BPFH Boston Private Financial Holdings Inc

Third Quarter Highlights:

• Core Fees and Income increased 13% year-over-year: Fees from the Wealth Management businesses increased 14% year-over-year and 2% linked quarter to $31.5 million.
• Deposit and loan growth: Average Total Deposits increased 9% year-over-year and 3% linked quarter to $5.2 billion. Average Total Loans increased 5% year-over-year to $5.2 billion. On a linked quarter basis, Average Total Loans were flat, influenced by the commercial loan sale executed in the second quarter of 2014.

• Net Interest Income growth: Net Interest Income grew 6% year-over-year to $44.8 million. On a linked quarter basis, Net Interest Income decreased 3% due to lower interest recovered on previous non-accrual loans and lower yields on commercial loans.
• Total Operating Expenses: Total Operating Expenses increased 4% to $54.0 million on a year-over-year basis and decreased 1% linked quarter due to seasonally lower marketing expenses and lower professional fees.
• Provision credit: The Company recorded a provision credit of $2.6 million in the quarter due to net recoveries of $3.3 million and a decrease in criticized loans, partially offset by provision for newly originated loans.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported third quarter 2014 GAAP Net Income Attributable to the Company of $18.3 million, compared to $21.3 million for the second quarter of 2014. GAAP Net Income Attributable to the Company was flat on a year-over-year basis relative to the third quarter of 2013. Third quarter 2014 diluted earnings per share were $0.22, a $0.03 decrease from the second quarter of 2014. Diluted earnings per share were unchanged from the third quarter of 2013.

“The Company demonstrated desired loan and deposit growth and satisfactory returns on capital in the third quarter,” said Clayton G. Deutsch, CEO and President. "Total Revenue increased 8% year-over-year while Total Operating Expenses increased 4% for the same period, resulting in positive operating leverage of nearly 400 basis points. Given our focus on ROE attainment, we were pleased to see Return on Average Common Equity come in at 11.2% for the third quarter and 11.9% year-to-date.”

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 $33.6 million due to double-digit revenue growth across all three Wealth Management business lines. On a linked quarter basis, Core Fees and Income fell 2% from $34.1 million for the second quarter of 2014, due to lower gain on sale of loans.

Total Assets Under Management/Advisory (“AUM”) were $24.8 billion at the end of the third quarter, down 2% from $25.4 billion at the end of the second quarter of 2014. AUM increased 9% from $22.7 billion at the end of the third quarter of 2013.

Net Interest Income

Net Interest Income for the third quarter was $44.8 million, down 3% from $46.3 million for the second quarter of 2014. On a year-over-year basis, Net Interest Income increased 6% from $42.3 million.

Net Interest Margin was 2.93% at the end of the third quarter, down 21 basis points from 3.14% at the end of the second quarter. Net Interest Margin was down six basis points from September 30, 2013.

Total Operating Expenses

Total Operating Expenses for the third quarter of 2014 were $54.0 million, down 1% from $54.4 million for the second quarter of 2014. On a year-over-year basis, Total Operating Expenses increased 4% from $52.0 million.

Provision Credit of $2.6M Driven By Net Recoveries

The Company recorded a $2.6 million credit to its Provision for Loan Losses for the third quarter of 2014, compared to a provision credit of $5.0 million for the second quarter. The provision credit was driven by net recoveries of $3.3 million and a decrease in criticized loans, partially offset by provision for newly originated loans. The Company recorded a provision credit of $6.0 million for the third quarter of 2013.

Criticized Loans decreased 5% on a linked quarter basis. Year-over-year, criticized loans increased 6%. Nonaccrual Loans (“Nonaccruals”) decreased 19% to $33.5 million, down from $41.6 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 34% from $50.8 million. As a percentage of Total Loans, Nonaccruals were 64 basis points at September 30, 2014, down 18 basis points from 82 basis points at June 30, 2014, and down 39 basis points from 1.03% at September 30, 2013.

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

                    (In millions) September 30, 2014 June 30, 2014 September 30, 2013 Total Criticized Loans $ 179.5 $ 188.2 $ 169.3 Total Loans 30-89 Days Past Due and Accruing (13) $ 3.6 $ 6.0 $ 8.2 Total Net Loans (Charged-off)/ Recovered $ 3.3 $ 2.9 $ 2.4 Allowance for Loan Losses/ Total Loans 1.44 % 1.46 % 1.57 %  

Capital Ratios

The Company maintained strong capital ratios in the third quarter of 2014.

