Toggle SGML Header (+)


Section 1: 8-K (2018 Q3 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): October 17, 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 October 17, 2018, Boston Private Financial Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the three and nine months ended ended September 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 7.01.
Regulation FD Disclosure.
On October 17, 2018, the Company announced an agreement to sell all of its current equity interest in Bingham, Osborn & Scarborough, LLC, a majority-owned subsidiary of the Company (“BOS”), to the management team of BOS for an upfront cash payment and a non-voting, revenue share participation interest in BOS.  The transaction is expected to close in the fourth quarter of 2018.  Completion of the transaction is subject to obtaining client consents, as well as satisfaction of other customary closing conditions.  A copy of the press release issued by the Company is furnished herewith as Exhibit 99.2 and is incorporated herein by reference.
The information in this Current Report on Form 8-K furnished under this Item 7.01, including Exhibit 99.2 attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of 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 7.01, including Exhibit 99.2 attached hereto, shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in such filing.

Item 8.01.
Other Events.
During the third quarter of 2018, Company initiated an efficiency program guided by a focus on improving operating efficiency and sustained earnings enhancement. The program includes a net reduction in total employees of approximately 7%, and resulted in a restructuring expense during third quarter 2018 operating results of approximately $5.8 million.
The Company notified a majority of impacted staff on October 15, 2018, with the majority of departures expected to be complete by December 31, 2018. The Company expects the efficiency program to result in annual expense reduction of approximately $11 million, with the full impact of the savings evident in 2019.
Additional restructuring costs may be recognized in the fourth quarter of 2018.

Item 9.01    Financial Statements and Exhibits.
(d) Exhibits.
99.1    Earnings release dated October 17, 2018.
99.2    Press release dated October 17, 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: October 17, 2018
 
 





EXHIBIT INDEX

    Exhibit
No.     Description
99.1     Earnings release dated October 17, 2018
99.2     Press release dated October 17, 2018





(Back To Top)

Section 2: EX-99.1 (EX 99.1 Q3-18 EARNINGS PR 10-17-2018)

Exhibit


395382001_bplogo121416a02.jpg

Boston Private Financial Holdings, Inc. Reports Third Quarter 2018 Results
Third Quarter 2018 Highlights include:

GAAP net income was $18.0 million or $0.20 per diluted share, and operating net income was $22.5 million or $0.25 per diluted share
Operating return on average common equity was 12.1%
Operating return on average tangible common equity was 14.2%
Average total deposits were $6.7 billion, a 5% increase year-over-year
Average total loans were $6.7 billion, a 6% increase year-over-year
Total assets under management/advisory (“AUM”) were $22.4 billion and total net flows were positive $342 million
Restructuring expense of $5.8 million expected to result in $11 million of annual expense reduction in 2019
Boston, MA - October 17, 2018 - Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported third quarter 2018 GAAP Net income attributable to the Company of $18.0 million, compared to $6.4 million for the second quarter of 2018 and $19.8 million for the third quarter of 2017. Third quarter 2018 Diluted earnings per share were $0.20, compared to $0.03 in the second quarter of 2018 and $0.22 in the third quarter of 2017.
Summary Financial Results - Reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions, except for per share data)
 
3Q18

 
2Q18

 
3Q17

 
Linked
Quarter
 
Year over
Year
Net income attributable to the Company
 
$18.0
 
$6.4
 
$19.8
 
nm

 
(9
)%
Diluted earnings per share
 
$0.20
 
$0.03
 
$0.22
 
nm

 
(9
)%
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Financial Measures:
 
 
 
 
 
 
 
 
 
 
Pre-tax, pre-provision income
 
$23.4
 
$25.3
 
$27.5
 
(7
)%
 
(15
)%
Return on average common equity ("ROACE")
 
9.7
%
 
3.0
%
 
9.9
%
 
 
 
 
Return on average tangible common equity ("ROATCE")
 
11.4
%
 
3.9
%
 
13.2
%
 
 
 
 
nm = not meaningful
 
 
 
 
 
 
 
 
 
 
Net income attributable to the Company, Diluted earnings per share, ROACE, and ROATCE for the third quarter of 2018 improved primarily due to a $12.7 million income tax expense during second quarter results associated with the divestiture of Anchor Capital Advisors, LLC ("Anchor"), partially offset by a $5.8 million restructuring expense during third quarter results.
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 7. A full reconciliation of GAAP to non-GAAP results can be found in the footnotes beginning on page 18.

