BPFH Boston Private Financial Holdings Inc

Second Quarter 2018 Highlights include:

• GAAP net income was $6.4 million or $0.06 per diluted share, and operating net income was $19.1 million or $0.21 per diluted share
• Notable items: Income tax expense of $12.7 million or $0.15 per share attributable to the divestiture of Anchor Capital Advisors LLC (“Anchor”), which closed on April 13, 2018
• Operating return on average common equity was 10.0%
• Operating return on average tangible common equity was 11.9%
• Average total deposits were $6.3 billion, a 2% decrease year-over-year
• Average total loans were $6.7 billion, a 7% increase year-over-year
• Total assets under management (“AUM”) were $21.4 billion and total net flows were negative $76 million

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2018 GAAP Net income attributable to the Company of $6.4 million, compared to $22.7 million for the first quarter of 2018 and $23.4 million for the second quarter of 2017. Second quarter 2018 Diluted earnings per share were $0.06, compared to $0.27 in the first quarter of 2018 and the second quarter of 2017.

                          Summary Financial Results - Reported % Change ($ in millions, except for per share data)         2Q18 1Q18 2Q17

LinkedQuarter

Year overYear

Net income attributable to the Company $6.4 $22.7 $23.4

(72)%

(73)%

Diluted earnings per share $0.06 $0.27 $0.27

(78)%

(78)%

 

Non-GAAP Financial Measures:

Pre-tax, pre-provision income $25.3 $26.3 $27.3

(4)%

(8)%

Return on average common equity

3.0%

12.0%

12.1%

Return on average tangible common equity

3.9%

15.2%

16.3%

In addition to presenting the Company’s results in conformity with GAAP, the Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. For additional information on non-GAAP financial measures, see page 6. A full reconciliation of GAAP to non-GAAP results can be found in the footnotes beginning on page 17.

  Summary Financial Results - Operating Basis (non-GAAP)                       % Change ($ in millions, except for per share data)         2Q181 1Q18 2Q17 LinkedQuarter     Year overYear Net income attributable to the Company $19.1 $22.7 $23.4

(16)%

(18)%

Diluted earnings per share $0.21 $0.27 $0.27

(23)%

(22)%

  Pre-tax, pre-provision income $25.3 $26.3 $27.3

(4)%

(8)%

Return on average common equity

10.0%

12.0%

12.1%

Return on average tangible common equity

11.9%

15.2%

16.3%

1 2Q18 results have been adjusted to exclude the impact of income tax expense related to the divestiture of Anchor. No adjustments made to 1Q18 or 2Q17 resultsSee footnote 16 for a GAAP to non-GAAP reconciliation

 

“This quarter's reported results were heavily influenced by a $12.7 million tax charge related to the divestiture of Anchor Capital in April of 2018,” said Clayton G. Deutsch, CEO. “Despite this charge, the Anchor divestiture created economic value for BPFH in the form of an ongoing cash flow stream and capital flexibility. Additionally, we utilized the proceeds to help fund the redemption of $50 million of preferred shares in order to benefit common shareholders in future periods.”

“Looking through to core operating results, our three wealth affiliates turned in solid revenue growth with acceptable margins. Our Boston Private Wealth business generated record levels of new business during the quarter, which should benefit forward revenue and earnings. Boston Private Bank increased loan balances 2% linked quarter and 7% year-over-year. This was offset by intensifying deposit competition. Consolidated expenses, excluding Anchor, came down 2% linked quarter and the year-over-year increase was below our target range of 4% to 5% expense growth per year.”

Divestiture

On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. As a result of the transaction, Boston Private received approximately $32 million of cash and will receive future revenue share payments that have a net present value of approximately $15 million.

Anchor’s results through the closing date remain consolidated in the Company’s results during the current period and prior periods. For presentation purposes, Anchor’s AUM are excluded from current and prior period AUM amounts, but are included in the calculation of Core Fees and Income.

                Net Interest Income and Margin (non-GAAP, except for Net Interest Income)         % Change ($ in millions)         2Q18 1Q18 2Q17

LinkedQuarter

Year overYear

Net interest income $ 57.5 $ 57.4 $ 57.1

—

% 1 % Less: Interest recovered on previous nonaccrual loans          

—

    0.1     2.0   (100 )% (100 )% Core net interest income, non-FTE basis 57.5 57.3 55.2

—

% 4 % Add: FTE adjustment           0.9     1.0     2.9   (8 )% (69 )% Core net interest income, FTE basis 58.4 58.3 58.1

—

% 1 %   Net interest margin (FTE basis) 2.89 % 2.95 % 3.07 % Core net interest margin (FTE basis) 2.89 % 2.94 % 2.97 % Core net interest margin (non-FTE basis) 2.85 % 2.90 % 2.82 % FTE = Fully Taxable Equivalent  

Net interest income for the second quarter was $57.5 million, flat linked quarter, and an increase of 1% year-over-year. The year-over-year increase was primarily driven by higher yields on interest-earning assets and higher asset volumes, partially offset by lower interest recoveries, higher funding costs, and higher borrowing volumes. Core net interest income, non-FTE basis, which excludes interest recovered on previous nonaccrual loans, increased 4% year-over-year.

The Company’s Core net interest margin (FTE basis) decreased 5 basis points on a linked quarter basis to 2.89%, primarily driven by increased funding costs, and partially offset by higher asset yields. The year-over-year decline was primarily driven by a lower tax benefit on tax-exempt income.

                          Noninterest Income % Change ($ in millions)         2Q18 1Q18 2Q17 LinkedQuarter Year overYear Investment management fees $4.2 $11.4 $11.1 (63 )% (62 )% Wealth advisory fees 13.7 13.5 13.0 1 % 6 % Wealth management and trust fees 11.2 12.2 11.2 (8 )% — % Private banking fees2         2.8 2.3 2.0 20 % 39 % Total core fees and income $31.9 $39.4 $37.2 (19 )% (14 )% Total other income         0.2 0.3 0.8 (36 )% (75 )% Total noninterest income $32.1 $39.7 $38.0 (19 )% (16 )%  

Memo: Noninterest income lines excluding Anchor

Less: Anchor revenue 1.1 8.4 8.3 (87 )% (87 )% Investment management fees (non-GAAP) 3.1 3.0 2.8 3 % 8 % Total core fees and income (non-GAAP)         $30.7 $31.0 $29.0 (1 )% 6 % Total noninterest income (non-GAAP) $30.9 $31.3 $29.8 (1 )% 4 % 2 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net  

Total core fees and income for the second quarter was $31.9 million, a 19% decrease linked quarter and a 14% decrease year-over-year, primarily driven by the divestiture of Anchor. Excluding Anchor, Total core fees and income increased 6% year-over-year primarily driven by higher levels of assets under management in the Wealth Advisory and Investment Management segments.

Private banking fees increased $0.5 million linked quarter and $0.8 million year-over-year due to higher levels of swap fee income.

