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Boston Private Financial Holdings, Inc. Reports Third Quarter 2014 GAAP EPS of $0.22 per share

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Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) (the “Company” or “BPFH”) today reported third quarter 2014 GAAP Net Income Attributable to the Company of $18.3 million, compared to $21.3 million for the second quarter of 2014. GAAP Net Income Attributable to the Company was flat on a year-over-year basis relative to the third quarter of 2013. Third quarter 2014 diluted earnings per share were $0.22, a $0.03 decrease from the second quarter of 2014. Diluted earnings per share were unchanged from the third quarter of 2013.

“The Company demonstrated desired loan and deposit growth and satisfactory returns on capital in the third quarter,” said Clayton G. Deutsch, CEO and President. “Total Revenue increased 8% year-over-year while Total Operating Expenses increased 4% for the same period, resulting in positive operating leverage of nearly 400 basis points. Given our focus on ROE attainment, we were pleased to see Return on Average Common Equity come in at 11.2% for the third quarter and 11.9% year-to-date.”

Core Fees and Income Increased 13% Year-Over-Year

On a year-over-year basis, Core Fees and Income (Investment Management Fees, Wealth Advisory Fees, Private Banking Wealth Management and Trust Fees, Other Banking Fee Income and Gain on Sale of Loans) increased 13% to $33.6 million due to double-digit revenue growth across all three Wealth Management business lines. On a linked quarter basis, Core Fees and Income fell 2% from $34.1 million for the second quarter of 2014, due to lower gain on sale of loans.

Total Assets Under Management/Advisory (“AUM”) were $24.8 billion at the end of the third quarter, down 2% from $25.4 billion at the end of the second quarter of 2014. AUM increased 9% from $22.7 billion at the end of the third quarter of 2013.

Net Interest Income

Net Interest Income for the third quarter was $44.8 million, down 3% from $46.3 million for the second quarter of 2014. On a year-over-year basis, Net Interest Income increased 6% from $42.3 million.

Net Interest Margin was 2.93% at the end of the third quarter, down 21 basis points from 3.14% at the end of the second quarter. Net Interest Margin was down six basis points from September 30, 2013.

Total Operating Expenses

Total Operating Expenses for the third quarter of 2014 were $54.0 million, down 1% from $54.4 million for the second quarter of 2014. On a year-over-year basis, Total Operating Expenses increased 4% from $52.0 million.

Provision Credit of $2.6M Driven By Net Recoveries

The Company recorded a $2.6 million credit to its Provision for Loan Losses for the third quarter of 2014, compared to a provision credit of $5.0 million for the second quarter. The provision credit was driven by net recoveries of $3.3 million and a decrease in criticized loans, partially offset by provision for newly originated loans. The Company recorded a provision credit of $6.0 million for the third quarter of 2013.

Criticized Loans decreased 5% on a linked quarter basis. Year-over-year, criticized loans increased 6%. Nonaccrual Loans (“Nonaccruals”) decreased 19% to $33.5 million, down from $41.6 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 34% from $50.8 million. As a percentage of Total Loans, Nonaccruals were 64 basis points at September 30, 2014, down 18 basis points from 82 basis points at June 30, 2014, and down 39 basis points from 1.03% at September 30, 2013.

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

(In millions) September 30,
2014
June 30,
2014
September 30,
2013
Total Criticized Loans $ 179.5 $ 188.2 $ 169.3
Total Loans 30-89 Days Past Due and Accruing (13) $ 3.6 $ 6.0 $ 8.2
Total Net Loans (Charged-off)/ Recovered $ 3.3 $ 2.9 $ 2.4
Allowance for Loan Losses/ Total Loans 1.44 % 1.46 % 1.57 %

Capital Ratios

The Company maintained strong capital ratios in the third quarter of 2014.

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

September 30,
2014
June 30,
2014
September 30,
2013
Total Risk-Based Capital * 15.5 % 15.5 % 15.2 %
Tier I Risk-Based Capital * 14.2 % 14.2 % 13.9 %
Tier I Leverage Capital * 10.3 % 10.4 % 10.3 %
TCE/TA 7.6 % 7.8 % 7.2 %
Tier I Common Equity/ Risk Weighted Assets * 10.6 % 10.6 % 10.1 %

*September 30, 2014 data is presented based on estimated data.

