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Section 1: 8-K (8-K)

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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): January 30, 2019
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 January 30, 2019, Boston Private Financial Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 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 release dated January 30, 2019.









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: January 30, 2019
 
 





EXHIBIT INDEX

    Exhibit
No.     Description
99.1     Earnings release dated January 30, 2019






(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit



396549303_bplogo121416a02.jpg

Boston Private Financial Holdings, Inc. Reports Fourth Quarter and Full Year 2018 Results

Fourth Quarter 2018 Highlights include:

GAAP Net income was $33.3 million, or $0.42 per diluted share, and operating net income was $19.6 million or $0.26 per diluted share
Return on average common equity was 17.9%; operating return on average common equity was 10.5%
Return on average tangible common equity was 20.5%; operating return on average tangible common equity was 12.2%
Average total deposits were $6.9 billion, a 7% increase year-over-year
Average total loans were $6.8 billion, a 6% increase year-over-year
Total assets under management/advisory (“AUM”) were $15.9 billion and total net flows were negative $143 million

Notable Items impacting Fourth Quarter 2018 results ("Notable Items"):

$18.1 million gain on sale and $3.2 million tax expense related to the divestiture of Bingham, Osborn & Scarborough, LLC ("BOS")
$1.6 million net restructuring expense related to personnel and technology efficiencies

Full Year 2018 Highlights include:

GAAP Net income was $80.4 million, or $0.92 per diluted share, and operating net income was $84.2 million or $0.97 per diluted share
Returned $62.4 million of capital to common shareholders through dividends and share repurchases
Tangible book value per share increased 15% year-over-year to $8.18 and Tier 1 common equity ratio increased to 11.4%
Boston, MA - January 30, 2019 - Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported fourth quarter 2018 GAAP Net income/ (loss) attributable to the Company of $33.3 million, compared to $18.0 million for the third quarter of 2018 and ($18.3) million for the fourth quarter of 2017. Fourth quarter 2018 Diluted earnings/ (loss) per share were $0.42, compared to $0.20 in the third quarter of 2018 and ($0.24) in the fourth quarter of 2017.
Summary Financial Results - Reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions, except for per share data)
 
4Q18

 
3Q18

 
4Q17

 
LQ
 
Y/Y
Net income/ (loss)
 
$33.3
 
$18.0
 
$(18.3)
 
85
%
 
nm
Diluted earnings/ (loss) per share
 
$0.42
 
$0.20
 
$(0.24)
 
nm

 
nm
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Financial Measures:
 
 
 
 
 
 
 
 
 
 
Pre-tax, pre-provision income
 
$42.3
 
$23.4
 
$2.5
 
81
%
 
nm
Return on average common equity ("ROACE")
 
17.9
%
 
9.7
%
 
(9.9
)%
 
 
 
 
Return on average tangible common equity ("ROATCE")
 
20.5
%
 
11.4
%
 
(11.9
)%
 
 
 
 
nm = not meaningful
 
 
 
 
 
 
 
 
 
 
The Company's reported financial results increased linked quarter primarily as a result of the gain on sale related to the divestiture of BOS. Additional factors driving the year-over-year increase include impairment of goodwill related to the divestiture of Anchor Capital Advisors, LLC ("Anchor") and income tax expense related to the Tax Cuts and Jobs Act, each during the fourth quarter of 2017.

1





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.
Summary Financial Results - Operating Basis (non-GAAP)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions, except for per share data)
 
4Q181

 
3Q182

 
4Q173

 
LQ
 
Y/Y
Net income
 
$19.6
 
$22.5
 
$20.6
 
(13
)%
 
(5
)%
Diluted earnings per share
 
$0.26
 
$0.25
 
$0.22
 
4
 %
 
20
 %
 
 
 
 
 
 
 
 
 
 
 
Pre-tax, pre-provision income
 
$25.8
 
$29.2
 
$29.0
 
(12
)%
 
(11
)%
Return on average common equity
 
10.5
%
 
12.1
%
 
10.2
%
 
 
 
 
Return on average tangible common equity
 
12.2
%
 
14.2
%
 
13.4
%
 
 
 
 
1 4Q18 results adjusted to exclude the net after-tax impact of $18.1 million gain on sale and $3.2 million tax expense related to the divestiture of Bingham, Osborn, & Scarborough, LLC and $1.6 million restructuring expense
2 3Q18 results adjusted to exclude the net after-tax impact of $5.8 million restructuring expense
3 4Q17 results adjusted to exclude the net after-tax impact of $1.3 million loss on sale, $0.4 million legal expense, and $24.9 million goodwill impairment expense related to the divestiture of Anchor and $12.9 million tax expense related to the Tax Cuts and Jobs Act

