Boston Private Financial Holdings, Inc. Reports Second Quarter 2012 Results

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2012 GAAP Net Income Attributable to the Company of $14.2 million, compared to GAAP Net Income Attributable to the Company of $9.5 million in the first quarter of 2012. BPFH reported second quarter diluted earnings per share of $0.17 compared to diluted earnings per share of $0.11 in the first quarter of 2012.

On a year-over-year basis, GAAP Net Income Attributable to the Company decreased from $14.5 million in the second quarter of 2011. Earnings per share were flat on a year-over-year basis.

“While the yield environment remains challenging, our results show continued progress in our efforts to steadily build profitability,” said CEO and President Clayton G. Deutsch. “Our results reflect revenue growth, albeit below target growth rates due to the macro environment. We also continue to benefit from expense management initiatives, and a Provision for Loan Losses which reflects much improved credit quality. Our Return on Equity is now near 10%, and we continue to accumulate Tangible Common Equity.”

“We completed our restructuring program before the end of June, keeping our promise to bring all merger-related conversion and consolidation efforts to a close by the end of the first half of 2012. We are now shifting our attention to driving additional profitability gains across our Wealth Management and Private Banking businesses,” concluded Mr. Deutsch.

Revenue Growth Driven By Increase in Spread-Based Revenues and Fees

Net Interest Income in the second quarter was $46.6 million, up 4% from $44.8 million in the first quarter of 2012. Year-over-year, Net Interest Income increased 1% from $46.0 million. Fees and Other Income for the second quarter increased 2% to $28.0 million. On a year-over-year basis, Fees and Other Income decreased 9% from $30.7 million due primarily to fewer non-core gains in the second quarter of 2012 compared to the second quarter of 2011.

Net Interest Margin was 3.35% in the second quarter, up 8 basis points from 3.27% in the first quarter of 2012. Recovery of nonaccrual interest income and pre-payment penalties had a positive impact on Net Interest Margin in the quarter. On a year-over-year basis, Net Interest Margin increased five basis points from 3.30%.

Total Assets Under Management/Advisory (“AUM”) decreased to $19.1 billion, down 1% from $19.3 billion in the first quarter of 2012. AUM was flat with the second quarter of 2011. The Company experienced second quarter 2012 AUM net inflows of $16 million, as compared to AUM net inflows of $84 million in the first quarter of 2012. AUM net outflows for the second quarter of 2011 were ($147) million.

Operating Expenses Decrease in Q2

Operating Expenses (excluding restructuring costs of $0.6 million) in the second quarter were $54.7 million, down 1% from $55.5 million (excluding restructuring costs of $0.1 million) on a linked quarter basis. On a year-over-year basis, Operating Expenses (excluding restructuring costs of $4.3 million) were down 3% from $56.6 million.

“We are pleased with the decline in Operating Expenses on a year-over-year basis, largely reflecting the successful efforts of our bank restructuring program,” said David J. Kaye, Chief Financial Officer.

Provision Declines in Q2

Provision for Loan Losses in the second quarter was $1.7 million, down from $4.0 million in the first quarter of 2012. On a year-over-year basis, Provision for Loan Losses increased from a credit of ($2.2) million in the second quarter of 2011.

Nonaccrual Loans (“Nonaccruals”) decreased 7% to $67.4 million on a linked quarter basis. On a year-over-year basis, Nonaccruals declined 16% from $79.9 million. As a percentage of Total Loans, Nonaccruals were 1.32% in the second quarter of 2012, down 18 basis points from 1.50% in the first quarter of 2012. On a year-over-year basis, Nonaccruals as a percentage of Total Loans declined 49 basis points from 1.81%.

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

      Q2 12     Q1 12     Q2 11
Total Criticized Loans     $298.6M    

$306.2M
    $339.8M
Loans 30-89 Days Past Due     $14.2M     $21.4M     $6.5M
Net (Charge-Offs)/Recoveries     ($0.5M)     ($2.2M)     $0.7M
ALLL/Total Loans     1.95%     2.02%     2.24%

Regulatory Capital Increases in Q2 Due to Sale of Davidson Trust Company

In the second quarter of 2012, the Company closed on the sale of Davidson Trust Company to Bryn Mawr Bank Corporation. This transaction resulted in a one-time gain of approximately $0.8 million that flowed through discontinued operations in the second quarter of 2012. In addition, there is an estimated $2.2 million in additional consideration to be paid over an 18-month period contingent on future levels of assets under management.