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

                    September 30, 2014 June 30, 2014 September 30, 2013 Total Risk-Based Capital * 15.5 % 15.5 % 15.2 % Tier I Risk-Based Capital * 14.2 % 14.2 % 13.9 % Tier I Leverage Capital * 10.3 % 10.4 % 10.3 % TCE/TA 7.6 % 7.8 % 7.2 % Tier I Common Equity/ Risk Weighted Assets * 10.6 % 10.6 % 10.1 %  

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

Dividend Payments

Concurrent with the release of third 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 November 7, 2014, and the payment date is November 21, 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 November 17, 2014, and the payment date is December 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 Thursday, October 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003

Elite Entry Number: 2738721

Replay Information:

Available from October 16 at 12 noon until October 23

Dial In #: (877) 344-7529

Conference Number: 10053956

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 approximately $25 billion.

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)   9/30/2014     6/30/2014     9/30/2013   Assets: Cash and cash equivalents $ 308,912 $ 139,181 $ 323,941 Investment securities available for sale 724,638 683,590 702,944 Investment securities held to maturity 132,467 138,380 — Stock in Federal Home Loan Banks 32,534 35,276 39,715 Loans held for sale 4,943 2,841 1,745 Total loans 5,213,491 5,106,051 4,922,222 Less: Allowance for loan losses   75,283     74,547     77,177   Net loans 5,138,208 5,031,504 4,845,045 Other real estate owned (“OREO”) 1,074 921 776 Premises and equipment, net 29,473 28,410 29,319 Goodwill 110,180 110,180 110,180 Intangible assets, net 17,475 18,506 21,656 Fees receivable 11,439 11,957 10,653 Accrued interest receivable 15,018 14,337 13,442 Deferred income taxes, net 48,443 50,516 60,853 Other assets   114,281     123,224     114,670   Total assets $ 6,689,085   $ 6,388,823   $ 6,274,939   Liabilities: Deposits $ 5,334,881 $ 4,951,852 $ 4,942,765 Securities sold under agreements to repurchase 73,422 137,334 92,499 Federal funds purchased — — — Federal Home Loan Bank borrowings 371,367 416,579 391,466 Junior subordinated debentures 106,363 106,363 110,487 Other liabilities   106,024     93,149     97,461   Total liabilities   5,992,057     5,705,277     5,634,678   Redeemable Noncontrolling Interests 21,397 20,895 17,224 Shareholders’ Equity: Preferred stock, $1.00 par value; authorized: 2,000,000 shares 47,753 47,753 47,753 Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 80,464,390 shares at September 30, 2014; 80,394,009 shares at June 30, 2014; 79,821,898 shares at September 30, 2013 80,464 80,394 79,822 Additional paid-in capital 598,036 603,652 623,485 Accumulated deficit (49,573 ) (67,838 ) (123,879 ) Accumulated other comprehensive income/ (loss)   (1,312 )   (1,542 )   (4,283 ) Total Company’s shareholders’ equity   675,368     662,419     622,898   Noncontrolling interests   263     232     139   Total shareholders’ equity   675,631     662,651     623,037   Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,689,085   $ 6,388,823   $ 6,274,939                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Three Months Ended Nine Months Ended (In thousands, except share and per share data)   9/30/2014     6/30/2014     9/30/2013     9/30/2014     9/30/2013   Interest and dividend income: Loans $ 47,931 $ 49,396 $ 46,484 $ 144,541 $ 144,173 Taxable investment securities 876 730 544 2,242 1,544 Non-taxable investment securities 942 914 746 2,760 2,363 Mortgage-backed securities 1,605 1,689 1,338 5,230 4,080 Federal funds sold and other   379     253     277     978     635   Total interest and dividend income   51,733     52,982     49,389     155,751     152,795   Interest expense: Deposits 3,603 3,375 3,206 10,194 10,112 Federal Home Loan Bank borrowings 2,354 2,359 2,750 7,039 8,399 Junior subordinated debentures 976 965 1,119 2,896 3,429 Repurchase agreements and other short-term borrowings   17     15     12     49     378   Total interest expense   6,950     6,714     7,087     20,178     22,318   Net interest income 44,783 46,268 42,302 135,573 130,477 Provision/ (credit) for loan losses   (2,600 )   (5,000 )   (6,000 )   (8,800 )   (8,000 ) Net interest income after provision for loan losses   47,383     51,268     48,302     144,373     138,477   Fees and other income: Investment management fees 12,011 11,754 10,511 35,226 31,445 Wealth advisory fees 12,278 11,979 10,698 35,730 31,083 Private banking wealth management and trust fees 7,251 7,043 6,508 21,255 19,780 Other banking fee income 1,835 1,677 1,679 5,192 5,183 Gain on sale of loans, net   183     1,694     430     1,966     