BPFH Boston Private Financial Holdings Inc

First Quarter Highlights:

• Earnings increased 29% year-over-year: First quarter 2014 GAAP Net Income Attributable to the Company increased to $17.0 million, or $0.20 per share, versus net income of $13.2 million, or $0.15 per share, for the first quarter of 2013.
• Deposit and loan growth: Average deposits increased 2% linked quarter and 4% year-over-year to $5.1 billion. Total Loans increased 1% linked quarter and 8% year-over-year to $5.2 billion.
• Core fees increased 6% year-over-year: Fees from Wealth Management businesses increased 6% to $31.7 million on a year-over-year basis.
• Total Operating Expenses decreased: Total Operating Expenses decreased 1% to $55.0 million on a linked quarter basis and decreased 3% on a year-over-year basis. Expenses remained elevated in the first quarter due to seasonality in compensation and benefits.
• Provision credit: The Company recorded a provision credit of $1.2 million in the quarter due to net recoveries of $1.4 million.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the "Company" or "BPFH") today reported first quarter 2014 GAAP Net Income Attributable to the Company of $17.0 million, compared to $17.7 million in the fourth quarter of 2013. GAAP Net Income Attributable to the Company increased 29% on a year-over-year basis from $13.2 million in the first quarter of 2013. BPFH reported first quarter diluted earnings per share of $0.20, flat with the fourth quarter of 2013. Diluted earnings per share increased by 33% on a year-over-year basis from $0.15 in the first quarter of 2013.

"The first quarter was a good one for our Wealth Management businesses and our Private Bank," said Clayton G. Deutsch, CEO and President. "We are pleased with the NIM expansion and loan and deposit growth at our Private Bank. The Bank continues to demonstrate margin expansion. Our Wealth Advisors had another strong quarter, with fees increasing 2% quarter-over-quarter and 14% year-over-year. Our Investment Managers continue to face a challenging environment for active domestic equity strategies. Nevertheless, our Investment Managers grew revenue 14% year-over-year. Our Wealth Management affiliates overall are contributing strong margin expansion to our Company."

Core Fees Increased 6% Year-Over-Year

On a year-over-year basis, Core Fees and Income (Investment Management Fees, Private Banking Wealth Management and Trust Fees, Wealth Advisory Fees, Other Banking Fee Income and Gain on Sale of Loans) increased 6% to $31.7 million due to double-digit growth in Wealth Advisory Fees and Investment Management Fees. On a linked quarter basis, Core fees decreased 4% from $32.8 million in the fourth quarter of 2013. The decrease was driven by a decline in Investment Management Fees and a decline in Other Banking Fee Income. Fourth quarter 2013 Investment Management Fees included $1.2 million in seasonal performance fees.

Total Assets Under Management/Advisory ("AUM") increased to $24.7 billion in the first quarter, up 2% from $24.3 billion in the fourth quarter of 2013. AUM increased 13% from $21.9 billion in the first quarter of 2013. The Company experienced first quarter 2014 AUM net inflows of $103 million, as compared to fourth quarter 2013 AUM net inflows of $147 million. AUM net inflows for the first quarter of 2013 were $181 million.

Net Interest Income Increased 2% Linked Quarter

Net Interest Income in the first quarter was $44.5 million, up 2% from $43.5 million in the fourth quarter of 2013. On a year-over-year basis, Net Interest Income increased 1% from $44.3 million.

Net Interest Margin was 3.04% in the first quarter, up six basis points from 2.98% in the fourth quarter. Net Interest Margin decreased six basis points from 3.10% in the first quarter of 2013.

"Our NIM expanded in the first quarter as a result of specific actions taken in the fourth quarter," said David J. Kaye, Chief Financial Officer. "Late in the fourth quarter we deployed excess cash into investment securities and restructured some FHLB borrowings which lowered our borrowing costs."