                          Assets Under Management % Change ($ in millions)         2Q18 1Q18 2Q17 LinkedQuarter Year overYear Wealth Management and Trust $7,789 $7,831 $7,429 (1 )% 5 % Investment Management 3 2,031 1,920 1,829 6 % 11 % Wealth Advisory         11,566 11,446 10,744 1 % 8 % Total assets under management 3 4 $21,379 $21,186 $19,991 1 % 7 %     Net flows         2Q18 1Q18 2Q17 Wealth Management and Trust $(77) $77 $63 Investment Management 3 27 (15) (26) Wealth Advisory         (30) 136 (67) Total net flows 3 $(76) $198 $(30) 3 Information excludes Anchor 4 Segments do not sum to Total assets under management due to an intercompany relationship of $7 million in 2Q18 and $11 million in 1Q18 and 2Q17  

Total assets under management, excluding Anchor, were $21.4 billion at the end of the second quarter, an increase of 1% linked quarter and 7% year-over-year. The year-over-year increase was driven primarily by positive market action and positive net flows.

                          Operating Expense % Change ($ in millions)         2Q18 1Q18 2Q17 LinkedQuarter Year overYear Salaries and employee benefits $39.4 $47.1 $43.3 (16 )% (9 )% Occupancy and equipment 8.2 7.7 7.3 6 % 13 % Professional services 2.9 3.2 3.1 (10 )% (8 )% Marketing and business development 2.1 1.6 2.0 30 % 5 % Information systems 6.8 5.9 5.5 15 % 23 % Amortization of intangibles 0.7 0.8 1.4 — % (47 )% FDIC insurance 0.7 0.7 0.9 (5 )% (19 )% Other         3.6 3.9 4.3 (8 )% (18 )% Total operating expense $64.4 $70.9 $67.8 (9 )% (5 )%   Memo: Operating expense excluding Anchor Anchor operating expense         0.9 6.4 6.3 nm nm Total operating expense (non-GAAP) 5 $63.4 $64.5 $61.5 (2 )% 3 %

5 For information on non-GAAP financial measures, see page 6nm= not meaningful

 

Total operating expense decreased 9% linked quarter and 5% year-over-year, primarily driven by the divestiture of Anchor.

Excluding Anchor, Total operating expense for the second quarter of 2018 was $63.4 million, down 2% linked quarter, primarily driven by seasonal compensation expense in the first quarter. The 3% increase year-over-year was primarily driven by Occupancy and equipment and Information systems.

Income Tax Expense

The Company recognized income tax expense of $12.7 million attributable to the divestiture of Anchor, as previously disclosed in first quarter earnings release. Excluding this expense, the effective tax rate for continuing operations (excluding non-GAAP adjustments) for the second quarter was 18.9%, a decline from 21.5% in the previous quarter, primarily driven by tax benefits from restricted stock vesting.

                          Loans and Deposits - QTD Averages % Change ($ in millions)         2Q18 1Q18 2Q17 LinkedQuarter Year overYear Commercial and industrial $974 $933 $987 4 % (1 )% Commercial real estate 2,478 2,441 2,358 1 % 5 % Construction and land 167 169 119 (2 )% 40 % Residential 2,775 2,702 2,489 3 % 11 % Home equity 94 97 110 (3 )% (14 )% Other consumer         180 186 195 (3 )% (8 )% Total loans $6,668 $6,529 $6,259 2 % 7 %   Non-interest bearing deposits 1,908 1,872 1,900 2 % — % Interest bearing deposits         4,441 4,516 4,551 (2 )% (2 )% Total deposits $6,349 $6,388 $6,451 (1 )% (2 )%   Non-interest bearing deposits as a % of Total deposits 30 % 29 % 29 %  

Average total loans in the second quarter increased 7% year-over-year primarily driven by increases in Residential and Commercial real estate loans, partially offset by a decrease in Commercial and industrial loans.

Average total deposits decreased 2% year-over-year, primarily driven by a decrease in Interest bearing deposits. Average non-interest bearing deposits comprised 30% of Average total deposits in the second quarter of 2018 compared to 29% in the second quarter of 2017.

                          Provision and Asset Quality   ($ in millions)         2Q18 1Q18 4Q17 3Q17 2Q17 Provision/ (credit) for loan loss $0.5 $(1.8) $(0.9) $(0.4) $(6.1) Total criticized loans 114.4 124.1 154.8 146.0 129.5 Total nonaccrual loans 15.7 16.4 14.3 13.6 16.2 Total loans 30-89 days past due and accruing 5.0 20.4 25.0 5.3 3.2 Total net loans (charged-off)/ recovered 0.1 — 0.8 0.3 3.1   Ratios: Allowance for loan losses as a % of Total loans 1.09 % 1.10 % 1.15 % 1.17 % 1.19 % Nonaccrual loans as a % of Total loans 0.23 % 0.25 % 0.22 % 0.21 % 0.26 %  

The Company recorded a provision expense of $0.5 million for the second quarter of 2018, compared to a credit of $1.8 million for the first quarter of 2018 and a credit of $6.1 million for the second quarter of 2017. The provision expense in the second quarter of 2018 was primarily driven by loan growth, partially offset by a decline in criticized loans and improved loss rates.

Total criticized loans as of June 30, 2018 was $114.4 million, a decrease of 8% linked quarter and 12% year-over-year. Total nonaccrual loans (“Nonaccruals”) as of June 30, 2018 was $15.7 million, a decrease of 4% linked quarter and 3% year-over-year. As a percentage of Total loans, Nonaccruals were 23 basis points as of June 30, 2018, down 2 basis points from March 31, 2018, and 3 basis points from June 30, 2017.

                          Capital           2Q18 1Q18 4Q17 3Q17 2Q17 Tangible common equity/ Total assets 6 7.5 % 7.4 % 7.3 % 7.4 % 7.4 % Tangible book value per share 6 $7.62 $7.17 $7.12 $7.16 $6.97   Regulatory Capital Ratios: 7 Tier 1 common equity 10.9 % 10.4 % 10.3 % 10.4 % 10.3 % Total risk-based capital 13.8 % 14.2 % 14.1 % 14.3 % 14.1 % Tier 1 risk-based capital 12.5 % 12.9 % 12.9 % 13.0 % 12.9 % Tier 1 leverage capital 9.2 % 9.4 % 9.3 % 9.4 % 9.3 % 6 See footnote 6 for a GAAP to non-GAAP reconciliation. 7 Current quarter information is presented based on estimated data.  

On June 15, 2018, the Company redeemed $50 million of outstanding 6.95% Non-Cumulative Perpetual Preferred Stock, Series D. This will result in a $0.9 million quarterly benefit to common shareholders in future quarters.

Tangible book value per share as of June 30, 2018 increased 9% year-over-year to $7.62.

Dividend PaymentsConcurrent with the release of second quarter 2018 earnings, the Board of Directors of the Company declared a cash dividend payable to common shareholders of $0.12 per share. The record date for this dividend is August 3, 2018, and the payment date is August 17, 2018.

