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Boston Private Financial Holdings, Inc. Reports Fourth Quarter and Year End 2014 Results; Raises Dividend to $0.09 Per Share

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Boston Private Financial Holdings, Inc. (NASDAQ:BPFH) (the “Company” or “BPFH”) today reported fourth quarter 2014 GAAP Net Income Attributable to the Company of $12.2 million, compared to $18.3 million for the third quarter of 2014 and $17.7 million for the fourth quarter of 2013. Fourth quarter 2014 diluted earnings per share were $0.13, a $0.09 decrease from the third quarter of 2014 and a $0.07 decrease from the fourth quarter of 2013. Included in the fourth quarter of 2014 is $1.4 million of one-time pre-tax costs associated with the Banyan acquisition and an $800 thousand pre-tax expense for liability restructuring. Excluding the one-time costs, fourth quarter 2014 diluted earnings per share were $0.15.

For the full year of 2014, BPFH reported GAAP Net Income Attributable to the Company of $68.8 million, compared to $70.5 million for the full year of 2013. BPFH reported diluted earnings per share of $0.79 per share compared to $0.68 per share for the full years of 2014 and 2013, respectively.

“2014 was a pivotal year for Boston Private,” said Clayton G. Deutsch, CEO and President. “In October, we completed the acquisition of Banyan Partners, which accelerated the evolution of our Private Bank Wealth Management offering closer to our desired model. The Private Banking strategy continues to gain momentum on the West Coast, helping to drive strong deposit growth. As we enter 2015, Boston Private remains focused on expanding and deepening our private client base across all markets.”

Core Fees and Income Increased 21% 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 21% to $39.6 million. On a linked quarter basis, Core Fees and Income increased 18% from $33.6 million in the third quarter of 2014. In the fourth quarter of 2014, the acquisition of Banyan Partners contributed $6.1 million to Private Banking Wealth Management and Trust Fees. Excluding the impact of the Banyan acquisition, Core Fees and Income increased 2% year-over-year and were flat on a linked quarter basis. For the full year 2014, Core Fees and Income increased 13% to $139.0 million. Excluding Banyan, full year Core Fees and Income increased 8% from 2013.

Total Assets Under Management/Advisory (“AUM”) were $29.9 billion at the end of the fourth quarter, up 21% linked quarter and 23% year-over-year. The acquisition of Banyan Partners contributed $4.4 billion of AUM. Excluding the impact of Banyan, AUM increased 3% linked quarter and 5% year-over-year.

Net Interest Income

Net Interest Income for the fourth quarter was $44.1 million, down 1% from $44.8 million for the third quarter of 2014. On a year-over-year basis, Net Interest Income increased 1% from $43.5 million. For the full year, Net Interest Income increased 3% to $179.7 million.

Net Interest Margin was 2.83% for the fourth quarter, down 10 basis points from 2.93% for the third quarter. Net Interest Margin was down 15 basis points from 2.98% for the fourth quarter of 2013.

Total Operating Expenses

Total Operating Expenses for the fourth quarter of 2014 were $63.8 million, up 18% from $54.0 million for the third quarter of 2014. On a year-over-year basis, Total Operating Expenses increased 15% from $55.5 million. In the fourth quarter of 2014, Banyan accounted for $6.7 million of operating expenses. Excluding the impact of Banyan, the one-time acquisition related expenses of $1.4 million and the $800 thousand pre-tax expense for liability restructuring, fourth quarter 2014 operating expenses were $54.9 million, up 2% linked quarter and down 1% year-over-year.

For the full year 2014, Total Operating Expenses were $227.1 million, up 3% from 2013.

Provision and Asset Quality

The Company recorded a provision expense of $2.4 million for the fourth quarter of 2014, compared to a provision credit of $2.6 million for the third quarter. The provision expense was driven by net charge-offs of $1.8 million, loan growth and loan downgrades. The Company recorded a provision credit of $2.0 million for the fourth quarter of 2013.

