BPFH Boston Private Financial Holdings Inc

Second Quarter Highlights:

• Earnings increased 25% linked quarter: Second quarter 2014 GAAP Net Income Attributable to the Company increased to $21.3 million, or $0.25 per share, from $17.0 million, or $0.20 per share, for the first quarter of 2014.
• Loan sale: In the second quarter of 2014, the Company sold $57 million of commercial loans from the loan portfolio for a gain on sale of $1.6 million.
• Deposit and loan growth: Average Total Deposits increased 8% year-over-year to $5.0 billion. On a linked quarter basis, Average Total Deposits were flat. Average Total Loans increased 4% year-over-year to $5.1 billion although were flat for the second quarter of 2014 as a result of the portfolio loan sale.
• Core Fees and Income increased 13% year-over-year: Fees from Wealth Management businesses increased 3% linked quarter and 11% year-over-year to $30.8 million.
• Net Interest Income growth: Net Interest Income grew 4% linked quarter and 5% year-over-year to $46.3 million. Included in the quarter's Net Interest Income was $1.9 million of interest recovered on previous nonaccrual loans.
• Total Operating Expenses decreased: Total Operating Expenses decreased 1% to $54.4 million on a linked quarter basis and decreased 4% on a year-over-year basis.
• Provision credit: The Company recorded a provision credit of $5.0 million in the quarter due to net recoveries of $2.9 million and $1.2 million as result of the commercial loan sale.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2014 GAAP Net Income Attributable to the Company of $21.3 million, compared to $17.0 million for the first quarter of 2014. GAAP Net Income Attributable to the Company was flat on a year-over-year basis relative to the second quarter of 2013. Second quarter diluted earnings per share were $0.25, a $0.05 increase over the first quarter of 2014. Diluted earnings per share increased by $0.14 on a year-over-year basis from $0.11 for the second quarter of 2013. Excluding the impact of significant transactions in the second quarter of 2013, diluted earnings per share was $0.18.

“The second quarter demonstrated continued strength in our Wealth Management businesses and our Private Bank,” said Clayton G. Deutsch, CEO and President. “For the Private Bank, average loan and deposit growth year-over-year was 4% and 8%, respectively. Our Wealth Advisors had another strong quarter, with fees increasing 4% linked quarter and 16% year-over-year. Especially gratifying, given our long-standing focus on target ROE attainment, is seeing second quarter ROE come in at 13.5% and first half of 2014 ROE coming in at 12.2%.”

Core Fees and Income Increased 13% Year-Over-Year

On a year-over-year basis, Core Fees and Income (Investment Management Fees, Wealth Advisory Fees, Private Banking Wealth Management and Trust Fees, Other Banking Fee Income and Gain on Sale of Loans) increased 13% to $34.1 million due to double-digit growth in Wealth Advisory Fees. On a linked quarter basis, Core Fees and Income increased 8% from $31.7 million for the first quarter of 2014, due largely to higher AUM across our Wealth Management business as well as higher gain on sale of loans.

Total Assets Under Management/Advisory (“AUM”) increased to $25.4 billion at the end of the second quarter, up 3% from $24.7 billion at the end of the first quarter of 2014. AUM increased 17% from $21.8 billion at the end of the second quarter of 2013.

Net Interest Income Increased 4% Linked Quarter

Net Interest Income for the second quarter was $46.3 million, up 4% from $44.5 million for the first quarter of 2014. On a year-over-year basis, Net Interest Income increased 5% from $43.9 million. Included in the second quarter of 2014 Net Interest Income was $1.9 million of interest recovered on previous nonaccrual loans. Excluding the interest recovered, Net Interest Income was flat compared to the first quarter of 2014 and up 1% from the second quarter of 2013.

Net Interest Margin was 3.14% at the end of the second quarter, up ten basis points from 3.04% at the end of the first quarter. Net Interest Margin was unchanged from June 30, 2013. Excluding the impact from interest recovered, June 30, 2014 Net Interest Margin was 3.01%, down three basis points from March 31, 2014.