Total Operating Expenses Decreased 1% Linked Quarter, 3% Year-Over-Year

Total Operating Expenses for the first quarter of 2014 were $55.0 million, down 1% from $55.5 million in the fourth quarter of 2013. First quarter expenses were elevated by seasonal compensation expenses such as increased 401(k) employee contribution matches and FICA. On a year-over-year basis, Total Operating Expenses decreased 3% from $56.6 million due primarily to savings in compensation and benefits.

Provision Credit of $1.2M Driven By Net Recoveries

The Company recorded a $1.2 million credit to its Provision for Loan Losses in the first quarter of 2014, compared to a provision credit of $2.0 million in the fourth quarter. The provision credit was driven by net recoveries of $1.4 million. The Company recorded no provision in the first quarter of 2013.

Criticized Loans increased 8% to $187.3 million on a linked quarter basis, and decreased 16% year-over-year. The increase was driven primarily by the downgrade of one pass rated loan to Special Mention in Southern California. Nonaccrual Loans ("Nonaccruals") decreased 6% to $42.1 million, down from $44.8 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 42% from $73.0 million. As a percentage of Total Loans, Nonaccruals were 81 basis points at March 31, 2014, down 6 basis points from 87 basis points at December 31, 2013, and down 72 basis points from 1.53% at March 31, 2013.

Additional credit metrics are listed below on a linked quarter and year-over-year basis:

(In millions)         March 31, 2014       December 31, 2013       March 31, 2013 Total Criticized Loans $ 187.3 $ 173.6 $ 223.5 Total Loans 30-89 Days Past Due and Accruing (13) $ 10.6 $ 13.7 $ 17.3 Total Net Loans (Charged-off)/ Recovered $ 1.4 $ 1.2 $ (1.8 ) Allowance for Loan Losses/ Total Loans 1.48 % 1.49 % 1.72 %

Capital Ratios Held Steady

The Company maintained its strong capital position in the first quarter of 2014.

Capital ratios are listed below on a linked quarter and year-over-year basis:

        March 31, 2014       December 31, 2013       March 31, 2013 Total Risk-Based Capital * 14.9 % 14.8 % 14.9 % Tier I Risk-Based Capital * 13.7 % 13.5 % 13.6 % Tier I Leverage Capital * 10.2 % 10.1 % 10.1 % TCE/TA 7.1 % 7.2 % 8.0 % Tier I Common Equity/ Risk Weighted Assets * 10.1 % 9.9 % 9.2 %

*March 31, 2014 data is presented based on estimated data.

Dividend Payments

Concurrent with the release of first quarter 2014 earnings, the Board of Directors of the Company declared a cash dividend to common shareholders of $0.08 per share. The record date for this dividend is May 9, 2014, and the payment date is May 23, 2014.

The Board of Directors of the Company also declared a cash dividend to holders of the Non-Cumulative Perpetual Preferred Stock, Series D of $17.375 per share, which will result in a dividend of $0.434375 per depositary share. The record date for this dividend is May 15, 2014, and the payment date is June 16, 2014.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures, such as tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision earnings; and the efficiency ratio (FTE basis), to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. A detailed reconciliation table of the Company's GAAP to the non-GAAP measures is attached.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Wednesday, April 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003

Elite Entry Number: 8733419

Replay Information:

Available from April 16 at 12 noon until April 23

Dial In #: (877) 344-7529

Conference Number: 10043724

The call will be simultaneously webcast and may be accessed on www.bostonprivate.com

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization that owns Wealth Management and Private Banking affiliates in Boston, New York, Los Angeles and the San Francisco Bay Area. The Company has a $6 billion Private Banking balance sheet, and manages over $24 billion of client assets.

The Company positions its affiliates to serve the high net worth marketplace with high quality products and services of unique appeal to private clients. The Company also provides strategic oversight and access to resources, both financial and intellectual, to support affiliate management, marketing, compliance and legal activities. (NASDAQ: BPFH)

For more information about BPFH, visit the Company's website at www.bostonprivate.com.

