement that was reached a year ago between the Company and a former employee. These declines were partially offset by higher employee costs due, in part, to merit increases and higher benefits expenses.

INCOME TAXES
The effective income tax rate was 26% in the fourth quarter of 2018 compared to 27% in the third quarter of 2018 and 78% in the fourth quarter of 2017. The effective tax rates in 2018 were lower than historical rates due to the Tax Act, which was enacted on December 22, 2017 and provided for a reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018.  The Tax Act also resulted in a downward revaluation of approximately $2.5 million in the Company’s net deferred tax asset in the fourth quarter of 2017.  Excluding that charge, the Company’s effective tax rate was 35% in the fourth quarter of 2017.

ASSET QUALITY
The provision for loan losses reflects management’s assessment of risks inherent in the loan portfolio. The provision for loan losses was a credit of $577,000 in the fourth quarter of 2018 compared to a credit of $182,000 in the third quarter of 2018 and a provision of $681,000 in the fourth quarter of 2017.  The level of the provision in all three quarters reflects the impact of the Company’s continued migration from the use of historical loss rates based on national FDIC data to loss rates based on the Company’s own experience.

The allowance for loan losses as a percentage of total loans was 0.83% at December 31, 2018 compared to 0.86% at September 30, 2018 and 0.95% at December 31, 2017. The Company had net loan charge-offs of $8,000 in the fourth quarter of 2018 compared to net loan charge-offs of $23,000 in the third quarter of 2018 and net loan chargeoffs of $52,000 in the fourth quarter of 2017.

Nonperforming assets were $14.2 million at December 31, 2018 compared to $15.4 million at September 30, 2018 and $11.5 million at December 31, 2017. The linked quarter decline in nonperforming assets reflects decreases in nonperforming residential mortgages and home equity loans. The increase in nonperforming assets from the end of 2017 is mainly due to the placement of loans to one commercial real estate customer on nonaccrual in 2018.  Nonperforming assets as a percentage of total assets were 0.51% at December 31, 2018 compared to 0.55% at September 30, 2018 and 0.43% at December 31, 2017.

ABOUT BLUE HILLS BANCORP
Blue Hills Bancorp, Inc., with corporate headquarters in Norwood, MA, had assets of $2.8 billion at December 31, 2018 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.  Additional factors relating to the Company’s proposed merger with Independent Bank Corp (“Independent”), include the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the risk that the necessary regulatory approvals may not be obtained, may be delayed, or may be obtained subject to conditions that are not anticipated; the risk that Independent is required to issue debt on terms that are less than attractive in order to raise cash to complete the merger; delays in closing the merger or other risks that any of the closing conditions to the merger may not be satisfied in a timely manner or at all; the diversion of management’s time from existing business operations due to time spent related to the merger or integration efforts; the risk that the businesses of Independent and the Company will not be integrated successfully or such integration may be more difficult, time consuming or costly than expected; expected revenue and other synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; revenues following the merger may be lower than expected; and expenses related to the merger and costs following the merger that are higher than expected.