Total Operating Expenses Decreased 1% Linked Quarter, 4% Year-Over-Year

Total Operating Expenses for the second quarter of 2014 were $54.4 million, down 1% from $55.0 million for the first quarter of 2014. 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 4% from $56.7 million. The second quarter of 2013 included $2.4 million of one-time charges related to liability restructuring and tax reserves.

Provision Credit of $5.0M Driven By Net Recoveries

The Company recorded a $5.0 million credit for its Provision for Loan Losses for the second quarter of 2014, compared to a provision credit of $1.2 million for the first quarter. The provision credit was driven by net recoveries of $2.9 million and $1.2 million from the commercial loan sale. The Company recorded a provision credit of $2.0 million for the second quarter of 2013.

Criticized Loans were flat on a linked quarter basis, and decreased 2% year-over-year. Nonaccrual Loans (“Nonaccruals”) decreased 1% to $41.6 million, down from $42.1 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 20% from $52.3 million. As a percentage of Total Loans, Nonaccruals were 82 basis points at June 30, 2014, up 1 basis point from 81 basis points at March 31, 2014, and down 26 basis points from 1.08% at June 30, 2013.

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

(In millions)   June 30, 2014   March 31, 2014   June 30, 2013 Total Criticized Loans $ 188.2 $ 187.3 $ 191.4

Total Loans 30-89 Days Past Due and Accruing (13)

$ 6.0 $ 10.6 $ 11.5 Total Net Loans (Charged-off)/ Recovered $ 2.9 $ 1.4 $ 0.5 Allowance for Loan Losses/ Total Loans 1.46 % 1.48 % 1.67 %  

Capital Ratios Increase

The Company built upon its capital position in the second quarter of 2014. David J. Kaye, Chief Financial Officer, stated, “Strong earnings and proactive balance sheet management pushed the Tier 1 Common Equity Ratio up to 10.6%, providing the Company with additional flexibility going forward.”

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

  June 30, 2014   March 31, 2014   June 30, 2013 Total Risk-Based Capital * 15.5 % 15.0 % 15.6 % Tier I Risk-Based Capital * 14.3 % 13.7 % 14.3 % Tier I Leverage Capital * 10.4 % 10.2 % 10.4 % TCE/TA 7.8 % 7.1 % 7.3 % Tier I Common Equity/ Risk Weighted Assets * 10.6 % 10.1 % 9.9 %

*June 30, 2014 data is presented based on estimated data.

 

Dividend Payments

Concurrent with the release of second 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 August 8, 2014, and the payment date is August 22, 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 August 15, 2014, and the payment date is September 15, 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, July 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003Elite Entry Number: 2512612

Replay Information:Available from July 16 at 12 noon until July 23Dial In #: (877) 344-7529Conference Number: 10048703

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 $25 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)   6/30/14     3/31/14     6/30/13   Assets: Cash and cash equivalents $ 139,181 $ 398,687 $ 67,654 Investment securities available for sale 683,590 700,531 724,153 Investment securities held to maturity 138,380 127,938 — Stock in Federal Home Loan Banks 35,276 37,450 40,622

Loans held for sale

2,841 2,297 12,414 Total loans 5,106,051 5,162,470 4,838,713 Less: Allowance for loan losses   74,547     76,605     80,800   Net loans 5,031,504 5,085,865 4,757,913 Other real estate owned (“OREO”) 921 921 776 Premises and equipment, net 28,410 29,045 29,093 Goodwill 110,180 110,180 110,180 Intangible assets, net 18,506 19,551 22,712 Fees receivable 11,957 11,039 9,950 Accrued interest receivable 14,337 15,057 14,831 Deferred income taxes, net 50,516 53,716 60,019 Other assets   123,224     113,143     116,613   Total assets $ 6,388,823   $ 6,705,420   $ 5,966,930   Liabilities:

Deposits

$ 4,951,852 $ 5,341,644 $ 4,576,383 Securities sold under agreements to repurchase 137,334 93,550 26,700 Federal funds purchased — 15,000 65,000 Federal Home Loan Bank borrowings 416,579 394,458 448,706 Junior subordinated debentures 106,363 106,363 133,168 Other liabilities   93,149     87,652     90,035   Total liabilities   5,705,277     6,038,667     5,339,992   Redeemable Noncontrolling Interests 20,895 20,774 17,661 Shareholders’ Equity: Preferred stock, $1.00 par value; authorized: 2,000,000 shares 47,753 47,753 47,754 Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 80,394,009 shares at June 30, 2014; 80,001,139 shares at March 31, 2014; 79,734,389 shares at June 30, 2013 80,394 80,001 79,734 Additional paid-in capital 603,652 610,590 626,950 Accumulated deficit (67,838 ) (89,170 ) (142,215 ) Accumulated other comprehensive income/ (loss)   (1,542 )   (3,305 )   (3,081 ) Total Company’s shareholders’ equity   662,419     645,869     609,142   Noncontrolling interests   232     110     135   Total shareholders’ equity   662,651     645,979     609,277   Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,388,823   $ 6,705,420   $ 5,966,930               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Three Months Ended Six Months Ended (In thousands, except share and per share data)   6/30/14     3/31/14     6/30/13     6/30/14     6/30/13   Interest and dividend income: Loans $ 49,396 $ 47,214 $ 48,339 $ 96,610 $ 97,689 Taxable investment securities 730 636 489 1,366 1,000 Non-taxable investment securities 914 904 778 1,818 1,617 Mortgage-backed securities 1,689 1,936 1,340 3,625 2,742 Federal funds sold and other   253     346     179     599     358   Total interest and dividend income   52,982     51,036     51,125     104,018     103,406   Interest expense: Deposits 3,375 3,216 3,120 6,591 6,906 Federal Home Loan Bank borrowings 2,359 2,326 2,818 4,685 5,649 Junior subordinated debentures 965 955 1,156 1,920 2,310 Repurchase agreements and other short-term borrowings   15     17     132     32     366   Total interest expense   6,714     6,514     7,226     13,228     15,231   Net interest income 46,268 44,522 43,899 90,790 88,175 Provision/ (credit) for loan losses   (5,000 )   (1,200 )   (2,000 )   (6,200 )   (2,000 ) Net interest income after provision for loan losses   51,268     45,722     45,899     96,990     90,175   Fees and other income: Investment management fees 11,754 11,461 10,848 23,215 20,934 Wealth advisory fees 11,979 11,473 10,317 23,452 20,385 Private banking wealth management and trust fees 7,043 6,961 6,490 14,004 13,272 Other banking fee income 1,677 1,680 1,706 3,357 3,504 Gain on sale of loans, net   1,694     89     746     1,783     1,933   Total core fees and income   34,147     31,664     30,107     65,811     60,028   Gain on repurchase of debt — — 46 — 620 Gain on sale of investments, net — 1 18 1 28 Gain/(loss) on OREO, net 19 819 (47 ) 838 (13 ) Gain on sale of Pacific Northwest offices (1) — — 10,574 — 10,574 Other   208     249     286     457     508   Total other income   227     1,069     10,877     1,296     11,717   Operating expense: Salaries and employee benefits 34,338 36,574 34,054 70,912 71,503 Occupancy and equipment 7,349 7,797 7,597 15,146 15,104 Professional services 3,526 2,843 2,585 6,369 5,246 Marketing and business development 2,730 1,426 2,726 4,156 4,162 Contract services and data processing 1,447 1,438 1,484 2,885 3,052 Amortization of intangibles 1,045 1,053 1,101 2,098 2,219 FDIC insurance 854 896 954 1,750 1,994 Other   3,113     2,941     6,165     6,054     9,972   Total operating expense   54,402     54,968     56,666     109,370     113,252   Income before income