Forward-Looking Statements

Certain statements in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements include, among others, statements regarding our strategy, evaluations of future interest rate trends and liquidity, prospects for growth in assets, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, adverse conditions in the capital and debt markets and the impact of such conditions on the Company's private banking, investment management and wealth advisory activities; changes in interest rates; competitive pressures from other financial institutions; the effects of continued weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or decreases in deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; the risk that the Company's deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Note to Editors:

Boston Private Financial Holdings, Inc. is not to be confused with Boston Private Bank & Trust Company. Boston Private Bank & Trust Company is a wholly-owned subsidiary of BPFH. The information reported in this press release is related to the performance and results of BPFH.

                          Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited)       (In thousands, except share and per share data) Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Assets: Cash and cash equivalents $ 398,687 $ 191,881 $ 54,136 Investment securities available for sale 700,531 691,729 736,610 Investment securities held to maturity 127,938 112,014 — Stock in Federal Home Loan Banks 37,450 38,612 40,436 Loans held for sale (1) 2,297 6,123 289,180 Total loans 5,162,470 5,112,459 4,783,467 Less: Allowance for loan losses   76,605     76,371     82,286   Net loans 5,085,865 5,036,088 4,701,181 Other real estate owned (“OREO”) 921 776 2,329 Premises and equipment, net 29,045 29,158 29,014 Goodwill 110,180 110,180 110,180 Intangible assets, net 19,551 20,604 23,813 Fees receivable 11,039 12,119 10,452 Accrued interest receivable 15,057 14,416 14,774 Deferred income taxes, net 53,716 55,364 60,634 Other assets   113,143     118,045     123,682   Total assets $ 6,705,420   $ 6,437,109   $ 6,196,421   Liabilities: Deposits (1) $ 5,341,644 $ 5,110,370 $ 4,517,351 Deposits held for sale (1) — — 188,252 Securities sold under agreements to repurchase 93,550 102,353 122,187 Federal funds purchased 15,000 — 50,000 Federal Home Loan Bank borrowings 394,458 367,254 461,411 Junior subordinated debentures 106,363 106,363 133,835 Other liabilities   87,652     97,613     88,869   Total liabilities   6,038,667     5,783,953     5,561,905   Redeemable Noncontrolling Interests 20,774 19,468 17,438 Shareholders’ Equity: Preferred stock, $1.00 par value; authorized: 2,000,000 shares 47,753 47,753 58,089

Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 80,001,139 shares at March 31, 2014; 79,837,612 shares at December 31, 2013; 79,053,668 shares at March 31, 2013

80,001 79,838 79,054

 