Non-GAAP Financial MeasuresThe Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

These non-GAAP financial measures include tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision income; total operating expense excluding intangibles, goodwill impairment, and restructuring, if any; the efficiency ratio (FTE basis); the efficiency ratio (FTE basis) excluding amortization of intangibles, goodwill impairment, and restructuring, if any; net interest income and net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as core net interest margin; net income attributable to the Company excluding notable items; net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP); diluted earnings per share excluding notable items; operating basis total revenue; operating basis total operating expenses; operating basis pre-tax, pre-provision income; operating basis income before income taxes; operating basis income tax expense; operating basis net income/ (loss) attributable to the Company; operating basis net income/ (loss) attributable to the Common Shareholders; operating basis weighted average diluted shares outstanding; operating basis diluted total earnings/ (loss) per share; operating basis return on average common equity; operating basis return on average tangible common equity; and operating basis effective tax rate.

A detailed reconciliation table of the Company’s GAAP to non-GAAP measures is included in the footnotes of the attached financial statements.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Thursday, July 19, 2018, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003Elite Entry Number: 8579299

Replay Information:Available from July 19, 2018 at 12 noon ET until July 26, 2018Dial In #: (877) 344-7529Conference Number: 10121736

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, Trust, and Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Florida, and Wisconsin. The Company has total assets of greater than $8 billion, and manages over $21 billion of client assets.

The Company’s affiliates 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 StatementsCertain 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, wealth advisory, and trust 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; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; changes in 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)

                         

June 30, 2018

March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 (In thousands, except share and per share data) Assets: Cash and cash equivalents $ 364,539 $ 77,085 $ 120,541 $ 110,440 $ 97,032 Investment securities available-for-sale 1,076,967 1,118,497 1,170,328 1,189,827 1,188,720 Investment securities held-to-maturity 78,955 70,809 74,576 84,090 99,024 Stock in Federal Home Loan Bank and Federal Reserve Bank 70,127 54,455 59,973 61,714 45,568 Loans held for sale 4,622 3,918 4,697 1,957 2,870 Total loans 6,767,123 6,602,327 6,505,028 6,413,201 6,279,928 Less: Allowance for loan losses 73,464   72,898   74,742   74,873   75,009   Net loans 6,693,659 6,529,429 6,430,286 6,338,328 6,204,919 Other real estate owned (“OREO”) 108 — — — — Premises and equipment, net 46,421 43,627 37,640 36,546 34,135 Goodwill (1) 75,598 75,598 75,598 142,554 142,554 Intangible assets, net (1) 14,584 15,334 16,083 22,447 23,873 Fees receivable 10,405 10,640 11,154 12,560 12,639 Accrued interest receivable 23,732 22,614 22,322 21,823 20,680 Deferred income taxes, net 26,316 32,058 29,031 46,088 49,827 Other assets (1) 230,170   264,295   259,515   201,024   185,805   Total assets $ 8,716,203   $ 8,318,359   $ 8,311,744   $ 8,269,398   $ 8,107,646   Liabilities: Deposits $ 6,620,179 $ 6,584,322 $ 6,510,246 $ 6,262,347 $ 6,381,339 Securities sold under agreements to repurchase 58,824 85,257 32,169 59,903 29,232 Federal funds purchased — — 30,000 70,000 40,000 Federal Home Loan Bank borrowings 1,056,938 611,588 693,681 812,773 618,989 Junior subordinated debentures 106,363 106,363 106,363 106,363 106,363 Other liabilities (1) 129,175   125,004   135,880   127,069   115,088   Total liabilities 7,971,479   7,512,534   7,508,339   7,438,455   7,291,011   Redeemable noncontrolling interests (“RNCI”) 10,747 16,322 17,461 15,882 17,216 Shareholders’ equity: Preferred stock, $1.00 par value; authorized: 2,000,000 shares — 47,753 47,753 47,753 47,753 Common stock, $1.00 par value; authorized: 170,000,000 shares 84,479 84,194 84,208 84,082 84,015 Additional paid-in capital 613,918 612,526 607,929 606,802 602,507 Retained earnings 56,912 61,518 49,526 76,455 66,807 Accumulated other comprehensive income/ (loss) (23,328 ) (21,313 ) (8,658 ) (4,823 ) (6,038 ) Total Company’s shareholders’ equity 731,981   784,678   780,758   810,269   795,044   Noncontrolling interests 1,996   4,825   5,186   4,792   4,375   Total shareholders’ equity 733,977   789,503   785,944   815,061   799,419   Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 8,716,203   $ 8,318,359   $ 8,311,744   $ 8,269,398   $ 8,107,646      

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

          Three Months Ended June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 Interest and dividend income: (In thousands, except share and per share data) Loans $ 64,048 $ 60,929 $ 59,496 $ 58,096 $ 57,736 Taxable investment securities 1,501 1,510 1,562 1,569 1,592 Non-taxable investment securities 1,752 1,730 1,697 1,664 1,655 Mortgage-backed securities 3,049 3,178 3,125 3,267 3,495 Federal funds sold and other 1,205   1,009   978   916   831   Total interest and dividend income 71,555   68,356   66,858   65,512   65,309   Interest expense: Deposits 8,365 6,524 6,048 5,356 4,949 Federal Home Loan Bank borrowings 4,447 3,344 2,626 2,657 2,489 Junior subordinated debentures 1,008 846 771 761 716 Repurchase agreements and other short-term borrowings 190   259   141   111   10   Total interest expense 14,010   10,973   9,586   8,885   8,164   Net interest income 57,545 57,383 57,272 56,627 57,145 Provision/ (credit) for loan losses 453   (1,795 ) (942 ) (432 ) (6,114 ) Net interest income after provision/ (credit) for loan losses 57,092   59,178   58,214   57,059   63,259   Fees and other income: Investment management fees 4,227 11,425 12,321 11,274 11,081 Wealth advisory fees 13,693 13,512 13,496 13,279 12,961 Wealth management and trust fees 11,169 12,151 11,756 11,619 11,161 Other banking fee income 2,745 2,273 2,531 2,726 1,964 Gain on sale of loans, net 63   74   85   169   59   Total core fees and income 31,897   39,435   40,189   39,067   37,226   Gain/ (loss) on sale of investments, net 7 (24 ) (110 ) 230 237 Gain/ (loss) on OREO, net — — — — — Gain/ (loss) on sale of affiliates or offices — — (1,264 ) — — Other 191   332   360   970   555   Total other income 198   308   (1,014 ) 1,200   792   Total revenue (2) 89,640 97,126 96,447 96,894 95,163 Operating expense: Salaries and employee benefits 39,433 47,084 44,612 44,912 43,312 Occupancy and equipment 8,229 7,748 7,753 7,944 7,283 Professional services 2,872 3,177 4,035 3,308 3,106 Marketing and business development 2,070 1,593 1,919 2,216 1,971 Information systems 6,770 5,886 5,635 5,282 5,500 Amortization of intangibles 749 750 1,323 1,426 1,426 Impairment of goodwill — — 24,901 — — FDIC insurance 708 744 677 647 879 Other 3,553   3,875   3,134   3,611   4,344   Total operating expense 64,384   70,857   93,989   69,346   67,821   Income before income taxes 24,803 28,064 3,400 27,980 33,456 Income tax expense 17,399   6,026   21,391   8,289   9,963   Net income/ (loss) from continuing operations 7,404 22,038 (17,991 ) 19,691 23,493 Net income from discontinued operations (3) (2 ) 1,698   989   1,186   1,063   Net income/ (loss) before attribution to noncontrolling interests 7,402 23,736 (17,002 ) 20,877 24,556 Less: Net income attributable to noncontrolling interests 968   1,050   1,278   1,074   1,150   Net income/ (loss) attributable to the Company $ 6,434   $ 22,686   $ (18,280 ) $ 19,803   $ 23,406      