2,363   Total core fees and income   33,558     34,147     29,826     99,369     89,854   Gain on repurchase of debt — — — — 620 Gain on sale of investments, net 8 — 7 9 35 Gain/(loss) on OREO, net 150 19 — 988 (13 ) Gain on sale of Pacific Northwest offices (1) — — — — 10,574 Other   53     208     418     510     926   Total other income   211     227     425     1,507     12,142   Operating expense: Salaries and employee benefits 35,855 34,338 33,102 106,767 104,605 Occupancy and equipment 7,346 7,349 7,307 22,492 22,411 Professional services 2,796 3,526 3,451 9,165 8,697 Marketing and business development 1,408 2,730 1,168 5,564 5,330 Contract services and data processing 1,404 1,447 1,462 4,289 4,514 Amortization of intangibles 1,031 1,045 1,056 3,129 3,275 FDIC insurance 857 854 823 2,607 2,817 Other   3,302     3,113     3,584     9,356     13,556   Total operating expense   53,999     54,402     51,953     163,369     165,205   Income before income taxes 27,153 31,240 26,600 81,880 75,268 Income tax expense   8,993     10,333     8,714     26,464     25,455   Net income from continuing operations 18,160 20,907 17,886 55,416 49,813 Net income from discontinued operations (2)   1,272     1,450     1,321     4,650     5,824   Net income before attribution to noncontrolling interests 19,432 22,357 19,207 60,066 55,637 Less: Net income attributable to noncontrolling interests   1,167     1,025     871     3,428     2,770   Net income attributable to the Company $ 18,265   $ 21,332   $ 18,336   $ 56,638   $ 52,867                             Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except share and per share data) Three Months Ended Nine Months Ended PER SHARE DATA:   9/30/2014     6/30/2014     9/30/2013     9/30/2014     9/30/2013   Calculation of Income for EPS: Net income attributable to the Company $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867 Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3)   (796 )   (1,195 )   (665 )   (3,052 )   (13,590 ) Net Income Attributable to the Common Shareholders 17,469 20,137 17,671 53,586 39,277 LESS: Amount allocated to participating securities   (75 )   (132 )   (160 )   (328 )   (1,378 ) Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 17,394   $ 20,005   $ 17,511   $ 53,258   $ 37,899     End of Period Common Shares Outstanding 80,464,390 80,394,009 79,821,898   Weighted Average Shares Outstanding: Weighted average basic shares, including participating securities 79,222,590 79,195,082 78,710,259 79,175,634 81,580,479 LESS: Participating securities (535,528 ) (756,446 ) (1,040,242 ) (750,021 ) (4,330,819 ) PLUS: Dilutive potential common shares   1,923,896     1,859,789     1,523,731     1,899,015     1,238,510   Weighted Average Diluted Shares (4)   80,610,958     80,298,425     79,193,748     80,324,628     78,488,170     Diluted Total Earnings per Share $ 0.22 $ 0.25 $ 0.22 $ 0.66 $ 0.48                 Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except per share data) FINANCIAL DATA:   9/30/2014     6/30/2014     9/30/2013   Book Value Per Common Share $ 7.80 $ 7.65 $ 7.21 Tangible Book Value Per Share (5) $ 6.22 $ 6.05 $ 5.56 Market Price Per Share $ 12.39 $ 13.44 $ 11.09   ASSETS UNDER MANAGEMENT AND ADVISORY: Private Banking $ 4,701,000 $ 4,716,000 $ 4,263,000 Investment Managers 10,376,000 10,917,000 9,697,000 Wealth Advisory 9,731,000 9,760,000 8,809,000 Less: Inter-company Relationship   (22,000 )   (23,000 )   (21,000 ) Total Assets Under Management and Advisory $ 24,786,000   $ 25,370,000   $ 22,748,000     FINANCIAL RATIOS: Total Equity/Total Assets 10.10 % 10.37 % 9.93 % Tangible Common Equity/Tangible Assets (5) 7.62 % 7.77 % 7.22 % Tier I Common Equity/ Risk Weighted Assets (5) 10.63 % 10.60 % 10.15 % Allowance for Loan Losses/Total Loans 1.44 % 1.46 % 1.57 % Allowance for Loan Losses/Nonaccrual Loans 224 % 179 % 152 % Return on Average Assets - Three Months Ended (Annualized) 1.10 % 1.32 % 1.18 % Return on Average Common Equity - Three Months Ended (Annualized) (6) 11.20 % 13.50 % 12.32 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6) 14.10 % 17.15 % 16.07 % Efficiency Ratio - Three Months Ended (7) 65.47 % 64.39 % 68.14 %                               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: 09/30/14 06/30/14 09/30/13 09/30/14 06/30/14 09/30/13 09/30/14 06/30/14 09/30/13 AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 295,395 $ 262,253 $ 244,408 $ 876 $ 730 $ 544 1.19 % 1.12 % 0.90 % Non-taxable investment securities (8) 223,499 224,634 209,511 1,449 1,406 1,148 2.59 % 2.50 % 2.19 % Mortgage-backed securities 325,913 332,928 263,380 1,605 1,689 1,338 1.97 % 2.03 % 2.03 % Federal funds sold and other   359,899   187,722   244,622   379   253   277 0.42 %