taxes 31,240 23,487 30,217 54,727 48,668 Income tax expense   10,333     7,138     10,701     17,471     16,741   Net income from continuing operations 20,907 16,349 19,516 37,256 31,927 Net income from discontinued operations (2)   1,450     1,928     2,781     3,378     4,503   Net income before attribution to noncontrolling interests 22,357 18,277 22,297 40,634 36,430 Less: Net income attributable to noncontrolling interests   1,025     1,236     969     2,261     1,899   Net income attributable to the Company $ 21,332   $ 17,041   $ 21,328   $ 38,373   $ 34,531               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except share and per share data) Three Months Ended Six Months Ended PER SHARE DATA:   6/30/14     3/31/14     6/30/13     6/30/14     6/30/13   Calculation of Income for EPS: Net income attributable to the Company $ 21,332 $ 17,041 $ 21,328 $ 38,373 $ 34,531 Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3)   (1,195 )   (1,061 )   (12,468 )   (2,256 )   (12,925 ) Net Income Attributable to the Common Shareholders 20,137 15,980 8,860 36,117 21,606 LESS: Amount allocated to participating securities   (132 )   (117 )   (199 )   (255 )   (998 ) Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 20,005   $ 15,863   $ 8,661   $ 35,862   $ 20,608     End of Period Common Shares Outstanding 80,394,009 80,001,139 79,734,389   Weighted Average Shares Outstanding: Weighted average basic shares, including participating securities 79,195,082 79,107,968 80,472,013 79,151,765 83,039,376 LESS: Participating securities (756,446 ) (962,783 ) (3,221,015 ) (859,044 ) (6,003,378 ) PLUS: Dilutive potential common shares   1,859,789     1,865,705     1,127,880     1,866,121     1,069,292   Weighted Average Diluted Shares (4)   80,298,425     80,010,890     78,378,878     80,158,842     78,105,290     Diluted Total Earnings per Share $ 0.25 $ 0.20 $ 0.11 $ 0.45 $ 0.26         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except per share data) FINANCIAL DATA:   6/30/14     3/31/14     6/30/13   Book Value Per Common Share $ 7.65 $ 7.48 $ 7.04 Tangible Book Value Per Share (5) $ 6.05 $ 5.86 $ 5.38 Market Price Per Share $ 13.44 $ 13.53 $ 10.64   ASSETS UNDER MANAGEMENT AND ADVISORY: Private Banking $ 4,716,000 $ 4,612,000 $ 4,126,000 Investment Managers 10,917,000 10,505,000 9,149,000 Wealth Advisory 9,760,000 9,641,000 8,516,000 Less: Inter-company Relationship   (23,000 )   (22,000 )   (20,000 ) Total Assets Under Management and Advisory $ 25,370,000   $ 24,736,000   $ 21,771,000     FINANCIAL RATIOS: Total Equity/Total Assets 10.37 % 9.63 % 10.21 % Tangible Common Equity/Tangible Assets (5) 7.77 % 7.12 % 7.35 % Tier I Common Equity/ Risk Weighted Assets (5) 10.63 % 10.11 % 9.95 % Allowance for Loan Losses/Total Loans 1.46 % 1.48 % 1.67 % Allowance for Loan Losses/Nonaccrual Loans 179 % 182 % 155 % Return on Average Assets - Three Months Ended (Annualized) 1.32 % 1.06 % 1.39 % Return on Average Common Equity - Three Months Ended (Annualized) (6) 13.50 % 10.91 % 14.59 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6) 17.15 % 13.99 % 19.05 % Efficiency Ratio - Three Months Ended (7) 64.39 % 67.88 % 63.94 %   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:   6/30/14     3/31/14     6/30/13   6/30/14     3/31/14     6/30/13 6/30/14     3/31/14     6/30/13   AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 262,253 $ 254,407 $ 208,717 $ 730 $ 636 $ 489 1.12 % 1.00 % 0.94 % Non-taxable investment securities (8) 224,634 224,054 204,219 1,406 1,391 1,197 2.50 % 2.48 % 2.34 % Mortgage-backed securities 332,928 341,082 294,976 1,689 1,936 1,340 2.03 % 2.27 % 1.82 % Federal funds sold and other   187,722     204,157     152,037   