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

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported third quarter 2012 GAAP Net Income Attributable to the Company of $16.5 million, compared to GAAP Net Income Attributable to the Company of $14.2 million in the second quarter of 2012. BPFH reported third quarter diluted earnings per share of $0.19 compared to diluted earnings per share of $0.17 in the second quarter of 2012.

On a year-over-year basis, GAAP Net Income Attributable to the Company increased from $11.7 million in the third quarter of 2011. Earnings per share increased from $0.14 on a year-over-year basis.

“Our third quarter results reflect the three management initiatives we’re executing to offset continuing pressure on Net Interest Income,” said Clayton G. Deutsch, CEO and President. “These initiatives are to place greater emphasis on growing our fee-based businesses; continue to improve our credit quality; and continue to tightly manage expenses. This month we have implemented a senior executive restructuring that will enable us to save in excess of $5 million per year of senior executive costs. We remain focused on these three initiatives as we continue our efforts to build earnings,” concluded Mr. Deutsch.

Net Interest Income Flat, Fee Revenue Up in Q3

Net Interest Income in the third quarter was $46.4 million, down 1% from $46.6 million in the second quarter of 2012. Year-over-year, Net Interest Income increased 3% from $45.1 million. Fees and Other Income for the third quarter increased 2% to $28.6 million from $28.0 million in the second quarter of 2012. On a year-over-year basis, Fees and Other Income decreased 4% from $29.7 million.

Net Interest Margin was 3.11% in the third quarter, down 24 basis points from 3.35% in the second quarter of 2012. Net Interest Margin in the third quarter was negatively impacted by a short term deposit that inflated Average Assets. In addition, Net Interest Margin in the second quarter of 2012 had the positive effect of pre-payment penalties and the recovery of nonaccrual interest income. On a year-over-year basis, Net Interest Margin decreased 14 basis points from 3.25%.

Total Assets Under Management/Advisory (“AUM”) increased to $20.1 billion, up 5% from $19.1 billion in the second quarter of 2012. AUM increased 16% from $17.3 billion in the third quarter of 2011 due to market appreciation and net positive flows. The Company experienced third quarter 2012 AUM net inflows of $223 million, as compared to AUM net inflows of $16 million in the second quarter of 2012. AUM net outflows for the third quarter of 2011 were ($236) million.

Operating Expenses Increase in Q3 Due to Management Restructuring

Operating Expenses (excluding restructuring costs of $3.6 million) in the third quarter of 2012 were $54.6 million and were flat (excluding second quarter restructuring costs of $0.6 million) on a linked quarter basis. On a year-over-year basis, Operating Expenses (excluding third quarter 2011 restructuring costs of $1.1 million) were up 1% from $53.8 million.

The $3.6 million in restructuring charges resulted from severance costs due to changes made in the management structure at the Holding Company and at Boston Private Bank & Trust Company, the Company’s largest subsidiary.

Provision Declines in Q3 Due Primarily to Improvements in Criticized Loans

Provision for Loan Losses in the third quarter was a credit of ($4.0) million, down from a provision of $1.7 million in the second quarter of 2012. On a year-over-year basis, Provision for Loan Losses decreased from a provision of $4.5 million in the third quarter of 2011.

Nonaccrual Loans (“Nonaccruals”) increased 9% to $73.4 million on a linked quarter basis. On a year-over-year basis, Nonaccruals were flat at $73.4 million. As a percentage of Total Loans, Nonaccruals were 1.48% in the third quarter of 2012, up 16 basis points from 1.32% in the second quarter of 2012. On a year-over-year basis, Nonaccruals as a percentage of Total Loans declined 16 basis points from 1.64%.

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

                   
(In millions)    

September 30, 2012
   

June 30, 2012
   

September 30, 2011
Total Criticized Loans     $275.5     $298.6     $355.4
Total Loans 30-89 Days Past Due and Accruing (10)     $9.5     $14.2     $20.9
Total Net Loans (Charged-off)/Recovered     ($3.9)     ($0.5)     ($4.5)
Allowance for Loan Losses/Total Loans     1.83%     1.95%     2.20%
           

Capital Ratios Strengthen in Q3

Both regulatory risk-based capital ratios and tangible common equity ratios increased on a linked quarter basis. The Tier 1 Leverage ratio declined slightly due to a larger Average Balance Sheet.