0.62

% 0.44 % Total Cash and Investments   1,204,706   1,007,537   961,921   4,309   4,078   3,307 1.43 %

1.64

% 1.37 % Loans: (9) Commercial and Construction (8) 2,841,869 2,856,603 2,657,121 31,657 33,397 30,435 4.36 % 4.62 % 4.48 % Residential 2,071,326 2,039,146 1,984,565 16,384 15,984 15,782 3.16 % 3.14 % 3.18 % Home Equity and Other Consumer   244,690   242,988   258,579   1,733   1,744   2,003 2.81 % 2.88 % 3.07 % Total Loans   5,157,885   5,138,737   4,900,265   49,774   51,125   48,220 3.81 % 3.95 % 3.88 % Total Earning Assets   6,362,591   6,146,274   5,862,186   54,083   55,203   51,527 3.36 % 3.57 % 3.47 % LESS: Allowance for Loan Losses 76,099 79,071 81,262 Cash and due From Banks (Non-Interest Bearing) 42,080 32,016 40,164 Other Assets   341,953   366,833   375,910 TOTAL AVERAGE ASSETS $ 6,670,525 $ 6,466,052 $ 6,196,998

AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits:

Savings and NOW $ 583,547 $ 601,104 $ 492,983 $ 110 $ 111 $ 97 0.07 % 0.07 % 0.08 % Money Market 2,640,762 2,509,400 2,425,333 2,273 1,994 1,782 0.34 % 0.32 % 0.29 % Certificates of Deposit   607,940   615,325   627,166   1,220   1,270   1,327 0.80 % 0.83 % 0.84 % Total Interest-Bearing Deposits 3,832,249 3,725,829 3,545,482 3,603 3,375 3,206 0.37 % 0.36 % 0.36 % Junior Subordinated Debentures 106,363 106,363 125,729 976 965 1,119 3.59 % 3.59 % 3.48 % FHLB Borrowings and Other   534,062   527,418   501,263   2,371   2,374   2,762 1.74 % 1.78 % 2.16 % Total Interest-Bearing Liabilities   4,472,674   4,359,610   4,172,474   6,950   6,714   7,087 0.61 % 0.61 % 0.67 % Noninterest Bearing Demand Deposits 1,404,875 1,334,791 1,277,319 Other Liabilities   100,106   93,539   114,588 Total Average Liabilities 5,977,655 5,787,940 5,564,381 Redeemable Noncontrolling Interests 23,584 23,850 17,688 Average Shareholders' Equity   669,286   654,262   614,929 TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,670,525 $ 6,466,052 $ 6,196,998 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 47,133 $ 48,489 $ 44,440 LESS: FTE Adjustment (8)   2,350   2,221   2,138 Net Interest Income (GAAP Basis) $ 44,783 $ 46,268 $ 42,302 Interest Rate Spread 2.75 % 2.96 % 2.80 % Bank only Net Interest Margin 3.00 % 3.21 % 3.07 % Net Interest Margin 2.93 % 3.14 % 2.99 %                         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Average Balance Interest Income/Expense Average Yield/Rate (In Thousands) Nine Months Ended Nine Months Ended Nine Months Ended AVERAGE BALANCE SHEET: 9/30/2014 9/30/2013 9/30/2014 9/30/2013 9/30/2014 9/30/2013 AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 270,914 $ 216,472 $ 2,242 $ 1,544 1.10 % 0.96 % Non-taxable investment securities (8) 224,061 206,344 4,246 3,635 2.53 % 2.35 % Mortgage-backed securities 333,252 291,815 5,230 4,080 2.09 % 1.86 % Federal funds sold and other   250,942   189,503   978   635 0.52 % 0.44 % Total Cash and Investments   1,079,169   904,134   12,696   9,894 1.57 % 1.46 % Loans: (9) Commercial and Construction (8) 2,844,013 2,721,191 95,975 94,277 4.45 % 4.57 % Residential 2,048,700 1,983,966 48,537 48,809 3.16 % 3.28 % Home Equity and Other Consumer   244,421   265,913   5,281   5,974 2.89 % 3.00 % Total Loans   5,137,134   4,971,070   149,793   149,060 3.86 % 3.97 % Total Earning Assets   6,216,303   5,875,204   162,489   158,954 3.46 % 3.58 % LESS: Allowance for Loan Losses 77,462 83,090 Cash and due From Banks (Non-Interest Bearing) 38,628 41,780 Other Assets   357,896   391,399 TOTAL AVERAGE ASSETS $ 6,535,365 $ 6,225,293 AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY Interest-Bearing Liabilities: Interest-Bearing Deposits: (10) Savings and NOW $ 577,012 $ 530,701 $ 319 $ 336 0.07 % 0.08 % Money Market 2,547,039 2,365,310 6,112 5,495 0.32 % 0.31 % Certificates of Deposit   615,903   658,464   3,763   4,281 0.82 % 0.87 % Total Interest-Bearing Deposits 3,739,954 3,554,475 10,194 10,112 0.36 % 0.38 % Junior Subordinated Debentures 106,363 132,117 2,896 3,429 3.59 % 3.42 % FHLB Borrowings and Other   522,881   540,788   7,088   8,777 1.79 % 2.14 % Total Interest-Bearing Liabilities   4,369,198   4,227,380   20,178   22,318 0.61 % 0.70 % Noninterest Bearing Demand Deposits 1,385,966 1,251,112 Other Liabilities   104,556   117,505 Total Average Liabilities 5,859,720 5,595,997 Redeemable Noncontrolling Interests 20,795 18,193 Average Shareholders' Equity   654,850   611,103 TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,535,365 $ 6,225,293 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 142,311 $ 136,636 LESS: FTE Adjustment (8)   6,738   6,159 Net Interest Income (GAAP Basis) $ 135,573 $ 130,477 Interest Rate Spread 2.85 % 2.88 % Bank only Net Interest Margin

3.10

% 3.16 % Net Interest Margin 3.03 % 3.08 %           Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands)         LOAN DATA (11): 9/30/2014 6/30/2014 9/30/2013 Commercial and Industrial Loans: New England $ 758,728 $ 715,814 $ 671,564 San Francisco Bay 124,993 119,554 75,519 Southern California   47,107   47,095   41,342 Total Commercial and Industrial Loans $ 930,828 $ 882,463 $ 788,425 Commercial Real Estate Loans: New England $ 712,464 $ 717,166 $ 673,428 San Francisco Bay 628,149 626,744 597,405 Southern California   467,428   436,991   451,198 Total Commercial Real Estate Loans $ 1,808,041 $ 1,780,901 $ 1,722,031 Construction and Land Loans: New England $ 82,492 $ 81,453 $ 106,324 San Francisco Bay 35,668 58,042 34,074 Southern California   12,385   10,927   14,211 Total Construction and Land Loans $ 130,545 $ 150,422 $ 154,609 Residential Loans: New England $ 1,273,544 $ 1,231,902 $ 1,218,560 San Francisco Bay 456,355 452,864 466,801 Southern California   367,628   354,306   321,341 Total Residential Loans $ 2,097,527 $ 2,039,072 $ 2,006,702 Home Equity Loans: New England $ 76,142 $ 81,465 $ 79,168 San Francisco Bay 30,060 27,804 31,882 Southern California   3,025   3,235   7,044 Total Home Equity Loans $ 109,227 $ 112,504 $ 118,094 Other Consumer Loans: New England $ 124,449 $ 128,698 $ 116,692 San Francisco Bay 6,738 6,917 8,518 Southern California 6,136 5,074 7,005 Eliminations and other, net   —   —   146 Total Other Consumer Loans $ 137,323 $ 140,689 $ 132,361