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

      Q2 12     Q1 12     Q2 11
Total Risk-Based Capital     14.3%*     14.4%     15.2%
Tier I Risk-Based Capital     12.2%*     12.0%     12.1%
Tier I Leverage Capital     9.3%*     8.8%     8.1%
TCE/TA     7.4%     7.2%     6.9%
TCE/Risk Weighted Assets    

9.9%*
    9.8%     10.2%

*June 30, 2012 data is presented based on estimated data.

Dividend PaymentsConcurrent with the release of the second quarter 2012 earnings, the Board of Directors of the Company declared a cash dividend to shareholders of $0.01 per share. The record date for this dividend is August 16, 2012, and the payment date is August 30, 2012.

Non-GAAP Financial MeasuresThe Company uses certain non-GAAP financial measures, such as the TCE/TA and TCE/Risk Weighted Assets ratios, and Operating Expenses excluding restructuring charges, 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 CallManagement will hold a conference call at 8 a.m. Eastern Time on Thursday, July 19, to discuss the financial results in more detail. To access the call:

Dial In #: (866) 843-0890International Dial In #: (412) 317-9250Elite Entry Number: 0616713

Replay Information:Available from July 19, 2012 at 12 noon until July 27, 2012Dial In #: (877) 344-7529International Dial In #: (412) 317-0088Conference Number: 10016166

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 with Wealth Management and Private Banking affiliates in Boston, New York, Los Angeles, San Francisco and Seattle. The Company has a $6 billion Private Banking balance sheet, and manages over $19 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.

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 locally operated and wholly-owned subsidiary of BPFH. The information reported in this press release is related to the performance and results of BPFH.

Statements in this press release that are not historical facts are 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 a continuing deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers’ ability to service and repay our loans; 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, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; 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; 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. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
   
(In thousands, except share and per share data) June 30, 2012 March 31, 2012 June 30, 2011
Assets:
Cash and cash equivalents $ 102,826 $ 131,136 $ 472,035
Investment securities available for sale 734,362 825,614 791,085
Loans held for sale 12,336 3,727 4,625
Total loans 5,091,128 4,849,048 4,410,440
Less: Allowance for loan losses   99,054     97,902     98,742  
Net loans 4,992,074 4,751,146 4,311,698
Other real estate owned (“OREO”) 3,054 3,886 14,485
Stock in Federal Home Loan Banks 43,089 42,639 44,785
Premises and equipment, net 28,919 29,432 27,168
Goodwill 110,180 110,180 110,180
Intangible assets, net 26,389 27,479 30,814
Fees receivable 8,363 9,042 8,481
Accrued interest receivable 16,667 16,968 16,881
Deferred income taxes, net 64,968 66,105 77,182
Other assets 121,016 120,318 118,091
Assets of discontinued operations (1)   -     10,890     10,268  
Total assets $ 6,264,243   $ 6,148,562   $ 6,037,778  
Liabilities:
Deposits $ 4,595,758 $ 4,602,451 $ 4,551,319
Securities sold under agreements to repurchase 100,842 108,551 122,448
Federal funds purchased 85,000 - -
Federal Home Loan Bank borrowings 616,749 582,551 523,695
Junior subordinated debentures 174,397 178,645 188,645
Other liabilities 96,654 91,827 90,042
Liabilities of discontinued operations (1)   -     1,392     1,449  
Total liabilities   5,669,400     5,565,417     5,477,598  
Redeemable Noncontrolling Interests 19,221 21,604 21,210
The Company’s Shareholders’ Equity:
Preferred stock, $1.00 par value; authorized: 2,000,000 shares;

Series B, issued and outstanding (contingently convertible): 401 shares at June 30, 2012, March 31, 2012, and June 30, 2011; liquidation value: $100,000 per share
58,089 58,089 58,089

Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 78,822,462 shares at June 30, 2012; 78,151,609 shares at March 31, 2012; and 77,942,074 shares at June 30, 2011
78,822 78,152 77,942
Additional paid-in capital 641,992 642,276 654,297
Accumulated deficit (206,351 ) (220,512 ) (254,758 )
Accumulated other comprehensive income   3,070     3,536     3,400  
Total shareholders’ equity   575,622     561,541     538,970  
Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,264,243   $ 6,148,562   $ 6,037,778  
 

Boston Private Financial Holdings, Inc.Selected Financial Data(Unaudited)
       
Three Months Ended Six Months Ended
(In thousands, except share and per share data) 6/30/2012   3/31/2012   6/30/2011 6/30/2012 6/30/2011
Interest and dividend income:
Loans $ 53,402 $ 51,946 $ 54,577 $ 105,349 $ 107,148
Taxable investment securities 1,078 1,256 1,393 2,335 2,773
Non-taxable investment securities 752 848 928 1,600 2,017
Mortgage-backed securities 1,604 1,603 1,841 3,206 3,648
Federal funds sold and other   72   149     281     221   600

Total interest and dividend income
  56,908   55,802     59,020     112,711   116,186
Interest expense:
Deposits 4,435 4,903 6,301 9,338 12,951
Federal Home Loan Bank borrowings 3,747 3,945 4,261 7,692 8,653
Junior subordinated debentures 1,690 1,752 1,905 3,443 3,797
Repurchase agreements and other short-term borrowings   440   434     519     874   1,040
Total interest expense   10,312   11,034     12,986     21,347   26,441
Net interest income 46,596 44,768 46,034 91,364 89,745
Provision/ (credit) for loan losses   1,700   4,000     (2,190 )   5,700   11,160
Net interest income after provision for loan losses   44,896   40,768     48,224     85,664   78,585
Fees and other income:
Investment management and trust fees 15,484 15,238 16,337 30,722 32,420
Wealth advisory fees 9,183 9,236 8,616 18,419 17,049
Other banking fee income 984 1,017 1,287 2,000 2,520
Gain on repurchase of debt 715 879 1,838 1,594 1,838
Gain on sale of investments, net 839 13 167 853 586
Gain on sale of loans, net 430 421 1,125 851 1,511
Gain/(loss) on OREO, net 366 (41 ) 844 325 954
Other   8   691     438     699   2,230
Total fees and other income   28,009   27,454     30,652     55,463   59,108
Operating expense:
Salaries and employee benefits 34,471 36,912 34,775 71,383 70,411
Occupancy and equipment 7,931 7,265 7,332 15,196 14,560
Professional services 3,021 2,939 5,284 5,960 10,427
Marketing and business development 1,779 1,329 1,863 3,108 3,297
Contract services and data processing 1,355 1,188 1,219 2,543 2,353
Amortization of intangibles 1,090 1,090 1,397 2,181 2,555
FDIC insurance 982 849 1,294 1,831 3,530
Restructuring expense 564 135 4,304 699 6,286
Other   4,142   3,920     3,442     8,061   7,552
Total operating expense   55,335   55,627     60,910     110,962   120,971
Income/(loss) before income taxes 17,570 12,595 17,966 30,165 16,722
Income tax expense/(benefit)   5,240   3,851     4,197     9,091   4,017
Net income/(loss) from continuing operations 12,330 8,744 13,769 21,074 12,705
Net income/(loss) from discontinued operations (1)   2,590   1,554     1,553     4,144   3,216
Net income/(loss) before attribution to noncontrolling interests 14,920 10,298 15,322 25,218 15,921
Less: Net income/ (loss) attributable to noncontrolling interests   759   793     777     1,552   1,525
Net income/(loss) attributable to the Company $ 14,161 $ 9,505   $ 14,545   $ 23,666 $ 14,396
 

Boston Private Financial Holdings, Inc.Selected Financial Data(Unaudited)
       