Dividend Payments

Concurrent with the release of third quarter 2014 earnings, the Board of Directors of the Company declared a cash dividend to common shareholders of $0.08 per share. The record date for this dividend is November 7, 2014, and the payment date is November 21, 2014.

The Board of Directors of the Company also declared a cash dividend to holders of the Non-Cumulative Perpetual Preferred Stock, Series D of $17.375 per share, which will result in a dividend of $0.434375 per depositary share. The record date for this dividend is November 17, 2014, and the payment date is December 15, 2014.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures, such as tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision earnings; and the efficiency ratio (FTE basis), to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. A detailed reconciliation table of the Company’s GAAP to the non-GAAP measures is attached.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Thursday, October 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003

Elite Entry Number: 2738721

Replay Information:

Available from October 16 at 12 noon until October 23

Dial In #: (877) 344-7529

Conference Number: 10053956

The call will be simultaneously webcast and may be accessed on www.bostonprivate.com.

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization that owns Wealth Management and Private Banking affiliates in Boston, New York, Los Angeles, and the San Francisco Bay Area. The Company has a $6 billion Private Banking balance sheet, and manages approximately $25 billion.

The Company positions its affiliates to serve the high net worth marketplace with high quality products and services of unique appeal to private clients. The Company also provides strategic oversight and access to resources, both financial and intellectual, to support affiliate management, marketing, compliance and legal activities. (NASDAQ:BPFH)

For more information about BPFH, visit the Company’s website at www.bostonprivate.com.

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 and wealth advisory activities; changes in interest rates; competitive pressures from other financial institutions; the effects of continued weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or decreases in deposit levels necessitating increased borrowing to fund loans and investments; increasing government regulation; 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 statements are 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.

Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except share and per share data) 9/30/2014 6/30/2014 9/30/2013
Assets:
Cash and cash equivalents $ 308,912 $ 139,181 $ 323,941
Investment securities available for sale 724,638 683,590 702,944
Investment securities held to maturity 132,467 138,380
Stock in Federal Home Loan Banks 32,534 35,276 39,715
Loans held for sale 4,943 2,841 1,745
Total loans 5,213,491 5,106,051 4,922,222
Less: Allowance for loan losses 75,283 74,547 77,177
Net loans 5,138,208 5,031,504 4,845,045
Other real estate owned (“OREO”) 1,074 921 776
Premises and equipment, net 29,473 28,410 29,319
Goodwill 110,180 110,180 110,180
Intangible assets, net 17,475 18,506 21,656
Fees receivable 11,439 11,957 10,653
Accrued interest receivable 15,018 14,337 13,442
Deferred income taxes, net 48,443 50,516 60,853
Other assets 114,281 123,224 114,670
Total assets $ 6,689,085 $ 6,388,823 $ 6,274,939
Liabilities:
Deposits $ 5,334,881 $ 4,951,852 $ 4,942,765
Securities sold under agreements to repurchase 73,422 137,334 92,499
Federal funds purchased -
Federal Home Loan Bank borrowings 371,367 416,579 391,466
Junior subordinated debentures 106,363 106,363 110,487
Other liabilities 106,024 93,149 97,461
Total liabilities 5,992,057 5,705,277 5,634,678
Redeemable Noncontrolling Interests 21,397 20,895 17,224
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; issued and outstanding: 80,464,390 shares at September 30, 2014; 80,394,009 shares at June 30, 2014; 79,821,898 shares at September 30, 2013 80,464 80,394 79,822
Additional paid-in capital 598,036 603,652 623,485
Accumulated deficit (49,573 ) (67,838 ) (123,879 )
Accumulated other comprehensive income/ (loss) (1,312 ) (1,542 ) (4,283 )
Total Company’s shareholders’ equity 675,368 662,419 622,898
Noncontrolling interests 263 232 139
Total shareholders’ equity 675,631 662,651 623,037
Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 6,689,085 $ 6,388,823 $ 6,274,939
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
Three Months Ended Nine Months Ended
(In thousands, except share and per share data) 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
Interest and dividend income:
Loans $ 47,931 $ 49,396 $ 46,484 $ 144,541 $ 144,173
Taxable investment securities 876 730 544 2,242 1,544
Non-taxable investment securities 942 914 746 2,760 2,363
Mortgage-backed securities 1,605 1,689 1,338 5,230 4,080
Federal funds sold and other 379 253 277 978 635
Total interest and dividend income 51,733 52,982 49,389 155,751 152,795
Interest expense:
Deposits 3,603 3,375 3,206 10,194 10,112
Federal Home Loan Bank borrowings 2,354 2,359 2,750 7,039 8,399
Junior subordinated debentures 976 965 1,119 2,896 3,429
Repurchase agreements and other short-term borrowings 17 15 12 49 378
Total interest expense 6,950 6,714 7,087 20,178 22,318
Net interest income 44,783 46,268 42,302 135,573 130,477
Provision/ (credit) for loan losses (2,600 ) (5,000 ) (6,000 ) (8,800 ) (8,000 )
Net interest income after provision for loan losses 47,383 51,268 48,302 144,373 138,477
Fees and other income:
Investment management fees 12,011 11,754 10,511 35,226 31,445
Wealth advisory fees 12,278 11,979 10,698 35,730 31,083
Private banking wealth management and trust fees 7,251 7,043 6,508 21,255 19,780
Other banking fee income 1,835 1,677 1,679 5,192 5,183
Gain on sale of loans, net 183 1,694 430 1,966 2,363
Total core fees and income 33,558 34,147 29,826 99,369 89,854
Gain on repurchase of debt - - 620
Gain on sale of investments, net 8 7 9 35
Gain/(loss) on OREO, net 150 19 988 (13 )
Gain on sale of Pacific Northwest offices (1) - - 10,574
Other 53 208 418 510 926
Total other income 211 227 425 1,507 12,142
Operating expense:
Salaries and employee benefits 35,855 34,338 33,102 106,767 104,605
Occupancy and equipment 7,346 7,349 7,307 22,492 22,411