1



Summary Financial Results - Operating Basis (non-GAAP)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions, except for per share data)
 
3Q181

 
2Q182

 
3Q17

 
Linked
Quarter
 
Year over
Year
Net income attributable to the Company
 
$22.5
 
$19.1
 
$19.8
 
18
%
 
14
%
Diluted earnings per share
 
$0.25
 
$0.21
 
$0.22
 
21
%
 
15
%
 
 
 
 
 
 
 
 
 
 
 
Pre-tax, pre-provision income
 
$29.2
 
$25.3
 
$27.5
 
15
%
 
6
%
Return on average common equity
 
12.1
%
 
10.0
%
 
9.9
%
 
 
 
 
Return on average tangible common equity
 
14.2
%
 
11.9
%
 
13.2
%
 
 
 
 
1 3Q18 results adjusted to exclude the impact of $5.8 million restructuring expense less a $1.2 million tax benefit, resulting in a net $4.6 million benefit to overall results
2 2Q18 results adjusted to exclude the impact of $12.7 million income tax expense related to the divestiture of Anchor Capital Advisors LLC
See footnote 16 for a GAAP to non-GAAP reconciliation
"Our third quarter results demonstrate improved financial performance across our core businesses. Operating basis pre-tax, pre-provision income increased 15% linked quarter and 6% year-over-year," said Clayton G. Deutsch, CEO. "The Bank demonstrated linked quarter average deposit growth of 6%, and Boston Private Wealth continues to demonstrate strong new business generation across regions and distribution channels."
"Our third quarter results include a restructuring charge of $5.8 million, which is the result of an efficiency initiative guided by a focus of delivering expense reduction and an improved return profile. We expect restructuring benefits to include approximately $11 million of expense savings in 2019."
Divestiture
 
 
 
 
 
 
 
 
 
 
On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. Anchor’s results through the closing date remain consolidated in the Company’s results through April 13, 2018 and prior periods. For presentation purposes, Anchor’s AUM are excluded from 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)
 
3Q18

 
2Q18

 
3Q17

 
Linked
Quarter
 
Year over
Year
Net interest income
 

$59.6

 

$57.5

 

$56.6

 
4
 %
 
5
 %
Less: Interest recovered on previous nonaccrual loans
 
1.0

 

 
0.1

 
nm

 
nm

Core net interest income, non-FTE basis
 
58.7

 
57.5

 
56.5

 
2
 %
 
4
 %
Add: FTE adjustment
 
0.6

 
0.9

 
2.9

 
(34
)%
 
(80
)%
Core net interest income, FTE basis
 
59.2

 
58.4

 
59.4

 
1
 %
 
 %
 
 
 
 
 
 
 
 
 
 

Net interest margin (FTE basis)
 
2.93
%
 
2.89
%
 
3.02
%
 
 
 
 
Core net interest margin (FTE basis)
 
2.88
%
 
2.89
%
 
3.02
%
 
 
 
 
Core net interest margin (non-FTE basis)
 
2.85
%
 
2.85
%
 
2.87
%
 
 
 
 
FTE = Fully Taxable Equivalent
 
 
 
 
 
 
 
 
 
 
Net interest income for the third quarter of 2018 was $59.6 million, an increase of 4% linked quarter and 5% year-over-year. The year-over-year increase was primarily driven by interest recovered on previous nonaccrual loans, higher yields on interest-earning assets, and higher asset volumes, partially offset by higher funding costs. Core net interest income, non-FTE basis, which excludes interest recovered on previous nonaccrual loans, increased 4% year-over-year and 2% linked quarter.
The Company’s Core net interest margin (FTE basis) decreased 1 basis point on a linked quarter basis to 2.88%, primarily driven by a lower FTE adjustment. Linked quarter, the net interest margin benefited from deposit inflows that funded repayment of short-term borrowings. The year-over-year decline was primarily driven by a lower tax benefit on tax-exempt income.

2



Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
3Q18

 
2Q18

 
3Q17

 
Linked
Quarter
 
Year over
Year
Investment management fees
 
$3.2
 
$4.2
 
$11.3
 
(23
)%
 
(71
)%
Wealth advisory fees
 
14.0

 
13.7

 
13.3

 
2
 %
 
5
 %
Wealth management and trust fees
 
11.5

 
11.2

 
11.6

 
3
 %
 
(1
)%
Private banking fees3
 
2.8

 
2.8

 
2.9

 
1
 %
 
(2
)%
Total core fees and income
 
$31.6
 
$31.9
 
$39.1
 
(1
)%
 
(19
)%
Total other income
 
0.7

 
0.2

 
1.2

 
nm

 
(40
)%
Total noninterest income
 
$32.3
 
$32.1
 
$40.3
 
1
 %
 
(20
)%
 
 
 
 
 
 
 
 
 
 
 
Memo: Noninterest income lines excluding Anchor
 
 
 
