BPFH Boston Private Financial Holdings Inc

Fourth Quarter and Full Year Highlights:

• Acquisition of Banyan Partners, LLC: The acquisition of Banyan Partners, a leading wealth management firm with over $4 billion of AUM, closed on October 2, 2014, bringing the Company's total AUM to just under $30 billion.
• Deposit and Loan growth: Average Total Deposits increased 10% year-over-year and 5% linked quarter to $5.5 billion, while Average Total Loans increased 5% year-over-year to $5.2 billion. On a linked quarter basis, Average Total Loans were up 1%. The average Loan-to-Deposit ratio was 95% at the end of the fourth quarter, down from 98% in the third quarter of 2014 and 100% in the fourth quarter of 2013.
• Core Fees and Income growth: Core Fees and Income increased 21% year-over-year and 18% linked quarter to $39.6 million. In the fourth quarter of 2014, the acquisition of Banyan Partners contributed $6.1 million to Private Banking Wealth Management and Trust Fees.
• Core Fees and Income Rise to 47% of Total Revenue: In the fourth quarter of 2014, Core Fees and Income increased to 47% of total revenue, up from 43% in the third quarter of 2014 and 42% in the fourth quarter of 2013.
• Dividend Increase: The Board of Directors today approved a quarterly cash dividend to common stock shareholders of $0.09 per share, up from $0.08 per share. This marks the fourth cash dividend increase in the past 8 quarters.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported fourth quarter 2014 GAAP Net Income Attributable to the Company of $12.2 million, compared to $18.3 million for the third quarter of 2014 and $17.7 million for the fourth quarter of 2013. Fourth quarter 2014 diluted earnings per share were $0.13, a $0.09 decrease from the third quarter of 2014 and a $0.07 decrease from the fourth quarter of 2013. Included in the fourth quarter of 2014 is $1.4 million of one-time pre-tax costs associated with the Banyan acquisition and an $800 thousand pre-tax expense for liability restructuring. Excluding the one-time costs, fourth quarter 2014 diluted earnings per share were $0.15.

For the full year of 2014, BPFH reported GAAP Net Income Attributable to the Company of $68.8 million, compared to $70.5 million for the full year of 2013. BPFH reported diluted earnings per share of $0.79 per share compared to $0.68 per share for the full years of 2014 and 2013, respectively.

“2014 was a pivotal year for Boston Private,” said Clayton G. Deutsch, CEO and President. "In October, we completed the acquisition of Banyan Partners, which accelerated the evolution of our Private Bank Wealth Management offering closer to our desired model. The Private Banking strategy continues to gain momentum on the West Coast, helping to drive strong deposit growth. As we enter 2015, Boston Private remains focused on expanding and deepening our private client base across all markets.”

Core Fees and Income Increased 21% 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 21% to $39.6 million. On a linked quarter basis, Core Fees and Income increased 18% from $33.6 million in the third quarter of 2014. In the fourth quarter of 2014, the acquisition of Banyan Partners contributed $6.1 million to Private Banking Wealth Management and Trust Fees. Excluding the impact of the Banyan acquisition, Core Fees and Income increased 2% year-over-year and were flat on a linked quarter basis. For the full year 2014, Core Fees and Income increased 13% to $139.0 million. Excluding Banyan, full year Core Fees and Income increased 8% from 2013.

Total Assets Under Management/Advisory (“AUM”) were $29.9 billion at the end of the fourth quarter, up 21% linked quarter and 23% year-over-year. The acquisition of Banyan Partners contributed $4.4 billion of AUM. Excluding the impact of Banyan, AUM increased 3% linked quarter and 5% year-over-year.

Net Interest Income

Net Interest Income for the fourth quarter was $44.1 million, down 1% from $44.8 million for the third quarter of 2014. On a year-over-year basis, Net Interest Income increased 1% from $43.5 million. For the full year, Net Interest Income increased 3% to $179.7 million.

Net Interest Margin was 2.83% for the fourth quarter, down 10 basis points from 2.93% for the third quarter. Net Interest Margin was down 15 basis points from 2.98% for the fourth quarter of 2013.