253     346     179 0.62 %   0.68 %   0.46 % Total Cash and Investments   1,007,537     1,023,700     859,949   4,078     4,309     3,205 1.64 %   1.68 %   1.49 % Loans: (9) Commercial and Construction (8) 2,856,603 2,833,475 2,702,401 33,397 30,921 31,854 4.62 % 4.37 % 4.66 % Residential 2,039,146 2,035,232 1,963,701 15,984 16,169 16,097 3.14 % 3.18 % 3.28 % Home Equity and Other Consumer   242,988     245,596     271,063   1,744     1,805     1,984 2.88 %   2.98 %   2.94 % Total Loans   5,138,737     5,114,303     4,937,165   51,125     48,895     49,935 3.95 %   3.83 %   4.02 % Total Earning Assets   6,146,274     6,138,003     5,797,114   55,203     53,204     53,140 3.57 %   3.47 %   3.64 % LESS: Allowance for Loan Losses 79,071 77,228 83,711 Cash and due From Banks (Non-Interest Bearing) 32,016 41,559 43,143 Other Assets   366,833     347,721     380,462 TOTAL AVERAGE ASSETS $ 6,466,052   $ 6,450,055   $ 6,137,008 AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY Interest-Bearing Liabilities: Interest-Bearing Deposits: (10) Savings and NOW $ 601,104 $ 545,973 $ 523,229 $ 111 $ 98 $ 107 0.07 % 0.07 % 0.08 % Money Market 2,509,400 2,490,836 2,272,302 1,994 1,845 1,627 0.32 % 0.30 % 0.29 % Certificates of Deposit   615,325     624,547     669,996   1,270     1,273     1,386 0.83 %   0.83 %   0.85 % Total Interest-Bearing Deposits 3,725,829 3,661,356 3,465,527 3,375 3,216 3,120 0.36 % 0.36 % 0.37 % Junior Subordinated Debentures 106,363 106,363 133,605 965 955 1,156 3.59 % 3.59 % 3.42 % FHLB Borrowings and Other   527,418     506,864     584,030   2,374     2,343     2,950 1.78 %   1.85 %   2.00 % Total Interest-Bearing Liabilities   4,359,610     4,274,583     4,183,162   6,714     6,514     7,226 0.61 %   0.61 %   0.69 % Noninterest Bearing Demand Deposits 1,334,791 1,422,928 1,212,127 Other Liabilities   93,539     91,863     116,744 Total Average Liabilities 5,787,940 5,789,374 5,512,033 Redeemable Noncontrolling Interests 23,850 20,132 15,966 Average Shareholders' Equity   654,262     640,549     609,009 TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,466,052   $ 6,450,055   $ 6,137,008 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 48,489 $ 46,690 $ 45,914 LESS: FTE Adjustment (8)   2,221     2,168     2,015 Net Interest Income (GAAP Basis) $ 46,268   $ 44,522   $ 43,899 Interest Rate Spread 2.96 % 2.86 % 2.95 % Bank only Net Interest Margin 3.21 % 3.11 % 3.23 % Net Interest Margin 3.14 % 3.04 % 3.14 %               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Average Balance Interest Income/Expense Average Yield/Rate (In Thousands) Six Months Ended Six Months Ended   Six Months Ended AVERAGE BALANCE SHEET:   6/30/14     6/30/13   6/30/14     6/30/13 6/30/14     6/30/13   AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 258,470 $ 203,873 $ 1,366 $ 1,000 1.06 % 0.99 % Non-taxable investment securities (8) 224,346 204,734 2,797 2,487 2.49 % 2.43 % Mortgage-backed securities 336,982 306,268 3,625 2,742 2.15 % 1.79 % Federal funds sold and other   195,632     159,976   599     358 0.62 %   0.44 % Total Cash and Investments   1,015,430     874,851   8,387     6,587 1.66 %   1.51 % Loans: (9) Commercial and Construction (8) 2,845,103 2,753,758 64,317 63,844 4.50 % 4.61 % Residential 2,037,200 1,983,662 32,153 33,025 3.16 % 3.33 % Home Equity and Other Consumer   244,285     269,635   3,548     3,971 2.93 %   2.97 % Total Loans   5,126,588     5,007,055   100,018     100,840 3.89 %   4.02 % Total Earning Assets   6,142,018     5,881,906   108,405     107,427 3.52 %   3.64 % LESS: Allowance for Loan Losses 78,155 84,019 Cash and due From Banks (Non-Interest Bearing) 36,835 42,579 Other Assets   367,856     385,142 TOTAL