"Our Fourth Quarter and Full Year 2018 financial results reflect the successful divestiture of two affiliates," said Anthony DeChellis, CEO of Boston Private. "These transactions enabled the return of capital to shareholders during 2018 in the form of the completion of our $20 million share repurchase program."
"At the same time, we have additional capital to be used for the expansion of our Wealth Management, Trust, and Commercial and Private Banking businesses. My review of Boston Private's market positioning is well underway, and I look forward to sharing details about our vision to improve the Company's scale, efficiency, and productivity early in the second quarter of 2019."
Divested Affiliates
 
 
 
 
 
 
 
 
 
 
The Company completed the sale of Anchor and BOS (together, "Divested Affiliates") during 2018. Financial results from Divested Affiliates remain consolidated in the Company's financial results through the closing dates of the divestitures. The Anchor divestiture announcement date was December 20, 2017, resulting in impairment of goodwill during fourth quarter 2017 results, and the closing date was April 13, 2018. The BOS announcement date was October 17, 2018, and the closing date was December 3, 2018.
For presentation purposes, Divested Affiliates' AUM are excluded from AUM amounts, but are included in the calculation of Core fees and income. The discussion below includes non-GAAP measures that exclude the contributions from these affiliates in order to enhance comparability of trends in the core business.

2




Net Interest Income and Margin (non-GAAP, except for Net Interest Income)
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
4Q18

 
3Q18

 
4Q17

 
LQ
 
Y/Y
Net interest income
 

$60.0

 

$59.6

 

$57.3

 
1
%
 
5
 %
Less: Interest recovered on previous nonaccrual loans
 
1.0

 
1.0

 
0.4

 
%
 
nm

Core net interest income, non-FTE basis
 
59.0

 
58.7

 
56.8

 
1
%
 
4
 %
Add: FTE adjustment
 
0.6

 
0.6

 
2.9

 
%
 
(79
)%
Core net interest income, FTE basis
 
59.6

 
59.2

 
59.7

 
1
%
 
 %
 
 
 
 
 
 
 
 
 
 

Net interest margin (FTE basis)
 
2.96
%
 
2.93
%
 
3.04
%
 
 
 
 
Core net interest margin (FTE basis)
 
2.92
%
 
2.88
%
 
3.02
%
 
 
 
 
Core net interest margin (non-FTE basis)
 
2.90
%
 
2.85
%
 
2.87
%
 
 
 
 
FTE = Fully Taxable Equivalent
 
 
 
 
 
 
 
 
 
 
Net interest income for the fourth quarter of 2018 was $60.0 million, an increase of 1% linked quarter and 5% 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 higher funding costs. Core net interest income, non-FTE basis, which excludes interest recovered on previous nonaccrual loans, increased 1% linked quarter and 4% year-over-year.
The Company’s Core net interest margin (FTE basis) increased 4 basis points on a linked quarter basis to 2.92%, primarily driven by linked quarter deposit inflows that funded repayment of borrowings, the positive impact of higher asset yields, and lower levels of cash and investments as a percentage of interest-earning assets. The year-over-year decline was primarily driven by a lower tax benefit on tax-exempt income as a result of the Tax Cuts and Jobs Act.
Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
4Q18

 
3Q18

 
4Q17

 
LQ
 
Y/Y
Investment management fees
 
$2.8
 
$3.2
 
$12.3
 
(13
)%
 
(77
)%
Wealth advisory fees
 
12.1

 
14.0

 
13.5

 
(13
)%
 
(10
)%
Wealth management and trust fees
 
11.7

 
11.5

 
11.8

 
1
 %
 
(1
)%
Private banking fees4
 
2.1

 
2.8

 
2.6

 
(27
)%
 
(21
)%
Total core fees and income
 
$28.7
 
$31.6
 
$40.2
 
(9
)%
 
(29
)%
Total other income
 
17.2

 
0.7

 
(1.0
)
 
nm

 
nm

Total noninterest income
 
$45.8
 
$32.3
 
$39.2
 
42
 %
 
17
 %
 
 
 
 
 
 
 
 
 
 
 
Memo: Excluding Notable Items and Divested Affiliates
 
 
 
 
 
 
 
 
 
 
Investment management fees (non-GAAP) 5
 
2.8

 
3.2

 
3.9

 
(13
)%
 
(27
)%
Wealth advisory fees (non-GAAP) 6
 
8.3

 
8.1

 
7.8

 
2
 %
 
6
 %
Total core fees and income (non-GAAP) 5 6
 
$24.9
 
$25.7
 
$26.0
 
(3
)%
 
(4
)%
Total other income (non-GAAP) 7
 
(1.0)