Total Operating Expenses

Total Operating Expenses for the fourth quarter of 2014 were $63.8 million, up 18% from $54.0 million for the third quarter of 2014. On a year-over-year basis, Total Operating Expenses increased 15% from $55.5 million. In the fourth quarter of 2014, Banyan accounted for $6.7 million of operating expenses. Excluding the impact of Banyan, the one-time acquisition related expenses of $1.4 million and the $800 thousand pre-tax expense for liability restructuring, fourth quarter 2014 operating expenses were $54.9 million, up 2% linked quarter and down 1% year-over-year.

For the full year 2014, Total Operating Expenses were $227.1 million, up 3% from 2013.

Provision and Asset Quality

The Company recorded a provision expense of $2.4 million for the fourth quarter of 2014, compared to a provision credit of $2.6 million for the third quarter. The provision expense was driven by net charge-offs of $1.8 million, loan growth and loan downgrades. The Company recorded a provision credit of $2.0 million for the fourth quarter of 2013.

Criticized Loans decreased 11% on a linked quarter basis and 8% year-over-year. The downgrade of three separate relationships drove Nonaccrual Loans (“Nonaccruals”) to increase 32% to $44.2 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 1% from $44.8 million. As a percentage of Total Loans, Nonaccruals were 84 basis points at December 31, 2014, up 20 basis points from 64 basis points at September 30, 2014, and down 4 basis points from 88 basis points at December 31, 2013.

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

(In millions)   December 31, 2014   September 30, 2014   December 31, 2013 Total Criticized Loans $ 159.6 $ 179.5 $ 173.6

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

$ 7.0 $ 3.6 $ 13.7 Total Net Loans (Charged-off)/ Recovered $ (1.8 ) $ 3.3 $ 1.2 Allowance for Loan Losses/ Total Loans 1.44 % 1.44 % 1.49 %  

Capital Ratios

The Company's capital ratios decreased due to the Banyan acquisition, as 68% of the upfront consideration was paid in cash.

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

  December 31, 2014   September 30, 2014   December 31, 2013 Total Risk-Based Capital * 14.5 % 15.5 % 14.8 % Tier I Risk-Based Capital * 13.3 % 14.2 % 13.5 % Tier I Leverage Capital * 9.5 % 10.3 % 10.1 % TCE/TA 7.0 % 7.6 % 7.2 % Tier I Common Equity/ Risk Weighted Assets * 9.8 % 10.6 % 9.9 %

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

 

Dividend Payments

Concurrent with the release of fourth quarter 2014 earnings, the Board of Directors of the Company declared a cash dividend to common stock shareholders of $0.09 per share. The record date for this dividend is February 6, 2015, and the payment date is February 20, 2015.

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 February 13, 2015, and the payment date is March 16, 2015.

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, January 22, 2015, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003Elite Entry Number: 7875780

Replay Information:Available from January 22, 2015 at 12 noon until January 29, 2015Dial In #: (877) 344-7529Conference Number: 10058435

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 with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Atlanta, Florida, Wisconsin, and Texas. The Company has a $7 billion Private Banking balance sheet, and manages approximately $30 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 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 statement is 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)   12/31/14     9/30/14     12/31/13   Assets: Cash and cash equivalents $ 172,609 $ 308,912 $ 191,881 Investment securities available for sale 829,993 724,638 691,729 Investment securities held to maturity 140,727 132,467 112,014 Stock in Federal Home Loan Banks 32,281 32,534 38,612 Loans held for sale 7,099 4,943 6,123 Total loans 5,269,936 5,213,491 5,112,459 Less: Allowance for loan losses   75,838     75,283     76,371   Net loans 5,194,098 5,138,208 5,036,088 Other real estate owned (“OREO”) 929 1,074 776 Premises and equipment, net 32,199 29,473 29,158 Goodwill 150,103 110,180 110,180 Intangible assets, net 41,697 17,475 20,604 Fees receivable