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 (“SEC”), and “Risk Factors – Risks Related to the Merger” in the proxy statement/prospectus in the Company’s
DEFM14A relating to the merger as filed with the SEC. 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, 2018 September 30, 2018 December 31, 2017 December 31, 2018
vs.
September 30, 2018
December 31, 2018
vs. 
December 31, 2017
Assets          
Cash and due from banks $ 15,170   $ 15,459   $ 16,149   (1.9 )% (6.1 )%
Short-term investments 29,135   32,290   30,018   (9.8 )% (2.9 )%
Total cash and cash equivalents 44,305   47,749   46,167   (7.2 )% (4.0 )%
Equity securities, at fair value 5,082   5,270     (3.6 )% NM  
Securities available-for-sale, at fair value     9,720   % NM  
Securities held-to-maturity, at amortized cost 307,763   305,935   303,716   0.6 % 1.3 %
Federal Home Loan Bank stock, at cost 13,565   11,815   12,105   14.8 % 12.1 %
Loans held for sale 4,368   5,035   8,992   (13.2 )% (51.4 )%
Loans:              
1-4 family residential 1,024,025   1,007,411   926,117   1.6 % 10.6 %
Home equity 67,844   70,955   81,358   (4.4 )% (16.6 )%
Commercial real estate 866,254   853,679   833,978   1.5 % 3.9 %
Construction 74,533   75,037   90,712   (0.7 )% (17.8 )%
Total real estate loans 2,032,656   2,007,082   1,932,165   1.3 % 5.2 %
Commercial business 287,352   282,680   253,001   1.7 % 13.6 %
Consumer 15,501   16,954   21,858   (8.6 )% (29.1 )%
Total loans 2,335,509   2,306,716   2,207,024   1.2 % 5.8 %
Allowance for loan losses (19,335 ) (19,920 ) (20,877 ) (2.9 )% (7.4 )%
Loans, net 2,316,174   2,286,796   2,186,147   1.3 % 5.9 %
Premises and equipment, net 19,512   19,882   21,573   (1.9 )% (9.6 )%
Other real estate owned 3,649   3,649     % NM  
Accrued interest receivable 7,187   7,143   6,438   0.6 % 11.6 %
Goodwill and core deposit intangible 9,255   9,335   9,717   (0.9 )% (4.8 )%
Net deferred tax asset 7,119   6,995   6,000   1.8 % 18.7 %
Bank-owned life insurance 34,179   33,889   33,078   0.9 % 3.3 %
Other assets 33,417   39,061   24,867   (14.4 )% 34.4 %
Total assets $ 2,805,575   $ 2,782,554   $ 2,668,520   0.8 % 5.1 %
Liabilities and Stockholders’ Equity              
Deposits:              
NOW and demand $ 400,361   $ 415,993   $ 381,316   (3.8 )% 5.0 %
Regular savings 198,871   206,726   221,004   (3.8 )% (10.0 )%
Money market 569,433   620,529   646,603   (8.2 )% (11.9 )%
Certificates of deposit 564,455   562,610   448,382   0.3 % 25.9 %
Brokered money market 81,366   80,143   92,798   1.5 % (12.3 )%
Brokered certificates of deposit 323,071   280,006   249,766   15.4 % 29.3 %
Total deposits 2,137,557   2,166,007   2,039,869   (1.3 )% 4.8 %
Short-term borrowings 153,000   98,000   100,000   56.1 % 53.0 %
Long-term debt 80,000   80,000   105,000   % (23.8 )%
Other liabilities 30,897   35,471   25,845   (12.9 )% 19.5 %
Total liabilities 2,401,454   2,379,478   2,270,714   0.9 % 5.8 %
Common stock 269   269   268   % 0.4 %
Additional paid-in capital 261,063   259,892   254,750   0.5 % 2.5 %
Unearned compensation- ESOP (18,978 ) (19,168 ) (19,737 ) (1.0 )% (3.8 )%
Retained earnings 164,364   163,892   163,978   0.3 % 0.2 %
Accumulated other comprehensive loss (2,597 ) (1,809 ) (1,453 ) 43.6 % 78.7 %
Total stockholders’ equity 404,121   403,076   397,806   0.3 % 1.6 %
Total liabilities and stockholders’ equity $ 2,805,575   $ 2,782,554   $ 2,668,520   0.8 % 5.1 %
                           