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

          Six Months Ended June 30, 2018     June 30, 2017 Interest and dividend income: (In thousands, except share and per share data) Loans $ 124,977 $ 111,372 Taxable investment securities 3,011 3,262 Non-taxable investment securities 3,482 3,261 Mortgage-backed securities 6,227 6,999 Federal funds sold and other 2,214   1,431   Total interest and dividend income 139,911   126,325   Interest expense: Deposits 14,889 9,480 Federal Home Loan Bank borrowings 7,791 4,600 Junior subordinated debentures 1,854 1,387 Repurchase agreements and other short-term borrowings 449   71   Total interest expense 24,983   15,538   Net interest income 114,928 110,787 Provision/ (credit) for loan losses (1,342 ) (6,295 ) Net interest income after provision/ (credit) for loan losses 116,270   117,082   Fees and other income: Investment management fees 15,652 21,920 Wealth advisory fees 27,205 25,784 Wealth management and trust fees 23,320 21,987 Other banking fee income 5,018 3,658 Gain on sale of loans, net 137   197   Total core fees and income 71,332   73,546   Gain/ (loss) on sale of investments, net (17 ) 256 Gain/ (loss) on OREO, net — (46 ) Other 523   768   Total other income 506   978   Total revenue (2) 186,766 185,311 Operating expense: Salaries and employee benefits 86,517 88,977 Occupancy and equipment 15,977 14,468 Professional services 6,049 6,420 Marketing and business development 3,663 3,631 Information systems 12,656 10,879 Amortization of intangibles 1,499 2,852 Impairment of goodwill — — FDIC insurance 1,452 1,645 Other 7,428   7,729   Total operating expense 135,241   136,601   Income before income taxes 52,867 55,005 Income tax expense 23,425   16,516   Net income/ (loss) from continuing operations 29,442 38,489 Net income from discontinued operations (3) 1,696   2,695   Net income/ (loss) before attribution to noncontrolling interests 31,138 41,184 Less: Net income attributable to noncontrolling interests 2,018   2,116   Net income/ (loss) attributable to the Company $ 29,120   $ 39,068      

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

          Three Months Ended PER SHARE DATA: June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017 (In thousands, except share and per share data) Calculation of income for EPS: Net income/ (loss) attributable to the Company $ 6,434 $ 22,686 $ (18,280 ) $ 19,803 $ 23,406

Adjustments to Net income/ (loss) attributable to the Company to arrive at Net income/ (loss) attributable to common shareholders, treasury stock method (4)

(1,277 ) (23 ) (1,998 ) (1,146 ) (577 ) Net income/ (loss) attributable to the common shareholders, treasury stock method $ 5,157   $ 22,663   $ (20,278 ) $ 18,657   $ 22,829     End of period common shares outstanding 84,478,858 84,194,267 84,208,538 84,082,250 84,015,141   Weighted average shares outstanding: Weighted average basic shares outstanding 83,509,115 83,097,758 82,904,776 82,556,225 82,298,493 Weighted average diluted shares outstanding (5) 85,413,575 85,271,650 82,904,776 84,888,311 84,741,680   Diluted total earnings/ (loss) per share $ 0.06 $ 0.27 $ (0.24 ) $ 0.22 $ 0.27             Six Months Ended PER SHARE DATA: June 30, 2018     June 30, 2017 (In thousands, except share

and per share data)

Calculation of income for EPS: Net income/ (loss) attributable to the Company $ 29,120 $ 39,068 Adjustments to Net income/ (loss) attributable to the Company to arrive at Net income/ (loss) attributable to common shareholders, treasury stock method (4) (1,300 ) (1,743 ) Net income/ (loss) attributable to the common shareholders, treasury stock method $ 27,820   $ 37,325     Weighted average shares outstanding: Weighted average basic shares outstanding 83,304,573 82,125,795 Weighted average diluted shares outstanding (5) 85,221,974 84,658,309   Diluted total earnings/ (loss) per share $ 0.33 $ 0.44    

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

                          (In thousands, except per share data) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 FINANCIAL DATA: Book value per common share $ 8.69 $ 8.81 $ 8.77 $ 9.13 $ 8.95 Tangible book value per share (6) $ 7.62 $ 7.17 $ 7.12 $ 7.16 $ 6.97 Market price per share $ 15.90 $ 15.05 $ 15.45 $ 16.55 $ 15.35   ASSETS UNDER MANAGEMENT AND ADVISORY: Wealth Management and Trust $ 7,789,000 $ 7,831,000 $ 7,865,000 $ 7,703,000 $ 7,429,000 Investment Management (7) 2,031,000 1,920,000 2,004,000 1,902,000 1,829,000 Wealth Advisory 11,566,000 11,446,000 11,350,000 10,992,000 10,744,000 Less: Inter-company relationship (7,000 ) (11,000 ) (11,000 ) (11,000 ) (11,000 ) Total assets under management and advisory, excluding Anchor (7) $ 21,379,000   $ 21,186,000   $ 21,208,000   $ 20,586,000   $ 19,991,000   Assets under management and advisory at Anchor —   9,042,000   9,277,000   9,181,000   9,072,000   Total assets under management and advisory, including Anchor $ 21,379,000   $ 30,228,000   $ 30,485,000   $ 29,767,000   $ 29,063,000     FINANCIAL RATIOS: Total equity/ Total assets 8.42 % 9.49 % 9.46 % 9.86 % 9.86 % Tangible common equity/ Tangible assets (6) 7.46 % 7.38 % 7.33 % 7.43 % 7.37 % Tier 1 common equity/ Risk weighted assets (6) 10.87 % 10.39 % 10.32 % 10.42 % 10.28 % Allowance for loan losses/ Total loans 1.09 % 1.10 % 1.15 % 1.17 % 1.19 % Allowance for loan losses/ Nonaccrual loans 469 % 445 % 523 % 550 % 464 % Return on average assets - three months ended (annualized) 0.31 % 1.11 % (0.88 )% 0.96 % 1.15 % Return on average common equity - three months ended (annualized) (8) 3.03 % 12.02 % (9.92 )% 9.87 % 12.12 % Return on average tangible common equity - three months ended (annualized) (8) 3.90 % 15.20 % (11.94 )% 13.24 % 16.27 % Efficiency ratio - three months ended (9) 70.29 % 71.46 % 68.23 % 68.06 % 67.69 %   DEPOSIT DETAIL: Demand deposits (noninterest-bearing) $ 2,089,373 $ 1,932,732 $ 2,025,690 $ 1,850,833 $ 1,935,622 NOW 635,841 689,526 645,361 636,013 631,973 Savings 73,675 73,580 70,935 74,333 69,892 Money market 3,128,211 3,177,692 3,121,811 3,009,779 3,055,642 Certificates of deposit 693,079   710,792   646,449   691,389   688,210   Total deposits $ 6,620,179   $ 6,584,322   $ 6,510,246   $ 6,262,347   $ 6,381,339      