 
 
 
 
 
 
 
Less: Anchor revenue
 

 
1.1

 
8.4

 
nm

 
nm

Investment management fees (non-GAAP)
 
3.2

 
3.1

 
2.9

 
5
 %
 
12
 %
Total core fees and income (non-GAAP)
 
$31.6
 
$30.7
 
$30.7
 
3
 %
 
3
 %
Total noninterest income (non-GAAP)
 
$32.3
 
$30.9
 
$31.9
 
4
 %
 
1
 %
3 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net
Total core fees and income for the third quarter of 2018 was $31.6 million, a 1% decrease linked quarter and a 19% decrease year-over-year, primarily driven by the divestiture of Anchor. Excluding Anchor, Total core fees and income increased 3% year-over-year primarily driven by higher levels of assets under management in the Wealth Advisory and Investment Management segments. Wealth Management & Trust revenues increased 3% linked quarter driven by higher levels of AUM.
Assets Under Management / Advisory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
3Q18
 
2Q18
 
3Q17
 
Linked
Quarter
 
Year over
Year
Wealth Management and Trust
 
$8,335
 
$7,789
 
$7,703
 
7
%
 
8
%
Investment Management 4
 
2,125
 
2,031
 
1,902
 
5
%
 
12
%
Wealth Advisory
 
11,977
 
11,566
 
10,992
 
4
%
 
9
%
Total assets under management / advisory 4 5
 
$22,430
 
$21,379
 
$20,586
 
5
%
 
9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net flows
 
3Q18
 
2Q18
 
3Q17
 
 
 
 
Wealth Management and Trust
 
$315
 
$(77)
 
$114
 
 
 
 
Investment Management 4
 
45
 
27
 
(5)
 
 
 
 
Wealth Advisory
 
(18)
 
(30)
 
(71)
 
 
 
 
Total net flows 4
 
$342
 
$(76)
 
$38
 
 
 
 
4 Information excludes Anchor
5 Segments do not sum to Total assets under management due to an intercompany relationship of $7 million in 3Q18 and 2Q18 and $11 million in 3Q17
Total assets under management / advisory, were $22.4 billion at the end of the third quarter of 2018, an increase of 5% linked quarter and 9% year-over-year. The year-over-year increase was driven primarily by positive market action and positive net flows in all three segments. Positive net flows in the Wealth Management & Trust segment during the third quarter of 2018 were driven by $394 million of new business and low client attrition.

3



Operating Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
3Q18

 
2Q18

 
3Q17

 
Linked
Quarter
 
Year over
Year
Salaries and employee benefits
 
$38.9
 
$39.4
 
$44.9
 
(1
)%
 
(13
)%
Occupancy and equipment
 
8.2

 
8.2

 
7.9

 
(1
)%
 
3
 %
Professional services
 
2.9

 
2.9

 
3.3

 
 %
 
(13
)%
Marketing and business development
 
1.7

 
2.1

 
2.2

 
(17
)%
 
(23
)%
Information systems
 
6.2

 
6.8

 
5.3

 
(8
)%
 
18
 %
Amortization of intangibles
 
0.8

 
0.7

 
1.4

 
 %
 
(47
)%
FDIC insurance
 
0.7

 
0.7

 
0.6

 
(5
)%
 
4
 %
Restructuring
 
5.8

 

 

 
nm

 
nm

Other
 
3.4

 
3.6

 
3.6

 
(3
)%
 
(5
)%
Total operating expense
 
$68.6
 
$64.4
 
$69.3
 
6
 %
 
(1
)%
 
 
 
 

 
 
 
 
 
 
Memo: Excluding Anchor and Restructuring
 
 
 
 
 
 
 
 
 
 
Restructuring
 
5.8

 

 

 
nm

 
nm

Anchor operating expense
 

 
0.9

 
6.4

 
nm

 
nm

Total operating expense (non-GAAP) 6
 
$62.8
 
$63.4
 
$62.9
 
(1
)%
 
 %
 6 For information on non-GAAP financial measures, see page 6
nm= not meaningful
Total operating expense increased 6% linked quarter primarily driven by restructuring expense, while decreasing 1% year-over-year, primarily driven by the divestiture of Anchor. The restructuring expense is related to a company-wide efficiency initiative and consists primarily of severance and other compensation related expenses.
Excluding Anchor and restructuring expense, Total operating expense for the third quarter of 2018 was $62.8 million, down 1% linked quarter, primarily driven by lower information systems expense and compensation.
Income Tax Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company's effective tax rate for continuing operations for the third quarter of 2018 was 22.4%, compared to 29.6% in the prior year with the decline primarily driven by the enactment of the Tax Cuts and Jobs Act of 2017.