“Strong Net Income and a reduction in the disallowed portion of our Deferred Tax Asset drove the 90 basis point increase in our Tier 1 Risk-Based Capital ratio in the third quarter,” said David J. Kaye, Chief Financial Officer.

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

September 30, 2012
    June 30, 2012     September 30, 2011
Total Risk-Based Capital*     14.7%     14.3%     15.5%
Tier I Risk-Based Capital*     13.1%     12.2%     12.5%
Tier I Leverage Capital*     9.2%     9.3%     8.6%
TCE/TA     7.7%     7.4%     7.1%
TCE/Risk Weighted Assets*     10.4%     9.9%     10.4%

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

Dividend Payments

Concurrent with the release of the third 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 November 16, 2012, and the payment date is November 30, 2012.

Non-GAAP Financial Measures

The 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 Call

Management will hold a conference call at 8 a.m. Eastern Time on Thursday, October 18, to discuss the financial results in more detail. To access the call:

Dial In #: (877) 883-0383International Dial In #: (412) 902-6506Elite Entry Number: 7158329

Replay Information:Available from October 18 at 12 noon until October 26, 2012Dial In #: (877) 344-7529International Dial In #: (412) 317-0088Conference Number: 10019250

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 $20 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 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 continued weakness 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) September 30, 2012 June 30, 2012 September 30, 2011
Assets:
Cash and cash equivalents $ 83,585 $ 102,826 $ 329,585
Investment securities available for sale 755,125 734,362 846,267
Loans held for sale 135,169 12,336 13,275
Total loans 4,967,607 5,091,128 4,488,719
Less: Allowance for loan losses   91,129     99,054     98,759  
Net loans 4,876,478 4,992,074 4,389,960
Other real estate owned (“OREO”) 3,186 3,054 9,161
Stock in Federal Home Loan Banks 42,886 43,089 44,248
Premises and equipment, net 28,390 28,919 28,707
Goodwill 110,180 110,180 110,180
Intangible assets, net 25,306 26,389 29,690
Fees receivable 9,460 8,363 7,998
Accrued interest receivable 16,731 16,667 16,504
Deferred income taxes, net 62,964 64,968 75,570
Other assets 123,324 121,016 112,627
Assets of discontinued operations (1)   -     -     10,549  
Total assets $ 6,272,784   $ 6,264,243   $ 6,024,321  
Liabilities:
Deposits $ 4,662,794 $ 4,595,758 $ 4,534,076
Securities sold under agreements to repurchase 106,713 100,842 108,294
Federal funds purchased 85,000 85,000 -
Federal Home Loan Bank borrowings 552,946 616,749 527,481
Junior subordinated debentures 158,647 174,397 188,645
Other liabilities 91,407 96,654 90,664
Liabilities of discontinued operations (1)   -     -     1,622  
Total liabilities   5,657,507     5,669,400     5,450,782  
Redeemable Noncontrolling Interests 19,675 19,221 21,885
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 September 30, 2012, June 30, 2012, and September 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: 78,929,750 shares at September 30, 2012; 78,822,462 shares at June 30, 2012; and 78,004,135 shares at September 30, 2011 78,930 78,822 78,004
Additional paid-in capital 644,801 641,992 655,165
Accumulated deficit (189,838 ) (206,351 ) (243,079 )
Accumulated other comprehensive income   3,620     3,070     3,475  
Total shareholders’ equity   595,602     575,622     551,654  
Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,272,784   $ 6,264,243   $ 6,024,321  
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
      Three Months Ended     Nine Months Ended
(In thousands, except share and per share data)   9/30/2012       6/30/2012     9/30/2011     9/30/2012     9/30/2011
Interest and dividend income:
Loans $ 52,533 $ 53,402 $ 53,043 $ 157,882 $ 160,190
Taxable investment securities 890 1,078 1,456 3,225 4,230
Non-taxable investment securities 782 752 905 2,382 2,922
Mortgage-backed securities 1,537 1,604 1,873 4,743 5,521