(In thousands, except share and per share data) Three Months Ended Six Months Ended
PER SHARE DATA: June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Calculation of Income/(Loss) for EPS:
Net income/(loss) attributable to the Company $ 14,161 $ 9,505

$
14,545

$

23,666

$
14,396
Adjustments to Net Income/(Loss) Attributable to the Company to Arrive at Net Income/(Loss) Attributable to Common Shareholders (3)   71     (178 )   (225 )   (107 )   (518 )
Net Income/(Loss) Attributable to the Common Shareholders

 
14,232

 
9,327

 
14,320

 
23,559

 
13,878
LESS: Amount allocated to participating securities   (1,471 )   (932 )   (1,465 )   (2,402 )   (1,325 )
Net Income/(Loss) Attributable to the Common Shareholders, after allocation to participating securities $ 12,761   $ 8,395   $ 12,855   $ 21,157   $ 12,553  
 
End of Period Common Shares Outstanding

 
78,822,462

 
78,151,609

 
77,942,074
 

Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities 85,099,821 84,859,038 84,297,014 84,980,095 83,913,178
LESS: Participating securities (9,295,848 ) (9,226,058 ) (9,102,327 ) (9,261,146 ) (8,979,120 )

PLUS: Dilutive potential common shares
  701,119     799,871     158,492     714,158     278,591  
Weighted Average Diluted Shares (2)   76,505,092     76,432,851     75,353,179     76,433,107     75,212,649  
 

Diluted Total Earnings/(Loss) per Share
$ 0.17 $ 0.11 $ 0.17 $ 0.28 $ 0.17
 

Boston Private Financial Holdings, Inc.Selected Financial Data(Unaudited)
   
(In thousands, except per share data)
FINANCIAL DATA:

June 30, 2012

March 31, 2012

June 30, 2011
Book Value Per Common Share $ 6.57 $ 6.44 $ 6.17
Tangible Book Value Per Share (4) $ 5.26 $ 5.05 $ 4.76
Market Price Per Share $ 8.93 $ 9.91 $ 6.58
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
Private Banking $ 3,680,000 $ 3,696,000 $ 3,739,000
Investment Managers 7,982,000 8,047,000 8,295,000
Wealth Advisory 7,474,000 7,579,000 7,175,000
Less: Inter-company Relationship   (19,000 )   (20,000 )   (20,000 )
Assets Under Management and Advisory of Continuing Operations

$
19,117,000 $ 19,302,000 $ 19,189,000
Assets Under Management and Advisory of Discontinued Operations (1)   -     1,137,000     1,009,000  
Total Assets Under Management and Advisory

$
19,117,000  

$
20,439,000  

$
20,198,000  
 
FINANCIAL RATIOS:
Total Equity/Total Assets 9.19 % 9.13 % 8.93 %
Tangible Common Equity/Tangible Assets (4) 7.39 % 7.19 % 6.88 %
Tangible Common Equity/Risk Weighted Assets (4) 9.87 % 9.78 % 10.22 %
Allowance for Loan Losses/Total Loans 1.95 % 2.02 % 2.24 %
Allowance for Loan Losses/Nonaccrual Loans

147
%

135
%

124

 
%
Return on Average Assets - Three Months Ended (Annualized) 0.92 % 0.62 % 0.96 %
Return on Average Equity - Three Months Ended (Annualized) 9.96 % 6.74 % 10.98 %