12,517

11,439 12,119 Accrued interest receivable

16,071

15,018 14,416 Deferred income taxes, net 47,576 48,443 55,364 Other assets  

119,975

    114,281     118,045   Total assets $ 6,797,874   $ 6,689,085   $ 6,437,109   Liabilities: Deposits $ 5,453,879 $ 5,334,881 $ 5,110,370 Securities sold under agreements to repurchase 30,496 73,422 102,353 Federal Home Loan Bank borrowings 370,150 371,367 367,254 Junior subordinated debentures 106,363 106,363 106,363 Other liabilities   112,170     106,024     97,613   Total liabilities   6,073,058     5,992,057     5,783,953   Redeemable Noncontrolling Interests 20,905 21,397 19,468 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; issuedand outstanding: 82,961,855 shares at December 31, 2014; 80,464,390shares at September 30, 2014; 79,837,612 shares at December 31, 2013

82,962 80,464 79,838 Additional paid-in capital 610,903 598,036 616,334 Accumulated deficit (37,396 ) (49,573 ) (106,211 ) Accumulated other comprehensive income/ (loss)   (697 )   (1,312 )   (4,197 ) Total Company’s shareholders’ equity   703,525     675,368     633,517   Noncontrolling interests   386     263     171   Total shareholders’ equity   703,911     675,631     633,688  

Total liabilities, redeemable noncontrolling interests andshareholders’ equity

$ 6,797,874   $ 6,689,085   $ 6,437,109                                         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) Three Months Ended Year Ended (In thousands, except share and per share data)   12/31/14     9/30/14     12/31/13     12/31/14     12/31/13   Interest and dividend income: Loans $ 47,117 $ 47,931 $ 47,421 $ 191,658 $ 191,594 Taxable investment securities 920 876 512 3,162 2,056 Non-taxable investment securities 978 942 750 3,738 3,113 Mortgage-backed securities 1,695 1,605 1,361 6,925 5,441 Federal funds sold and other   381     379     335     1,359     970   Total interest and dividend income   51,091     51,733     50,379     206,842     203,174   Interest expense: Deposits 3,908 3,603 3,283 14,102 13,395 Federal Home Loan Bank borrowings 2,069 2,354 2,564 9,108 10,963 Junior subordinated debentures 976 976 979 3,872 4,408 Repurchase agreements and other short-term borrowings   10     17     12     59     390   Total interest expense   6,963     6,950     6,838     27,141     29,156   Net interest income 44,128 44,783 43,541 179,701 174,018 Provision/ (credit) for loan losses   2,400     (2,600 )   (2,000 )   (6,400 )   (10,000 ) Net interest income after provision/ (credit) for loan losses   41,728     47,383     45,541     186,101     184,018   Fees and other income: Investment management fees 11,897 12,011 12,371 47,123 43,816 Wealth advisory fees 12,352 12,278 11,269 48,082 42,352 Wealth management and trust fees 13,327 7,251 6,767 34,582 26,547 Other banking fee income 1,841 1,835 2,280 7,033 7,463 Gain on sale of loans, net   192     183     156     2,158     2,519   Total core fees and income   39,609     33,558     32,843     138,978     122,697   Gain on repurchase of debt — — — — 620 Gain/ (loss) on sale of investments, net (16 ) 8 14 (7 ) 49 Gain/ (loss) on OREO, net (31 ) 150 — 957 (13 ) Gain on sale of Pacific Northwest offices (1) — — — — 10,574 Other   360     53     1,488     870     2,414   Total other income   313     211     1,502     1,820     13,644   Operating expense: Salaries and employee benefits 39,881 35,855 36,156 146,648 140,761 Occupancy and equipment 8,549 7,346 7,411 31,041 29,822 Professional services 3,308 2,796 3,412 12,473 12,109 Marketing and business development 2,425 1,408 1,764 7,989 7,094 Contract services and data processing 1,527 1,404 1,313 5,816 5,827 Amortization of intangibles 1,707 1,031 1,052 4,836 4,327 FDIC insurance 852 857 883 3,459 3,700 Restructuring 739 — — 739 — Other   4,772     3,302     3,509     14,128     17,065   Total operating expense   63,760     53,999     55,500     227,129     220,705   Income before income taxes 17,890 27,153 24,386 99,770 99,654 Income tax expense   5,901     8,993     7,508     32,365     32,963   Net income from continuing operations 11,989 18,160 16,878 67,405 66,691 Net income from discontinued operations (2)   1,510     1,272     1,968     6,160     7,792   Net income before attribution to noncontrolling interests 13,499 19,432 18,846 73,565 74,483 Less: Net income attributable to noncontrolling interests   1,322     1,167     1,178     4,750     3,948   Net income attributable to the Company $ 12,177   $ 18,265   $ 17,668   $ 68,815   $ 70,535                                         Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In thousands, except share and per share data) Three Months Ended Year Ended PER SHARE DATA:   12/31/14     9/30/14     12/31/13     12/31/14     12/31/13   Calculation of Income for EPS: Net income attributable to the Company $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535