Blue Hills Bancorp, Inc.
Consolidated Balance Sheet Trend

(Unaudited; dollars in thousands) December 31, 2018 September 30, 2018 June 30, 2018 March 31, 2018 December 31, 2017
Assets          
Cash and due from banks $ 15,170   $ 15,459   $ 17,566   $ 18,194   $ 16,149  
Short-term investments 29,135   32,290   34,383   26,878   30,018  
Total cash and cash equivalents 44,305   47,749   51,949   45,072   46,167  
Equity securities, at fair value 5,082   5,270   5,331   9,651    
Securities available for sale, at fair value         9,720  
Securities held-to-maturity, at amortized cost 307,763   305,935   303,137   304,036   303,716  
Federal Home Loan Bank stock, at cost 13,565   11,815   14,375   10,730   12,105  
Loans held for sale 4,368   5,035   10,005   5,865   8,992  
Loans:          
1-4 family residential 1,024,025   1,007,411   989,598   938,030   926,117  
Home equity 67,844   70,955   72,813   75,737   81,358  
Commercial real estate 866,254   853,679   824,541   849,040   833,978  
Construction 74,533   75,037   88,132   73,113   90,712  
Total real estate loans 2,032,656   2,007,082   1,975,084   1,935,920   1,932,165  
Commercial business 287,352   282,680   268,435   248,521   253,001  
Consumer 15,501   16,954   18,352   20,034   21,858  
Total loans 2,335,509   2,306,716   2,261,871   2,204,475   2,207,024  
Allowance for loan losses (19,335 ) (19,920 ) (20,125 ) (20,185 ) (20,877 )
Loans, net 2,316,174   2,286,796   2,241,746   2,184,290   2,186,147  
Premises and equipment, net 19,512   19,882   20,192   20,685   21,573  
Other real estate owned 3,649   3,649   3,649   3,649    
Accrued interest receivable 7,187   7,143   6,531   6,120   6,438  
Goodwill and core deposit intangible 9,255   9,335   9,438   9,566   9,717  
Net deferred tax asset 7,119   6,995   6,480   5,197   6,000  
Bank-owned life insurance 34,179   33,889   33,610   33,354   33,078  
Other assets 33,417   39,061   34,719   30,936   24,867  
Total assets $ 2,805,575   $ 2,782,554   $ 2,741,162   $ 2,669,151   $ 2,668,520  
Liabilities and Stockholders’ Equity          
Deposits:          
NOW and demand $ 400,361   $ 415,993   $ 375,934   $ 382,406   $ 381,316  
Regular savings 198,871   206,726   213,205   216,894   221,004  
Money market 569,433   620,529   628,718   643,336   646,603  
Certificates of deposit 564,455   562,610   525,587   504,996   448,382  
Brokered money market 81,366   80,143   85,951   90,369   92,798  
Brokered certificates of deposit 323,071   280,006   282,672   239,837   249,766  
Total deposits 2,137,557   2,166,007   2,112,067   2,077,838   2,039,869  
Short-term borrowings 153,000   98,000   110,000   65,000   100,000  
Long-term debt 80,000   80,000   90,000   105,000   105,000  
Other liabilities 30,897   35,471   28,850   25,869   25,845  
Total liabilities 2,401,454   2,379,478   2,340,917   2,273,707   2,270,714  
Common stock 269   269   268   268   268  
Additional paid-in capital 261,063   259,892   258,225   256,470   254,750  
Unearned compensation- ESOP (18,978 ) (19,168 ) (19,357 ) (19,547 ) (19,737 )
Retained earnings 164,364   163,892   162,948   160,124   163,978  
Accumulated other comprehensive loss (2,597 ) (1,809 ) (1,839 ) (1,871 ) (1,453 )
Total stockholders’ equity 404,121   403,076   400,245   395,444   397,806  
Total liabilities and stockholders’ equity $ 2,805,575   $ 2,782,554   $ 2,741,162   $ 2,669,151   $ 2,668,520  
                               

Blue Hills Bancorp, Inc.
Consolidated Statements of Net Income – Quarters

(Unaudited; dollars in thousands, except share data) Quarters Ended % Change
  December 31, 2018 September 30, 2018 December 31, 2017 December 31, 2018
vs. 
September 30, 2018
December 31, 2018
vs. 
December 31, 2017
Interest and fees on loans $ 25,309   $ 24,455   $ 20,883   3.5 % 21.2 %
Interest on securities 2,089   1,854   1,763   12.7 % 18.5 %
Dividends 194   210   189   (7.6 )% 2.6 %
Other 125   92   40   35.9 % 212.5 %
Total interest and dividend income 27,717   26,611   22,875   4.2 % 21.2 %
Interest on deposits 6,846   6,357   4,349   7.7 % 57.4 %
Interest on borrowings 920   791   732   16.3 % 25.7 %
Total interest expense 7,766   7,148   5,081   8.6 % 52.8 %
Net interest and dividend income 19,951   19,463   17,794   2.5 % 12.1 %
Provision (credit) for loan losses (577 ) (182 ) 681   217.0 % (184.7 )%
Net interest and dividend income, after provision for loan losses 20,528   19,645   17,113   4.5 % 20.0 %
Deposit account fees 472   473   372   (0.2 )% 26.9 %
Interchange and ATM fees 454   471   418   (3.6 )% 8.6 %
Mortgage banking 706   974   552   (27.5 )% 27.9 %
Loan level derivative fee income 195   1,044   1,105   (81.3 )% (82.4 )%
Unrealized losses on equity securities (188 ) (61 )   208.2 % NM  
Bank-owned life insurance income 290   279   277   3.9 % 4.7 %
Miscellaneous 315   675   206   (53.3 )% 52.9 %
Total noninterest income 2,244   3,855   2,930   (41.8 )% (23.4 )%
Salaries and employee benefits 8,353   8,874   7,755   (5.9 )% 7.7 %
Pension settlement charges     317   % NM  
Occupancy and equipment 2,047   2,071   2,224   (1.2 )% (8.0 )%
Data processing 1,023   1,062   1,067   (3.7 )% (4.1 )%
Professional fees 354   302   540   17.2 % (34.4 )%
Advertising 305   509   503   (40.1 )% (39.4 )%
FDIC deposit insurance 230   221   220   4.1 % 4.5 %
Directors’ fees 373   383   382   (2.6 )% (2.4 )%
Amortization of core deposit intangible 81   103   175   (21.4 )% (53.7 )%
Merger expenses 1,655   1,321     25.3 % NM  
Other general and administrative 590   677   1,002   (12.9 )% (41.1 )%
Total noninterest expense 15,011   15,523   14,185   (3.3 )% 5.8 %
Income before income taxes 7,761   7,977   5,858   (2.7 )% 32.5 %
Provision for income taxes 2,034   2,188   4,565   (7.0 )% (55.4 )%
Net income $ 5,727   $ 5,789   $ 1,293   (1.1 )% 342.9 %
           