Efficiency Ratio - Three Months Ended (Annualized)
72.42 % 75.14 % 77.58 %
 

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: June 30, March 31, June 30, June 30, March 31, June 30, June 30,   March 31, June 30,
2012   2012   2011 2012   2012   2011 2012   2012   2011
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 337,933 $ 376,206 $ 365,043 $ 1,078 $ 1,256 $ 1,393 1.28 % 1.34 % 1.53 %
Non-taxable investment securities (5) 186,030 194,410 187,379 1,174 1,323 1,401 2.52 % 2.72 % 2.99 %
Mortgage-backed securities 245,043 251,989 228,578 1,604 1,603 1,841 2.62 % 2.54 % 3.22 %
Federal funds sold and other   122,977     130,771     461,832   72     149     281 0.24 %   0.46 %   0.24 %
Total Cash and Investments   891,983     953,376     1,242,832   3,928     4,331     4,916 1.76 %   1.82 %   1.58 %
Loans: (6)
Commercial and Construction (5) 2,691,458 2,591,377 2,400,681 34,470 32,693 33,819 5.15 % 5.07 % 5.49 %
Residential Mortgage 1,926,628 1,857,838 1,742,769 17,979 17,826 19,131 3.73 % 3.84 % 4.39 %
Home Equity and Other Consumer   292,353     320,160     316,268   2,336     2,760     2,983 3.23 %   3.45 %   3.76 %
Total Loans   4,910,439     4,769,375     4,459,718   54,785     53,279     55,933 4.48 %   4.48 %   4.94 %
Total Earning Assets   5,802,422   5,722,751   5,702,550   58,713     57,610     60,849 4.06 %   4.04 %   4.21 %
Less: Allowance for Loan Losses 100,236 97,471 103,233
Cash and due From Banks (Non-Interest Bearing) 73,153 112,844 31,690

Other Assets (7)
  405,190     427,083     460,181
TOTAL AVERAGE ASSETS $ 6,180,529   $ 6,165,207   $ 6,091,188

AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Deposits:
Savings and NOW $ 501,759 $ 533,075 $ 517,271 $ 201 $ 331 $ 358 0.16 % 0.25 % 0.28 %
Money Market 2,067,625 1,983,558 1,910,004 2,147 2,136 2,787 0.42 % 0.43 % 0.59 %
Certificates of Deposit   837,295     898,458     1,029,713   2,087     2,436     3,156 1.00 %   1.09 %   1.23 %
Total Deposits 3,406,679 3,415,091 3,456,988 4,435 4,903 6,301 0.52 % 0.58 % 0.73 %
Junior Subordinated Debentures 177,566 180,817 192,416 1,690 1,752 1,905 3.77 % 3.83 % 3.96 %
FHLB Borrowings and Other   707,315     709,611     644,084   4,187     4,379     4,780 2.34 %   2.44 %   2.94 %
Total Interest-Bearing Liabilities   4,291,560     4,305,519     4,293,488   10,312     11,034     12,986 0.96 %   1.02 %   1.21 %
Non-interest Bearing Demand Deposits 1,190,428 1,167,623 1,128,330

Payables and Other Liabilities (7)
  109,578     106,536     118,707
Total Average Liabilities 5,591,566 5,579,678 5,540,525
Redeemable Noncontrolling Interests 20,254 21,701 20,613

Average Shareholders' Equity
  568,709     563,828     530,050

TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
$ 6,180,529   $ 6,165,207   $ 6,091,188

Net Interest Income - on a Fully Taxable Equivalent Basis (FTE)
$ 48,401 $ 46,576 $ 47,863

Less: FTE Adjustment (5)
  1,805     1,808     1,829
Net Interest Income (GAAP Basis) $ 46,596   $ 44,768   $ 46,034
Interest Rate Spread 3.10 % 3.02 % 3.00 %
Net Interest Margin 3.35 % 3.27 % 3.30 %
 

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: June 30, June 30, June 30, June 30, June 30, June 30,
2012 2011 2012 2011 2012 2011
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 357,533 $ 361,988 $ 2,335 $ 2,773 1.31 % 1.52 %
Non-taxable investment securities (5) 190,220 194,789 2,497 3,043 2.63 % 3.12 %
Mortgage-backed securities 248,516 231,887 3,206 3,648 2.58 % 3.15 %
Federal funds sold and other   126,477   497,028   221   600 0.35 % 0.24 %
Total Cash and Investments   922,746   1,285,692   8,259   10,064 1.79 % 1.57 %
Loans: (6)
Commercial and Construction (5) 2,641,302 2,423,320 67,164 66,134 5.11 % 5.42 %
Residential Mortgage 1,892,347 1,714,044 35,806 37,860 3.78 % 4.42 %
Home Equity and Other Consumer   306,260   306,302   5,096   5,863 3.35 % 3.84 %
Total Loans   4,839,909   4,443,666   108,066   109,857 4.48 % 4.93 %
Total Earning Assets   5,762,655   5,729,358   116,325   119,921 4.05 % 4.17 %
Less: Allowance for Loan Losses 98,854 101,460
Cash and due From Banks (Non-Interest Bearing) 88,808 32,644
Other Assets (7)   431,091   462,570
TOTAL AVERAGE ASSETS $ 6,183,700 $ 6,123,112

AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Deposits:
Savings and NOW $ 517,291 $ 529,671 $ 532 $ 732 0.21 % 0.28 %
Money Market 2,020,871 1,873,025 4,283 5,602 0.43 % 0.60 %
Certificates of Deposit   882,885   1,056,952   4,523   6,617 1.03 % 1.26 %
Total Deposits 3,421,047 3,459,648 9,338 12,951 0.55 % 0.75 %
Junior Subordinated Debentures 179,355 192,938 3,443 3,797 3.80 % 3.94 %
FHLB Borrowings and Other   708,463   670,910   8,566   9,693 2.39 % 2.87 %
Total Interest-Bearing Liabilities   4,308,865   4,323,496   21,347   26,441 0.99 % 1.23 %
Noninterest Bearing Demand Deposits 1,175,414 1,135,483
Payables and Other Liabilities (7)   111,551   118,575
Total Average Liabilities 5,595,830 5,577,554
Redeemable Noncontrolling Interests 20,886 20,241

Average Shareholders' Equity
  566,984   525,317

TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
$ 6,183,700 $ 6,123,112
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 94,978 $ 93,480

Less: FTE Adjustment (5)
  3,614   3,735
Net Interest Income (GAAP Basis) $ 91,364 $ 89,745
Interest Rate Spread 3.06 % 2.94 %
Net Interest Margin 3.31 % 3.25 %
 

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

 
   
(In Thousands)
LOAN DATA (8): June 30, 2012 March 31, 2012 June 30, 2011
Commercial and Industrial Loans:
New England $ 666,145 $ 572,091 $ 480,452
San Francisco Bay 66,586 74,100 60,065
Southern California 38,625 39,508 45,001
Pacific Northwest 47,014 41,462 34,326
Eliminations and other, net   -   -   (116 )
Total Commercial and Industrial Loans $ 818,370 $ 727,161 $ 619,728  
Commercial Real Estate Loans:
New England $ 663,038 $ 667,014 $ 625,328
San Francisco Bay 679,358 691,644 670,469
Southern California 335,924 282,407 170,496
Pacific Northwest   145,253   136,105   102,295  
Total Commercial Real Estate Loans $ 1,823,573 $ 1,777,170 $ 1,568,588  
Construction and Land Loans:
New England $ 108,874 $ 99,387 $ 78,149
San Francisco Bay 44,628 40,390 42,286
Southern California 7,492 5,899 3,215
Pacific Northwest   3,128   3,979   6,920  
Total Construction and Land Loans $ 164,122 $ 149,655 $ 130,570  
Residential Mortgage Loans:
New England $ 1,247,117 $ 1,246,700 $ 1,217,654
San Francisco Bay 392,340 335,753 321,110
Southern California 281,113 231,284 177,320
Pacific Northwest   71,117   65,411   51,587  
Total Residential Mortgage Loans $ 1,991,687 $ 1,879,148 $ 1,767,671  
Home Equity Loans:
New England $ 84,790 $ 85,388 $ 91,041
San Francisco Bay 41,557 43,064 52,132
Southern California 7,484 6,500 4,910
Pacific Northwest   2,727   4,006   5,445  
Total Home Equity Loans $ 136,558 $ 138,958 $ 153,528  
Other Consumer Loans:
New England $ 135,221 $ 152,190 $ 140,006
San Francisco Bay 11,992 11,787 14,330
Southern California 7,570 9,376 12,199
Pacific Northwest 1,338 1,472 1,180
Eliminations and other, net   697   2,131   2,640  
Total Other Consumer Loans $ 156,818 $ 176,956 $ 170,355  
Total Loans
New England $ 2,905,185 $ 2,822,770 $ 2,632,630
San Francisco Bay 1,236,461 1,196,738 1,160,392
Southern California 678,208 574,974 413,141
Pacific Northwest 270,577 252,435 201,753
Eliminations and other, net   697   2,131   2,524  
Total Loans $ 5,091,128 $ 4,849,048 $ 4,410,440  
   