Adjustments to Net Income Attributable to the Company to Arriveat Net Income Attributable to Common Shareholders (3)

  (1,176 )   (796 )   (1,467 )   (4,228 )   (15,057 ) Net Income Attributable to the Common Shareholders 11,001 17,469 16,201 64,587 55,478 LESS: Amount allocated to participating securities   (27 )   (75 )   (133 )   (335 )   (1,579 )

Net Income Attributable to the Common Shareholders, afterallocation to participating securities

$ 10,974   $ 17,394   $ 16,068   $ 64,252   $ 53,899     End of Period Common Shares Outstanding 82,961,855 80,464,390 79,837,612   Weighted Average Shares Outstanding: Weighted average basic shares, including participating securities

80,880,508

79,222,590 78,719,000

79,605,355

80,859,229 LESS: Participating securities

(487,596)

(535,528 ) (976,760 )

(683,875)

(3,485,412 ) PLUS: Dilutive potential common shares   2,096,172     1,923,896     1,758,720     1,957,751     1,379,707   Weighted Average Diluted Shares (4)   82,489,084     80,610,958     79,500,960     80,879,231     78,753,524     Diluted Total Earnings per Share $ 0.13 $ 0.22 $ 0.20 $ 0.79 $ 0.68     Boston Private Financial Holdings, Inc.                         Selected Financial Data (Unaudited) (In thousands, except per share data) FINANCIAL DATA:   12/31/14     9/30/14     12/31/13   Book Value Per Common Share $ 7.91 $ 7.80 $ 7.34 Tangible Book Value Per Share (5) $ 5.60 $ 6.22 $ 5.70 Market Price Per Share $ 13.47 $ 12.39 $ 12.62   ASSETS UNDER MANAGEMENT AND ADVISORY: Wealth Management and Trust $ 9,274,000 $ 4,701,000 $ 4,565,000 Investment Managers 10,772,000 10,376,000 10,401,000 Wealth Advisory 9,883,000 9,731,000 9,336,000 Less: Inter-company Relationship   (22,000 )   (22,000 )   (22,000 ) Total Assets Under Management and Advisory $ 29,907,000   $ 24,786,000   $ 24,280,000     FINANCIAL RATIOS:

Total Equity/ Total Assets

10.35 % 10.10 % 9.84 %

Tangible Common Equity/ Tangible Assets (5)

7.03 % 7.62 % 7.22 %

Tier I Common Equity/ Risk Weighted Assets (5)