Earnings per common share:          
Basic $ 0.23   $ 0.24   $ 0.05      
Diluted $ 0.23   $ 0.23   $ 0.05      
Weighted average shares outstanding:          
Basic 24,395,005   24,256,902   24,104,329      
Diluted 25,308,794   25,242,737   24,795,366      
           
Regular dividends declared per share $ 0.20   $ 0.20   $ 0.15      
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, 2018 December 31, 2017 % Change
Interest and fees on loans $ 94,654   $ 76,701   23.4 %
Interest on securities 7,609   7,110   7.0 %
Dividends 803   733   9.5 %
Other 357   231   54.5 %
Total interest and dividend income 103,423   84,775   22.0 %
Interest on deposits 23,230   15,215   52.7 %
Interest on borrowings 3,437   2,523   36.2 %
Total interest expense 26,667   17,738   50.3 %
Net interest and dividend income 76,756   67,037   14.5 %
Provision (credit) for loan losses (1,118 ) 2,098   (153.3 )%
Net interest and dividend income, after provision for loan losses 77,874   64,939   19.9 %
Deposit account fees 1,722   1,418   21.4 %
Interchange and ATM fees 1,770   1,609   10.0 %
Mortgage banking 3,453   3,657   (5.6 )%
Loss on sale of purchased home equity portfolio   (118 ) NM  
Loan level derivative fee income 1,622   2,792   (41.9 )%
Unrealized gains on equity securities 134     NM  
Realized securities losses, net   (94 ) NM  
Gain on exchange of investment in Northeast Retirement Services 653   5,947   (89.0 )%
Bank-owned life insurance income 1,101   1,063   3.6 %
Gain on sale of premises and equipment 271     NM  
Miscellaneous 2,903   808   259.3 %
Total noninterest income 13,629   17,082   (20.2 )%
Salaries and employee benefits 33,873   30,961   9.4 %
Pension settlement charges   317   NM  
Occupancy and equipment 8,251   8,393   (1.7 )%
Data processing 4,183   4,149   0.8 %
Professional fees 1,559   2,275   (31.5 )%
Advertising 1,617   1,922   (15.9 )%
FDIC deposit insurance 914   881   3.7 %
Directors’ fees 1,527   1,566   (2.5 )%
Amortization of core deposit intangible 462   843   (45.2 )%
Merger expenses 2,976     NM  
Other general and administrative 2,734   2,999   (8.8 )%
Total noninterest expense 58,096   54,306   7.0 %
Income before income taxes 33,407   27,715   20.5 %
Provision for income taxes 8,851   11,226   (21.2 )%
Net income $ 24,556   $ 16,489   48.9 %
       
Earnings per common share:      
Basic $ 1.01   $ 0.69    
Diluted $ 0.98   $ 0.67    
Weighted average shares outstanding:      
Basic 24,264,204   23,985,822    
Diluted 25,093,479   24,482,414    
       
