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10 Community Bank M&A Targets, Revisited

5. Boston Private Financial Holdings

Shares of Boston Private Financial Holdings (BPFH) closed at $5.86 Wednesday, down 10% year-to-date.

The company had $6 billion in total assets as of June 30.

KBW Chris McGratty told TheStreet earlier this year that that Boston Private was "a good opportunity for investors to consider," since it had "been under a lot of stress and has raised capital from Carlyle," with the private equity investor looking to "monetize that in the next 18 months."

Carlyle Financial Services Ltd. and affiliates controlled just under 10% of Boston Private's common shares, according to a late-August filing.

Over the past year, major events for Boston Private have included the company's repayment of its remaining TARP preferred shares last June, the appointment of Clayton Deutsch as new CEO, various other board of directors and senior management changes, the consolidation of its three banking subsidiaries, and $35 million in common equity raised.

Boston Private reported second-quarter net income attributable to common shareholders of $14.3 million, or 19 cents a share, compared to a net loss of $5 million, or seven cents a share, in the second quarter of 2010. The second quarter profit mainly reflected a $2.2 million transfer from loan loss reserves. A year earlier, the company added $15 million to reserves.

Boston Private reported net recoveries during the second quarter of $650 thousand, since recoveries on previously charged-off loans exceeded newly recorded loan losses.

Nonperforming assets totaled $94.4 million, or 1.56% of total assets as of June 30 declining from 1.92% a year earlier. Loan loss reserves covered 2.24% of total loans as of June 30.

Total revenue increased 11% year-over-year, to $78.3 million in the second quarter.

Following the earnings announcement, Christopher Marinac of FIG Partners reiterated his neutral "market perform" rating for Boston Private, saying "patient investors may see a $10 stock price if they are willing to wait for the company to deliver on pledged cost reductions and then execute on moderate external growth in loans, investment management revenues, and overall profits."

The shares trade for 10 times the 2012 earnings estimate of 55 cents a share.

Out of eight analysts covering Boston Private, two rate the shares a buy, while the remaining analysts all have neutral ratings.

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