4



Loans and Deposits - QTD Averages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
3Q18

 
2Q18

 
3Q17

 
Linked
Quarter
 
Year over
Year
Commercial and industrial
 
$999
 
$974
 
$994
 
3
 %
 
 %
Commercial real estate
 
2,475
 
2,478
 
2,382
 
 %
 
4
 %
Construction and land
 
179
 
167
 
114
 
8
 %
 
58
 %
Residential
 
2,837
 
2,775
 
2,567
 
2
 %
 
11
 %
Home equity
 
94
 
94
 
107
 
 %
 
(12
)%
Other consumer
 
163
 
180
 
187
 
(9
)%
 
(13
)%
Total loans
 
$6,747
 
$6,668
 
$6,351
 
1
 %
 
6
 %
 
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits
 
2,064
 
1,908
 
1,966
 
8
 %
 
5
 %
Interest bearing deposits
 
4,668
 
4,441
 
4,439
 
5
 %
 
5
 %
Total deposits
 
$6,732
 
$6,349
 
$6,406
 
6
 %
 
5
 %
 
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits as a % of Total deposits
 
31
%

30
%

31
%
 
 
 
 
Average total loans in the third quarter of 2018 increased 6% year-over-year primarily driven by increases in Residential loans in all geographic markets. End of period Commercial real estate loans increased 2% from September 30, 2017 to September 30, 2018 with New England increasing 6%, Northern California increasing 4%, and Southern California decreasing 7%.
Average total deposits increased 5% year-over-year, primarily driven by growth in money market accounts, demand deposit accounts and certificates of deposits, partially offset by net declines in savings and NOW accounts. Average non-interest bearing deposits comprised 31% of Average total deposits in the third quarter of 2018 and the third quarter of 2017. The cost of total deposits, including DDA, was 0.68%, an increase of 15 basis points linked quarter and 35 basis points year-over-year. The increase was primarily driven by increasing cost of interest bearing deposits.
Provision and Asset Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
 
3Q18

 
2Q18

 
1Q18

 
4Q17

 
3Q17

Provision/ (credit) for loan loss
 
$(0.9)
 
$0.5
 
$(1.8)
 
$(0.9)
 
$(0.4)
Total criticized loans
 
134.7
 
114.4
 
124.1
 
154.8
 
146.0
Total nonaccrual loans
 
12.1
 
15.7
 
16.4
 
14.3
 
13.6
Total loans 30-89 days past due and accruing
 
11.6
 
5.0
 
20.4
 
25.0
 
5.3
Total net loans (charged-off)/ recovered
 
1.0

 
0.1
 

 
0.8
 
0.3
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses as a % of Total loans
 
1.09
%
 
1.09
%
 
1.10
%
 
1.15
%
 
1.17
%
Nonaccrual loans as a % of Total loans
 
0.18
%
 
0.23
%
 
0.25
%
 
0.22
%
 
0.21
%
The Company recorded a provision credit of $0.9 million for the third quarter of 2018, compared to an expense of $0.5 million for the second quarter of 2018 and a credit of $0.4 million for the third quarter of 2017. The provision credit in the third quarter of 2018 was primarily driven by loan recoveries and loan balance declines, partially offset by an increase in criticized and classified loans.
Total criticized loans as of September 30, 2018 was $134.7 million, an increase of 18% linked quarter and a decrease of 8% year-over-year. The linked quarter increase was driven by an increase in Southern California special mention loans and San Francisco Bay Area accruing substandard loans. Total nonaccrual loans (“Nonaccruals”) as of September 30, 2018 was $12.1 million, a decrease of 23% linked quarter and 11% year-over-year. As a percentage of Total loans, Nonaccruals were 18 basis points as of September 30, 2018, down 5 basis points from June 30, 2018, and down 3 basis points from September 30, 2017.

5



Capital
 
 
 
 
 
 
 
 
 
 
 
 
3Q18

 
2Q18

 
1Q18

 
4Q17

 
3Q17

Tangible common equity/ Total assets 7
 
7.8
%
 
7.5
%
 
7.4
%
 
7.3
%
 
7.4
%
Tangible book value per share 7
 
$7.67
 
$7.62
 
$7.17
 
$7.12
 
$7.16
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital Ratios: 8
 
 
 
 
 
 
 

 

Tier 1 common equity
 
11.1
%
 
10.9
%
 
10.4
%
 
10.3
%
 
10.4
%
Total risk-based capital
 
14.1
%
 
13.8
%
 
14.2
%
 
14.1
%
 
14.3
%
Tier 1 risk-based capital
 
12.8
%
 
12.6
%
 
12.9
%
 
12.9
%
 
13.0
%
Tier 1 leverage capital
 
9.2
%
 
9.2
%
 
9.4
%
 
9.3
%
 
9.4
%
7 See footnote 6 for a GAAP to non-GAAP reconciliation.
8 Current quarter information is presented based on estimated data.
Tangible book value per share as of September 30, 2018 increased 7% year-over-year to $7.67.