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: 06/30/18   03/31/18   06/30/17 06/30/18   03/31/18   06/30/17 06/30/18   03/31/18   06/30/17 AVERAGE ASSETS             Interest-earning assets: Cash and investments: Taxable investment securities $ 326,482 $ 333,253 $ 363,166 $ 1,501 $ 1,510 $ 1,592 1.84 % 1.81 % 1.75 % Non-taxable investment securities (10) 297,852 296,958 294,836 2,217 2,190 2,546 2.98 % 2.95 % 3.45 % Mortgage-backed securities 570,845 588,461 653,201 3,049 3,178 3,495 2.14 % 2.16 % 2.14 % Federal funds sold and other 157,878     161,573     199,230   1,205     1,009     831   3.03 %   2.51 %   1.66 % Total cash and investments 1,353,057     1,380,245     1,510,433   7,972     7,887     8,464   2.35 %   2.29 %   2.24 % Loans (11): Commercial and industrial (10) 974,443 933,209 987,144 9,439 8,756 9,773 3.83 % 3.75 % 3.92 % Commercial real estate (10) 2,477,634 2,441,215 2,358,409 27,550 26,341 26,433 4.40 % 4.32 % 4.43 % Construction and land (10) 166,736 169,384 119,366 2,040 1,965 1,377 4.84 % 4.64 % 4.56 % Residential 2,775,239 2,702,317 2,489,072 22,590 21,766 19,574 3.26 % 3.22 % 3.15 % Home equity 94,445 97,191 109,942 1,041 1,042 1,085 4.42 % 4.35 % 3.96 % Other consumer 179,684     185,596     195,384   1,818     1,573     1,526   4.06 %   3.44 %   3.13 % Total loans 6,668,181     6,528,912     6,259,317   64,478     61,443     59,768   3.84 %   3.77 %   3.79 % Total earning assets 8,021,238     7,909,157     7,769,750   72,450     69,330     68,232   3.59 %   3.51 %   3.49 % LESS: Allowance for loan losses 72,998 74,834 80,614 Cash and due from banks (non-interest bearing) 45,337 51,944 42,166 Other assets 396,744     425,617     450,703   TOTAL AVERAGE ASSETS $ 8,390,321     $ 8,311,884     $ 8,182,005   AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY Interest-bearing liabilities: Interest-bearing deposits (11): Savings and NOW $ 719,159 $ 716,930 $ 711,883 $ 304 $ 215 $ 187 0.17 % 0.12 % 0.11 % Money market 3,033,306 3,141,564 3,173,768 5,543 4,314 3,244 0.73 % 0.56 % 0.41 % Certificates of deposit 688,567     657,109     665,668   2,518     1,995     1,518   1.47 %   1.23 %   0.91 % Total interest-bearing deposits (12) 4,441,032 4,515,603 4,551,319 8,365 6,524 4,949 0.76 % 0.59 % 0.44 % Junior subordinated debentures 106,363 106,363 106,363 1,008 846 716 3.75 % 3.18 % 2.67 % FHLB borrowings and other 1,022,636     878,093     703,149   4,637     3,603     2,499   1.79 %   1.64 %   1.41 % Total interest-bearing liabilities 5,570,031     5,500,059     5,360,831   14,010     10,973     8,164   1.00 %   0.80 %   0.61 % Non-interest bearing demand

deposits (11) (12)

1,908,037 1,872,472 1,899,916 Payables and other liabilities 122,175     133,243     106,657   Total average liabilities 7,600,243 7,505,774 7,367,404 Redeemable noncontrolling interests 14,129 22,085 21,075 Average shareholders’ equity 775,949     784,025     793,526   TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY $ 8,390,321     $ 8,311,884     $ 8,182,005   Net interest income - on a fully taxable equivalent basis (FTE) $ 58,440 $ 58,357 $ 60,068 LESS: FTE adjustment (10) 895     974     2,923   Net interest income (GAAP basis) $ 57,545     $ 57,383     $ 57,145   Interest rate spread 2.59 % 2.71 % 2.88 % Bank only net interest margin 2.95 % 3.00 % 3.12 % Net interest margin 2.89 % 2.95 % 3.07 %    

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: 06/30/18   06/30/17 06/30/18   06/30/17 06/30/18   06/30/17 AVERAGE ASSETS       Interest-earning assets: Cash and investments: Taxable investment securities $ 330,220 $ 379,164 $ 3,011 $ 3,262 1.83 % 1.72 % Non-taxable investment securities (10) 297,407 294,925 4,407 5,017 2.96 % 3.40 % Mortgage-backed securities 579,604 662,888 6,227 6,999 2.15 % 2.11 % Federal funds sold and other 158,853     179,901   2,214     1,431   2.78 %   1.10 % Total cash and investments 1,366,084     1,516,878   15,859     16,709   2.32 %   2.15 % Loans (11): Commercial and industrial (10) 953,940 985,430 18,195 19,076 3.79 % 3.85 % Commercial real estate (10) 2,459,525 2,341,482 53,891 49,977 4.36 % 4.25 % Construction and land (10) 168,052 116,679 4,005 2,621 4.74 % 4.47 % Residential 2,738,980 2,457,100 44,356 38,565 3.24 % 3.14 % Home equity 95,810 113,801 2,083 2,174 4.39 % 3.85 % Other consumer 182,623     193,769   3,391     2,946   3.74 %   3.07 % Total loans 6,598,930     6,208,261   125,921     115,359   3.81 %   3.70 % Total earning assets 7,965,014     7,725,139   141,780     132,068   3.55 %   3.40 % LESS: Allowance for loan losses 73,911 79,375 Cash and due from banks (non-interest bearing) 48,725 41,929 Other assets 408,810     426,349   TOTAL AVERAGE ASSETS $ 8,348,638     $ 8,114,042   AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY Interest-bearing liabilities: Interest-bearing deposits (11): Savings and NOW $ 718,051 $ 682,126 $ 519 $ 316 0.15 % 0.09 % Money market 3,086,710 3,193,336 9,857 6,365 0.64 % 0.40 % Certificates of deposit 672,736     627,993   4,513     2,799   1.35 %   0.90 % Total interest-bearing deposits (12) 4,477,497 4,503,455 14,889 9,480 0.67 % 0.42 % Junior subordinated debentures 106,363 106,363 1,854 1,387 3.52 % 2.59 % FHLB borrowings and other 950,763     714,998   8,240     4,671   1.72 %   1.30 % Total interest-bearing liabilities 5,534,623     5,324,816   24,983     15,538   0.91 %   0.59 %

Non-interest bearing demand deposits (11) (12)

1,890,184 1,871,924 Payables and other liabilities 126,601     112,157   Total average liabilities 7,551,408 7,308,897 Redeemable noncontrolling interests 17,644 21,208 Average shareholders’ equity 779,586     783,937   TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY $ 8,348,638     $ 8,114,042   Net interest income - on a fully taxable equivalent basis (FTE) $ 116,797 $ 116,530 LESS: FTE adjustment (10) 1,869     5,743   Net interest income (GAAP basis) $ 114,928     $ 110,787   Interest rate spread 2.64 % 2.81 % Bank only net interest margin 2.97 % 3.05 % Net interest margin 2.92 % 3.00 %    