9.76 % 10.63 % 9.93 %

Allowance for Loan Losses/ Total Loans

1.44 % 1.44 % 1.49 %

Allowance for Loan Losses/ Nonaccrual Loans

172 % 224 % 171 % Return on Average Assets - Three Months Ended (Annualized) 0.71 % 1.10 % 1.11 % Return on Average Common Equity - Three Months Ended (Annualized) (6) 6.97 % 11.20 % 11.56 % Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6) 9.74 % 14.10 % 14.93 % Efficiency Ratio - Three Months Ended (7) 70.83 % 65.47 % 68.02 %                                                   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:   12/31/14         9/30/14         12/31/13   12/31/14       9/30/14       12/31/13 12/31/14       9/30/14       12/31/13   AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 305,118 $ 295,395 $ 237,342 $ 920 $ 876 $ 512 1.21 % 1.19 % 0.87 % Non-taxable investment securities (8) 229,157 223,499 215,083 1,504 1,449 1,154 2.63 % 2.59 % 2.15 % Mortgage-backed securities 350,312 325,913 267,463 1,695 1,605 1,361 1.93 % 1.97 % 2.04 % Federal funds sold and other   389,833         359,899         352,285   381       379       335 0.39 %     0.42 %     0.37 % Total Cash and Investments   1,274,420         1,204,706         1,072,173   4,500       4,309       3,362 1.41 %     1.43 %     1.25 % Loans: (9) Commercial and Construction (8) 2,852,064 2,841,869 2,707,370 30,855 31,657 31,150 4.23 % 4.36 % 4.50 % Residential 2,120,416 2,071,326 2,022,698 16,447 16,384 16,159 3.10 % 3.16 % 3.20 % Home Equity and Other Consumer   254,387         244,690         250,212   1,799       1,733       1,874 2.80 %     2.81 %     2.97 % Total Loans   5,226,867         5,157,885         4,980,280   49,101       49,774       49,183 3.71 %     3.81 %     3.89 % Total Earning Assets   6,501,287         6,362,591         6,052,453   53,601       54,083       52,545 3.26 %     3.36 %     3.43 % LESS: Allowance for Loan Losses 75,590 76,099 78,463 Cash and due From Banks (Non-Interest Bearing) 41,595 42,080 40,332 Other Assets   411,546         341,953         364,130 TOTAL AVERAGE ASSETS $ 6,878,838       $ 6,670,525       $ 6,378,452

AVERAGE LIABILITIES, REDEEMABLENONCONTROLLING INTERESTS, ANDSHAREHOLDERS' EQUITY

Interest-Bearing Liabilities: Interest-Bearing Deposits: Savings and NOW $ 584,210 $ 583,547 $ 490,408 $ 112 $ 110 $ 94 0.08 % 0.07 % 0.08 % Money Market 2,836,731 2,640,762 2,500,191 2,589 2,273 1,871 0.36 % 0.34 % 0.30 % Certificates of Deposit   597,460         607,940         620,161   1,207       1,220       1,318 0.80 %     0.80 %     0.84 % Total Interest-Bearing Deposits 4,018,401 3,832,249 3,610,760 3,908 3,603 3,283 0.39 % 0.37 % 0.36 % Junior Subordinated Debentures 106,363 106,363 106,673 976 976 979 3.59 % 3.59 % 3.59 % FHLB Borrowings and Other   447,955         534,062         487,584   2,079       2,371       2,576 1.82 %     1.74 %     2.07 % Total Interest-Bearing Liabilities   4,572,719         4,472,674         4,205,017   6,963       6,950       6,838 0.60 %     0.61 %     0.64 % Noninterest Bearing Demand Deposits 1,465,145 1,404,875 1,391,809 Other Liabilities   121,318         100,106         134,429 Total Average Liabilities 6,159,182 5,977,655 5,731,255 Redeemable Noncontrolling Interests 22,802 23,584 17,929 Average Shareholders' Equity   696,854         669,286         629,268

TOTAL AVERAGE LIABILITIES, REDEEMABLENONCONTROLLING INTERESTS, ANDSHAREHOLDERS' EQUITY

$ 6,878,838       $ 6,670,525       $ 6,378,452 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 46,638 $ 47,133 $ 45,707 LESS: FTE Adjustment (8)   2,510       2,350       2,166 Net Interest Income (GAAP Basis) $ 44,128     $ 44,783     $ 43,541 Interest Rate Spread 2.66 % 2.75 % 2.79 % Bank only Net Interest Margin 2.90 % 3.00 % 3.05 % Net Interest Margin 2.83 % 2.93 % 2.98 %     Boston Private Financial Holdings, Inc.                                     Selected Financial Data (Unaudited) Average Balance Interest Income/Expense Average Yield/Rate (In Thousands) Year Ended Year Ended Year Ended AVERAGE BALANCE SHEET:   12/31/14         12/31/13   12/31/14   12/31/13 12/31/14         12/31/13   AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 279,438 $ 221,677 $ 3,162 $ 2,056 1.13 % 0.93 % Non-taxable investment securities (8) 225,346 208,547 5,751 4,790 2.55 % 2.30 % Mortgage-backed securities 337,552 285,677 6,925 5,441 2.05 % 1.90 % Federal funds sold and other   285,783         230,542   1,359         970 0.47 %       0.41 % Total Cash and Investments   1,128,119         946,443   17,197         13,257 1.52 %       1.40 %