Regular dividends declared per share $ 0.70   $ 0.40    
Special dividends declared per share $ 0.30   $ 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,
  2018 2018 2018 2018 2017
Interest and fees on loans $ 25,309   $ 24,455   $ 23,081   $ 21,809   $ 20,883  
Interest on securities 2,089   1,854   1,809   1,857   1,763  
Dividends 194   210   195   204   189  
Other 125   92   62   78   40  
Total interest and dividend income 27,717   26,611   25,147   23,948   22,875  
Interest on deposits 6,846   6,357   5,252   4,775   4,349  
Interest on borrowings 920   791   912   814   732  
Total interest expense 7,766   7,148   6,164   5,589   5,081  
Net interest and dividend income 19,951   19,463   18,983   18,359   17,794  
Provision (credit) for loan losses (577 ) (182 ) 101   (460 ) 681  
Net interest and dividend income, after provision for loan losses 20,528   19,645   18,882   18,819   17,113  
Deposit account fees 472   473   422   355   372  
Interchange and ATM fees 454   471   454   391   418  
Mortgage banking 706   974   1,033   740   552  
Loan level derivative fee income 195   1,044   143   240   1,105  
Unrealized gains (losses) on equity securities (188 ) (61 ) 452   (69 )  
Gain on exchange of investment in Northeast Retirement Services       653    
Bank-owned life insurance income 290   279   256   276   277  
Gain on sale of property plant and equipment       271    
Miscellaneous 315   675   872   1,041   206  
Total noninterest income 2,244   3,855   3,632   3,898   2,930  
Salaries and employee benefits 8,353   8,874   8,264   8,382   7,755  
Pension settlement charges         317  
Occupancy and equipment 2,047   2,071   2,050   2,083   2,224  
Data processing 1,023   1,062   1,054   1,044   1,067  
Professional fees 354   302   450   453   540  
Advertising 305   509   499   304   503  
FDIC deposit insurance 230   221   230   233   220  
Directors’ fees 373   383   362   409   382  
Amortization of core deposit intangible 81   103   127   151   175  
Merger expenses 1,655   1,321        
Other general and administrative 590   677   655   812   1,002  
Total noninterest expense 15,011   15,523   13,691   13,871   14,185  
Income before income taxes 7,761   7,977   8,823   8,846   5,858  
Provision for income taxes 2,034   2,188   2,366   2,263   4,565  
Net income $ 5,727   $ 5,789   $ 6,457   $ 6,583   $ 1,293  
           
Earnings per common share:          
Basic $ 0.23   $ 0.24   $ 0.27   $ 0.27   $ 0.05  
Diluted $ 0.23   $ 0.23   $ 0.26   $ 0.27   $ 0.05  
Weighted average shares outstanding:          
Basic   24,395,005     24,256,902     24,230,098     24,172,237     24,104,329  
Diluted   25,308,794     25,242,737     24,991,958     24,827,850     24,795,366  
           
Regular dividends declared per share $ 0.20   $ 0.20   $ 0.15   $ 0.15   $ 0.15  
Special dividends declared per share $   $   $   $ 0.30   $  

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands) Quarters Ended
  December 31, 2018   September 30, 2018   December 31, 2017
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets                      
Total loans (1) $ 2,311,424   $ 25,344   4.35 %   $ 2,301,946   $ 24,490   4.22 %   $ 2,178,388   $ 20,947   3.81 %
Securities (1) 311,024   2,108   2.69     310,557   1,873   2.39     312,313   1,836   2.33  
Other interest earning assets and FHLB stock 38,717   300   3.07     30,522   283   3.68     28,842   156   2.15  
Total interest-earning assets 2,661,165   27,752   4.14 %   2,643,025   26,646   4.00 %   2,519,543   22,939   3.61 %
Non-interest-earning assets 112,819           109,429           96,781        
Total assets $ 2,773,984           $ 2,752,454           $ 2,616,324        
                             
Interest-bearing liabilities                            
NOW $ 168,594   $ 23   0.05 %   $ 166,144   $ 21   0.05 %   $ 160,371   $ 17   0.04 %
Regular savings 202,123   140   0.27     209,797   152   0.29     235,864   183   0.31  
Money market 688,701   2,310   1.33     714,539   2,244   1.25     718,489   1,823   1.01  
Certificates of deposit 868,883   4,373   2.00     836,584   3,940   1.87     653,573   2,326   1.41  
Total interest-bearing deposits 1,928,301   6,846   1.41     1,927,064   6,357   1.31     1,768,297   4,349   0.98  
Borrowings 171,283   920   2.13     162,641   791   1.93     202,255   732   1.44  
Total interest-bearing liabilities 2,099,584   7,766   1.47 %   2,089,705   7,148   1.36 %   1,970,552   5,081   1.02 %
Non-interest-bearing deposits 234,535         229,293         220,167      
Other non-interest-bearing liabilities 33,310         30,545         23,602      
Total liabilities 2,367,429         2,349,543         2,214,321      
Stockholders’ equity 406,555         402,911         402,003      
Total liabilities and stockholders’ equity $ 2,773,984         $ 2,752,454         $ 2,616,324      
                       