Additional paid-in capital 610,590 616,334 641,918 Accumulated deficit (89,170 ) (106,211 ) (163,543 ) Accumulated other comprehensive income/ (loss)   (3,305 )   (4,197 )   1,560   Total Company’s shareholders’ equity   645,869     633,517     617,078   Noncontrolling interests   110     171     —   Total shareholders’ equity   645,979     633,688     617,078   Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,705,420   $ 6,437,109   $ 6,196,421                                 Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Three Months Ended (In thousands, except share and per share data) Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Interest and dividend income: Loans $ 47,214 $ 47,421 $ 49,350 Taxable investment securities 636 512 511 Non-taxable investment securities 904 750 839 Mortgage-backed securities 1,936 1,361 1,402 Federal funds sold and other   346     335     179 Total interest and dividend income   51,036     50,379     52,281 Interest expense: Deposits 3,216 3,283 3,786 Federal Home Loan Bank borrowings 2,326 2,564 2,831 Junior subordinated debentures 955 979 1,154 Repurchase agreements and other short-term borrowings   17     12     234 Total interest expense   6,514     6,838     8,005 Net interest income 44,522 43,541 44,276 Provision/ (credit) for loan losses   (1,200 )   (2,000 )   — Net interest income after provision for loan losses   45,722     45,541     44,276 Fees and other income: Investment management fees 11,461 12,371 10,086 Wealth advisory fees 11,473 11,269 10,068 Private banking wealth management and trust fees 6,961 6,767 6,782 Other banking fee income 1,680 2,280 1,798 Gain on sale of loans, net   89     156     1,187 Total core fees and income   31,664     32,843     29,921 Gain on repurchase of debt — — 574 Gain on sale of investments, net 1 14 10 Gain/(loss) on OREO, net 819 — 34 Other   249     1,488     222 Total other income   1,069     1,502     840 Operating expense: Salaries and employee benefits 36,574 36,156 37,449 Occupancy and equipment 7,797 7,411 7,507 Professional services 2,843 3,412 2,661 Marketing and business development 1,426 1,764 1,436 Contract services and data processing 1,438 1,313 1,568 Amortization of intangibles 1,053 1,052 1,118 FDIC insurance 896 883 1,040 Other   2,941     3,509     3,807 Total operating expense   54,968     55,500     56,586 Income before income taxes 23,487 24,386 18,451 Income tax expense   7,138     7,508     6,040 Net income from continuing operations 16,349 16,878 12,411 Net income from discontinued operations (2)   1,928     1,968     1,722 Net income before attribution to noncontrolling interests 18,277 18,846 14,133 Less: Net income attributable to noncontrolling interests   1,236     1,178     930 Net income attributable to the Company $ 17,041   $ 17,668   $ 13,203                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except share and per share data) Three Months Ended PER SHARE DATA: Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Calculation of Income for EPS: Net income attributable to the Company $ 17,041 $ 17,668 $ 13,203 Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3)   (1,061 )   (1,467 )   (457 ) Net Income Attributable to the Common Shareholders 15,980 16,201 12,746 LESS: Amount allocated to participating securities   (117 )   (133 )   (908 ) Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 15,863   $ 16,068   $ 11,838     End of Period Common Shares Outstanding 80,001,139 79,837,612 79,053,668   Weighted Average Shares Outstanding: Weighted average basic shares, including participating securities 79,107,968 78,719,000 85,635,265 LESS: Participating securities (962,783 ) (976,760 ) (8,816,655 ) PLUS: Dilutive potential common shares   1,865,705     1,758,720     1,006,820   Weighted Average Diluted Shares (4)   80,010,890     79,500,960     77,825,430     Diluted Total Earnings per Share $ 0.20 $ 0.20 $ 0.15                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except per share data)       FINANCIAL DATA: Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Book Value Per Common Share $ 7.48 $ 7.34 $ 7.07 Tangible Book Value Per Share (5) $ 5.86 $ 5.70 $ 5.60 Market Price Per Share $ 13.53 $ 12.62 $ 9.88   ASSETS UNDER MANAGEMENT AND ADVISORY: Private Banking $ 4,612,000 $ 4,565,000 $ 4,167,000 Investment Managers 10,505,000 10,401,000 9,314,000 Wealth Advisory 9,641,000 9,336,000 8,487,000 Less: Inter-company Relationship   (22,000 )   (22,000 )   (21,000 ) Total Assets Under Management and Advisory $ 24,736,000   $ 24,280,000   $ 21,947,000     FINANCIAL RATIOS: Total Equity/Total Assets 9.63 % 9.84 % 9.96 % Tangible Common Equity/Tangible Assets (5) 7.12 % 7.22 % 7.97 % Tier I Common Equity/ Risk Weighted Assets (5) 10.09 % 9.93 %

9.25

% Allowance for Loan Losses/Total Loans 1.48 % 1.49 % 1.72 % Allowance for Loan Losses/Nonaccrual Loans 182 % 171 % 113 % Return on Average Assets - Three Months Ended (Annualized) 1.06 % 1.11 % 0.84 % Return on Average Common Equity - Three Months Ended (Annualized) (6) 10.91 % 11.56 % 8.66 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6) 13.99 % 14.93 % 11.11 % Efficiency Ratio - Three Months Ended (7) 67.88 %