Criticized Loans decreased 11% on a linked quarter basis and 8% year-over-year. The downgrade of three separate relationships drove Nonaccrual Loans (“Nonaccruals”) to increase 32% to $44.2 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 1% from $44.8 million. As a percentage of Total Loans, Nonaccruals were 84 basis points at December 31, 2014, up 20 basis points from 64 basis points at September 30, 2014, and down 4 basis points from 88 basis points at December 31, 2013.

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

(In millions) December 31,
2014
September 30,
2014
December 31,
2013
Total Criticized Loans $ 159.6 $ 179.5 $ 173.6

Total Loans 30-89 Days Past Due and Accruing (13)

$ 7.0 $ 3.6 $ 13.7
Total Net Loans (Charged-off)/ Recovered $ (1.8 ) $ 3.3 $ 1.2
Allowance for Loan Losses/ Total Loans 1.44 % 1.44 % 1.49 %

Capital Ratios

The Company’s capital ratios decreased due to the Banyan acquisition, as 68% of the upfront consideration was paid in cash.

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

December 31,
2014
September 30,
2014
December 31,
2013
Total Risk-Based Capital * 14.5 % 15.5 % 14.8 %
Tier I Risk-Based Capital * 13.3 % 14.2 % 13.5 %
Tier I Leverage Capital * 9.5 % 10.3 % 10.1 %
TCE/TA 7.0 % 7.6 % 7.2 %
Tier I Common Equity/ Risk Weighted Assets * 9.8 % 10.6 % 9.9 %

*December 31, 2014 data is presented based on estimated data.

Dividend Payments

Concurrent with the release of fourth quarter 2014 earnings, the Board of Directors of the Company declared a cash dividend to common stock shareholders of $0.09 per share. The record date for this dividend is February 6, 2015, and the payment date is February 20, 2015.

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 February 13, 2015, and the payment date is March 16, 2015.

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, January 22, 2015, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
Elite Entry Number: 7875780

Replay Information:
Available from January 22, 2015 at 12 noon until January 29, 2015
Dial In #: (877) 344-7529
Conference Number: 10058435

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 with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Atlanta, Florida, Wisconsin, and Texas. The Company has a $7 billion Private Banking balance sheet, and manages approximately $30 billion of client assets.

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

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

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 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 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.

Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except share and per share data) 12/31/14 9/30/14 12/31/13
Assets:
Cash and cash equivalents $ 172,609 $ 308,912 $ 191,881
Investment securities available for sale 829,993 724,638 691,729
Investment securities held to maturity 140,727 132,467 112,014
Stock in Federal Home Loan Banks 32,281 32,534 38,612
Loans held for sale 7,099 4,943 6,123
Total loans 5,269,936 5,213,491 5,112,459
Less: Allowance for loan losses 75,838 75,283 76,371
Net loans 5,194,098 5,138,208 5,036,088
Other real estate owned (“OREO”) 929 1,074 776
Premises and equipment, net 32,199 29,473 29,158
Goodwill 150,103 110,180 110,180
Intangible assets, net 41,697 17,475 20,604
Fees receivable

12,517

11,439 12,119
Accrued interest receivable

16,071

15,018 14,416
Deferred income taxes, net 47,576 48,443 55,364
Other assets

119,975

114,281 118,045
Total assets $ 6,797,874 $ 6,689,085 $ 6,437,109
Liabilities:
Deposits $ 5,453,879 $ 5,334,881 $ 5,110,370
Securities sold under agreements to repurchase 30,496 73,422 102,353
Federal Home Loan Bank borrowings 370,150 371,367 367,254
Junior subordinated debentures 106,363 106,363 106,363
Other liabilities 112,170 106,024 97,613
Total liabilities 6,073,058 5,992,057 5,783,953
Redeemable Noncontrolling Interests 20,905 21,397 19,468
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: 82,961,855 shares at December 31, 2014; 80,464,390
shares at September 30, 2014; 79,837,612 shares at December 31, 2013

