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Section 1: 8-K (2018 Q2 EARNINGS 8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 18, 2018
Boston Private Financial Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
Massachusetts
001-35070
04-2976299
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification Number)
Ten Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
(617) 912-1900
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
o    Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o    







Item 2.02.
Results of Operations and Financial Condition.
On July 18, 2018, Boston Private Financial Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter and six months ended June 30, 2018. The text of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
The information in this Current Report on Form 8-K furnished under this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. Furthermore, the information in this Current Report on Form 8-K furnished under this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

Item 9.01    Financial Statements and Exhibits.
(d) Exhibits.
99.1    Earnings Press Release of the Company dated July 18, 2018.







SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
 
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
 
 
 
 
By:
/S/ STEVEN M. GAVEN
 
Name:
Steven M. Gaven
 
Title:
Executive Vice President, Chief
Financial Officer
Date: July 18, 2018
 
 





EXHIBIT INDEX

    Exhibit
No.     Description
99.1     Earnings Press Release of the Company dated July 18, 2018





(Back To Top)

Section 2: EX-99.1 (EX 99.1 Q2-18 EARNINGS PR 07-18-2018)

Exhibit


394272342_bplogo121416a02.jpg

Boston Private Financial Holdings, Inc. Reports Second Quarter 2018 Results
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, MA - July 18, 2018 - 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

 
Linked
Quarter
 
Year over
Year
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

 
Linked
Quarter
 
Year over
Year
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 results
See footnote 16 for a GAAP to non-GAAP reconciliation

1



“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

 
Linked
Quarter
 
Year over
Year
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.


2



Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
2Q18
 
1Q18
 
2Q17
 
Linked
Quarter
 
Year over
Year
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
 
Linked
Quarter
 
Year over
Year
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.

3



Operating Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
2Q18
 
1Q18
 
2Q17
 
Linked
Quarter
 
Year over
Year
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 6
nm= 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

 
Linked
Quarter
 
Year over
Year
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.

4



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.



5



Dividend Payments
Concurrent 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 Measures
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. 
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) 317-6003
Elite Entry Number: 8579299

Replay Information:
Available from July 19, 2018 at 12 noon ET until July 26, 2018
Dial In #: (877) 344-7529
Conference Number: 10121736
The call will be simultaneously webcast and may be accessed on www.bostonprivate.com

6



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 Statements
Certain statements in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements include, among others, statements regarding our strategy, evaluations of future interest rate trends and liquidity, prospects for growth in assets, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s private banking, investment management, 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.
###
CONTACT:
Adam Bromley
(617) 912-4386
abromley@bostonprivate.com


7



394272342_bplogo121416a02.jpg
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



8



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


9



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



10



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

 
 
 
 




11



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



12



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