6



Dividend Payments
Concurrent with the release of third 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 November 2, 2018, and the payment date is November 16, 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, October 18, 2018, to discuss the financial results, business highlights and outlook. To access the call:
Dial In #: (888) 317-6003
Elite Entry Number: 3938300

Replay Information:
Available from October 18, 2018 at 12 noon ET until October 25, 2018
Dial In #: (877) 344-7529
Conference Number: 10124992
The call will be simultaneously webcast and may be accessed on www.bostonprivate.com

7



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 $22 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


8



395382001_bplogo121416a02.jpg
Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
 
(In thousands, except share and per share data)
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
92,634

 
$
364,539

 
$
77,085

 
$
120,541

 
$
110,440

Investment securities available-for-sale
1,063,340

 
1,076,967

 
1,118,497

 
1,170,328

 
1,189,827

Investment securities held-to-maturity
75,468

 
78,955

 
70,809

 
74,576

 
84,090

Stock in Federal Home Loan Bank and Federal Reserve Bank
48,727

 
70,127

 
54,455

 
59,973

 
61,714

Loans held for sale
3,344

 
4,622

 
3,918

 
4,697

 
1,957

Total loans
6,720,420

 
6,767,123

 
6,602,327

 
6,505,028

 
6,413,201

Less: Allowance for loan losses
73,500

 
73,464

 
72,898

 
74,742

 
74,873

Net loans
6,646,920

 
6,693,659

 
6,529,429

 
6,430,286

 
6,338,328

Other real estate owned (“OREO”)
108

 
108

 

 

 

Premises and equipment, net
47,399

 
46,421

 
43,627

 
37,640

 
36,546

Goodwill (1)
75,598

 
75,598

 
75,598

 
75,598

 
142,554

Intangible assets, net (1)
13,834

 
14,584

 
15,334

 
16,083

 
22,447

Fees receivable
10,445

 
10,405

 
10,640

 
11,154

 
12,560

Accrued interest receivable
24,641

 
23,732

 
22,614

 
22,322

 
21,823

Deferred income taxes, net
27,833

 
26,316

 
32,058

 
29,031

 
46,088

Other assets (1)
245,549

 
230,170

 
264,295

 
259,515

 
201,024

Total assets
$
8,375,840

 
$
8,716,203

 
$
8,318,359

 
$
8,311,744

 
$
8,269,398

Liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
6,768,723

 
$
6,620,179

 
$
6,584,322

 
$
6,510,246

 
$
6,262,347

Securities sold under agreements to repurchase
39,453

 
58,824

 
85,257

 
32,169

 
59,903

Federal funds purchased
120,000

 

 

 
30,000

 
70,000

Federal Home Loan Bank borrowings
441,836

 
1,056,938

 
611,588

 
693,681

 
812,773

Junior subordinated debentures
106,363

 
106,363

 
106,363

 
106,363

 
106,363

Other liabilities (1)
149,770

 
129,175

 
125,004

 
135,880

 
127,069

Total liabilities
7,626,145

 
7,971,479

 
7,512,534

 
7,508,339

 
7,438,455

Redeemable noncontrolling interests (“RNCI”)
11,686

 
10,747

 
16,322

 
17,461

 
15,882

Shareholders’ equity:
 
 
 
 
 
 
 
 
 
Preferred stock, $1.00 par value; authorized: 2,000,000 shares

 

 
47,753

 
47,753

 
47,753

Common stock, $1.00 par value; authorized: 170,000,000 shares
84,603

 
84,479

 
84,194

 
84,208

 
84,082

Additional paid-in capital
614,157

 
613,918

 
612,526

 
607,929

 
606,802

Retained earnings
64,618

 
56,912

 
61,518

 
49,526

 
76,455

Accumulated other comprehensive income/ (loss)
(27,578
)
 
(23,328
)
 
(21,313
)
 
(8,658
)
 
(4,823
)
Total Company’s shareholders’ equity
735,800

 
731,981

 
784,678

 
780,758

 
810,269

Noncontrolling interests
2,209

 
1,996

 
4,825

 
5,186

 
4,792

Total shareholders’ equity
738,009

 
733,977

 
789,503

 
785,944

 
815,061

Total liabilities, redeemable noncontrolling interests and shareholders’ equity
$
8,375,840