68.02

% 72.00 %                                           Boston Private Financial Holdings, Inc. Selected Financial Data         (Unaudited) Average Balance Interest Income/Expense Average Yield/Rate (In Thousands) Three Months Ended Three Months Ended Three Months Ended AVERAGE BALANCE SHEET:   3/31/14       12/31/13       3/31/13   3/31/14       12/31/13       3/31/13 3/31/14       12/31/13       3/31/13   AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 254,407 $ 237,342 $ 198,833 $ 636 $ 512 $ 511 1.00 % 0.87 % 1.03 % Non-taxable investment securities (8) 224,054 215,083 205,255 1,391 1,154 1,291 2.48 % 2.15 % 2.52 % Mortgage-backed securities 341,082 267,463 317,686 1,936 1,361 1,402 2.27 % 2.04 % 1.76 % Federal funds sold and other   204,157       352,285       168,004   346       335       179 0.68 %     0.37 %     0.43 % Total Cash and Investments   1,023,700       1,072,173       889,778   4,309       3,362       3,383 1.68 %     1.25 %     1.52 % Loans: (9) Commercial and Construction (8) 2,833,475 2,707,370 2,805,685 30,921 31,150 31,990 4.37 % 4.50 % 4.56 % Residential 2,035,232 2,022,698 2,003,845 16,169 16,159 16,928 3.18 % 3.20 % 3.38 % Home Equity and Other Consumer   245,596       250,212       268,156   1,805       1,874       1,987 2.98 %     2.97 %     3.01 % Total Loans   5,114,303       4,980,280       5,077,686   48,895       49,183       50,905 3.83 %     3.89 %     4.01 % Total Earning Assets   6,138,003       6,052,453       5,967,464   53,204       52,545       54,288 3.47 %     3.43 %     3.64 % LESS: Allowance for Loan Losses 77,228 78,463 84,330 Cash and due From Banks (Non-Interest Bearing) 41,559 40,332 41,897 Other Assets   347,721       364,130       391,909 TOTAL AVERAGE ASSETS $ 6,450,055     $ 6,378,452     $ 6,316,940 AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits: (10)

Savings and NOW $ 545,973 $ 490,408 $ 576,814 $ 98 $ 94 $ 132 0.07 % 0.08 % 0.09 % Money Market 2,490,836 2,500,191 2,387,363 1,845 1,871 2,086 0.30 % 0.30 % 0.35 % Certificates of Deposit   624,547       620,161       678,788   1,273       1,318       1,568 0.83 %     0.84 %     0.94 %