Professional services 2,796 3,526 3,451 9,165 8,697
Marketing and business development 1,408 2,730 1,168 5,564 5,330
Contract services and data processing 1,404 1,447 1,462 4,289 4,514
Amortization of intangibles 1,031 1,045 1,056 3,129 3,275
FDIC insurance 857 854 823 2,607 2,817
Other 3,302 3,113 3,584 9,356 13,556
Total operating expense 53,999 54,402 51,953 163,369 165,205
Income before income taxes 27,153 31,240 26,600 81,880 75,268
Income tax expense 8,993 10,333 8,714 26,464 25,455
Net income from continuing operations 18,160 20,907 17,886 55,416 49,813
Net income from discontinued operations (2) 1,272 1,450 1,321 4,650 5,824
Net income before attribution to noncontrolling interests 19,432 22,357 19,207 60,066 55,637
Less: Net income attributable to noncontrolling interests 1,167 1,025 871 3,428 2,770
Net income attributable to the Company $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except share and per share data) Three Months Ended Nine Months Ended
PER SHARE DATA: 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
Calculation of Income for EPS:
Net income attributable to the Company $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867
Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3) (796 ) (1,195 ) (665 ) (3,052 ) (13,590 )
Net Income Attributable to the Common Shareholders 17,469 20,137 17,671 53,586 39,277
LESS: Amount allocated to participating securities (75 ) (132 ) (160 ) (328 ) (1,378 )
Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 17,394 $ 20,005 $ 17,511 $ 53,258 $ 37,899
End of Period Common Shares Outstanding 80,464,390 80,394,009 79,821,898
Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities 79,222,590 79,195,082 78,710,259 79,175,634 81,580,479
LESS: Participating securities (535,528 ) (756,446 ) (1,040,242 ) (750,021 ) (4,330,819 )
PLUS: Dilutive potential common shares 1,923,896 1,859,789 1,523,731 1,899,015 1,238,510
Weighted Average Diluted Shares (4) 80,610,958 80,298,425 79,193,748 80,324,628 78,488,170
Diluted Total Earnings per Share $ 0.22 $ 0.25 $ 0.22 $ 0.66 $ 0.48
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except per share data)
FINANCIAL DATA: 9/30/2014 6/30/2014 9/30/2013
Book Value Per Common Share $ 7.80 $ 7.65 $ 7.21
Tangible Book Value Per Share (5) $ 6.22 $ 6.05 $ 5.56
Market Price Per Share $ 12.39 $ 13.44 $ 11.09
ASSETS UNDER MANAGEMENT AND ADVISORY:
Private Banking $ 4,701,000 $ 4,716,000 $ 4,263,000
Investment Managers 10,376,000 10,917,000 9,697,000
Wealth Advisory 9,731,000 9,760,000 8,809,000
Less: Inter-company Relationship (22,000 ) (23,000 ) (21,000 )
Total Assets Under Management and Advisory $ 24,786,000 $ 25,370,000 $ 22,748,000
FINANCIAL RATIOS:
Total Equity/Total Assets 10.10 % 10.37 % 9.93 %
Tangible Common Equity/Tangible Assets (5) 7.62 % 7.77 % 7.22 %
Tier I Common Equity/ Risk Weighted Assets (5) 10.63 % 10.60 % 10.15 %
Allowance for Loan Losses/Total Loans 1.44 % 1.46 % 1.57 %
Allowance for Loan Losses/Nonaccrual Loans 224 % 179 % 152 %
Return on Average Assets – Three Months Ended (Annualized) 1.10 % 1.32 % 1.18 %
Return on Average Common Equity – Three Months Ended (Annualized) (6) 11.20 % 13.50 % 12.32 %
Return on Average Tangible Common Equity – Three Months Ended (Annualized) (6) 14.10 % 17.15 % 16.07 %
Efficiency Ratio – Three Months Ended (7) 65.47 % 64.39 % 68.14 %
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: 09/30/14 06/30/14 09/30/13 09/30/14 06/30/14 09/30/13 09/30/14 06/30/14 09/30/13
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 295,395 $ 262,253 $ 244,408 $ 876 $ 730 $ 544 1.19 % 1.12 % 0.90 %
Non-taxable investment securities (8) 223,499 224,634 209,511 1,449 1,406 1,148 2.59 % 2.50 % 2.19 %
Mortgage-backed securities 325,913 332,928 263,380 1,605 1,689 1,338 1.97 % 2.03 % 2.03 %
Federal funds sold and other 359,899 187,722 244,622 379 253 277 0.42 %