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

                          (In thousands) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 LOAN DATA (13): Other commercial and industrial loans: New England $ 481,081 $ 444,419 $ 438,322 $ 503,322 $ 429,598 San Francisco Bay Area 35,220 23,491 23,311 50,686 49,163 Southern California 66,892   63,183   59,359   64,248   62,995 Total other commercial and industrial loans $ 583,193   $ 531,093   $ 520,992   $ 618,256   $ 541,756 Commercial tax-exempt loans: New England $ 332,572 $ 313,955 $ 305,792 $ 320,172 $ 312,783 San Francisco Bay Area 94,959 95,380 101,340 99,540 91,666 Southern California 11,351   11,422   11,566   11,638   11,708 Total commercial tax-exempt loans $ 438,882   $ 420,757   $ 418,698   $ 431,350   $ 416,157 Total commercial and industrial loans $ 1,022,075   $ 951,850   $ 939,690   $ 1,049,606   $ 957,913 Commercial real estate loans: New England $ 1,069,942 $ 1,046,178 $ 1,002,092 $ 988,788 $ 993,426 San Francisco Bay Area 739,769 721,871 725,454 698,148 688,751 Southern California 694,810   696,954   712,674   676,223   674,168 Total commercial real estate loans $ 2,504,521   $ 2,465,003   $ 2,440,220   $ 2,363,159   $ 2,356,345 Construction and land loans: New England $ 88,068 $ 79,563 $ 86,874 $ 61,635 $ 74,919 San Francisco Bay Area 37,783 34,050 27,891 20,893 22,177 Southern California 46,173   51,627   50,225   35,763   33,808 Total construction and land loans $ 172,024   $ 165,240   $ 164,990   $ 118,291   $ 130,904 Residential loans: New England $ 1,643,039 $ 1,619,856 $ 1,598,072 $ 1,558,587 $ 1,540,393 San Francisco Bay Area 533,394 511,903 512,189 510,956 488,854 Southern California 631,773   605,610   572,272   531,245   495,978 Total residential loans $ 2,808,206   $ 2,737,369   $ 2,682,533   $ 2,600,788   $ 2,525,225 Home equity loans: New England $ 61,125 $ 65,434 $ 67,435 $ 72,149 $ 71,953 San Francisco Bay Area 17,366 19,314 22,462 26,052 28,400 Southern California 13,310   9,583   10,061   9,026   8,196 Total home equity loans $ 91,801   $ 94,331   $ 99,958   $ 107,227   $ 108,549 Other consumer loans: New England $ 145,726 $ 166,413 $ 149,022 $ 150,309 $ 175,644 San Francisco Bay Area 14,659 13,569 14,707 15,302 17,909 Southern California 8,111   8,552   13,908   8,519   7,439 Total other consumer loans $ 168,496   $ 188,534   $ 177,637   $ 174,130   $ 200,992 Total loans: New England $ 3,821,553 $ 3,735,818 $ 3,647,609 $ 3,654,962 $ 3,598,716 San Francisco Bay Area 1,473,150 1,419,578 1,427,354 1,421,577 1,386,920 Southern California 1,472,420   1,446,931   1,430,065   1,336,662   1,294,292 Total loans $ 6,767,123   $ 6,602,327   $ 6,505,028   $ 6,413,201   $ 6,279,928    

Boston Private Financial Holdings, Inc.Selected Financial Data (Unaudited)

                          (In thousands) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 CREDIT QUALITY (13): Special mention loans: New England $ 18,515 $ 33,282 $ 45,640 $ 37,569 $ 34,538 San Francisco Bay Area 19,255 14,117 23,400 23,898 23,399 Southern California 15,678   15,689   18,134   17,207   4,327   Total special mention loans $ 53,448   $ 63,088   $ 87,174   $ 78,674   $ 62,264   Accruing substandard loans (14): New England $ 11,493 $ 8,767 $ 10,911 $ 8,196 $ 10,185 San Francisco Bay Area 12,766 14,970 11,615 11,622 6,574 Southern California 21,194   21,436   30,826   33,923   34,339   Total accruing substandard loans $ 45,453   $ 45,173   $ 53,352   $ 53,741   $ 51,098   Nonaccruing loans: New England $ 7,282 $ 8,056 $ 6,061 $ 7,380 $ 9,880 San Francisco Bay Area 1,319 1,442 1,473 1,494 1,857 Southern California 7,050   6,882   6,761   4,749   4,439   Total nonaccruing loans $ 15,651   $ 16,380   $ 14,295   $ 13,623   $ 16,176   Loans 30-89 days past due and accruing: New England $ 4,653 $ 10,571 $ 19,725 $ 4,664 $ 3,182 San Francisco Bay Area — 2,251 1,911 430 12 Southern California 324   7,554   3,412   198   —   Total loans 30-89 days past due and accruing $ 4,977   $ 20,376   $ 25,048   $ 5,292   $ 3,194   Loans (charged-off)/ recovered, net for the three months ended: New England $ (73 ) $ (285 ) $ 1,020 $ 73 $ 667 San Francisco Bay Area 91 67 64 206 2,856 Southern California 95   169   (273 ) 17   (431 ) Total net loans (charged-off)/ recovered $ 113   $ (49 ) $ 811   $ 296   $ 3,092   Loans (charged-off)/ recovered, net for the six months ended: New England $ (358 ) $ 746 San Francisco Bay Area 158 2,891 Southern California 264   (410 ) Total Net Loans (Charged-off)/ Recovered $ 64   $ 3,227      

Boston Private Financial Holdings, Inc.Selected Financial Data(Unaudited)

FOOTNOTES:

(1)

On December 20, 2017, Boston Private Financial Holdings, Inc. (the “Company”) announced an agreement, effective December 19, 2017, to sell all of its current equity interest in Anchor Capital Advisors LLC, an indirect, majority-owned subsidiary of the Company (“Anchor”), to the management team of Anchor for an upfront cash payment and a non-voting, revenue share participation interest in Anchor.  On April 13, 2018, the Company completed the sale of its ownership interest in Anchor.  Anchor’s results remain consolidated in the Company’s results during current and prior periods through the closing date.  For presentation purposes, Anchor’s AUM are excluded from current and prior period AUM amounts, but are included in the calculation of Core Fees and Income.  The Company classified the assets and liabilities of Anchor as held for sale at March 31, 2018 and December 31, 2017, which are included with Other assets and Other liabilities, respectively, on the Company’s consolidated balance sheet. For regulatory purposes, the goodwill and intangible assets of Anchor will be included in consolidated calculations. See footnotes 6 and 8, below.

 

(2)

Total revenue is the sum of Net interest income, Total core fees and income, and Total other income.

 

(3)

Net income from discontinued operations consists of contingent payments net of expenses related to our divested affiliate, Westfield Capital Management Company, LLC.  The Company received its final contingent payment in the first quarter of 2018 related to this affiliate.

 

(4)

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 and dividends paid on preferred stock.

 

(5)

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 Weighted average diluted shares outstanding for the Diluted earnings/ (loss) 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 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, 2017 for additional information.