Total Interest-Bearing Deposits

3,661,356 3,610,760 3,642,965 3,216 3,283 3,786 0.36 % 0.36 % 0.42 % Junior Subordinated Debentures 106,363 106,673 137,016 955 979 1,154 3.59 % 3.59 % 3.37 % FHLB Borrowings and Other   506,864       487,584       537,468   2,343       2,576       3,065 1.85 %     2.07 %     2.28 % Total Interest-Bearing Liabilities   4,274,583       4,205,017       4,317,449   6,514       6,838       8,005 0.61 %     0.64 %     0.75 % Noninterest Bearing Demand Deposits 1,422,928 1,391,809 1,264,803 Other Liabilities   91,863       134,429       107,645 Total Average Liabilities 5,789,374 5,731,255 5,689,897 Redeemable Noncontrolling Interests 20,132 17,929 17,184 Average Shareholders' Equity   640,549       629,268       609,859 TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,450,055     $ 6,378,452     $ 6,316,940 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 46,690 $ 45,707 $ 46,283 LESS: FTE Adjustment (8)   2,168   2,166   2,007 Net Interest Income (GAAP Basis) $ 44,522 $ 43,541 $ 44,276 Interest Rate Spread 2.86 % 2.79 % 2.89 % Net Interest Margin 3.04 % 2.98 % 3.10 %                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) LOAN DATA (11):   3/31/2014   12/31/2013   3/31/2013 Commercial and Industrial Loans: New England $ 704,056 $ 713,484 $ 672,895 San Francisco Bay 108,365 107,154 61,806 Southern California   39,780   45,415   53,811 Total Commercial and Industrial Loans $ 852,201 $ 866,053 $ 788,512 Commercial Real Estate Loans: New England $ 730,709 $ 721,924 $ 643,756 San Francisco Bay 644,108 641,746 642,170 Southern California   483,817   449,724   402,515 Total Commercial Real Estate Loans $ 1,858,634 $ 1,813,394 $ 1,688,441 Construction and Land Loans: New England $ 94,966 $ 92,456 $ 99,989 San Francisco Bay 62,879 45,941 37,923 Southern California   16,871   15,520   11,005 Total Construction and Land Loans $ 174,716 $ 153,917 $ 148,917 Residential Loans: New England $ 1,227,114 $ 1,228,623 $ 1,163,647 San Francisco Bay 456,372 459,667 436,577 Southern California   352,369   344,004   298,189 Total Residential Loans $ 2,035,855 $ 2,032,294 $ 1,898,413 Home Equity Loans: New England $ 77,470 $ 81,010 $ 78,154 San Francisco Bay 28,159 30,002 34,745 Southern California   3,334   2,648   5,283 Total Home Equity Loans $ 108,963 $ 113,660 $ 118,182 Other Consumer Loans: New England $ 119,500 $ 117,079 $ 126,409 San Francisco Bay 7,311 8,854 7,792 Southern California 5,246 7,069 6,606 Eliminations and other, net   44   139   195 Total Other Consumer Loans $ 132,101 $ 133,141 $ 141,002 Total Loans New England $ 2,953,815 $ 2,954,576 $ 2,784,850 San Francisco Bay 1,307,194 1,293,364 1,221,013 Southern California 901,417 864,380 777,409 Eliminations and other, net   44   139   195 Total Loans $ 5,162,470 $ 5,112,459 $ 4,783,467                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) CREDIT QUALITY (11):   3/31/2014   12/31/2013     3/31/2013   Special Mention Loans: New England $ 41,920 $ 41,759 $ 31,132 San Francisco Bay 25,055 25,912 24,130 Southern California   36,452   19,642     19,917   Total Special Mention Loans $ 103,427 $ 87,313   $ 75,179   Accruing Substandard Loans (12): New England $ 12,319 $ 13,304 $ 17,372 San Francisco Bay 26,294 25,171 49,306 Southern California   3,507   3,540     8,680   Total Accruing Substandard Loans $ 42,120 $ 42,015   $ 75,358   Nonaccruing Loans: New England $ 21,569 $ 24,838 $ 39,853 San Francisco Bay 12,541 14,016 25,626 Southern California   7,944   5,908     7,547   Total Nonaccruing Loans $ 42,054 $ 44,762   $ 73,026   Other Real Estate Owned: New England $ 336 $ 191 $ 1,744 San Francisco Bay 585 585 585 Southern California — — — Pacific Northwest (1)   N/A   N/A     477   Total Other Real Estate Owned $ 921 $ 776   $ 2,806   Loans 30-89 Days Past Due and Accruing (13): New England $ 4,472 $ 5,029 $ 10,609 San Francisco Bay 2,577 3,029 5,862 Southern California   3,528   5,684     833   Total Loans 30-89 Days Past Due and Accruing $ 10,577 $ 13,742   $ 17,304   Loans (Charged-off)/ Recovered, Net for the Three Months Ended: New England $ 540 $ (344 ) $ (1,236 ) San Francisco Bay 640 1,798 (1,508 ) Southern California   254   (260 )   973   Total Net Loans (Charged-off)/ Recovered $ 1,434 $ 1,194   $ (1,771 )       Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited)   FOOTNOTES:

(1)

      On December 17, 2012, Boston Private Bank & Trust Company announced that it had entered into an agreement to sell its three offices in the Pacific Northwest region. The sale closed on May 10, 2013, at which time the Company recorded a gain on sale of $10.6 million. Accordingly, the assets and liabilities to be sold as part of this transaction were classified as held for sale at March 31, 2013. Within loans held for sale on the consolidated balance sheet at March 31, 2013, $273.6 million relate to the Pacific Northwest transaction. All of the deposits held for sale at March 31, 2013 relate to the Pacific Northwest transaction. All other assets and liabilities that were identified be included in the Pacific Northwest transaction were classified as other assets held for sale or other liabilities held for sale and were included within other assets or other liabilities on the consolidated balance sheet at March 31, 2013.