Federal funds sold and other   290     72   242     511   842
Total interest and dividend income   56,032     56,908   57,519     168,743   173,705
Interest expense:
Deposits 4,206 4,435 5,921 13,544 18,871
Federal Home Loan Bank borrowings 3,501 3,747 4,203 11,193 12,856
Junior subordinated debentures 1,507 1,690 1,851 4,950 5,648
Repurchase agreements and other short-term borrowings   452     440   485     1,326   1,526
Total interest expense   9,666     10,312   12,460     31,013   38,901
Net interest income 46,366 46,596 45,059 137,730 134,804
Provision/ (credit) for loan losses   (4,000 )   1,700   4,500     1,700   15,660
Net interest income after provision for loan losses   50,366     44,896   40,559     136,030   119,144
Fees and other income:
Investment management and trust fees 15,906 15,484 16,161 46,628 48,581
Wealth advisory fees 9,495 9,183 8,623 27,914 25,672
Other banking fee income 1,250 984 1,339 3,250 3,859
Gain on repurchase of debt 976 715 - 2,570 1,838
Gain on sale of investments, net 25 839 103 878 689
Gain on sale of loans, net 648 430 386 1,499 1,897
Gain/(loss) on OREO, net (104 ) 366 3,156 221 4,110
Other   408     8   (44 )   1,107   2,186
Total fees and other income   28,604     28,009   29,724     84,067   88,832
Operating expense:
Salaries and employee benefits 34,688 34,471 33,796 106,071 104,207
Occupancy and equipment 8,078 7,931 7,519 23,274 22,079
Professional services 3,455 3,021 3,634 9,415 14,062
Marketing and business development 1,346 1,779 1,473 4,454 4,770
Contract services and data processing 1,446 1,355 1,150 3,989 3,503
Amortization of intangibles 1,082 1,090 1,124 3,263 3,679
FDIC insurance 1,138 982 1,356 2,969 4,887
Restructuring expense 3,581 564 1,116 4,280 7,402
Other   3,336     4,142   3,748     11,397   11,298
Total operating expense   58,150     55,335   54,916     169,112   175,887
Income/(loss) before income taxes 20,820 17,570 15,367 50,985 32,089
Income tax expense/(benefit)   5,124     5,240   4,542     14,215   8,559
Net income/(loss) from continuing operations 15,696 12,330 10,825 36,770 23,530
Net income/(loss) from discontinued operations (1)   1,672     2,590   1,594     5,816   4,810
Net income/(loss) before attribution to noncontrolling interests 17,368 14,920 12,419 42,586 28,340
Less: Net income/ (loss) attributable to noncontrolling interests   855     759   740     2,407   2,265
Net income/(loss) attributable to the Company $ 16,513   $ 14,161 $ 11,679   $ 40,179 $ 26,075
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
(In thousands, except share and per share data)       Three Months Ended     Nine Months Ended
PER SHARE DATA:   9/30/2012       6/30/2012       9/30/2011     9/30/2012       9/30/2011  
Calculation of Income/(Loss) for EPS:
Net income/(loss) attributable to the Company $ 16,513 $ 14,161 $ 11,679 $ 40,179 $ 26,075
Adjustments to Net Income/(Loss) Attributable to the Company to Arrive at Net Income/(Loss) Attributable to Common Shareholders (3)   (435 )   71     (285 )   (542 )   (803 )
Net Income/(Loss) Attributable to the Common Shareholders 16,078 14,232 11,394

39,637

25,272
LESS: Amount allocated to participating securities   (1,617 )   (1,471 )   (1,167 )   (4,009 )   (2,484 )
Net Income/(Loss) Attributable to the Common Shareholders, after allocation to participating securities $ 14,461   $ 12,761   $ 10,227   $ 35,628   $ 22,788  
 
End of Period Common Shares Outstanding 78,929,750 78,822,462 78,004,135
 
Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities 86,180,999 85,099,821 84,665,098 85,777,464

84,164,113
LESS: Participating securities (9,101,692 ) (9,295,848 ) (9,286,175 ) (9,207,410 )

(9,080,137

)
PLUS: Dilutive potential common shares   1,077,229     701,119     201,954     902,683     175,295  
Weighted Average Diluted Shares (2)   78,156,536     76,505,092     75,580,877     77,472,737     75,259,271  
 
Diluted Total Earnings/(Loss) per Share $ 0.19 $ 0.17 $ 0.14 $ 0.46 $ 0.30
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
         