0.62

% 0.44 %
Total Cash and Investments 1,204,706 1,007,537 961,921 4,309 4,078 3,307 1.43 %

1.64

% 1.37 %
Loans: (9)
Commercial and Construction (8) 2,841,869 2,856,603 2,657,121 31,657 33,397 30,435 4.36 % 4.62 % 4.48 %
Residential 2,071,326 2,039,146 1,984,565 16,384 15,984 15,782 3.16 % 3.14 % 3.18 %
Home Equity and Other Consumer 244,690 242,988 258,579 1,733 1,744 2,003 2.81 % 2.88 % 3.07 %
Total Loans 5,157,885 5,138,737 4,900,265 49,774 51,125 48,220 3.81 % 3.95 % 3.88 %
Total Earning Assets 6,362,591 6,146,274 5,862,186 54,083 55,203 51,527 3.36 % 3.57 % 3.47 %
LESS: Allowance for Loan Losses 76,099 79,071 81,262
Cash and due From Banks (Non-Interest Bearing) 42,080 32,016 40,164
Other Assets 341,953 366,833 375,910
TOTAL AVERAGE ASSETS $ 6,670,525 $ 6,466,052 $ 6,196,998

AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits:

Savings and NOW $ 583,547 $ 601,104 $ 492,983 $ 110 $ 111 $ 97 0.07 % 0.07 % 0.08 %
Money Market 2,640,762 2,509,400 2,425,333 2,273 1,994 1,782 0.34 % 0.32 % 0.29 %
Certificates of Deposit 607,940 615,325 627,166 1,220 1,270 1,327 0.80 % 0.83 % 0.84 %
Total Interest-Bearing Deposits 3,832,249 3,725,829 3,545,482 3,603 3,375 3,206 0.37 % 0.36 % 0.36 %
Junior Subordinated Debentures 106,363 106,363 125,729 976 965 1,119 3.59 % 3.59 % 3.48 %
FHLB Borrowings and Other 534,062 527,418 501,263 2,371 2,374 2,762 1.74 % 1.78 % 2.16 %
Total Interest-Bearing Liabilities 4,472,674 4,359,610 4,172,474 6,950 6,714 7,087 0.61 % 0.61 % 0.67 %
Noninterest Bearing Demand Deposits 1,404,875 1,334,791 1,277,319
Other Liabilities 100,106 93,539 114,588
Total Average Liabilities 5,977,655 5,787,940 5,564,381
Redeemable Noncontrolling Interests 23,584 23,850 17,688
Average Shareholders’ Equity 669,286 654,262 614,929
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY $ 6,670,525 $ 6,466,052 $ 6,196,998
Net Interest Income – on a Fully Taxable Equivalent Basis (FTE) $ 47,133 $ 48,489 $ 44,440
LESS: FTE Adjustment (8) 2,350 2,221 2,138
Net Interest Income (GAAP Basis) $ 44,783 $ 46,268 $ 42,302
Interest Rate Spread 2.75 % 2.96 % 2.80 %
Bank only Net Interest Margin 3.00 % 3.21 % 3.07 %
Net Interest Margin 2.93 % 3.14 % 2.99 %
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
Average Balance Interest Income/Expense Average Yield/Rate
(In Thousands) Nine Months Ended Nine Months Ended Nine Months Ended
AVERAGE BALANCE SHEET: 9/30/2014 9/30/2013 9/30/2014 9/30/2013 9/30/2014 9/30/2013
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 270,914 $ 216,472 $ 2,242 $ 1,544 1.10 % 0.96 %
Non-taxable investment securities (8) 224,061 206,344 4,246 3,635 2.53 % 2.35 %
Mortgage-backed securities 333,252 291,815 5,230 4,080 2.09 % 1.86 %
Federal funds sold and other 250,942 189,503 978 635 0.52 % 0.44 %
Total Cash and Investments 1,079,169 904,134 12,696 9,894 1.57 % 1.46 %
Loans: (9)
Commercial and Construction (8) 2,844,013 2,721,191 95,975 94,277 4.45 % 4.57 %
Residential 2,048,700 1,983,966 48,537 48,809 3.16 % 3.28 %
Home Equity and Other Consumer 244,421 265,913 5,281 5,974 2.89 % 3.00 %
Total Loans 5,137,134 4,971,070 149,793 149,060 3.86 % 3.97 %
Total Earning Assets 6,216,303 5,875,204 162,489 158,954 3.46 % 3.58 %
LESS: Allowance for Loan Losses 77,462 83,090
Cash and due From Banks (Non-Interest Bearing) 38,628 41,780
Other Assets 357,896 391,399
TOTAL AVERAGE ASSETS $ 6,535,365 $ 6,225,293
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY
Interest-Bearing Liabilities:
Interest-Bearing Deposits: (10)
Savings and NOW $ 577,012 $ 530,701 $ 319 $ 336 0.07 % 0.08 %
Money Market 2,547,039 2,365,310 6,112 5,495 0.32 % 0.31 %
Certificates of Deposit 615,903 658,464 3,763 4,281 0.82 % 0.87 %
Total Interest-Bearing Deposits 3,739,954 3,554,475 10,194 10,112 0.36 % 0.38 %
Junior Subordinated Debentures 106,363 132,117 2,896 3,429 3.59 % 3.42 %
FHLB Borrowings and Other 522,881 540,788 7,088 8,777 1.79 % 2.14 %
Total Interest-Bearing Liabilities 4,369,198 4,227,380 20,178 22,318 0.61 % 0.70 %
Noninterest Bearing Demand Deposits 1,385,966 1,251,112
Other Liabilities 104,556 117,505
Total Average Liabilities 5,859,720 5,595,997
Redeemable Noncontrolling Interests 20,795 18,193
Average Shareholders’ Equity 654,850 611,103
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY $ 6,535,365 $ 6,225,293
Net Interest Income – on a Fully Taxable Equivalent Basis (FTE) $ 142,311 $ 136,636
LESS: FTE Adjustment (8) 6,738 6,159
Net Interest Income (GAAP Basis) $ 135,573 $ 130,477
Interest Rate Spread 2.85 % 2.88 %
Bank only Net Interest Margin