(2)

      Net income from discontinued operations consists of contingent payments from certain of our divested affiliates, including Davidson Trust Company; Boston Private Value Investors, Inc.; Sand Hill Advisors, LLC; RINET Company, LLC; Gibraltar Private Bank & Trust Company; and Westfield Capital Management Company, LLC.

(3)

      Adjustments to net income attributable to the Company to arrive at net income attributable to the common shareholders, as presented in these tables, include decrease/ (increase) in noncontrolling interests redemption value, dividends paid on preferred stock, and dividends on participating securities.

(4)

      When the Company has positive net income from continuing operations attributable to the common shareholders, the Company adds additional shares to basic weighted average shares outstanding to arrive at diluted weighted average shares outstanding for the diluted earnings per share calculation. These additional shares reflect the assumed exercise, conversion, or contingent issuance of dilutive securities. If the additional shares would result in anti-dilution they would be excluded from the diluted earning per share calculation. The potential dilutive shares relate to: unexercised stock options, unvested non-participating restricted stock, and unexercised stock warrants. See Part II. Item 8. "Financial Statements and Supplementary Data - Note 16: Earnings Per Share" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 for additional information.

(5)

      The Company uses certain non-GAAP financial measures, such as: Tangible Book Value Per Share and the Tangible Common Equity ("TCE") to Tangible Assets ("TA") ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.   Reconciliations from the Company's GAAP Total Equity to Total Assets ratio to the Non-GAAP TCE to TA ratio, and from GAAP Book Value to Non-GAAP Tangible Book Value are presented below:   The Company calculates Tangible Assets by adjusting Total Assets to exclude Goodwill and Intangible Assets.   The Company calculates Tangible Common Equity by adjusting Total Equity to exclude non-convertible Series D Preferred stock and exclude Goodwill and Intangible Assets, net.                               (In thousands, except per share data) Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Total Balance Sheet Assets $ 6,705,420 $ 6,437,109 $ 6,196,421 LESS: Goodwill and Intangible Assets, net   (129,731 )   (130,784 )   (133,993 ) Tangible Assets (non-GAAP) $ 6,575,689 $ 6,306,325 $ 6,062,428 Total Shareholders' Equity $ 645,979 $ 633,688 $ 617,078 LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) — LESS: Goodwill and Intangible Assets, net   (129,731 )   (130,784 )   (133,993 ) Total adjusting items   (177,484 )   (178,537 )   (133,993 ) Tangible Common Equity (non-GAAP) $ 468,495   $ 455,151   $ 483,085   Total Equity/Total Assets 9.63 % 9.84 % 9.96 % Tangible Common Equity/Tangible Assets (non-GAAP) 7.12 % 7.22 % 7.97 %   Total Risk Weighted Assets * $ 4,716,065 $ 4,668,531 $ 4,592,071 Tier I Common Equity * $ 475,929 $ 463,627 $

424,732

Tier I Common Equity/ Risk Weighted Assets 10.09 % 9.93 %

9.25

%   End of Period Shares Outstanding 80,001 79,838 79,054 End of Period Carlyle Common Convertible Shares   —     —     7,261   Common Equivalent Shares   80,001     79,838     86,315     Book Value Per Common Share $ 7.48 $ 7.34 $ 7.07 Tangible Book Value Per Share (non-GAAP) $ 5.86 $ 5.70 $ 5.60   * Risk Weighted Assets and Tier I Common Equity for March 31, 2014 are presented based on estimated data.    

(6)

      The Company uses certain non-GAAP financial measures, such as: Return on Average Common Equity and Return on Average Tangible Common Equity to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.   Reconciliations from the Company's GAAP Return on Average Equity ratio to the Non-GAAP Return on Average Common Equity ratio, and the Non-GAAP Return on Average Tangible Common Equity ratio are presented below:  

The Company calculates Average Common Equity by adjusting Average Equity to exclude Average Preferred Equity.