 
0.7

 
0.3

 
nm

 
nm

Total noninterest income (non-GAAP) 5 6
 
$23.9
 
$26.4
 
$26.3
 
(10
)%
 
(9
)%
4 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net
5 Excludes Anchor revenue of $8.4 million in 4Q17
6 Excludes BOS revenue of $3.9 million in 4Q18, $5.9 million in 3Q18, and $5.8 million in 4Q17
7 Excludes$18.1 million gain on sale in 4Q18 and $1.3 million loss on sale in 4Q17
Total core fees and income for the fourth quarter of 2018 was $28.7 million, a decline of 9% linked quarter and 29% year-over-year primarily driven by the divestitures of Anchor and BOS. Notable Items impacting Total other income include an $18.1 million gain on sale related to BOS in the fourth quarter of 2018 and a $1.3 million loss on sale related to Anchor in the fourth quarter of 2017.
Excluding Notable Items and Divested Affiliates, Total core fees and income decreased 4% year-over-year primarily driven by the absence of Investment management performance fees in the fourth quarter of 2018, partially offset by increased Wealth advisory fees. Performance fees in the fourth quarter of 2017 were $0.9 million.

3




During the fourth quarter of 2018, the securities in a rabbi trust, related to the Company's Deferred Compensation Plan, declined in value, which was recorded as $0.8 million of negative revenue in Total other income (Noninterest Income). This had a net zero impact to overall earnings because it had an equal and offsetting reduction in Salaries and employee benefits expense (Operating Expenses).
Assets Under Management / Advisory
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
4Q18
 
3Q18
 
4Q17
 
LQ
 
Y/Y
Wealth Management and Trust
 
$7,602
 
$8,335
 
$7,865
 
(9
)%
 
(3
)%
Affiliate Partners 8
 
8,319
 
9,388
 
8,920
 
(11
)%
 
(7
)%
Total assets under management / advisory 9
 
$15,921
 
$17,723
 
$16,785
 
(10
)%
 
(5
)%
Total net flows 9
 
$(143)
 
$260
 
$70
 
 
 
 
8 Segment includes Dalton, Greiner, Hartman, Maher & Co., LLC and KLS Professional Advisors Group, LLC ("KLS")
9 Excludes Anchor and BOS
Total assets under management / advisory, were $15.9 billion at the end of the fourth quarter of 2018, a decrease of 10% linked quarter and 5% year-over-year. The linked quarter decrease was primarily driven by negative market action and negative net flows, while the year-over-year decrease was primarily driven by negative market action, partially offset by positive net flows.
Net flows in the Wealth Management & Trust segment during the fourth quarter of 2018 were negative $79 million driven by elevated current client outflows, partially offset by $194 million of new business and low client attrition.
Operating Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
4Q18

 
3Q18

 
4Q17

 
LQ
 
Y/Y
Salaries and employee benefits
 
$36.0
 
$38.9
 
$44.6
 
(8
)%
 
(19
)%
Occupancy and equipment
 
8.0

 
8.2

 
7.8

 
(2
)%
 
3
 %
Professional services
 
4.2

 
2.9

 
4.0

 
47
 %
 
5
 %
Marketing and business development
 
2.3

 
1.7

 
1.9

 
33
 %
 
19
 %
Information systems
 
6.3

 
6.2

 
5.6

 
1
 %
 
12
 %
Amortization of intangibles
 
0.7

 
0.8

 
1.3

 
(9
)%
 
(49
)%
Impairment of goodwill
 

 

 
24.9

 
nm

 
nm

FDIC insurance
 
0.7

 
0.7

 
0.7

 
10
 %
 
9
 %
Restructuring
 
2.1

 
5.8

 

 
(64
)%
 
nm

Other
 
3.3

 
3.4

 
3.1

 
(4
)%
 
5
 %
Total operating expense
 
$63.6
 
$68.6
 
$94.0
 
(7
)%
 
(32
)%
 
 
 
 

 
 
 
 
 
 
Memo: Excluding Notable Items and Divested Affiliates
 
 
 
 
 
 
 
 
 
 
Notable items related to Anchor Divestiture 10
 

 

 
25.3

 
nm

 
nm

Information systems 11
 
(0.4
)
 

 

 
nm

 
nm

Restructuring
 
2.1

 
5.8

 

 
(64
)%
 
nm

Divested Affiliates operating expense
 
2.8

 
4.0

 
10.0

 
(30
)%
 
(72
)%
Total operating expense (non-GAAP)
 
$59.1
 
$58.8
 
$58.7
 
1
 %
 
1
 %
10 Includes $24.9 million of Impairment of goodwill and $0.4 million of legal expense
11 $0.4 million of Information services expense was reclassified to Restructuring expense in conjunction with the Company's formal restructuring plan announced in 4Q18
Total operating expense decreased 7% linked quarter primarily driven by lower restructuring expense, while decreasing 32% year-over-year, primarily driven by impairment of goodwill related to the divestiture of Anchor during the fourth quarter of 2017.