Boston Private Financial Holdings, Inc.Selected Financial Data(Unaudited)
 
(In Thousands)
CREDIT QUALITY (8): June 30, 2012 March 31, 2012 June 30, 2011
Special Mention Loans:
New England $ 35,308 $ 53,929 $ 55,051
San Francisco Bay 31,508 40,655 68,262
Southern California 20,544 24,784 16,158
Pacific Northwest   5,573     8,925     17,029  
Total Special Mention Loans $ 92,933   $ 128,293   $ 156,500  
Accruing Classified Loans (9):
New England $ 50,343 $ 25,002 $ 17,213
San Francisco Bay 62,736 57,629 57,420
Southern California 20,098 19,374 25,145
Pacific Northwest   5,084     3,317     3,697  
Total Accruing Classified Loans $ 138,261   $ 105,322   $ 103,475  
Nonaccruing Loans:
New England $ 29,733 $ 34,629 $ 29,095
San Francisco Bay 28,350 28,721 31,753
Southern California 7,273 7,572 13,226
Pacific Northwest   2,001     1,744     5,868  
Total Nonaccruing Loans $ 67,357   $ 72,666   $ 79,942  
Other Real Estate Owned:
New England $ 191 $ 98 $ 1,498
San Francisco Bay 2,383 2,194 10,974
Southern California - 1,114 345
Pacific Northwest   480     480     1,668  
Total Other Real Estate Owned $ 3,054   $ 3,886   $ 14,485  
Loans 30-89 Days Past Due and Accruing:
New England (10) $ 3,272 $ 5,304 $ 3,060
San Francisco Bay 7,270 10,824 2,304
Southern California 3,058 5,130 1,137
Pacific Northwest   565     99     -  
Total Loans 30-89 Days Past Due and Accruing $ 14,165   $ 21,357   $ 6,501  
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ (576 ) $ (341 ) $ (127 )
San Francisco Bay 117 (1,980 ) (2,036 )
Southern California (38 ) (72 ) 3,552
Pacific Northwest   (51 )   181     (739 )
Total Net Loans (Charged-off)/ Recovered $ (548 ) $ (2,212 ) $ 650  
Loans (Charged-off)/ Recovered, Net for the Six Months Ended:
New England $ (917 ) $ (1,401 )
San Francisco Bay (1,863 ) (13,325 )
Southern California (110 ) 4,638
Pacific Northwest   130     (733 )
Total Net Loans (Charged-off)/ Recovered $ (2,760 ) $ (10,821 )
 
FOOTNOTES:
   

(1

)
In the second quarter of 2012, the Company completed the sale of its affiliate Davidson Trust Company. In 2009, the Company completed the sale of its affiliates Boston Private Value Investors, Sand Hill Advisors, RINET, Gibraltar, and Westfield Capital Management. Accordingly, prior period and current financial information related to the divested companies are included with discontinued operations.
 

(2

)

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 to 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 Earning Per Share calculation. The potential dilutive shares relate to: unexercised stock options, unvested non-participating restricted stock, unexercised stock warrants, and unconverted Convertible Trust Preferred securities. The amount of shares that were anti-dilutive for the three and six months ended June 30, 2012 was 1.3 million in both periods. The amount of shares that were anti-dilutive for the three and six months ended June 30, 2011 were 1.7 million in both periods. The amount of shares that were anti-dilutive for the three months ended March 31, 2012 was 1.4 million. See Part II. Item 8. "Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 for additional information.

 
 

(3

)
Adjustments to Net Income/(Loss) Attributable to the Company to arrive at Net Income/(Loss) Attributable to the Common Shareholders, as presented in these tables, include decrease/ (increase) in Noncontrolling Interests Redemption Value and Dividends on Participating Securities.
 