Loans (9):

Commercial and Construction (8) 2,846,042 2,717,707 126,830 125,427 4.40 % 4.55 % Residential 2,066,776 1,993,729 64,984 64,968 3.14 % 3.26 % Home Equity and Other Consumer   246,934         261,958   7,080         7,848 2.87 %       3.00 % Total Loans   5,159,752         4,973,394   198,894         198,243 3.82 %       3.95 % Total Earning Assets   6,287,871         5,919,837   216,091         211,500 3.41 %       3.54 % LESS: Allowance for Loan Losses 76,990 81,924 Cash and due From Banks (Non-Interest Bearing) 39,381 41,402 Other Assets   374,782         383,833 TOTAL AVERAGE ASSETS $ 6,625,044       $ 6,263,148

AVERAGE LIABILITIES, REDEEMABLENONCONTROLLING INTERESTS, ANDSHAREHOLDERS' EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits (10):

Savings and NOW $ 578,827 $ 520,546 $ 431 $ 430 0.07 % 0.08 % Money Market 2,619,930 2,401,622 8,701 7,366 0.33 % 0.31 % Certificates of Deposit   611,285         633,759   4,970         5,599 0.81 %       0.88 % Total Interest-Bearing Deposits 3,810,042 3,555,927 14,102 13,395 0.37 % 0.38 % Junior Subordinated Debentures 106,363 125,756 3,872 4,408 3.59 % 3.46 % FHLB Borrowings and Other   503,995         527,377   9,167         11,353 1.79 %       2.12 % Total Interest-Bearing Liabilities   4,420,400         4,209,060   27,141         29,156 0.61 %       0.69 % Noninterest Bearing Demand Deposits 1,406,007 1,286,539 Other Liabilities   111,664         133,592 Total Average Liabilities 5,938,071 5,629,191 Redeemable Noncontrolling Interests 20,757 18,162 Average Shareholders' Equity   666,216         615,795