4




Excluding Notable Items and Divested Affiliates, Total operating expense for the fourth quarter of 2018 was $59.1 million, up 1% linked quarter and year-over-year. Year-over-year, compensation declined as a result of efficiency initiatives and the previously mentioned $0.8 million expense reversal related to the liability for the Company's Deferred Compensation Plan, partially offset by information technology investments.
Income Tax Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company's Income tax expense for the fourth quarter of 2018 includes $3.2 million of expense related to the divestiture of BOS. Excluding Notable Items, the Company's effective tax rate for the fourth quarter of 2018 was 22.7%.
Loans and Deposits - QTD Averages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Change
($ in millions)
 
4Q18

 
3Q18

 
4Q17

 
LQ
 
Y/Y
Commercial and industrial
 
$1,027
 
$999
 
$962
 
3
 %
 
7
 %
Commercial real estate
 
2,402
 
2,475
 
2,370
 
(3
)%
 
1
 %
Construction and land
 
209
 
179
 
131
 
17
 %
 
60
 %
Residential
 
2,907
 
2,837
 
2,650
 
2
 %
 
10
 %
Home equity
 
94
 
94
 
105
 
 %
 
(11
)%
Other consumer
 
141
 
163
 
178
 
(14
)%
 
(21
)%
Total loans
 
$6,781
 
$6,747
 
$6,396
 
 %
 
6
 %
 
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits
 
2,092
 
2,064
 
1,895
 
1
 %
 
10
 %
Interest bearing deposits
 
4,826
 
4,668
 
4,550
 
3
 %
 
6
 %
Total deposits
 
$6,918
 
$6,732
 
$6,445
 
3
 %
 
7
 %
 
 
 
 
 
 
 
 
 
 
 
Non-interest bearing deposits as a % of Total deposits
 
30
%

31
%

29
%
 
 
 
 
Average total loans in the fourth quarter of 2018 increased 6% year-over-year primarily driven by increases in Residential loans in all geographic markets. Construction and land loans increased year-over-year and linked quarter primarily as a result of funding tax-exempt industrial revenue bonds associated with affordable housing projects.
Average total deposits increased 7% 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. The cost of total deposits, including DDA, was 0.77%, an increase of 9 basis points linked quarter and 40 basis points year-over-year.
Provision and Asset Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in millions)
 
4Q18

 
3Q18

 
2Q18

 
1Q18

 
4Q17

Provision/ (credit) for loan loss
 
$0.1
 
$(0.9)
 
$0.5
 
$(1.8)
 
$(0.9)
Total criticized loans
 
146.6
 
134.7
 
114.4
 
124.1
 
154.8
Total nonaccrual loans
 
14.1
 
12.1
 
15.7
 
16.4
 
14.3
Total loans 30-89 days past due and accruing
 
22.3
 
11.6
 
5.0
 
20.4
 
25.0
Total net loans (charged-off)/ recovered
 
1.7

 
1.0
 
0.1
 

 
0.8
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses as a % of Total loans
 
1.09
%
 
1.09
%
 
1.09
%
 
1.10
%
 
1.15
%
Nonaccrual loans as a % of Total loans
 
0.20
%
 
0.18
%
 
0.23
%
 
0.25
%
 
0.22
%

5




The Company recorded a provision expense of $0.1 million for the fourth quarter of 2018, compared to credits of $0.9 million for the third quarter of 2018 and the fourth quarter of 2017. The provision expense in the fourth quarter of 2018 was primarily driven by loan growth and an increase in criticized loans, offset by net loan recoveries.
Total criticized loans as of December 31, 2018 was $146.6 million, an increase of 9% linked quarter and a decrease of 5% year-over-year. The $12.0 million linked quarter increase was driven by the downgrade of certain C&I and commercial real estate relationships in New England.
Total nonaccrual loans as of December 31, 2018 was $14.1 million, or 20 basis points of total loans, compared to $12.1 million, or 18 basis points as of September 30, 2018, and $14.3 million, or 22 basis points as of December 31, 2017.
Capital
 
 
 
 
 
 
 
 
 
 
 
 
4Q18

 
3Q18

 
2Q18

 
1Q18

 
4Q17

Tangible common equity/ Tangible assets 12
 
8.1
%
 
7.8
%
 
7.5
%
 
7.4
%
 
7.3
%
Tangible book value per share 12
 
$8.18
 
$7.67
 
$7.62
 
$7.17
 
$7.12
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital Ratios: 13
 
 
 
 
 
 
 

 

Tier 1 common equity
 
11.4
%
 
11.1
%
 
10.9
%
 
10.4
%
 
10.3
%
Total risk-based capital
 
14.3
%
 
14.1
%
 
13.8
%
 
14.2
%
 
14.1
%
Tier 1 risk-based capital
 
13.0
%
 
12.8
%
 
12.6
%
 
12.9
%
 
12.9
%
Tier 1 leverage capital
 
9.5
%
 
9.2
%
 
9.2
%
 
9.4
%
 
9.3
%
 
 
 