Net interest and dividend income (FTE)   19,986         19,498         17,858    
Less: FTE adjustment   (35 )       (35 )       (64 )  
Net interest and dividend income (GAAP)   $ 19,951         $ 19,463         $ 17,794    
                       
Net interest rate spread (FTE)     2.67 %       2.64 %       2.59 %
Net interest margin (FTE)     2.98 %       2.93 %       2.81 %
Total deposit cost     1.26 %       1.17 %       0.87 %

(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 21% for the three months ended December 31, and  September 30, 2018. A statutory rate of 35% was used in the fourth quarter of 2017.

Blue Hills Bancorp Inc.
Average Balances/Yields
(Unaudited; dollars in thousands) Year to Date
  December 31, 2018   December 31, 2017
  Average
balance
Interest Yield/
Cost
  Average
balance
Interest Yield/
Cost
Interest-earning assets              
Total loans (1) $ 2,258,126   $ 94,790   4.20 %   $ 2,070,513   $ 76,932   3.72 %
Securities (1) 311,485   7,715   2.48     329,369   7,306   2.22  
Other interest earning assets and FHLB stock 32,746   1,054   3.22     32,345   785   2.43  
Total interest-earning assets 2,602,357   103,559   3.98 %   2,432,227   85,023   3.50 %
Non-interest-earning assets 105,598           99,333        
Total assets $ 2,707,955           $ 2,531,560        
                   
Interest-bearing liabilities                  
NOW $ 163,167   $ 76   0.05 %   $ 152,469   $ 67   0.04 %
Regular savings 211,414   613   0.29     249,256   800   0.32  
Money market 716,499   8,592   1.20     692,474   6,780   0.98  
Certificates of deposit 782,103   13,949   1.78     612,486   7,568   1.24  
Total interest-bearing deposits 1,873,183   23,230   1.24     1,706,685   15,215   0.89  
Borrowings 183,430   3,437   1.87     199,004   2,523   1.27  
Total interest-bearing liabilities 2,056,613   26,667   1.30 %   1,905,689   17,738   0.93 %
Non-interest-bearing deposits 220,166         201,715      
Other non-interest-bearing liabilities 28,841         25,477      
Total liabilities 2,305,620         2,132,881      
Stockholders’ equity 402,335         398,679      
Total liabilities and stockholders’ equity $ 2,707,955         $ 2,531,560      
               
Net interest and dividend income (FTE)   76,892         67,285    
Less: FTE adjustment   (136 )       (248 )  
Net interest and dividend income (GAAP)   $ 76,756         $ 67,037    
               
Net interest rate spread (FTE)     2.68 %       2.57 %
Net interest margin (FTE)     2.95 %       2.77 %
Total deposit cost     1.11 %       0.80 %

(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 21% in 2018. A statutory rate of 35% was used in 2017.

Blue Hills Bancorp, Inc.
Average Balances – Trend
(Unaudited; dollars in thousands) Quarters Ended
  December 31, September 30, June 30, March 31, December 31,
  2018 2018 2018 2018 2017
Interest-earning assets          
Total loans $ 2,311,424   $ 2,301,946   $ 2,209,618   $ 2,207,895   $ 2,178,388  
Securities 311,024   310,557   311,183   313,212   312,313  
Other interest earning assets and FHLB stock 38,717   30,522   28,181   33,533   28,842  
Total interest-earning assets 2,661,165   2,643,025   2,548,982   2,554,640   2,519,543  
Non-interest-earning assets 112,819   109,429   103,295   96,629   96,781  
Total assets $ 2,773,984   $ 2,752,454   $ 2,652,277   $ 2,651,269   $ 2,616,324  
           