AVERAGE ASSETS $ 6,468,554   $ 6,225,608 AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY Interest-Bearing Liabilities: Interest-Bearing Deposits: (10) Savings and NOW $ 573,691 $ 549,873 $ 209 $ 239 0.07 % 0.09 % Money Market 2,499,981 2,329,515 3,839 3,713 0.31 % 0.32 % Certificates of Deposit   619,884     674,367   2,543     2,954 0.83 %   0.91 % Total Interest-Bearing Deposits 3,693,556 3,553,755 6,591 6,906 0.36 % 0.40 % Junior Subordinated Debentures 106,363 135,311 1,920 2,310 3.59 % 3.39 % FHLB Borrowings and Other   517,198     560,878   4,716     6,015 1.81 %   2.13 % Total Interest-Bearing Liabilities   4,317,117     4,249,944   13,227     15,231 0.61 %   0.72 % Noninterest Bearing Demand Deposits 1,380,285 1,238,320 Other Liabilities   100,221     112,333 Total Average Liabilities 5,797,623 5,600,597 Redeemable Noncontrolling Interests 23,285 16,697 Average Shareholders' Equity   647,646     608,314 TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,468,554   $ 6,225,608 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 95,178 $ 92,196 LESS: FTE Adjustment (8)   4,389     4,021 Net Interest Income (GAAP Basis) $ 90,789   $ 88,175 Interest Rate Spread 2.91 % 2.92 % Bank only Net Interest Margin 3.16 % 3.21 % Net Interest Margin 3.09 % 3.12 %         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) LOAN DATA (11):   6/30/14   3/31/14   6/30/13 Commercial and Industrial Loans: New England $ 715,814 $ 704,056 $ 670,377 San Francisco Bay 119,554 108,365 72,511 Southern California   47,095   39,780   53,745 Total Commercial and Industrial Loans $ 882,463 $ 852,201 $ 796,633 Commercial Real Estate Loans: New England $ 717,166 $ 730,709 $ 622,529 San Francisco Bay 626,744 644,108 622,743 Southern California   436,991   483,817   433,396 Total Commercial Real Estate Loans $ 1,780,901 $ 1,858,634 $ 1,678,668 Construction and Land Loans: New England $ 81,453 $ 94,966 $ 104,451 San Francisco Bay 58,042 62,879 34,073 Southern California   10,927   16,871   11,721 Total Construction and Land Loans $ 150,422 $ 174,716 $ 150,245 Residential Loans: New England $ 1,231,902 $ 1,227,114 $ 1,172,993 San Francisco Bay 452,864 456,372 452,344 Southern California   354,306   352,369   313,031 Total Residential Loans $ 2,039,072 $ 2,035,855 $ 1,938,368 Home Equity Loans: New England $ 81,465 $ 77,470 $ 81,588 San Francisco Bay 27,804 28,159 32,705 Southern California   3,235   3,334   6,301 Total Home Equity Loans $ 112,504 $ 108,963 $ 120,594 Other Consumer Loans: New England $ 128,698 $ 119,500 $ 139,533 San Francisco Bay 6,917 7,311 8,024 Southern California 5,074 5,246 6,463 Eliminations and other, net   —   44   185 Total Other Consumer Loans $ 140,689 $ 132,101 $ 154,205 Total Loans New England $ 2,956,498 $ 2,953,815 $ 2,791,471 San Francisco Bay 1,291,925 1,307,194 1,222,400 Southern California 857,628 901,417 824,657 Eliminations and other, net   —   44   185 Total Loans $ 5,106,051 $ 5,162,470 $ 4,838,713         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) CREDIT QUALITY (11):   6/30/14     3/31/14   6/30/13   Special Mention Loans: New England $ 55,882 $ 41,920 $ 28,644 San Francisco Bay 24,264 25,055 21,617 Southern California   26,455     36,452   19,077   Total Special Mention Loans $ 106,601   $ 103,427 $ 69,338   Accruing Substandard Loans (12): New England $ 12,849 $ 12,319 $ 17,657 San Francisco Bay 25,838 26,294 43,460 Southern California   1,306     3,507   8,656   Total Accruing Substandard Loans $ 39,993   $ 42,120 $ 69,773   Nonaccruing Loans: New England $ 19,818 $ 21,569 $ 25,361 San Francisco Bay 16,487 12,541 19,379 Southern California   5,315     7,944   7,549   Total Nonaccruing Loans $ 41,620   $ 42,054 $ 52,289   