TOTAL AVERAGE LIABILITIES, REDEEMABLENONCONTROLLING INTERESTS, ANDSHAREHOLDERS' EQUITY

$ 6,625,044       $ 6,263,148 Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 188,950 $ 182,344 LESS: FTE Adjustment (8)   9,249         8,326 Net Interest Income (GAAP Basis) $ 179,701       $ 174,018 Interest Rate Spread 2.80 % 2.85 % Bank only Net Interest Margin 3.05 % 3.13 % Net Interest Margin 2.98 % 3.05 %                       Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) LOAN DATA (11):   12/31/14   9/30/14   12/31/13 Commercial and Industrial Loans: New England $ 781,646 $ 758,728 $ 713,484 San Francisco Bay 117,105 124,993 107,154 Southern California   54,334   47,107   45,415 Total Commercial and Industrial Loans $ 953,085 $ 930,828 $ 866,053 Commercial Real Estate Loans: New England $ 690,965 $ 712,464 $ 721,924 San Francisco Bay 619,222 628,149 641,746 Southern California   478,216   467,428   449,724 Total Commercial Real Estate Loans $ 1,788,403 $ 1,808,041 $ 1,813,394 Construction and Land Loans: New England $ 85,272 $ 82,492 $ 92,456 San Francisco Bay 31,329 35,668 45,941 Southern California   8,748   12,385   15,520 Total Construction and Land Loans $ 125,349 $ 130,545 $ 153,917 Residential Loans: New England $ 1,299,568 $ 1,273,544 $ 1,228,623 San Francisco Bay 462,497 456,355 459,667 Southern California   370,030   367,628   344,004 Total Residential Loans $ 2,132,095 $ 2,097,527 $ 2,032,294 Home Equity Loans: New England $ 82,877 $ 76,142 $ 81,010 San Francisco Bay 27,575 30,060 30,002 Southern California   4,407   3,025   2,648 Total Home Equity Loans $ 114,859 $ 109,227 $ 113,660 Other Consumer Loans: New England $ 143,166 $ 124,449 $ 117,079 San Francisco Bay 6,505 6,738 8,854 Southern California 6,474 6,136 7,069 Eliminations and other, net   —   —   139 Total Other Consumer Loans $ 156,145 $ 137,323 $ 133,141 Total Loans: New England $ 3,083,494 $ 3,027,819 $ 2,954,576 San Francisco Bay 1,264,233 1,281,963 1,293,364 Southern California 922,209 903,709 864,380 Eliminations and other, net   —   —   139 Total Loans $ 5,269,936 $ 5,213,491 $ 5,112,459                               Boston Private Financial Holdings, Inc. Selected Financial Data (Unaudited) (In Thousands) CREDIT QUALITY (11):   12/31/14     9/30/14   12/31/13   Special Mention Loans: New England $ 32,254 $ 45,788 $ 41,759 San Francisco Bay 18,161 24,623 25,912 Southern California   26,325     32,614   19,642   Total Special Mention Loans $ 76,740   $ 103,025 $ 87,313   Accruing Substandard Loans (12): New England $ 11,126 $ 13,589 $ 13,304 San Francisco Bay 23,403 24,267 25,171 Southern California   4,331     5,331   3,540   Total Accruing Substandard Loans $ 38,860   $ 43,187 $ 42,015   Nonaccruing Loans: New England $ 26,205 $ 16,205 $ 24,838 San Francisco Bay 13,430 15,133 14,016 Southern California   4,547     2,203   5,908   Total Nonaccruing Loans $ 44,182   $ 33,541 $ 44,762   Other Real Estate Owned: New England $ 344 $ 489 $ 191 San Francisco Bay 585 585 585 Southern California   —     —   —   Total Other Real Estate Owned $ 929   $ 1,074 $ 776   Loans 30-89 Days Past Due and Accruing (13): New England $ 6,572 $ 1,825 $ 5,029 San Francisco Bay 375 653 3,029 Southern California   13     1,145   5,684   Total Loans 30-89 Days Past Due and Accruing $ 6,960   $ 3,623 $ 13,742   Loans (Charged-off)/ Recovered, Net for the Three Months Ended: New England $ (2,516 ) $ 912 $ (344 ) San Francisco Bay 607 465 1,798 Southern California   64     1,959   (260 ) Total Net Loans (Charged-off)/ Recovered $ (1,845 ) $ 3,336 $ 1,194   Loans (Charged-off)/ Recovered, Net for the Twelve Months Ended: New England $ (1,686 ) $ (2,422 ) San Francisco Bay 3,671 2,576 Southern California   3,882     2,160   Total Net Loans (Charged-off)/ Recovered $ 5,867   $ 2,314                 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)           12/31/14             9/30/14             12/31/13   Total Balance Sheet Assets $ 6,797,874 $ 6,689,085 $ 6,437,109 LESS: Goodwill and Intangible Assets, net   (191,800 )   (127,655 )   (130,784 ) Tangible Assets (non-GAAP) $ 6,606,074 $ 6,561,430 $ 6,306,325 Total Shareholders' Equity $ 703,911 $ 675,631 $ 633,688 LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) LESS: Goodwill and Intangible Assets, net   (191,800 )   (127,655 )   (130,784 ) Total adjusting items   (239,553 )   (175,408 )   (178,537 ) Tangible Common Equity (non-GAAP) $ 464,358   $ 500,223   $ 455,151   Total Equity/Total Assets 10.35 % 10.10 % 9.84 % Tangible Common Equity/Tangible Assets (non-GAAP) 7.03 % 7.62 % 7.22 %   Total Risk Weighted Assets * $ 4,799,329 $ 4,754,417 $ 4,668,531 Tier I Common Equity * $ 468,612 $ 505,474 $ 463,627 Tier I Common Equity/ Risk Weighted Assets 9.76 % 10.63 % 9.93 %   End of Period Shares Outstanding 82,962 80,464 79,838   Book Value Per Common Share $ 7.91 $ 7.80 $ 7.34 Tangible Book Value Per Share (non-GAAP) $