(In thousands, except per share data)
FINANCIAL DATA: September 30, 2012

June 30, 2012

September 30, 2011
Book Value Per Common Share $ 6.81 $ 6.57 $ 6.33
Tangible Book Value Per Share (4) $ 5.49 $ 5.26 $ 4.92
Market Price Per Share $ 9.59 $ 8.93 $ 5.88
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
Private Banking $ 3,784,000 $ 3,680,000 $ 3,427,000
Investment Managers 8,553,000 7,982,000 7,127,000
Wealth Advisory 7,797,000 7,474,000 6,740,000
Less: Inter-company Relationship   (20,000 )   (19,000 )   (18,000 )
Assets Under Management and Advisory of Continuing Operations $ 20,114,000 $ 19,117,000 $ 17,276,000
Assets Under Management and Advisory of Discontinued Operations (1)   -     -     933,000  
Total Assets Under Management and Advisory $ 20,114,000   $ 19,117,000   $ 18,209,000  
 
FINANCIAL RATIOS:
Total Equity/Total Assets 9.50 % 9.19 % 9.16 %
Tangible Common Equity/Tangible Assets (4) 7.70 % 7.39 % 7.14 %
Tangible Common Equity/Risk Weighted Assets (4) 10.38 % 9.90 % 10.42 %
Allowance for Loan Losses/Total Loans 1.83 % 1.95 % 2.20 %
Allowance for Loan Losses/Nonaccrual Loans 124 % 147 % 134 %
Return on Average Assets - Three Months Ended (Annualized) 1.00 % 0.92 % 0.77 %
Return on Average Equity - Three Months Ended (Annualized) 11.30 % 9.96 % 8.57 %
Efficiency Ratio - Three Months Ended (Annualized) 75.25 % 72.42 % 71.82 %
 
 
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:  