Interest-bearing liabilities          
NOW $ 168,594   $ 166,144   $ 160,194   $ 157,582   $ 160,371  
Regular savings 202,123   209,797   214,116   219,834   235,864  
Money market 688,701   714,539   721,329   742,035   718,489  
Certificates of deposit 868,883   836,584   725,904   694,526   653,573  
Total interest-bearing deposits 1,928,301   1,927,064   1,821,543   1,813,977   1,768,297  
Borrowings 171,283   162,641   197,429   202,944   202,255  
Total interest-bearing liabilities 2,099,584   2,089,705   2,018,972   2,016,921   1,970,552  
Non-interest-bearing deposits 234,535   229,293   207,888   208,561   220,167  
Other non-interest-bearing liabilities 33,310   30,545   25,349   26,063   23,602  
Total liabilities 2,367,429   2,349,543   2,252,209   2,251,545   2,214,321  
Stockholders’ equity 406,555   402,911   400,068   399,724   402,003  
Total liabilities and stockholders’ equity $ 2,773,984   $ 2,752,454   $ 2,652,277   $ 2,651,269   $ 2,616,324  
                               

Blue Hills Bancorp, Inc.
Yield Trend
(Unaudited) Quarters Ended
  December 31, September 30, June 30, March 31, December 31,
  2018 2018 2018 2018 2017
Interest-earning assets          
Total loans (1) 4.35 % 4.22 % 4.20 % 4.01 % 3.81 %
Securities (1) 2.69 % 2.39 % 2.36 % 2.46 % 2.33 %
Other interest earning assets and FHLB stock 3.07 % 3.68 % 3.33 % 2.87 % 2.15 %
Total interest-earning assets 4.14 % 4.00 % 3.96 % 3.81 % 3.61 %
           
Interest-bearing liabilities          
NOW 0.05 % 0.05 % 0.04 % 0.04 % 0.04 %
Regular savings 0.27 % 0.29 % 0.29 % 0.30 % 0.31 %
Money market 1.33 % 1.25 % 1.15 % 1.08 % 1.01 %
Certificates of deposit 2.00 % 1.87 % 1.67 % 1.53 % 1.41 %
Total interest-bearing deposits 1.41 % 1.31 % 1.16 % 1.07 % 0.98 %
Borrowings 2.13 % 1.93 % 1.85 % 1.63 % 1.44 %
Total interest-bearing liabilities 1.47 % 1.36 % 1.22 % 1.12 % 1.02 %
           
Net interest rate spread (FTE) (1) 2.67 % 2.64 % 2.74 % 2.69 % 2.59 %
Net interest margin (FTE) (1) 2.98 % 2.93 % 2.99 % 2.92 % 2.81 %
Total deposit cost 1.26 % 1.17 % 1.04 % 0.96 % 0.87 %

(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 21% for the three months ended December 31, September 30, June 30, and March 31, 2018. A statutory rate of 35% was used for the three months ended December 31, 2017.

Blue Hills Bancorp Inc.
Reconciliation of GAAP to Non-GAAP Net Income
(Unaudited; dollars in thousands, except share data) Quarter Ended
  December 31, 2018
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 7,761     $ 2,034     $ 5,727     $ 0.23  
Add unrealized loss on equity securities 188     49     139     0.01  
Add merger expenses 1,655     434     1,221     0.04  
Non-GAAP basis $ 9,604     $ 2,517     $ 7,087     $ 0.28  
   
  Quarter Ended
  September 30, 2018
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 7,977     $ 2,188     $ 5,789     $ 0.23  
Add unrealized loss on equity securities 61     17     44      
Add merger expenses 1,321     362     959     0.04  
Non-GAAP basis $ 9,359     $ 2,567     $ 6,792     $ 0.27  
   
  Quarter Ended
  June 30, 2018
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 8,823     $ 2,366     $ 6,457     $ 0.26  
Less unrealized gain on equity securities (452 )   (121 )   (331 )   (0.01 )
Non-GAAP basis $ 8,371     $ 2,245     $ 6,126     $ 0.25  
   
  Quarter Ended
  March 31, 2018
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 8,846     $ 2,263     $ 6,583     $ 0.27  
Add unrealized loss on equity securities 69     18     51      
Less gain on exchange of investment in Northeast Retirement Service (653 )   (169 )   (484 )   (0.02 )
Less gain on sale of premises and equipment (271 )   (70 )   (201 )   (0.01 )
Non-GAAP basis $ 7,991     $ 2,042     $ 5,949     $ 0.24  
   
  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 deferred tax asset valuation     (2,500 )   2,500     0.10  
Non-GAAP basis $ 6,175     $ 2,194     $ 3,981     $ 0.16  
                               