 

The Company calculates Average Tangible Common Equity by adjusting Average Equity to exclude Average Goodwill and Intangible Assets, net and Average Preferred Equity.

                              (In thousands, except per share data) Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Total average shareholders' equity $ 640,549 $ 629,268 $ 609,859 LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,753 )   —   Average common equity (non-GAAP)   592,796     581,515     609,859   LESS: Average goodwill and intangible assets, net   (130,272 )   (131,375 )   (134,511 ) Total adjusting items   (130,272 )   (131,375 )   (134,511 ) Average Tangible Common Equity (non-GAAP) $ 462,524   $ 450,140   $ 475,348     Net income attributable to the Company $ 17,041 $ 17,668 $ 13,203 Less: Dividends on Series D preferred stock   (869 )   (869 )   —   Net income, after dividends on Series D preferred stock (non-GAAP) $ 16,172   $ 16,799   $ 13,203     Return on Average Equity - Three Months Ended (Annualized) 10.64 % 11.23 % 8.66 % Return on Average Common Equity - Three Months Ended (Annualized) (non-GAAP) 10.91 % 11.56 % 8.66 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (non-GAAP) 13.99 % 14.93 % 11.11 %    

(7)

     

The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision earnings and the efficiency ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

 

Reconciliations from the Company's GAAP income from continuing operations before income taxes to non-GAAP pre-tax, pre-provision earnings; and from GAAP efficiency ratio to non-GAAP efficiency ratio (FTE basis) are presented below:

 

 

          Three Months Ended (In thousands, except per share data) Mar 31, 2014         Dec 31, 2013         Mar 31, 2013 Income before income taxes (GAAP) $ 23,487 $ 24,386 $ 18,451 ADD BACK: Provision/ (credit) for loan losses   (1,200 )   (2,000 )   —  

Pre-tax, pre-provision earnings (non-GAAP)

$ 22,287 $ 22,386 $ 18,451   Net income attributable to the Company (GAAP) $ 17,041 $ 17,668 $ 13,203   Total operating expense (GAAP) $ 54,968 $ 55,500 $ 56,586 Less: Amortization of intangibles   1,053     1,052     1,118  

Total operating expense (excluding amortization of intangibles) (non-GAAP)

$ 53,915 $ 54,448 $ 55,468   Net interest income $ 44,522 $ 43,541 $ 44,276 Total core fees and income 31,664 32,843 29,921 Total other income 1,069 1,502 840 FTE income   2,168     2,166     2,007   Total revenue (FTE basis) $ 79,423 $ 80,052 $ 77,044 Efficiency Ratio, before deduction of intangible amortization (GAAP) 71.15 % 71.26 % 75.41 % Efficiency Ratio, FTE Basis (non-GAAP) 67.88 % 68.02 % 72.00 %    

(8)

      Interest Income on Non-taxable Investments and Loans are presented on an FTE basis using the federal statutory rate of 35% for each period presented.

(9)

      Includes Loans Held for Sale and Nonaccrual Loans.

(10)

      Includes Deposits Held for Sale.

(11)

     

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender's regional offices. Loans in the Pacific Northwest region that were not included the sale of that region's offices are included with the offices from which they are being managed after the sale. Net loans from the Company to certain principals of the Company's affiliate partners, loans at the Company's non-banking segments, and inter-company loan eliminations are identified as “Eliminations and other, net”.

(12)

     

Accruing substandard loans include loans that are classified as substandard but are still accruing interest income. Boston Private Bank & Trust Company may classify a loan as substandard where known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present repayment terms and which may result in disclosure of such loans as nonaccrual at some time in the future.

(13)

      In addition to loans 30-89 days past due and accruing, at March 31, 2014, the Company had three loans totaling $0.6 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At December 31, 2013, the Company had two loans totaling $0.1 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At March 31, 2013, the Company had one loan totaling $0.1 million that was more than 90 days past due but still on accrual status. These loans originated in the New England region.

Boston Private Financial Holdings, Inc.Jeanne Hess, 617-912-3798Vice President, Investor Relationsjhess@bostonprivate.com