9/30/12
   

6/30/12
   

9/30/11
 

9/30/12
   

6/30/12
   

9/30/11

9/30/12
   

6/30/12
   

9/30/11
 
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 271,990 $ 337,933 $ 393,845 $ 890 $ 1,078 $ 1,456 1.31 % 1.28 % 1.48 %
Non-taxable investment securities (5) 188,183 186,030 190,772 1,221 1,174 1,400 2.60 % 2.52 % 2.94 %
Mortgage-backed securities 257,680 245,043 236,105 1,537 1,604 1,873 2.38 % 2.62 % 3.17 %
Federal funds sold and other   440,586   122,977   422,361   290   72   242 0.26 % 0.24 % 0.23 %
Total Cash and Investments   1,158,439   891,983   1,243,083   3,938   3,928   4,971 1.36 % 1.76 % 1.60 %
Loans: (6)
Commercial and Construction (5) 2,768,279 2,691,458 2,346,169 33,932 34,470 32,204 4.88 % 5.15 % 5.39 %
Residential 2,038,277 1,926,628 1,794,929 18,230 17,979 19,022 3.58 % 3.73 % 4.24 %
Home Equity and Other Consumer   280,366   292,353   318,003   2,236   2,336   3,006 3.17 % 3.23 % 3.71 %
Total Loans   5,086,922   4,910,439   4,459,101   54,398   54,785   54,232 4.26 % 4.48 % 4.81 %
Total Earning Assets   6,245,361   5,802,422   5,702,184   58,336   58,713   59,203 3.72 % 4.06 % 4.11 %
LESS: Allowance for Loan Losses 99,778 100,236 99,387
Cash and due From Banks (Non-Interest Bearing) 42,688 73,153 53,582
Other Assets (7)   412,559   405,340   415,951
TOTAL AVERAGE ASSETS $ 6,600,830 $ 6,180,679 $ 6,072,330
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Deposits:
Savings and NOW $ 458,499 $ 501,759 $ 539,489 $ 127 $ 201 $ 357 0.11 % 0.16 % 0.26 %
Money Market 2,260,748 2,067,625 1,857,755 2,206 2,147 2,506 0.39 % 0.42 % 0.54 %
Certificates of Deposit   805,540   837,295   1,006,639   1,873   2,087   3,058 0.92 % 1.00 % 1.21 %
Total Deposits 3,524,787 3,406,679 3,403,883 4,206 4,435 5,921 0.47 % 0.52 % 0.69 %
Junior Subordinated Debentures 168,288 177,566 188,645 1,507 1,690 1,851 3.50 % 3.77 % 3.92 %
FHLB Borrowings and Other   637,471   707,315   657,122   3,953   4,187   4,688 2.43 % 2.34 % 2.79 %
Total Interest-Bearing Liabilities   4,330,546   4,291,560   4,249,650   9,666   10,312   12,460 0.88 % 0.96 % 1.16 %
Noninterest Bearing Demand Deposits 1,561,135 1,190,428 1,139,457
Payables and Other Liabilities (7)   105,914   109,578   116,403
Total Average Liabilities 5,997,595 5,591,566 5,505,510
Redeemable Noncontrolling Interests 18,496 20,254 21,516
Average Shareholders' Equity   584,739   568,859   545,304
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,600,830 $ 6,180,679 $ 6,072,330
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 48,670 $ 48,401 $ 46,743
LESS: FTE Adjustment (5)   2,304   1,805   1,684
Net Interest Income (GAAP Basis) $ 46,366 $ 46,596 $ 45,059
Interest Rate Spread 2.84 % 3.10 % 2.95 %
Net Interest Margin 3.11 % 3.35 % 3.25 %
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
      Average Balance   Interest Income/Expense   Average Yield/Rate
(In Thousands) Nine Months Ended Nine Months Ended Nine Months Ended
AVERAGE BALANCE SHEET:   9/30/2012     9/30/2011   9/30/2012     9/30/2011 9/30/2012     9/30/2011  
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 329,337 $ 372,687 $ 3,225 $ 4,230 1.31 % 1.51 %
Non-taxable investment securities (5) 189,536 193,435 3,718 4,443 2.62 % 3.06 %
Mortgage-backed securities 251,593 233,309 4,743 5,521 2.51 % 3.16 %
Federal funds sold and other   245,485   473,590   511   842 0.28 % 0.24 %
Total Cash and Investments   1,015,951   1,273,021   12,197   15,036 1.60 % 1.58 %
Loans: (6)
Commercial and Construction (5) 2,683,936 2,379,006 101,096 98,338 5.03 % 5.47 %
Residential 1,941,345 1,741,302 54,037 56,882 3.71 % 4.36 %
Home Equity and Other Consumer   297,532   328,641   7,331   8,868 3.29 % 3.57 %
Total Loans   4,922,813   4,448,949   162,464   164,088 4.41 % 4.89 %
Total Earning Assets   5,938,764   5,721,970   174,661   179,124 3.93 % 4.15 %
LESS: Allowance for Loan Losses 99,164 100,761
Cash and due From Banks (Non-Interest Bearing) 59,085 39,168
Other Assets (7)   445,116   442,860
TOTAL AVERAGE ASSETS $ 6,343,801 $ 6,103,237
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Deposits:
Savings and NOW $ 497,128 $ 532,340 $ 659 $ 1,090 0.18 % 0.27 %
Money Market 2,116,993 1,867,430 6,490 8,107 0.41 % 0.58 %
Certificates of Deposit   863,646   1,039,997   6,395   9,674 0.99 % 1.24 %
Total Deposits 3,477,767 3,439,767 13,544 18,871 0.52 % 0.73 %
Junior Subordinated Debentures 174,665 191,639 4,950 5,648 3.72 % 3.93 %
FHLB Borrowings and Other   684,626   666,263   12,519   14,382 2.40 % 2.85 %
Total Interest-Bearing Liabilities   4,337,058   4,297,669   31,013   38,901 0.95 % 1.20 %
Noninterest Bearing Demand Deposits 1,305,344 1,136,918
Payables and Other Liabilities (7)   108,116   117,046
Total Average Liabilities 5,750,518 5,551,633
Redeemable Noncontrolling Interests 20,001 20,657
Average Shareholders' Equity   573,282   531,947
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,343,801 $ 6,104,237
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 143,648 $ 140,223
LESS: FTE Adjustment (5)   5,918   5,419
Net Interest Income (GAAP Basis) $ 137,730 $ 134,804
Interest Rate Spread 2.98 % 2.95 %
Net Interest Margin 3.23 % 3.25 %
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)          
LOAN DATA (8):   9/30/2012   6/30/2012   9/30/2011
Commercial and Industrial Loans:
New England $ 642,141 $ 666,145 $ 502,382
San Francisco Bay 65,034 66,586 57,918
Southern California 31,181 29,631 33,685
Pacific Northwest   47,979   47,014   38,223
Total Commercial and Industrial Loans $ 786,335 $ 809,376 $ 632,208
Commercial Real Estate Loans:
New England $ 645,222 $ 663,038 $ 627,413
San Francisco Bay 663,753 679,358 662,436
Southern California 354,097 344,918 204,083
Pacific Northwest   141,739   145,253   109,983
Total Commercial Real Estate Loans $ 1,804,811 $ 1,832,567 $ 1,603,915
Construction and Land Loans:
New England $ 116,783 $ 108,874 $ 90,751
San Francisco Bay 36,747 44,628 41,157
Southern California 8,590 7,492 5,530
Pacific Northwest   2,771   3,128   7,279
Total Construction and Land Loans $ 164,891 $ 164,122 $ 144,717