 

(6)

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 share and per share data) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 Total balance sheet assets $ 8,716,203 $ 8,318,359 $ 8,311,744 $ 8,269,398 $ 8,107,646 LESS: Goodwill and intangible assets, net * (90,182 ) (138,026 ) (138,775 ) (165,001 ) (166,427 ) Tangible assets (non-GAAP) $ 8,626,021 $ 8,180,333 $ 8,172,969 $ 8,104,397 $ 7,941,219 Total shareholders’ equity $ 733,977 $ 789,503 $ 785,944 $ 815,061 $ 799,419 LESS: Series D preferred stock (non-convertible) — (47,753 ) (47,753 ) (47,753 ) (47,753 ) LESS: Goodwill and intangible assets, net * (90,182 ) (138,026 ) (138,775 ) (165,001 ) (166,427 ) Total adjusting items (90,182 ) (185,779 ) (186,528 ) (212,754 ) (214,180 ) Tangible common equity (non-GAAP) $ 643,795   $ 603,724   $ 599,416   $ 602,307   $ 585,239   Total equity/ Total assets 8.42 % 9.49 % 9.46 % 9.86 % 9.86 % Tangible common equity/ Tangible assets (non-GAAP) 7.46 % 7.38 % 7.33 % 7.43 % 7.37 %   Total risk weighted assets ** $ 6,125,515 $ 5,974,866 $ 5,892,286 $ 5,831,558 $ 5,765,471 Tier 1 common equity ** $ 665,628 $ 621,084 $ 607,800 $ 607,822 $ 592,845 Tier 1 common equity/ Risk weighted assets ** 10.87 % 10.39 % 10.32 % 10.42 % 10.28 %   End of period shares outstanding 84,478,858 84,194,267 84,208,538 84,082,250 84,015,141   Book value per common share $ 8.69 $ 8.81 $ 8.77 $ 9.13 $ 8.95 Tangible book value per share (non-GAAP) $ 7.62 $ 7.17 $ 7.12 $ 7.16 $ 6.97  

* Includes goodwill and intangible assets at affiliates held for sale at March 31, 2018 and December 31, 2017.

 

** Risk weighted assets and Tier 1 common equity for June 30, 2018 are presented based on estimated data.

 

(7)

Assets under management and advisory for all periods shown have been reduced to exclude those assets managed or advised by Anchor.

 

(8)

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 annualizes income data based on the number of days in the period presented and a 365 day year. 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 (In thousands) June 30, 2018   March 31, 2018   December 31, 2017 September 30, 2017   June 30, 2017 Total average shareholders’ equity $ 775,949 $ 784,025 $ 813,518 $ 808,596 $ 793,526 LESS: Average Series D preferred stock (non-convertible) (39,881 ) (47,753 ) (47,753 ) (47,753 ) (47,753 ) Average common equity (non-GAAP) 736,068   736,272   765,765   760,843   745,773   LESS: Average goodwill and intangible assets, net * (102,533 ) (138,451 ) (157,978 ) (165,766 ) (167,204 ) Average tangible common equity (non-GAAP) $ 633,535   $ 597,821   $ 607,787   $ 595,077   $ 578,569     Net income/ (loss) attributable to the Company $ 6,434 $ 22,686 $ (18,280 ) $ 19,803 $ 23,406 LESS: Dividends on Series D preferred stock (869 ) (869 ) (869 ) (868 ) (869 ) Common net income/ (loss) (non-GAAP) 5,565 21,817 (19,149 ) 18,935 22,537 ADD: Amortization of intangibles, net of tax (35% in 2017, 21% in 2018) 592   593   860   927   927   Tangible common net income/ (loss) (non-GAAP) $ 6,157   $ 22,410   $ (18,289 ) $ 19,862   $ 23,464     Return on average equity - (annualized) 3.33 % 11.73 % (8.91 )% 9.72 % 11.83 % Return on average common equity - (annualized) (non-GAAP) 3.03 % 12.02 % (9.92 )% 9.87 % 12.12 %

Return on average tangible common equity - (annualized) (non-GAAP)

3.90 % 15.20 % (11.94 )% 13.24 % 16.27 %   Six Months Ended (In thousands) June 30, 2018 June 30, 2017 Total average shareholders’ equity $ 779,586 $ 783,937 LESS: Average Series D preferred stock (non-convertible) (43,795 ) (47,753 ) Average common equity (non-GAAP) 735,791   736,184   LESS: Average goodwill and intangible assets, net * (117,839 ) (167,939 ) Average tangible common equity (non-GAAP) $ 617,952   $ 568,245     Net income/ (loss) attributable to the Company $ 29,120 $ 39,068 LESS: Dividends on Series D preferred stock (1,738 ) (1,738 ) Common net income/ (loss) (non-GAAP) 27,382 37,330 ADD: Amortization of intangibles, net of tax (35% in 2017, 21% in 2018) 1,184   1,854   Tangible common net income/ (loss) (non-GAAP) $ 28,566   $ 39,184     Return on average equity - (annualized) 7.53 % 10.05 % Return on average common equity - (annualized) (non-GAAP) 7.50 % 10.23 % Return on average tangible common equity - (annualized) (non-GAAP) 9.32 % 13.91 %  

* Includes goodwill and intangible assets at affiliates held for sale at March 31, 2018 and December 31, 2017.

 

(9)

 

The Company uses certain non-GAAP financial measures, such as: Pre-tax, pre-provision income, Total operating expenses excluding amortization of intangibles, goodwill impairment, and restructuring expense, if any, 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 income; from GAAP Total operating expense to non-GAAP Total operating expense excluding amortization of intangibles, goodwill impairment, and restructuring, if any; and from GAAP Efficiency ratio to Non-GAAP Efficiency ratio (FTE basis), excluding amortization of intangibles, goodwill impairment, and restructuring, if any, are presented below:

  Three Months Ended (In thousands) June 30, 2018   March 31, 2018   December 31, 2017 September 30, 2017   June 30, 2017 Income before income taxes (GAAP) $ 24,803 $ 28,064 $ 3,400 $ 27,980 $ 33,456 ADD BACK: Provision/ (credit) for loan losses 453   (1,795 ) (942 ) (432 ) (6,114 ) Pre-tax, pre-provision income (non-GAAP) $ 25,256 $ 26,269 $ 2,458 $ 27,548 $ 27,342   Total operating expense (GAAP) $ 64,384 $ 70,857 $ 93,989 $ 69,346 $ 67,821 Less: Amortization of intangibles 749 750 1,323 1,426 1,426 Less: Goodwill impairment —   —   24,901   —   —   Total operating expense (excluding amortization of intangibles, and goodwill impairment) (non-GAAP) $ 63,635 $ 70,107 $ 67,765 $ 67,920 $ 66,395   Net interest income $ 57,545 $ 57,383 $ 57,272 $ 56,627 $ 57,145 Total core fees and income 31,897 39,435 40,189 39,067 37,226 Total other income 198 308 (1,014 ) 1,200 792 FTE income 895   974   2,873   2,899   2,923   Total revenue (FTE basis) $ 90,535 $ 98,100 $ 99,320 $ 99,793 $ 98,086 Efficiency ratio (GAAP) 71.83 % 72.95 % 97.45 % 71.57 % 71.27 %