5.60

$ 6.22 $

5.70

* Risk Weighted Assets and Tier I Common Equity for December 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.         Three Months Ended       Year ended (In thousands, except per share data)   12/31/14           9/30/14           12/31/13     12/31/14           12/31/13   Total average shareholders' equity $ 696,854 $ 669,286 $ 629,268 $ 666,216 $ 615,795 LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,753 )   (47,753 )   (47,753 )   (33,921 ) Average common equity (non-GAAP)   649,101     621,533     581,515     618,463     581,874   LESS: Average goodwill and intangible assets, net   (184,473 )   (128,178 )   (131,375 )   (144,658 )   (132,908 ) Total adjusting items   (184,473 )   (128,178 )   (131,375 )   (144,658 )   (132,908 ) Average Tangible Common Equity (non-GAAP) $ 464,628   $ 493,355   $ 450,140   $ 473,805   $ 448,966     Net income attributable to the Company $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535 Less: Dividends on Series D preferred stock   (869 )   (869 )   (869 )   (3,475 )   (2,297 ) Net income, after dividends on Series D preferred stock (non-GAAP) $ 11,308   $ 17,396   $ 16,799   $ 65,340   $ 68,238     Return on Average Equity - (Annualized) 6.99 % 10.92 % 10.68 % 10.33 % 11.45 % Return on Average Common Equity - (Annualized) (non-GAAP) 6.97 % 11.20 % 11.56 % 10.56 % 11.73 % Return on Average Tangible Common Equity - (Annualized) (non-GAAP) 9.74 % 14.10 % 14.93 % 13.79 % 15.20 %   (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), excluding restructuring, are presented below:         Three Months Ended         Year ended (In thousands, except per share data)   12/31/14             9/30/14             12/31/13     12/31/14             12/31/13   Income before income taxes (GAAP) $ 17,890 $ 27,153 $ 24,386 $ 99,770 $ 99,654 ADD BACK: Provision/ (credit) for loan losses   2,400     (2,600 )   (2,000 )   (6,400 )   (10,000 ) Pre-tax, pre-provision earnings (non-GAAP) $ 20,290 $ 24,553 $ 22,386 $ 93,370 $ 89,654   Net income attributable to the Company (GAAP) $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535 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) $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 64,268   Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP) $ 10,974 $ 17,394 $ 16,068 $ 64,252 $ 53,899 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) $ 10,974

$

17,394

$

16,068

$ 64,252

$

59,370

  Diluted Total Earnings Per Share (GAAP) $ 0.13 $ 0.22 $ 0.20 $ 0.79 $ 0.68 Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $ 0.13 $ 0.22 $

0.20

$ 0.79 $

0.75

  Total operating expense (GAAP) $ 63,760 $ 53,999 $ 55,500 $ 227,129 $ 220,705 Less: Amortization of intangibles 1,707 1,031 1,052 4,836 4,327 Less: Restructuring   739     —     —     739     —   Total operating expense (excluding amortization of intangibles) (non-GAAP) $ 61,314 $ 52,968 $ 54,448 $ 221,554 $ 216,378   Net interest income $ 44,128 $ 44,783 $ 43,541 $ 179,701 $ 174,018 Total core fees and income 39,609 33,558 32,843 138,978 122,697 Total other income 313 211 1,502 1,820 13,644 FTE income   2,510     2,350     2,166     9,249     8,326   Total revenue (FTE basis) $ 86,560 $ 80,902 $ 80,052 $ 329,748 $ 318,685 Efficiency Ratio, before deduction of intangible amortization (GAAP) 75.86 % 68.74 % 71.26 % 70.87 % 71.11 %

Efficiency Ratio, FTE Basis (non-GAAP)

70.83 % 65.47 % 68.02 % 67.19 % 67.90 %   (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 December 31, 2014 the Company had no loans were more than 90 days past due but still on accrual status. 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 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.

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