Residential Loans:
New England $ 1,168,492 $ 1,247,117 $ 1,237,389
San Francisco Bay 391,782 392,340 322,783
Southern California 306,001 281,113 177,647
Pacific Northwest   74,942   71,117   53,056

Total Residential Loans
$ 1,941,217 $ 1,991,687 $ 1,790,875
Home Equity Loans:
New England $ 81,473 $ 84,790 $ 90,082
San Francisco Bay 37,122 41,557 49,475
Southern California 7,280 7,484 5,756
Pacific Northwest   2,377   2,727   5,343
Total Home Equity Loans $ 128,252 $ 136,558 $ 150,656
Other Consumer Loans:
New England $ 116,951 $ 135,221 $ 137,692
San Francisco Bay 11,551 11,992 12,427
Southern California 8,964 7,570 11,970
Pacific Northwest 1,678 1,338 1,688
Eliminations and other, net   2,957   697   2,571
Total Other Consumer Loans $ 142,101 $ 156,818 $ 166,348
Total Loans
New England $ 2,771,062 $ 2,905,185 $ 2,685,709
San Francisco Bay 1,205,989 1,236,461 1,146,196
Southern California 716,113 678,208 438,671
Pacific Northwest 271,486 270,577 215,572
Eliminations and other, net   2,957   697   2,571
Total Loans $ 4,967,607 $ 5,091,128 $ 4,488,719
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)          
CREDIT QUALITY (8):   9/30/2012     6/30/2012     9/30/2011  
Special Mention Loans:
New England $ 33,174 $ 35,308 $ 60,383
San Francisco Bay 26,443 31,508 71,640
Southern California 26,967 20,544 32,189
Pacific Northwest   7,838     5,573     13,901  
Total Special Mention Loans $ 94,422   $ 92,933   $ 178,113  
Accruing Substandard Loans (9):
New England $ 39,707 $ 50,343 $ 21,328
San Francisco Bay 49,754 62,736 55,426
Southern California 13,588 20,098 23,815
Pacific Northwest   4,757     5,084     3,310  
Total Accruing Substandard Loans $ 107,806   $ 138,261   $ 103,879  
Nonaccruing Loans:
New England $ 36,919 $ 29,733 $ 33,413
San Francisco Bay 28,710 28,350 27,449
Southern California 6,817 7,273 10,186
Pacific Northwest   948     2,001     2,397  
Total Nonaccruing Loans $ 73,394   $ 67,357   $ 73,445  
Other Real Estate Owned:
New England $ 191 $ 191 $ 1,301
San Francisco Bay 2,383 2,383 5,847
Southern California - - 345
Pacific Northwest   612     480     1,668  
Total Other Real Estate Owned $ 3,186   $ 3,054   $ 9,161  
Loans 30-89 Days Past Due and Accruing (10):
New England $ 4,832 $ 3,272 $ 348
San Francisco Bay 3,751 7,270 16,649
Southern California 917 3,058 3,947
Pacific Northwest   -     565     -  
Total Loans 30-89 Days Past Due and Accruing $ 9,500   $ 14,165   $ 20,944  
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ (3,528 ) $ (576 ) $ (752 )
San Francisco Bay 189 117 (3,266 )
Southern California 231 (38 ) (179 )
Pacific Northwest   (817 )   (51 )   (286 )
Total Net Loans (Charged-off)/ Recovered $ (3,925 ) $ (548 ) $ (4,483 )
Loans (Charged-off)/ Recovered, Net for the Nine Months Ended:
New England $ (4,445 ) $ (2,153 )
San Francisco Bay (1,674 ) (16,591 )
Southern California 121 4,459
Pacific Northwest   (687 )   (1,019 )
Total Net Loans (Charged-off)/ Recovered $ (6,685 ) $ (15,304 )
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
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, Inc.; Sand Hill Advisors, LLC; RINET Company, LLC; Gibraltar Private Bank & Trust Company; and Westfield Capital Management Company, LLC. 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 nine months ended September 30, 2012 was 0.8 million in both periods. The amount of shares that were anti-dilutive for the three and nine months ended September 30, 2011 were 1.7 million in both periods. The amount of shares that were anti-dilutive for the three months ended June 30, 2012 was 1.3 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 ASC 810, Consolidation ("ASC 810"), for Redeemable Noncontrolling Interests.
 