 
 
 
 
 
 
 
 
Common Equity Repurchase Program:
 
 
 
 
 
 
 
 
 
 
Total shares of common stock repurchased
 
1,505,521

 
137,144

 

 

 

Average price paid per share of common stock
 
$12.02
 
$13.89
 

 

 

Aggregate repurchases of common equity ($ in millions)
 
$18.1
 
$1.9
 

 

 

12 See footnote 6 for a GAAP to non-GAAP reconciliation.
13 Current quarter information is presented based on estimated data.
Tangible book value per share as of December 31, 2018 increased 7% linked quarter and 15% year-over-year to $8.18. The increase of Tangible book value per share from December 31, 2017 to December 31, 2018 was primarily driven by the divestitures of Anchor and BOS and increased retained earnings, partially offset by common share repurchases and lower Accumulated Other Comprehensive Income.
EPS Calculation
 
 
 
 
 
 
 
 
 
 
For calculation of income for EPS, fourth quarter 2018 Net income attributable to the common shareholders benefited by $2.7 million, or $0.03 per share, related to the changes in value of Redeemable noncontrolling interests ("RNCI").


6




Dividend Payments
Concurrent with the release of fourth 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 February 8, 2019, and the payment date is February 22, 2019.
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 8:00 a.m. Eastern Time on Thursday, January 31, 2019, to discuss the financial results, business highlights and outlook. To access the call:
Dial In #: (888) 317-6003
Elite Entry Number: 7238859

Replay Information:
Available from January 31, 2019 at 12:00 p.m Eastern Time until February 7, 2019
Dial In #: (877) 344-7529
Conference Number: 10127383
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 Commercial and Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, and Florida. The Company has total assets of greater than $8 billion, and manages over $15 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




396549303_bplogo121416a02.jpg
Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
(In thousands, except share and per share data)
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
127,259

 
$
92,634

 
$
364,539

 
$
77,085

 
$
120,541

Investment securities available-for-sale
1,008,293

 
1,063,340

 
1,076,967

 
1,118,497

 
1,170,328

Investment securities held-to-maturity
70,438

 
75,468

 
78,955

 
70,809

 
74,576

Stock in Federal Home Loan Bank and Federal Reserve Bank
49,263

 
48,727

 
70,127

 
54,455

 
59,973

Loans held for sale
2,812

 
3,344

 
4,622

 
3,918

 
4,697

Total loans
6,893,158

 
6,720,420

 
6,767,123

 
6,602,327

 
6,505,028

Less: Allowance for loan losses
75,312

 
73,500

 
73,464

 
72,898

 
74,742

Net loans
6,817,846

 
6,646,920

 
6,693,659

 
6,529,429

 
6,430,286

Other real estate owned (“OREO”)
401

 
108

 
108

 

 

Premises and equipment, net
45,412

 
47,399

 
46,421

 
43,627

 
37,640

Goodwill (1)
57,607

 
75,598

 
75,598

 
75,598

 
75,598

Intangible assets, net (1)
12,227

 
13,834

 
14,584

 
15,334

 
16,083

Fees receivable
5,101

 
10,445

 
10,405

 
10,640

 
11,154

Accrued interest receivable
24,366

 
24,641

 
23,732

 
22,614

 
22,322

Deferred income taxes, net
26,638

 
27,833

 
26,316

 
32,058

 
29,031

Other assets (1)
246,962

 
245,549

 
230,170

 
264,295

 
259,515

Total assets
$
8,494,625

 
$
8,375,840

 
$
8,716,203

 
$
8,318,359

 
$
8,311,744

Liabilities:
 
 
 
 
 
 
 
 
 
Deposits
$
6,781,170

 
$
6,768,723

 
$
6,620,179

 
$
6,584,322

 
$
6,510,246

Securities sold under agreements to repurchase
36,928

 
39,453

 
58,824

 
85,257

 
32,169

Federal funds purchased
250,000

 
120,000

 

 

 
30,000

Federal Home Loan Bank borrowings
420,144

 
441,836

 
1,056,938

 
611,588

 
693,681

Junior subordinated debentures
106,363

 
106,363

 
106,363

 
106,363

 
106,363

Other liabilities (1)
143,540

 
149,770

 
129,175

 
125,004

 
135,880

Total liabilities
7,738,145

 
7,626,145

 
7,971,479

 
7,512,534

 
7,508,339

Redeemable noncontrolling interests (“RNCI”)
2,526

 
11,686

 
10,747

 
16,322

 
17,461

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

 

 