Efficiency ratio, FTE Basis excluding amortization of intangibles, and goodwill impairment (non-GAAP)

70.29 % 71.46 % 68.23 % 68.06 % 67.69 %   Six Months Ended (In thousands) June 30, 2018 June 30, 2017 Income before income taxes (GAAP) $ 52,867 $ 55,005 ADD BACK: Provision/ (credit) for loan losses (1,342 ) (6,295 ) Pre-tax, pre-provision income (non-GAAP) $ 51,525 $ 48,710   Total operating expense (GAAP) $ 135,241 $ 136,601 Less: Amortization of intangibles 1,499 2,852 Less: Goodwill impairment —   —   Total operating expense (excluding amortization of intangibles, and goodwill impairment) (non-GAAP) $ 133,742 $ 133,749   Net interest income $ 114,928 $ 110,787 Total core fees and income 71,332 73,546 Total other income 506 978 FTE income 1,869   5,743   Total revenue (FTE basis) $ 188,635 $ 191,054 Efficiency ratio (GAAP) 72.41 % 73.71 % Efficiency ratio, FTE Basis excluding amortization of intangibles, and goodwill impairment (non-GAAP) 70.90 % 70.01 %

(10)

 

Interest income on Non-taxable investments and loans are presented on an FTE basis using the federal statutory rate of 35% in 2017 and 21% in 2018 for each respective period presented.

   

(11)

Average loans includes Loans held for sale and Nonaccrual loans.

 

(12)

Average total deposits is the sum of Average total interest-bearing deposits and Average non-interest bearing demand deposits.

 

(13)

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender’s regional offices.

 

(14)

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.

 

(15)

The Company uses certain non-GAAP financial measures, such as: Net interest income excluding interest recovered on previous nonaccrual loans and Net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as Core net interest margin, 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 Net interest income to non-GAAP Net interest income excluding interest recovered on previous nonaccrual loans; and from GAAP Net interest margin to non-GAAP Net interest margin excluding interest recovered on previous nonaccrual loans, are presented below:     Three Months Ended (In thousands)

June 30,2018

   

March 31,2018

   

December 31,2017

   

September 30,2017

   

June 30,2017

Net interest income (GAAP basis) $ 57,545 $ 57,383 $ 57,272 $ 56,627 $ 57,145 LESS: Interest recovered on previously nonaccrual loans   —     80     429     133     1,971   Net interest income, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest income (non-GAAP) 57,545 57,303 56,843 56,494 55,174 ADD: FTE income   895     974     2,873     2,899     2,923   Net interest income, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest income, FTE basis (non-GAAP)   58,440     58,277     59,716     59,393     58,097     Net interest margin (FTE basis) 2.89 % 2.95 % 3.04 % 3.02 % 3.07 % Net interest margin, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest margin (FTE basis) 2.89 % 2.94 % 3.02 % 3.02 % 2.97 % Net interest margin, non-FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest margin (non-FTE basis) (non-GAAP) 2.85 % 2.90 % 2.87 % 2.87 % 2.82 %

(16)

 

The Company uses certain non-GAAP financial measures, such as: Net income attributable to the Company excluding notable items and Diluted earnings per share excluding notable items 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 Net income attributable to the Company to non-GAAP Net income attributable to the Company excluding notable items and from GAAP Diluted earnings per share to non-GAAP Diluted earnings per share excluding notable items are presented below:

    Three Months Ended (In thousands, except share and per share data) June 30, 2018   March 31, 2018   December 31, 2017   September 30, 2017   June 30, 2017 Net income/ (loss) attributable to the Company (GAAP) $ 6,434 $ 22,686 $ (18,280 ) $ 19,803 $ 23,406 LESS: Gain/ (loss) on sale of affiliates or offices — — (1,264 ) — — ADD BACK: Anchor divestiture legal expense — — 400 — — ADD BACK: Impairment of goodwill — — 24,901 — — ADD BACK: Tax adjustments * 12,706 — 12,880 — — Tax effect at statutory rate

(35% in 2017, 21% in 2018) **

—   —   (582 ) —   —   Net income attributable to the Company

excluding notable items (non-GAAP)

$ 19,140 $ 22,686 $ 20,583 $ 19,803 $ 23,406   Net income/ (loss) attributable to the common shareholders, treasury stock method (GAAP) $ 5,157 $ 22,663 $ (20,278 ) $ 18,657 $ 22,829 LESS: Gain/ (loss) on sale of affiliates or offices — — (1,264 ) — — ADD BACK: Anchor divestiture legal expense — — 400 — — ADD BACK: Impairment of goodwill — — 24,901 — — ADD BACK: Tax adjustments * 12,706 — 12,880 — — Tax effect at statutory rate(35% in 2017, 21% in 2018) ** —   —   (582 ) —   —   Net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP) $ 17,863 $ 22,663 $ 18,585 $ 18,657 $ 22,829   Weighted average diluted shares outstanding (GAAP) 85,413,575 85,271,650 82,904,776 84,888,311 84,741,680 Weighted average diluted shares outstanding, excluding notable items (non-GAAP) *** 85,413,575 85,271,650 85,196,760 84,888,311 84,741,680   Diluted total earnings/ (loss) per share (GAAP) $ 0.06 $ 0.27 $ (0.24 ) $ 0.22 $ 0.27 Diluted total earnings per share, excluding notable items (non-GAAP) $ 0.21 $ 0.27 $ 0.22 $ 0.22 $ 0.27   Average common equity (non-GAAP) $ 736,068 $ 736,272 $ 765,765 $ 760,843 $ 745,773 Average tangible common equity (non-GAAP) $ 633,535 $ 597,821 $ 607,787 $ 595,077 $ 578,569 Return on average common equity - (annualized), excluding notable items (non-GAAP) 9.96 % 12.02 % 10.21 % 9.87 % 12.12 % Return on average tangible common equity - (annualized), excluding notable items (non-GAAP) 11.94 % 15.20 % 13.43 % 13.24 % 16.27 %   Pre-tax, pre-provision income (non-GAAP) $ 25,256 $ 26,269 $ 2,458 $ 27,548 $ 27,342 LESS: Gain/ (loss) on sale of affiliates or offices — — (1,264 ) — — ADD BACK: Anchor divestiture legal expense — — 400 — — ADD BACK: Impairment of goodwill —   —   24,901   —   —   Pre-tax, pre-provision income, excluding notable items (non-GAAP) $ 25,256 $ 26,269 $ 29,023 $ 27,548 $ 27,342  

* Additional tax expense in the second quarter of 2018 relates to the tax impact of the April 2018 completion of the sale of Anchor.

** Due to the nature of the goodwill related to Anchor, no tax effect is applied to the goodwill impairment in the fourth quarter of 2017.

*** For the fourth quarter of 2017, Weighted average diluted shares outstanding include the dilutive effects when the excluded notable items move net income/ (loss) attributable to the common shareholders from a net loss to a net income position.

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Boston Private Financial Holdings, Inc.Adam Bromley(617) 912-4386abromley@bostonprivate.com