3.10

% 3.16 %
Net Interest Margin 3.03 % 3.08 %
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)
LOAN DATA (11): 9/30/2014 6/30/2014 9/30/2013
Commercial and Industrial Loans:
New England $ 758,728 $ 715,814 $ 671,564
San Francisco Bay 124,993 119,554 75,519
Southern California 47,107 47,095 41,342
Total Commercial and Industrial Loans $ 930,828 $ 882,463 $ 788,425
Commercial Real Estate Loans:
New England $ 712,464 $ 717,166 $ 673,428
San Francisco Bay 628,149 626,744 597,405
Southern California 467,428 436,991 451,198
Total Commercial Real Estate Loans $ 1,808,041 $ 1,780,901 $ 1,722,031
Construction and Land Loans:
New England $ 82,492 $ 81,453 $ 106,324
San Francisco Bay 35,668 58,042 34,074
Southern California 12,385 10,927 14,211
Total Construction and Land Loans $ 130,545 $ 150,422 $ 154,609
Residential Loans:
New England $ 1,273,544 $ 1,231,902 $ 1,218,560
San Francisco Bay 456,355 452,864 466,801
Southern California 367,628 354,306 321,341
Total Residential Loans $ 2,097,527 $ 2,039,072 $ 2,006,702
Home Equity Loans:
New England $ 76,142 $ 81,465 $ 79,168
San Francisco Bay 30,060 27,804 31,882
Southern California 3,025 3,235 7,044
Total Home Equity Loans $ 109,227 $ 112,504 $ 118,094
Other Consumer Loans:
New England $ 124,449 $ 128,698 $ 116,692
San Francisco Bay 6,738 6,917 8,518
Southern California 6,136 5,074 7,005
Eliminations and other, net - 146
Total Other Consumer Loans $ 137,323 $ 140,689 $ 132,361

Total Loans:

New England $ 3,027,819 $ 2,956,498 $ 2,865,736
San Francisco Bay 1,281,963 1,291,925 1,214,199
Southern California 903,709 857,628 842,141
Eliminations and other, net - 146
Total Loans $ 5,213,491 $ 5,106,051 $ 4,922,222
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)
CREDIT QUALITY (11): 9/30/2014 6/30/2014 9/30/2013
Special Mention Loans:
New England $ 45,788 $ 55,882 $ 34,630
San Francisco Bay 24,623 24,264 20,875
Southern California 32,614 26,455 18,704
Total Special Mention Loans $ 103,025 $ 106,601 $ 74,209
Accruing Substandard Loans (12):
New England $ 13,589 $ 12,849 $ 12,053
San Francisco Bay 24,267 25,838 27,049
Southern California 5,331 1,306 5,207
Total Accruing Substandard Loans $ 43,187 $ 39,993 $ 44,309
Nonaccruing Loans:
New England $ 16,205 $ 19,818 $ 30,160
San Francisco Bay 15,133 16,487 14,218
Southern California 2,203 5,315 6,414
Total Nonaccruing Loans $ 33,541 $ 41,620 $ 50,792
Other Real Estate Owned:
New England $ 489 $ 336 $ 191
San Francisco Bay 585 585 585
Southern California -
Total Other Real Estate Owned $ 1,074 $ 921 $ 776
Loans 30-89 Days Past Due and Accruing (13):
New England $ 1,825 $ 3,547 $ 2,047
San Francisco Bay 653 487 2,317
Southern California 1,145 1,950 3,819
Total Loans 30-89 Days Past Due and Accruing $ 3,623 $ 5,984 $ 8,183
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ 912 $ (622 ) $ 22
San Francisco Bay 465 1,959 2,111
Southern California 1,959 1,605 244
Total Net Loans (Charged-off)/ Recovered $ 3,336 $ 2,942 $ 2,377
Loans (Charged-off)/ Recovered, Net for the Nine Months Ended:
New England $ 830 $ (2,078 )
San Francisco Bay 3,064 778
Southern California 3,818 2,420
Total Net Loans (Charged-off)/ Recovered $ 7,712 $ 1,120
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
FOOTNOTES:

(1)

On December 17, 2012, Boston Private Bank & Trust Company announced that it had entered into an agreement to sell its three offices in the Pacific Northwest region. The sale closed on May 10, 2013, at which time the Company recorded a gain on sale of $10.6 million.

(2)

Net income from discontinued operations consists of contingent payments or expenses related to our divested affiliates, including Davidson Trust Company; Boston Private Value Investors, Inc.; Sand Hill Advisors, LLC; RINET Company, LLC; Gibraltar Private Bank & Trust Company; and Westfield Capital Management Company, LLC.

(3)

Adjustments to net income attributable to the Company to arrive at net income attributable to the common shareholders, as presented in these tables, include decrease/ (increase) in noncontrolling interests redemption value, dividends paid on preferred stock, and dividends on participating securities.

(4)

When the Company has positive net income from continuing operations attributable to the common shareholders, the Company adds additional shares to basic weighted average shares outstanding to arrive at diluted weighted average shares outstanding for the diluted earnings per share calculation. These additional shares reflect the assumed exercise, conversion, or contingent issuance of dilutive securities. If the additional shares would result in anti-dilution they would be excluded from the diluted earnings per share calculation. The potential dilutive shares relate to: unexercised stock options, unvested non-participating restricted stock, and unexercised stock warrants. See Part II. Item 8. “Financial Statements and Supplementary Data – Note 16: Earnings Per Share” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 for additional information.