(4

)
The Company uses certain non-GAAP financial measures, such as: Tangible Book Value; the Tangible Common Equity ("TCE") to Tangible Assets ("TA") ratio; the TCE to Risk Weighted Assets ratio; pre-tax, pre-provision earnings; and operating expenses excluding restructuring costs 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 the Non-GAAP TCE to Risk Weighted Assets 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 Goodwill and Intangible Assets, net and includes the difference between Redemption Value and value per ARB 51 for Redeemable Non-controlling Interests.
 
June 30, 2012 March 31, 2012 June 30, 2011

(In thousands, except per share data)
Total Balance Sheet Assets $ 6,264,243 $ 6,148,562 $ 6,037,778
LESS: Goodwill and Intangible Assets, net *   (136,569 )   (144,456 )   (147,952 )
Tangible Assets (non-GAAP) 6,127,674 6,004,106 5,889,826
Total Equity 575,622 561,541 538,970
LESS: Goodwill and Intangible Assets, net (136,569 ) (144,456 ) (147,952 )
ADD: Difference between Redemption Value of Non-controlling Interests and value under ARB 51   13,937     14,319     14,170  
Total adjusting items (122,632 ) (130,137 ) (133,782 )
Tangible Common Equity (non-GAAP) 452,990 431,404 405,188
Total Equity/Total Assets 9.19 % 9.13 % 8.93 %
Tangible Common Equity/Tangible Assets (non-GAAP) 7.39 % 7.19 % 6.88 %
 
Total Risk Weighted Assets ** 4,589,718 4,410,389 3,965,672
Tangible Common Equity/Total Risk Weighted Assets (non-GAAP) 9.87 % 9.78 % 10.22 %
 
End of Period Shares outstanding

78,822

78,152

77,942
EOP Carlyle Common Convertible Shares  

7,261
   

7,261
   

7,261
 
Common Equivalent Shares  

86,084
   

85,413
   

85,203
 
 
Book Value Per Common Share $ 6.57 $ 6.44 $ 6.17
Tangible Book Value Per Share (non-GAAP) $ 5.26 $ 5.05 $ 4.76
 
* For the TCE to TA ratio, Goodwill and Intangible Assets, net includes Goodwill and Intangible Assets of discontinued operations for March 31, 2012 and June 30, 2011, which are included on the consolidated balance sheet with Assets of Discontinued Operations.

** Risk Weighted Assets for June 30, 2012 is presented based on estimated data.
 
Reconciliations from the Company's GAAP net income attributable to the Company to Non-GAAP pre-tax, pre-provision earnings and from GAAP operating expenses to Non-GAAP operating expenses excluding restructuring costs are presented below:
 
(In Thousands) June 30, 2012 March 31, 2012 June 30, 2011
Net income/(loss) attributable to the Company (GAAP) $ 14,161 $ 9,505 $ 14,545
ADD BACK: Provision/ (credit) for loan losses 1,700 4,000 (2,190 )
ADD BACK: Income tax expense/(benefit)   5,240     3,851     4,197  
Pre-tax, pre-provision earnings (Non-GAAP) $ 21,101 $ 17,356 $ 16,552
 
Total operating expense (GAAP) $ 55,335 $ 55,627 $ 60,910
LESS: Restructuring expense   564     135     4,304  
Total operating expenses (excluding restructuring costs) (Non-GAAP) $ 54,771 $ 55,492 $ 56,606
 

(5

)
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.
 

(6

)
Includes Loans Held for Sale and Nonaccrual Loans.
 

(7

)
Assets and liabilities of discontinued operations are included in other assets and other liabilities in the average balance sheet presentation.
 

(8

)
The concentration of the Private Banking loan data and credit quality is based on the location of the lender's regional offices. Net loans from the Holding 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”.
 

(9

)

Accruing classified loans include loans that are classified as substandard but are still accruing interest income. The Bank 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.
 

(10

)
In addition to loans 30-89 days past due and accruing, at June 30, 2012 and March 31, 2012, the Company had two loans totaling less than $0.1 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. There were no loans more than 90 days past due and still on accrual status at June 30, 2011.

Copyright Business Wire 2010

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