 
$
8,716,203

 
$
8,318,359

 
$
8,311,744

 
$
8,269,398



9



Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Three Months Ended
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
Interest and dividend income:
(In thousands, except share and per share data)
Loans
$
68,254

 
$
64,048

 
$
60,929

 
$
59,496

 
$
58,096

Taxable investment securities
1,510

 
1,501

 
1,510

 
1,562

 
1,569

Non-taxable investment securities
1,779

 
1,752

 
1,730

 
1,697

 
1,664

Mortgage-backed securities
2,941

 
3,049

 
3,178

 
3,125

 
3,267

Short-term investments and other
1,617

 
1,205

 
1,009

 
978

 
916

Total interest and dividend income
76,101

 
71,555

 
68,356

 
66,858

 
65,512

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
11,487

 
8,365

 
6,524

 
6,048

 
5,356

Federal Home Loan Bank borrowings
3,877

 
4,447

 
3,344

 
2,626

 
2,657

Junior subordinated debentures
1,028

 
1,008

 
846

 
771

 
761

Repurchase agreements and other short-term borrowings
68

 
190

 
259

 
141

 
111

Total interest expense
16,460

 
14,010

 
10,973

 
9,586

 
8,885

Net interest income
59,641

 
57,545

 
57,383

 
57,272

 
56,627

Provision/ (credit) for loan losses
(949
)
 
453

 
(1,795
)
 
(942
)
 
(432
)
Net interest income after provision/ (credit) for loan losses
60,590

 
57,092

 
59,178

 
58,214

 
57,059

Fees and other income:
 
 
 
 
 
 
 
 
 
Investment management fees
3,245

 
4,227

 
11,425

 
12,321

 
11,274

Wealth advisory fees
13,995

 
13,693

 
13,512

 
13,496

 
13,279

Wealth management and trust fees
11,510

 
11,169

 
12,151

 
11,756

 
11,619

Other banking fee income
2,775

 
2,745

 
2,273

 
2,531

 
2,726

Gain on sale of loans, net
67

 
63

 
74

 
85

 
169

Total core fees and income
31,592

 
31,897

 
39,435

 
40,189

 
39,067

Gain/ (loss) on sale of investments, net

 
7

 
(24
)
 
(110
)
 
230

Gain/ (loss) on sale of affiliates or offices

 

 

 
(1,264
)
 

Other
722

 
191

 
332

 
360

 
970

Total other income
722

 
198

 
308

 
(1,014
)
 
1,200

Total revenue (2)
91,955

 
89,640

 
97,126

 
96,447

 
96,894

Operating expense:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
38,944

 
39,433

 
47,084

 
44,612

 
44,912

Occupancy and equipment
8,164

 
8,229

 
7,748

 
7,753

 
7,944

Professional services
2,877

 
2,872

 
3,177

 
4,035

 
3,308

Marketing and business development
1,710

 
2,070

 
1,593

 
1,919

 
2,216

Information systems
6,233

 
6,770

 
5,886

 
5,635

 
5,282

Amortization of intangibles
750

 
749

 
750

 
1,323

 
1,426

Impairment of goodwill

 

 

 
24,901

 

FDIC insurance
674

 
708

 
744

 
677

 
647

Restructuring
5,763

 

 

 

 

Other
3,442

 
3,553

 
3,875

 
3,134

 
3,611

Total operating expense
68,557

 
64,384

 
70,857

 
93,989

 
69,346

Income before income taxes
24,347

 
24,803

 
28,064

 
3,400

 
27,980

Income tax expense
5,461

 
17,399

 
6,026

 
21,391

 
8,289

Net income/ (loss) from continuing operations
18,886

 
7,404

 
22,038

 
(17,991
)
 
19,691

Net income from discontinued operations (3)

 
(2
)
 
1,698

 
989

 
1,186

Net income/ (loss) before attribution to noncontrolling interests
18,886

 
7,402

 
23,736

 
(17,002
)
 
20,877

Less: Net income attributable to noncontrolling interests
924

 
968

 
1,050

 
1,278

 
1,074

Net income/ (loss) attributable to the Company
$
17,962

 
$
6,434

 
$
22,686

 
$
(18,280
)
 
$
19,803


10



Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Nine Months Ended
 
September 30,
2018
 
September 30,
2017
Interest and dividend income:
(In thousands, except share and per share data)
Loans
$
193,231

 
$
169,468

Taxable investment securities
4,521

 
4,831

Non-taxable investment securities
5,261

 
4,925

Mortgage-backed securities
9,168

 
10,266

Short-term investments and other
3,831

 
2,347

Total interest and dividend income
216,012

 
191,837

Interest expense:
 