(5)

The Company uses certain non-GAAP financial measures, such as: Tangible Book Value Per Share and the Tangible Common Equity (“TCE”) to Tangible Assets (“TA”) ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.
Reconciliations from the Company’s GAAP Total Equity to Total Assets ratio to the Non-GAAP TCE to TA ratio, and from GAAP Book Value to Non-GAAP Tangible Book Value are presented below:
The Company calculates Tangible Assets by adjusting Total Assets to exclude Goodwill and Intangible Assets.
The Company calculates Tangible Common Equity by adjusting Total Equity to exclude non-convertible Series D Preferred stock and exclude Goodwill and Intangible Assets, net.
(In thousands, except per share data) 9/30/2014 6/30/2014 9/30/2013
Total Balance Sheet Assets $ 6,689,085 $ 6,388,823 $ 6,274,939
LESS: Goodwill and Intangible Assets, net (127,655 ) (128,686 ) (131,836 )
Tangible Assets (non-GAAP) $ 6,561,430 $ 6,260,137 $ 6,143,103
Total Shareholders’ Equity $ 675,631 $ 662,651 $ 623,037
LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 )
LESS: Goodwill and Intangible Assets, net (127,655 ) (128,686 ) (131,836 )
Total adjusting items (175,408 ) (176,439 ) (179,589 )
Tangible Common Equity (non-GAAP) $ 500,223 $ 486,212 $ 443,448
Total Equity/Total Assets 10.10 % 10.37 % 9.93 %
Tangible Common Equity/Tangible Assets (non-GAAP) 7.62 % 7.77 % 7.22 %
Total Risk Weighted Assets * $ 4,753,785 $ 4,643,514 $ 4,462,531
Tier I Common Equity * $ 505,474 $ 491,982 $ 452,879
Tier I Common Equity/ Risk Weighted Assets 10.63 % 10.60 % 10.15 %
End of Period Shares Outstanding 80,464 80,394 79,822
Book Value Per Common Share $ 7.80 $ 7.65 $ 7.21
Tangible Book Value Per Share (non-GAAP) $ 6.22 $ 6.05 $ 5.56

* Risk Weighted Assets and Tier I Common Equity for September 30, 2014 are presented based on estimated data.

(6)

The Company uses certain non-GAAP financial measures, such as: Return on Average Common Equity and Return on Average Tangible Common Equity to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.
Reconciliations from the Company’s GAAP Return on Average Equity ratio to the Non-GAAP Return on Average Common Equity ratio, and the Non-GAAP Return on Average Tangible Common Equity ratio are presented below:
The Company calculates Average Common Equity by adjusting Average Equity to exclude Average Preferred Equity.
The Company calculates Average Tangible Common Equity by adjusting Average Equity to exclude Average Goodwill and Intangible Assets, net and Average Preferred Equity.
Three Months Ended Nine months ended
(In thousands, except per share data) 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
Total average shareholders’ equity $ 669,286 $ 654,262 $ 614,929 $ 654,850 $ 611,103
LESS: Average Series D preferred stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) (47,753 ) (29,260 )
Average common equity (non-GAAP) 621,533 606,509 567,176 607,097 581,843
LESS: Average goodwill and intangible assets, net (128,178 ) (129,216 ) (132,373 ) (129,217 ) (133,442 )
Total adjusting items (128,178 ) (129,216 ) (132,373 ) (129,217 ) (133,442 )
Average Tangible Common Equity (non-GAAP) $ 493,355 $ 477,293 $ 434,803 $ 477,880 $ 448,401
Net income attributable to the Company $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867
Less: Dividends on Series D preferred stock (869 ) (869 ) (869 ) (2,606 ) (1,429 )
Net income, after dividends on Series D preferred stock (non-GAAP) $ 17,396 $ 20,463 $ 17,467 $ 54,032 $ 51,438
Return on Average Equity – (Annualized) 10.92 % 13.04 % 11.93 % 11.53 % 11.53 %
Return on Average Common Equity – (Annualized) (non-GAAP) 11.20 % 13.50 % 12.32 % 11.87 % 11.79 %
Return on Average Tangible Common Equity – (Annualized) (non-GAAP) 14.10 % 17.15 % 16.07 % 15.08 % 15.30 %