Other Real Estate Owned: New England $ 336 $ 336 $ 191 San Francisco Bay 585 585 585 Southern California   —     —   —   Total Other Real Estate Owned $ 921   $ 921 $ 776   Loans 30-89 Days Past Due and Accruing (13): New England $ 3,547 $ 4,472 $ 7,433 San Francisco Bay 487 2,577 3,504 Southern California   1,950     3,528   605   Total Loans 30-89 Days Past Due and Accruing $ 5,984   $ 10,577 $ 11,542   Loans (Charged-off)/ Recovered, Net for the Three Months Ended: New England $ (622 ) $ 540 $ (864 ) San Francisco Bay 1,959 640 175 Southern California   1,605     254   1,203   Total Net Loans (Charged-off)/ Recovered $ 2,942   $ 1,434 $ 514   Loans (Charged-off)/ Recovered, Net for the Six Months Ended: New England $ (82 ) $ (2,100 ) San Francisco Bay 2,599 (1,333 ) Southern California   1,859     2,176   Total Net Loans (Charged-off)/ Recovered $ 4,376   $ (1,257 )     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.   (2) Net income from discontinued operations consists of contingent payments or expenses related to 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 earnings 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)   6/30/14     3/31/14     6/30/13   Total Balance Sheet Assets $ 6,388,823 $ 6,705,420 $ 5,966,930 LESS: Goodwill and Intangible Assets, net   (128,686 )   (129,731 )   (132,892 ) Tangible Assets (non-GAAP) $ 6,260,137 $ 6,575,689 $ 5,834,038 Total Shareholders' Equity $ 662,651 $ 645,979 $ 609,277 LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,754 ) LESS: Goodwill and Intangible Assets, net   (128,686 )   (129,731 )   (132,892 ) Total adjusting items   (176,439 )   (177,484 )   (180,646 ) Tangible Common Equity (non-GAAP) $ 486,212   $ 468,495   $ 428,631   Total Equity/Total Assets 10.37 % 9.63 % 10.21 % Tangible Common Equity/Tangible Assets (non-GAAP) 7.77 % 7.12 % 7.35 %   Total Risk Weighted Assets * $ 4,629,247 $ 4,707,604 $ 4,379,436 Tier I Common Equity * $ 491,982 $ 475,930 $ 435,630 Tier I Common Equity/ Risk Weighted Assets 10.63 % 10.11 % 9.95 %   End of Period Shares Outstanding 80,394 80,001 79,734   Book Value Per Common Share $ 7.65 $ 7.48 $ 7.04 Tangible Book Value Per Share (non-GAAP) $ 6.05 $ 5.86 $ 5.38 * Risk Weighted Assets and Tier I Common Equity for June 30, 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)   6/30/14     3/31/14     6/30/13   Total average shareholders' equity $ 654,262 $ 640,549 $ 609,009 LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,753 )   (39,501 ) Average common equity (non-GAAP)   606,509     592,796     569,508   LESS: Average goodwill and intangible assets, net   (129,216 )   (130,272 )   (133,451 ) Total adjusting items   (129,216 )   (130,272 )   (133,451 ) Average Tangible Common Equity (non-GAAP) $ 477,293   $ 462,524   $ 436,057     Net income attributable to the Company $ 21,332 $ 17,041 $ 21,328 Less: Dividends on Series D preferred stock   (869 )   (869 )   (560 ) Net income, after dividends on Series D preferred stock (non-GAAP) $ 20,463   $ 16,172   $ 20,768     Return on Average Equity - Three Months Ended (Annualized) 13.04 % 10.64 % 14.01 % Return on Average Common Equity - Three Months Ended (Annualized) (non-GAAP) 13.50 % 10.91 % 14.59 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (non-GAAP) 17.15 % 13.99 % 19.05 %   (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; from GAAP net income attributable to the Company to Non-GAAP net income attributable to the Company, excluding the sale of the Pacific Northwest offices; from GAAP diluted total EPS to Non-GAAP diluted total EPS, excluding the effect of significant transactions; and from GAAP efficiency ratio to Non-GAAP efficiency ratio (FTE basis) are presented below:

Three Months Ended Six months ended (In thousands, except per share data)   6/30/14     3/31/14     6/30/13     6/30/14     6/30/13   Income before income taxes (GAAP) $ 31,240 $ 23,487 $ 30,217 $ 54,727 $ 48,668 ADD BACK: Provision/ (credit) for loan losses   (5,000 )   (1,200 )   (2,000 )   (6,200 )   (2,000 ) Pre-tax, pre-provision earnings (non-GAAP) $ 26,240 $ 22,287 $ 28,217 $ 48,527 $ 46,668   Net income attributable to the Company (GAAP) $ 21,332 $ 17,041 $ 21,328 $ 38,373 $ 34,531 LESS: Gain on sale of Pacific Northwest offices, net of tax  

—

   

—

   

6,267

   

—

   

6,267

  Net income attributable to the Company, excluding the effect of significant transactions (Non-GAAP) $

21,332

$

17,041

$

15,061

$

38,373

$

28,264

 

Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP)

$

20,005

$

15,863

$

8,661

$

35,862

$

20,608

ADD BACK: Deemed dividend due to repurchase of Series B Preferred

—

—

11,738

—

11,738

LESS: Gain on sale of Pacific Northwest offices, net of tax  

—

   

—

   

(6,267

)

 

—

 

 

(6,267

)

Net income attributable to the Common Shareholders, after allocation to participating securities, excluding the effect of significant transactions (Non-GAAP)

$

20,005

$

15,863

$

14,132

$

35,862

$

26,079

 

Diluted Total Earnings Per Share (GAAP)

$

0.25

$

0.20

$

0.11

$

0.45

$

0.26

Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $

0.25

$

0.20

$

0.18

$

0.45

$

0.33

  Total operating expense (GAAP) $

54,402

$

54,968

$

56,666

$

109,370

$

113,252

Less: Amortization of intangibles  

1,045

   

1,053

   

1,101

   

2,098

   

2,219

  Total operating expense (excluding amortization of intangibles) (non-GAAP) $ 53,357 $ 53,915 $ 55,565 $ 107,272 $ 111,033   Net interest income $ 46,268 $ 44,522 $ 43,899 $ 90,790 $ 88,175 Total core fees and income 34,147 31,664 30,107 65,811 60,028 Total other income 227 1,069 10,877 1,296 11,717 FTE income   2,221     2,168     2,015     4,389     4,021   Total revenue (FTE basis) $ 82,863 $ 79,423 $ 86,898 $ 162,286 $ 163,941 Efficiency Ratio, before deduction of intangible amortization (GAAP) 67.46 % 71.15 % 66.76 % 69.27 % 70.82 % Efficiency Ratio, FTE Basis (non-GAAP) 64.39 % 67.88 % 63.94 % 66.10 % 67.73 %   (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 June 30, 2014, 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, 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 June 30, 2013, the Company had one loan totaling $0.1 million that was more than 90 days past due but still on accrual status. This loan originated in the New England region.

Boston Private Financial Holdings, Inc.Steve Gaven, 617-912-3793Vice President, Investor Relationssgaven@bostonprivate.com