Total Loans:

New England $ 3,027,819 $ 2,956,498 $ 2,865,736 San Francisco Bay 1,281,963 1,291,925 1,214,199 Southern California 903,709 857,628 842,141 Eliminations and other, net   —   —   146 Total Loans $ 5,213,491 $ 5,106,051 $ 4,922,222                   Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) CREDIT QUALITY (11): 9/30/2014 6/30/2014 9/30/2013 Special Mention Loans: New England $ 45,788 $ 55,882 $ 34,630 San Francisco Bay 24,623 24,264 20,875 Southern California   32,614   26,455     18,704   Total Special Mention Loans $ 103,025 $ 106,601   $ 74,209   Accruing Substandard Loans (12): New England $ 13,589 $ 12,849 $ 12,053 San Francisco Bay 24,267 25,838 27,049 Southern California   5,331   1,306     5,207   Total Accruing Substandard Loans $ 43,187 $ 39,993   $ 44,309   Nonaccruing Loans: New England $ 16,205 $ 19,818 $ 30,160 San Francisco Bay 15,133 16,487 14,218 Southern California   2,203   5,315     6,414   Total Nonaccruing Loans $ 33,541 $ 41,620   $ 50,792   Other Real Estate Owned: New England $ 489 $ 336 $ 191 San Francisco Bay 585 585 585 Southern California   —   —     —   Total Other Real Estate Owned $ 1,074 $ 921   $ 776   Loans 30-89 Days Past Due and Accruing (13): New England $ 1,825 $ 3,547 $ 2,047 San Francisco Bay 653 487 2,317 Southern California   1,145   1,950     3,819   Total Loans 30-89 Days Past Due and Accruing $ 3,623 $ 5,984   $ 8,183   Loans (Charged-off)/ Recovered, Net for the Three Months Ended: New England $ 912 $ (622 ) $ 22 San Francisco Bay 465 1,959 2,111 Southern California   1,959   1,605     244   Total Net Loans (Charged-off)/ Recovered $ 3,336 $ 2,942   $ 2,377   Loans (Charged-off)/ Recovered, Net for the Nine Months Ended: New England $ 830 $ (2,078 ) San Francisco Bay 3,064 778 Southern California   3,818   2,420   Total Net Loans (Charged-off)/ Recovered $ 7,712 $ 1,120           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)         9/30/2014     6/30/2014     9/30/2013 Total Balance Sheet Assets $ 6,689,085 $ 6,388,823 $ 6,274,939 LESS: Goodwill and Intangible Assets, net   (127,655 )   (128,686 )   (131,836 ) Tangible Assets (non-GAAP) $ 6,561,430 $ 6,260,137 $ 6,143,103 Total Shareholders' Equity $ 675,631 $ 662,651 $ 623,037 LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) LESS: Goodwill and Intangible Assets, net   (127,655 )   (128,686 )   (131,836 ) Total adjusting items   (175,408 )   (176,439 )   (179,589 ) Tangible Common Equity (non-GAAP) $ 500,223   $ 486,212   $ 443,448   Total Equity/Total Assets 10.10 % 10.37 % 9.93 % Tangible Common Equity/Tangible Assets (non-GAAP) 7.62 % 7.77 % 7.22 %   Total Risk Weighted Assets * $ 4,753,785 $ 4,643,514 $ 4,462,531 Tier I Common Equity * $ 505,474 $ 491,982 $ 452,879 Tier I Common Equity/ Risk Weighted Assets 10.63 % 10.60 % 10.15 %   End of Period Shares Outstanding 80,464 80,394 79,822   Book Value Per Common Share $ 7.80 $ 7.65 $ 7.21 Tangible Book Value Per Share (non-GAAP) $ 6.22 $ 6.05 $ 5.56