 
47,753

 
47,753

Common stock, $1.00 par value; authorized: 170,000,000 shares
83,656

 
84,603

 
84,479

 
84,194

 
84,208

Additional paid-in capital
600,196

 
614,157

 
613,918

 
612,526

 
607,929

Retained earnings
87,821

 
64,618

 
56,912

 
61,518

 
49,526

Accumulated other comprehensive income/ (loss)
(17,719
)
 
(27,578
)
 
(23,328
)
 
(21,313
)
 
(8,658
)
Total Company’s shareholders’ equity
753,954

 
735,800

 
731,981

 
784,678

 
780,758

Noncontrolling interests

 
2,209

 
1,996

 
4,825

 
5,186

Total shareholders’ equity
753,954

 
738,009

 
733,977

 
789,503

 
785,944

Total liabilities, redeemable noncontrolling interests and shareholders’ equity
$
8,494,625

 
$
8,375,840

 
$
8,716,203

 
$
8,318,359

 
$
8,311,744



9




Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Three Months Ended
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Interest and dividend income:
(In thousands, except share and per share data)
Loans
$
69,294

 
$
68,254

 
$
64,048

 
$
60,929

 
$
59,496

Taxable investment securities
1,486

 
1,510

 
1,501

 
1,510

 
1,562

Non-taxable investment securities
1,833

 
1,779

 
1,752

 
1,730

 
1,697

Mortgage-backed securities
2,923

 
2,941

 
3,049

 
3,178

 
3,125

Short-term investments and other
1,356

 
1,617

 
1,205

 
1,009

 
978

Total interest and dividend income
76,892

 
76,101

 
71,555

 
68,356

 
66,858

Interest expense:
 
 
 
 
 
 
 
 
 
Deposits
13,470

 
11,487

 
8,365

 
6,524

 
6,048

Federal Home Loan Bank borrowings
2,119

 
3,877

 
4,447

 
3,344

 
2,626

Junior subordinated debentures
1,043

 
1,028

 
1,008

 
846

 
771

Repurchase agreements and other short-term borrowings
263

 
68

 
190

 
259

 
141

Total interest expense
16,895

 
16,460

 
14,010

 
10,973

 
9,586

Net interest income
59,997

 
59,641

 
57,545

 
57,383

 
57,272

Provision/ (credit) for loan losses
93

 
(949
)
 
453

 
(1,795
)
 
(942
)
Net interest income after provision/ (credit) for loan losses
59,904

 
60,590

 
57,092

 
59,178

 
58,214

Fees and other income:
 
 
 
 
 
 
 
 
 
Investment management fees
2,831

 
3,245

 
4,227

 
11,425

 
12,321

Wealth advisory fees
12,111

 
13,995

 
13,693

 
13,512

 
13,496

Wealth management and trust fees
11,677

 
11,510

 
11,169

 
12,151

 
11,756

Other banking fee income
2,033

 
2,775

 
2,745

 
2,273

 
2,531

Gain on sale of loans, net
39

 
67

 
63

 
74

 
85

Total core fees and income
28,691

 
31,592

 
31,897

 
39,435

 
40,189

Gain/ (loss) on sale of investments, net
(596
)
 

 
7

 
(24
)
 
(110
)
Gain/ (loss) on sale of affiliates
18,142

 

 

 

 
(1,264
)
Other
(392
)
 
722

 
191

 
332

 
360

Total other income
17,154

 
722

 
198

 
308

 
(1,014
)
Total revenue (2)
105,842

 
91,955

 
89,640

 
97,126

 
96,447

Operating expense:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
36,007

 
38,944

 
39,433

 
47,084

 
44,612

Occupancy and equipment
7,975

 
8,164

 
8,229

 
7,748

 
7,753

Professional services
4,229

 
2,877

 
2,872

 
3,177

 
4,035

Marketing and business development
2,275

 
1,710

 
2,070

 
1,593

 
1,919

Information systems
6,296

 
6,233

 
6,770

 
5,886

 
5,635

Amortization of intangibles
680

 
750

 
749

 
750

 
1,323

Impairment of goodwill

 

 

 

 
24,901

FDIC insurance
739

 
674

 
708

 
744

 
677

Restructuring
2,065

 
5,763

 

 

 

Other
3,291

 
3,442

 
3,553

 
3,875

 
3,134

Total operating expense
63,557

 
68,557

 
64,384

 
70,857

 
93,989

Income before income taxes
42,192

 
24,347

 
24,803

 
28,064

 
3,400

Income tax expense
8,651

 
5,461

 
17,399

 
6,026

 
21,391

Net income/ (loss) from continuing operations
33,541

 
18,886

 
7,404

 
22,038

 
(17,991
)
Net income/ (loss) from discontinued operations (3)
306

 

 
(2
)
 