 
 
Deposits
26,376

 
14,836

Federal Home Loan Bank borrowings
11,668

 
7,257

Junior subordinated debentures
2,882

 
2,148

Repurchase agreements and other short-term borrowings
517

 
182

Total interest expense
41,443

 
24,423

Net interest income
174,569

 
167,414

Provision/ (credit) for loan losses
(2,291
)
 
(6,727
)
Net interest income after provision/ (credit) for loan losses
176,860

 
174,141

Fees and other income:
 
 
 
Investment management fees
18,897

 
33,194

Wealth advisory fees
41,200

 
39,063

Wealth management and trust fees
34,830

 
33,606

Other banking fee income
7,793

 
6,384

Gain on sale of loans, net
204

 
366

Total core fees and income
102,924

 
112,613

Gain/ (loss) on sale of investments, net
(17
)
 
486

Gain/ (loss) on OREO, net

 
(46
)
Other
1,245

 
1,738

Total other income
1,228

 
2,178

Total revenue (2)
278,721

 
282,205

Operating expense:
 
 
 
Salaries and employee benefits
125,461

 
133,889

Occupancy and equipment
24,141

 
22,412

Professional services
8,926

 
9,728

Marketing and business development
5,373

 
5,847

Information systems
18,889

 
16,161

Amortization of intangibles
2,249

 
4,278

FDIC insurance
2,126

 
2,292

Restructuring
5,763

 

Other
10,870

 
11,340

Total operating expense
203,798

 
205,947

Income before income taxes
77,214

 
82,985

Income tax expense
28,886

 
24,805

Net income from continuing operations
48,328

 
58,180

Net income from discontinued operations (3)
1,696

 
3,881

Net income before attribution to noncontrolling interests
50,024

 
62,061

Less: Net income attributable to noncontrolling interests
2,942

 
3,190

Net income attributable to the Company
$
47,082

 
$
58,871



11



Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Three Months Ended
PER SHARE DATA:
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
 
(In thousands, except share and per share data)
Calculation of income for EPS:
 
 
 
 
 
 
 
 
 
Net income/ (loss) attributable to the Company
$
17,962

 
$
6,434

 
$
22,686

 
$
(18,280
)
 
$
19,803

Adjustments to Net income/ (loss) attributable to the Company to arrive at Net income/ (loss) attributable to common shareholders, treasury stock method (4)
(829
)
 
(3,524
)
 
(23
)
 
(1,998
)
 
(1,146
)
Net income/ (loss) attributable to the common shareholders, treasury stock method
$
17,133

 
$
2,910

 
$
22,663

 
$
(20,278
)
 
$
18,657

 
 
 
 
 
 
 
 
 
 
End of period common shares outstanding
84,602,519

 
84,478,858

 
84,194,267

 
84,208,538

 
84,082,250

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
84,017,284

 
83,509,115

 
83,097,758

 
82,904,776

 
82,556,225

Weighted average diluted shares outstanding (5)
85,498,568

 
85,413,575

 
85,271,650

 
82,904,776

 
84,888,311

 
 
 
 
 
 
 
 
 
 
Diluted total earnings/ (loss) per share
$
0.20

 
$
0.03

 
$
0.27

 
$
(0.24
)
 
$
0.22


 
Nine Months Ended
PER SHARE DATA:
September 30,
2018
 
September 30,
2017
 
(In thousands, except share 
and per share data)
Calculation of income for EPS:
 
 
 
Net income attributable to the Company
$
47,082

 
$
58,871

Adjustments to Net income attributable to the Company to arrive at Net income attributable to common shareholders, treasury stock method (4)
(4,376
)
 
(2,889
)
Net income attributable to the common shareholders, treasury stock method
$
42,706

 
$
55,982

 
 
 
 
Weighted average shares outstanding:
 
 
 
Weighted average basic shares outstanding
83,544,754

 
82,270,849

Weighted average diluted shares outstanding (5)
85,254,295

 
84,741,172

 
 
 
 
Diluted total earnings per share
$
0.50

 
$
0.66

 
 
 
 




12



Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
(In thousands, except per share data)
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
September 30,
2017
FINANCIAL DATA:
Book value per common share
$
8.72

 
$
8.69

 
$
8.81

 
$
8.77

 
$
9.13

Tangible book value per share (6)
$
7.67

 
$
7.62

 
$
7.17

 
$
7.12

 
$
7.16

Market price per share
$
13.65

 
$
15.90

 
$
15.05

 
$
15.45

 
$
16.55

 
 
 
 
 
 
 
 
 
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
 
 
 
 
 
 
 
 
 