  (In thousands, except per share data)   9/30/2012       6/30/2012       9/30/2011  
Total Balance Sheet Assets $ 6,272,784 $ 6,264,243 $ 6,024,321
LESS: Goodwill and Intangible Assets, net *   (135,486 )   (136,569 )   (146,774 )
Tangible Assets (non-GAAP) 6,137,298 6,127,674 5,877,547
Total Equity 595,602 575,622 551,654
LESS: Goodwill and Intangible Assets, net (135,486 ) (136,569 ) (146,774 )

ADD: Difference between Redemption Value of Non-controlling Interests and value under ASC 810
  12,744     13,937     14,641  
Total adjusting items (122,742 ) (122,632 ) (132,133 )
Tangible Common Equity (non-GAAP) 472,860 452,990 419,521
Total Equity/Total Assets 9.50 % 9.19 % 9.16 %
Tangible Common Equity/Tangible Assets (non-GAAP) 7.70 % 7.39 % 7.14 %
 
Total Risk Weighted Assets ** 4,553,776 4,575,120 4,024,575
Tangible Common Equity/Total Risk Weighted Assets (non-GAAP) 10.38 % 9.90 % 10.42 %
 
End of Period Shares outstanding 78,930 78,822 78,004
EOP Carlyle Common Convertible Shares   7,261     7,261     7,261  
Common Equivalent Shares   86,191     86,084     85,265  
 
Book Value Per Common Share $ 6.81 $ 6.57 $ 6.33
Tangible Book Value Per Share (non-GAAP) $ 5.49 $ 5.26 $ 4.92
 

* For the TCE to TA ratio, Goodwill and Intangible Assets, net includes Goodwill and Intangible Assets of discontinued operations for September 30, 2011, which are included on the consolidated balance sheet with Assets of Discontinued Operations.
 
** Risk Weighted Assets for September 30, 2012 is presented based on estimated data.
 
Reconciliations from the Company's GAAP income from continuing operations before income taxes to Non-GAAP pre-tax, pre-provision earnings and from GAAP operating expenses to Non-GAAP operating expenses excluding restructuring costs are presented below:

 

Three Months Ended
(In Thousands)   9/30/2012     6/30/2012     9/30/2011  

Income/(loss) before income taxes (GAAP)
$ 20,820 $ 17,570 $ 15,367
ADD BACK: Provision/ (credit) for loan losses   (4,000 )   1,700     4,500  
Pre-tax, pre-provision earnings (Non-GAAP) $ 16,820 $ 19,270 $ 19,867
 
Total operating expense (GAAP) $ 58,150 $ 55,335 $ 54,916
LESS: Restructuring expense   3,581     564     1,116  
Total operating expenses (excluding restructuring costs) (Non-GAAP) $ 54,569 $ 54,771 $ 53,800
 

(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 substandard 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 September 30, 2012, the Company had three loans totaling $2.7 million that were more than 90 days past due but still on accrual status. These loans originated in the New England and San Francisco regions. At June 30, 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 September 30, 2011.

Copyright Business Wire 2010

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