1,698

 
989

Net income/ (loss) before attribution to noncontrolling interests
33,847

 
18,886

 
7,402

 
23,736

 
(17,002
)
Less: Net income attributable to noncontrolling interests
545

 
924

 
968

 
1,050

 
1,278

Net income/ (loss) attributable to the Company
$
33,302

 
$
17,962

 
$
6,434

 
$
22,686

 
$
(18,280
)

10




Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Year Ended
 
December 31,
2018
 
December 31,
2017
Interest and dividend income:
(In thousands, except share and per share data)
Loans
$
262,525

 
$
228,964

Taxable investment securities
6,007

 
6,393

Non-taxable investment securities
7,094

 
6,622

Mortgage-backed securities
12,091

 
13,391

Short-term investments and other
5,187

 
3,325

Total interest and dividend income
292,904

 
258,695

Interest expense:
 
 
 
Deposits
39,846

 
20,884

Federal Home Loan Bank borrowings
13,787

 
9,883

Junior subordinated debentures
3,925

 
2,919

Repurchase agreements and other short-term borrowings
780

 
323

Total interest expense
58,338

 
34,009

Net interest income
234,566

 
224,686

Provision/ (credit) for loan losses
(2,198
)
 
(7,669
)
Net interest income after provision/ (credit) for loan losses
236,764

 
232,355

Fees and other income:
 
 
 
Investment management fees
21,728

 
45,515

Wealth advisory fees
53,311

 
52,559

Wealth management and trust fees
46,507

 
45,362

Other banking fee income
9,826

 
8,915

Gain on sale of loans, net
243

 
451

Total core fees and income
131,615

 
152,802

Gain/ (loss) on sale of investments, net
(613
)
 
376

Gain/ (loss) on OREO, net

 
(46
)
Gain/ (loss) on sale of affiliates
18,142

 
(1,264
)
Other
853

 
2,098

Total other income
18,382

 
1,164

Total revenue (2)
384,563

 
378,652

Operating expense:
 
 
 
Salaries and employee benefits
161,468

 
178,501

Occupancy and equipment
32,116

 
30,165

Professional services
13,155

 
13,763

Marketing and business development
7,648

 
7,766

Information systems
25,185

 
21,796

Amortization of intangibles
2,929

 
5,601

Impairment of goodwill

 
24,901

FDIC insurance
2,865

 
2,969

Restructuring
7,828

 

Other
14,161

 
14,474

Total operating expense
267,355

 
299,936

Income before income taxes
119,406

 
86,385

Income tax expense
37,537

 
46,196

Net income from continuing operations
81,869

 
40,189

Net income from discontinued operations (3)
2,002

 
4,870

Net income before attribution to noncontrolling interests
83,871

 
45,059

Less: Net income attributable to noncontrolling interests
3,487

 
4,468

Net income attributable to the Company
$
80,384

 
$
40,591



11




Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
 
Three Months Ended
PER SHARE DATA:
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
 
(In thousands, except share and per share data)
Calculation of income for EPS:
 
 
 
 
 
 
 
 
 
Net income/ (loss) attributable to the Company
$
33,302

 
$
17,962

 
$
6,434

 
$
22,686

 
$
(18,280
)
Adjustments to Net income/ (loss) attributable to the Company to arrive at Net income/ (loss) attributable to common shareholders, treasury stock method (4)
2,694

 
(829
)
 
(3,524
)
 
(23
)
 
(1,998
)
Net income/ (loss) attributable to the common shareholders, treasury stock method
$
35,996

 
$
17,133

 
$
2,910

 
$
22,663

 
$
(20,278
)
 
 
 
 
 
 
 
 
 
 
End of period common shares outstanding
83,655,651

 
84,602,519

 
84,478,858

 
84,194,267

 
84,208,538

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Weighted average basic shares outstanding
83,750,785

 
84,017,284

 
83,509,115

 
83,097,758

 
82,904,776

Weighted average diluted shares outstanding (5)
84,863,779

 
85,498,568

 
85,413,575

 
85,271,650

 
82,904,776

 
 
 
 
 
 
 
 
 
 
Diluted total earnings/ (loss) per share
$
0.42

 
$
0.20

 
$
0.03

 
$
0.27

 
$
(0.24
)

 
Year Ended
PER SHARE DATA:
December 31,
2018
 
December 31,
2017
 
(In thousands, except share 
and per share data)
Calculation of income for EPS:
 
 
 
Net income attributable to the Company
$
80,384

 
$
40,591

Adjustments to Net income attributable to the Company to arrive at Net income attributable to common shareholders, treasury stock method (4)
(1,682
)
 
(4,887
)
Net income attributable to the common shareholders, treasury stock method
$
78,702

 
$
35,704

 
 
 
 
Weighted average shares outstanding:
 
 
 
Weighted average basic shares outstanding
83,596,685

 
82,430,633

Weighted average diluted shares outstanding (5)
85,331,314

 
84,802,565

 
 