(7)

The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision earnings and the efficiency ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.
Reconciliations from the Company’s GAAP income from continuing operations before income taxes to non-GAAP pre-tax, pre-provision earnings; from GAAP net income attributable to the Company to Non-GAAP net income attributable to the Company, excluding the sale of the Pacific Northwest offices; from GAAP diluted total EPS to Non-GAAP diluted total EPS, excluding the effect of significant transactions; and from GAAP efficiency ratio to Non-GAAP efficiency ratio (FTE basis) are presented below:

Three Months Ended

Nine months ended

(In thousands, except per share data) 9/30/2014 6/30/2014 9/30/2013 9/30/2014 9/30/2013
Income before income taxes (GAAP) $ 27,153 $ 31,240 $ 26,600 $ 81,880 $ 75,268
ADD BACK: Provision/ (credit) for loan losses (2,600 ) (5,000 ) (6,000 ) (8,800 ) (8,000 )
Pre-tax, pre-provision earnings (non-GAAP) $ 24,553 $ 26,240 $ 20,600 $ 73,080 $ 67,268
Net income attributable to the Company (GAAP) $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 52,867
LESS: Gain on sale of Pacific Northwest offices, net of tax - - 6,267
Net income attributable to the Company, excluding the effect of significant transactions (Non-GAAP) $ 18,265 $ 21,332 $ 18,336 $ 56,638 $ 46,600
Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP) $ 17,394 $ 20,005 $ 17,511 $ 53,258 $ 37,899
ADD BACK: Deemed dividend due to repurchase of Series B Preferred - - 11,738
LESS: Gain on sale of Pacific Northwest offices, net of tax - - (6,267 )
Net income attributable to the Common Shareholders, after allocation to participating securities, excluding the effect of significant transactions (Non-GAAP) $ 17,394 $ 20,005 $ 17,511 $ 53,258 $ 43,370
Diluted Total Earnings Per Share (GAAP) $ 0.22 $ 0.25 $ 0.22 $ 0.66 $ 0.48
Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $ 0.22 $ 0.25 $ 0.22 $ 0.66 $

0.55

Total operating expense (GAAP) $ 53,999 $ 54,402 $ 51,953 $ 163,369 $ 165,205
Less: Amortization of intangibles 1,031 1,045 1,056 3,129 3,275
Total operating expense (excluding amortization of intangibles) (non-GAAP) $ 52,968 $ 53,357 $ 50,897 $ 160,240 $ 161,930
Net interest income $ 44,783 $ 46,268 $ 42,302 $ 135,573 $ 130,477
Total core fees and income 33,558 34,147 29,826 99,369 89,854
Total other income 211 227 425 1,507 12,142
FTE income 2,350 2,221 2,138 6,738 6,159
Total revenue (FTE basis) $ 80,902 $ 82,863 $ 74,691 $ 243,187 $ 238,632
Efficiency Ratio, before deduction of intangible amortization (GAAP) 68.74 % 67.46 % 71.61 % 69.09 % 71.06 %
Efficiency Ratio, FTE Basis (non-GAAP) 65.47 % 64.39 % 68.14 % 65.89 % 67.86 %

(8)

Interest Income on Non-taxable Investments and Loans are presented on an FTE basis using the federal statutory rate of 35% for each period presented.

(9)

Includes Loans Held for Sale and Nonaccrual Loans.

(10)

Includes Deposits Held for Sale.

(11)

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender’s regional offices. Loans in the Pacific Northwest region that were not included the sale of that region’s offices are included with the offices from which they are being managed after the sale. Net loans from the Company to certain principals of the Company’s affiliate partners, loans at the Company’s non-banking segments, and inter-company loan eliminations are identified as “Eliminations and other, net”.

(12)

Accruing substandard loans include loans that are classified as substandard but are still accruing interest income. Boston Private Bank & Trust Company may classify a loan as substandard where known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present repayment terms and which may result in disclosure of such loans as nonaccrual at some time in the future.

(13)

In addition to loans 30-89 days past due and accruing, at September 30, 2014, the Company had two loans totaling $0.5 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At June 30, 2014, the Company had two loans totaling $0.1 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At September 30, 2013, the Company had four loans totaling $1.7 million that were more than 90 days past due but still on accrual status. These loans originated in the San Francisco Bay and New England regions.

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