* Risk Weighted Assets and Tier I Common Equity for September 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.         Three Months Ended     Nine months ended (In thousands, except per share data) 9/30/2014   6/30/2014   9/30/2013 9/30/2014   9/30/2013 Total average shareholders' equity $ 669,286 $ 654,262 $ 614,929 $ 654,850 $ 611,103 LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,753 )   (47,753 )   (47,753 )   (29,260 ) Average common equity (non-GAAP)   621,533     606,509     567,176     607,097     581,843   LESS: Average goodwill and intangible assets, net   (128,178 )   (129,216 )   (132,373 )   (129,217 )   (133,442 ) Total adjusting items   (128,178 )   (129,216 )   (132,373 )   (129,217 )   (133,442 ) Average Tangible Common Equity (non-GAAP) $ 493,355   $ 477,293   $ 434,803   $ 477,880   $ 448,401     Net income attributable to the Company $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867 Less: Dividends on Series D preferred stock   (869 )   (869 )   (869 )   (2,606 )   (1,429 ) Net income, after dividends on Series D preferred stock (non-GAAP) $ 17,396   $ 20,463   $ 17,467   $ 54,032   $ 51,438     Return on Average Equity - (Annualized) 10.92 % 13.04 % 11.93 % 11.53 % 11.53 % Return on Average Common Equity - (Annualized) (non-GAAP) 11.20 % 13.50 % 12.32 % 11.87 % 11.79 % Return on Average Tangible Common Equity - (Annualized) (non-GAAP) 14.10 % 17.15 % 16.07 % 15.08 % 15.30 %  

(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

   

Nine months ended

(In thousands, except per share data) 9/30/2014   6/30/2014   9/30/2013 9/30/2014   9/30/2013 Income before income taxes (GAAP) $ 27,153 $ 31,240 $ 26,600 $ 81,880 $ 75,268 ADD BACK: Provision/ (credit) for loan losses   (2,600 )   (5,000 )   (6,000 )   (8,800 )   (8,000 ) Pre-tax, pre-provision earnings (non-GAAP) $ 24,553 $ 26,240 $ 20,600 $ 73,080 $ 67,268   Net income attributable to the Company (GAAP) $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867 LESS: Gain on sale of Pacific Northwest offices, net of tax   —     —     —     —     6,267   Net income attributable to the Company, excluding the effect of significant transactions (Non-GAAP) $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 46,600   Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP) $ 17,394 $ 20,005 $ 17,511 $ 53,258 $ 37,899 ADD BACK: Deemed dividend due to repurchase of Series B Preferred — — — — 11,738 LESS: Gain on sale of Pacific Northwest offices, net of tax   —     —     —     —     (6,267 ) Net income attributable to the Common Shareholders, after allocation to participating securities, excluding the effect of significant transactions (Non-GAAP) $ 17,394 $ 20,005 $ 17,511 $ 53,258 $ 43,370   Diluted Total Earnings Per Share (GAAP) $ 0.22 $ 0.25 $ 0.22 $ 0.66 $ 0.48 Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $ 0.22 $ 0.25 $ 0.22 $ 0.66 $

0.55

  Total operating expense (GAAP) $ 53,999 $ 54,402 $ 51,953 $ 163,369 $ 165,205 Less: Amortization of intangibles   1,031     1,045     1,056     3,129     3,275   Total operating expense (excluding amortization of intangibles) (non-GAAP) $ 52,968 $ 53,357 $ 50,897 $ 160,240 $ 161,930   Net interest income $ 44,783 $ 46,268 $ 42,302 $ 135,573 $ 130,477 Total core fees and income 33,558 34,147 29,826 99,369 89,854 Total other income 211 227 425 1,507 12,142 FTE income   2,350     2,221     2,138     6,738     6,159   Total revenue (FTE basis) $ 80,902 $ 82,863 $ 74,691 $ 243,187 $ 238,632 Efficiency Ratio, before deduction of intangible amortization (GAAP) 68.74 % 67.46 % 71.61 % 69.09 % 71.06 % Efficiency Ratio, FTE Basis (non-GAAP) 65.47 % 64.39 % 68.14 % 65.89 % 67.86 %

(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 September 30, 2014, the Company had two loans totaling $0.5 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, 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 September 30, 2013, the Company had four loans totaling $1.7 million that were more than 90 days past due but still on accrual status. These loans originated in the San Francisco Bay and New England regions.  

Boston Private Financial Holdings, Inc.Steven Gaven, (617) 912-3793Vice President Corporate Finance and Director of Investor Relationssgaven@bostonprivate.com