 
 
Diluted total earnings per share
$
0.92

 
$
0.42

 
 
 
 




12




Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)
(In thousands, except per share data)
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
FINANCIAL DATA:
Book value per common share
$
9.01

 
$
8.72

 
$
8.69

 
$
8.81

 
$
8.77

Tangible book value per share (6)
$
8.18

 
$
7.67

 
$
7.62

 
$
7.17

 
$
7.12

Market price per share
$
10.57

 
$
13.65

 
$
15.90

 
$
15.05

 
$
15.45

 
 
 
 
 
 
 
 
 
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
 
 
 
 
 
 
 
 
 
Wealth Management and Trust
$
7,602,000

 
$
8,335,000

 
$
7,789,000

 
$
7,831,000

 
$
7,865,000

Affiliate Partners, excluding Anchor and BOS
$
8,319,000

 
$
9,388,000

 
$
9,072,000

 
$
8,878,000

 
$
8,920,000

Total assets under management and advisory, excluding Anchor and BOS (7)
$
15,921,000

 
$
17,723,000

 
$
16,861,000

 
$
16,709,000

 
$
16,785,000

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

 

 

 
9,042,000

 
9,277,000

Assets under management and advisory at BOS through September 30, 2018
$

 
$
4,714,000

 
$
4,525,000

 
$
4,488,000

 
$
4,434,000

Less: Inter-company relationship
$

 
$
(7,000
)
 
$
(7,000
)
 
$
(11,000
)
 
$
(11,000
)
Total assets under management and advisory, including Anchor and BOS through December 31, 2018
$
15,921,000

 
$
22,430,000

 
$
21,379,000

 
$
30,228,000

 
$
30,485,000

 
 
 
 
 
 
 
 
 
 
FINANCIAL RATIOS:
 
 
 
 
 
 
 
 
 
Total equity/ Total assets
8.88
%
 
8.81
%
 
8.42
%
 
9.49
%
 
9.46
 %
Tangible common equity/ Tangible assets (6)
8.12
%
 
7.83
%
 
7.46
%
 
7.38
%
 
7.33
 %
Tier 1 common equity/ Risk weighted assets (6)
11.40
%
 
11.14
%
 
10.90
%
 
10.39
%
 
10.32
 %
Allowance for loan losses/ Total loans
1.09
%
 
1.09
%
 
1.09
%
 
1.10
%
 
1.15
 %
Allowance for loan losses/ Nonaccrual loans
536
%
 
608
%
 
469
%
 
445
%
 
523
 %
Return on average assets - three months ended (annualized)
1.56
%
 
0.84
%
 
0.31
%
 
1.11
%
 
(0.88
)%
Return on average common equity - three months ended (annualized) (8)
17.87
%
 
9.67
%
 
3.03
%
 
12.02
%
 
(9.92
)%
Return on average tangible common equity - three months ended (annualized) (8)
20.46
%
 
11.37
%
 
3.90
%
 
15.20
%
 
(11.94
)%
Efficiency ratio - three months ended (9)
57.14
%
 
67.04
%
 
70.29
%
 
71.46
%
 
68.23
 %
 
 
 
 
 
 
 
 
 
 
DEPOSIT DETAIL:
 
 
 
 
 
 
 
 
 
Demand deposits (non-interest bearing)
$
1,951,274

 
$
2,001,275

 
$
2,089,373

 
$
1,932,732

 
$
2,025,690

NOW
626,685

 
568,148

 
635,841

 
689,526

 
645,361

Savings
73,834

 
72,967

 
73,675

 
73,580

 
70,935

Money market
3,338,892

 
3,363,062

 
3,128,211

 
3,177,692

 
3,121,811

Certificates of deposit
790,485

 
763,271

 
693,079

 
710,792

 
646,449

Total deposits
$
6,781,170

 
$
6,768,723

 
$
6,620,179

 
$
6,584,322

 
$
6,510,246



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:
12/31/18
09/30/18
12/31/17
 
12/31/18
09/30/18
12/31/17
 
12/31/18
09/30/18
12/31/17
AVERAGE ASSETS
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and investments:
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities
$
317,230

$
324,583

$
345,743

 
$
1,486

$
1,510

$
1,562

 
1.87
%
1.86
%
1.81
%
Non-taxable investment securities (10)
301,242

297,710

298,851

 
2,321

2,256

2,611

 
3.08
%
3.03
%
3.50
%
Mortgage-backed securities
536,264

552,820

608,508

 
2,923

2,941

3,125

 
2.18
%
2.13
%
2.05
%
Short-term investments and other
134,182

204,814

172,656

 
1,356

1,617

978

 
3.98
%
3.11
%
2.23
%
Total cash and investments
1,288,918

1,379,927