The Company’s management believes that the presentation of net income on a non-GAAP basis, excluding unrealized gains and losses on equity securities and 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, 2018
  Income Before
Income Taxes
  Provision for
Income Taxes
  Net Income   Earnings per
Common Share
(diluted)
GAAP basis $ 33,407     $ 8,851     $ 24,556     $ 0.98  
Less unrealized gain on equity securities (134 )   (37 )   (97 )    
Less gain on exchange of investment in Northeast Retirement Service (653 )   (169 )   (484 )   (0.02 )
Less gain on sale of property, plant and equipment (271 )   (70 )   (201 )   (0.01 )
Add merger expenses 2,976     796     2,180     0.08  
Non-GAAP basis $ 35,325     $ 9,371     $ 25,954     $ 1.03  
   
  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 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 unrealized gains and losses on equity securities and nonrecurring items, provides useful information for evaluating the Company’s operating results and any related trends that may be affecting the Company’s business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited) Quarters Ended
  December 31, September 30, June 30, March 31, December 31,
  2018 2018 2018 2018 2017
Performance Ratios (annualized)          
           
Diluted EPS:          
GAAP $ 0.23   $ 0.23   $ 0.26   $ 0.27   $ 0.05  
Non-GAAP $ 0.28   $ 0.27   $ 0.25   $ 0.24   $ 0.16  
                               
Return on average assets (ROAA):                              
GAAP 0.82 % 0.83 % 0.98 % 1.01 % 0.20 %
Non-GAAP 1.01 % 0.98 % 0.93 % 0.91 % 0.60 %
                               
Return on average equity (ROAE):                              
GAAP 5.59 % 5.70 % 6.47 % 6.68 % 1.28 %
Non-GAAP 6.92 % 6.69 % 6.14 % 6.04 % 3.93 %
                               
Return on average tangible common equity (ROATCE) (1) (3):                              
GAAP 5.72 % 5.84 % 6.63 % 6.84 % 1.31 %
Non-GAAP 7.08 % 6.85 % 6.29 % 6.19 % 4.03 %
                               
Efficiency ratio (2) (3):                              
GAAP 68 % 67 % 61 % 62 % 68 %
Non-GAAP 60 % 61 % 62 % 65 % 67 %

(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 14 for reconciliation of Non-GAAP financial measures.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited) Year to Date
  December 31, 2018 December 31, 2017
Performance Ratios (annualized)    
     
Diluted EPS    
GAAP $ 0.98   $ 0.67  
Non-GAAP 1.03   0.56  
             
Return on average assets (ROAA)            
GAAP 0.91 % 0.65 %
Non-GAAP 0.96 % 0.55 %
             
Return on average equity (ROAE)            
GAAP 6.10 % 4.14 %
Non-GAAP 6.45 % 3.47 %
             
Return on average tangible common equity (ROATCE) (1) (3)            
GAAP 6.25 % 4.24 %
Non-GAAP 6.61 % 3.56 %
             
Efficiency ratio (2) (3)            
GAAP 64 % 65 %
Non-GAAP 62 % 69 %

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

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

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

See page 15 for Non-GAAP financial measures.

Blue Hills Bancorp, Inc.
Selected Financial Highlights
(Unaudited; dollars in thousands, except share data) At or for the Quarters Ended At or for the Year Ended
  December 31, September 30, December 31, December 31, December 31,
  2018 2018 2017 2018 2017
Asset Quality          
Non-performing Assets $ 14,243   $ 15,433   $ 11,523   $ 14,243   $ 11,523  
Non-performing Assets/ Total Assets 0.51 % 0.55 % 0.43 % 0.51 % 0.43 %
Allowance for Loan Losses/ Total Loans 0.83 % 0.86 % 0.95 % 0.83 % 0.95 %
Net Charge-offs (Recoveries) $ 8   $ 23   $ 52   $ 424   $ (81 )
Annualized Net Charge-offs (Recoveries)/ Average Loans % % 0.01 % 0.02 % %
Allowance for Loan Losses/ Nonperforming Loans 183 % 169 % 181 % 183 % 181 %
                       
Capital/Other                      
Common shares outstanding 26,920,613   26,899,594   26,827,660      
Book value per share $ 15.01   $ 14.98   $ 14.83      
Tangible book value per share $ 14.67   $ 14.64   $ 14.47      
Tangible Common Equity/Tangible Assets (1) (2) 14.12 % 14.20 % 14.60 %    
Full-time Equivalent Employees 236   239   237      

(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.