Wealth Management and Trust
$
8,335,000

 
$
7,789,000

 
$
7,831,000

 
$
7,865,000

 
$
7,703,000

Investment Management (7)
2,125,000

 
2,031,000

 
1,920,000

 
2,004,000

 
1,902,000

Wealth Advisory
11,977,000

 
11,566,000

 
11,446,000

 
11,350,000

 
10,992,000

Less: Inter-company relationship
(7,000
)
 
(7,000
)
 
(11,000
)
 
(11,000
)
 
(11,000
)
Total assets under management and advisory, excluding Anchor (7)
$
22,430,000

 
$
21,379,000

 
$
21,186,000

 
$
21,208,000

 
$
20,586,000

Assets under management and advisory at Anchor through March 31, 2018

 

 
9,042,000

 
9,277,000

 
9,181,000

Total assets under management and advisory, including Anchor through March 31, 2018
$
22,430,000

 
$
21,379,000

 
$
30,228,000

 
$
30,485,000

 
$
29,767,000

 
 
 
 
 
 
 
 
 
 
FINANCIAL RATIOS:
 
 
 
 
 
 
 
 
 
Total equity/ Total assets
8.81
%
 
8.42
%
 
9.49
%
 
9.46
 %
 
9.86
%
Tangible common equity/ Tangible assets (6)
7.83
%
 
7.46
%
 
7.38
%
 
7.33
 %
 
7.43
%
Tier 1 common equity/ Risk weighted assets (6)
11.14
%
 
10.90
%
 
10.39
%
 
10.32
 %
 
10.42
%
Allowance for loan losses/ Total loans
1.09
%
 
1.09
%
 
1.10
%
 
1.15
 %
 
1.17
%
Allowance for loan losses/ Nonaccrual loans
608
%
 
469
%
 
445
%
 
523
 %
 
550
%
Return on average assets - three months ended (annualized)
0.84
%
 
0.31
%
 
1.11
%
 
(0.88
)%
 
0.96
%
Return on average common equity - three months ended (annualized) (8)
9.67
%
 
3.03
%
 
12.02
%
 
(9.92
)%
 
9.87
%
Return on average tangible common equity - three months ended (annualized) (8)
11.37
%
 
3.90
%
 
15.20
%
 
(11.94
)%
 
13.24
%
Efficiency ratio - three months ended (9)
67.04
%
 
70.29
%
 
71.46
%
 
68.23
 %
 
68.06
%
 
 
 
 
 
 
 
 
 
 
DEPOSIT DETAIL:
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
$
2,001,275

 
$
2,089,373

 
$
1,932,732

 
$
2,025,690

 
$
1,850,833

NOW
568,148

 
635,841

 
689,526

 
645,361

 
636,013

Savings
72,967

 
73,675

 
73,580

 
70,935

 
74,333

Money market
3,363,062

 
3,128,211

 
3,177,692

 
3,121,811

 
3,009,779

Certificates of deposit
763,271

 
693,079

 
710,792

 
646,449

 
691,389

Total deposits
$
6,768,723

 
$
6,620,179

 
$
6,584,322

 
$
6,510,246

 
$
6,262,347



13



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:
09/30/18
06/30/18
09/30/17
 
09/30/18
06/30/18
09/30/17
 
09/30/18
06/30/18
09/30/17
AVERAGE ASSETS
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and investments:
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities
$
324,583

$
326,482

$
353,374

 
$
1,510

$
1,501

$
1,569

 
1.86
%
1.84
%
1.77
%
Non-taxable investment securities (10)
297,710

297,852

295,727

 
2,256

2,217

2,559

 
3.03
%
2.98
%
3.46
%
Mortgage-backed securities
552,820

570,845

631,052

 
2,941

3,049

3,267

 
2.13
%
2.14
%
2.07
%
Short-term investments and other
204,814

157,878

146,285

 
1,617

1,205

916

 
3.11
%
3.03
%
2.47
%
Total cash and investments
1,379,927

1,353,057

1,426,438

 
8,324

7,972

8,311

 
2.41
%
2.35
%
2.33
%
Loans (11):
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial (10)
998,817

974,443

994,388

 
9,940

9,439

10,001

 
3.89
%
3.83
%
3.94
%
Commercial real estate (10)
2,475,143

2,477,634

2,381,583

 
29,547

27,550

25,579

 
4.67
%
4.40
%
4.20
%
Construction and land (10)
179,248

166,736

113,562

 
2,196

2,040

1,415

 
4.80
%
4.84
%
4.88
%
Residential
2,836,593

2,775,239

2,567,044

 
23,907

22,590

20,423

 
3.37
%
3.26
%
3.18
%
Home equity