82,962 80,464 79,838
Additional paid-in capital 610,903 598,036 616,334
Accumulated deficit (37,396 ) (49,573 ) (106,211 )
Accumulated other comprehensive income/ (loss) (697 ) (1,312 ) (4,197 )
Total Company’s shareholders’ equity 703,525 675,368 633,517
Noncontrolling interests 386 263 171
Total shareholders’ equity 703,911 675,631 633,688

Total liabilities, redeemable noncontrolling interests and
shareholders’ equity

$ 6,797,874 $ 6,689,085 $ 6,437,109
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
Three Months Ended Year Ended
(In thousands, except share and per share data) 12/31/14 9/30/14 12/31/13 12/31/14 12/31/13
Interest and dividend income:
Loans $ 47,117 $ 47,931 $ 47,421 $ 191,658 $ 191,594
Taxable investment securities 920 876 512 3,162 2,056
Non-taxable investment securities 978 942 750 3,738 3,113
Mortgage-backed securities 1,695 1,605 1,361 6,925 5,441
Federal funds sold and other 381 379 335 1,359 970
Total interest and dividend income 51,091 51,733 50,379 206,842 203,174
Interest expense:
Deposits 3,908 3,603 3,283 14,102 13,395
Federal Home Loan Bank borrowings 2,069 2,354 2,564 9,108 10,963
Junior subordinated debentures 976 976 979 3,872 4,408
Repurchase agreements and other short-term borrowings 10 17 12 59 390
Total interest expense 6,963 6,950 6,838 27,141 29,156
Net interest income 44,128 44,783 43,541 179,701 174,018
Provision/ (credit) for loan losses 2,400 (2,600 ) (2,000 ) (6,400 ) (10,000 )
Net interest income after provision/ (credit) for loan losses 41,728 47,383 45,541 186,101 184,018
Fees and other income:
Investment management fees 11,897 12,011 12,371 47,123 43,816
Wealth advisory fees 12,352 12,278 11,269 48,082 42,352
Wealth management and trust fees 13,327 7,251 6,767 34,582 26,547
Other banking fee income 1,841 1,835 2,280 7,033 7,463
Gain on sale of loans, net 192 183 156 2,158 2,519
Total core fees and income 39,609 33,558 32,843 138,978 122,697
Gain on repurchase of debt - - 620
Gain/ (loss) on sale of investments, net (16 ) 8 14 (7 ) 49
Gain/ (loss) on OREO, net (31 ) 150 957 (13 )
Gain on sale of Pacific Northwest offices (1) - - 10,574
Other 360 53 1,488 870 2,414
Total other income 313 211 1,502 1,820 13,644
Operating expense:
Salaries and employee benefits 39,881 35,855 36,156 146,648 140,761
Occupancy and equipment 8,549 7,346 7,411 31,041 29,822
Professional services 3,308 2,796 3,412 12,473 12,109
Marketing and business development 2,425 1,408 1,764 7,989 7,094
Contract services and data processing 1,527 1,404 1,313 5,816 5,827
Amortization of intangibles 1,707 1,031 1,052 4,836 4,327
FDIC insurance 852 857 883 3,459 3,700
Restructuring 739 739
Other 4,772 3,302 3,509 14,128 17,065
Total operating expense 63,760 53,999 55,500 227,129 220,705
Income before income taxes 17,890 27,153 24,386 99,770 99,654
Income tax expense 5,901 8,993 7,508 32,365 32,963
Net income from continuing operations 11,989 18,160 16,878 67,405 66,691
Net income from discontinued operations (2) 1,510 1,272 1,968 6,160 7,792
Net income before attribution to noncontrolling interests 13,499 19,432 18,846 73,565 74,483
Less: Net income attributable to noncontrolling interests 1,322 1,167 1,178 4,750 3,948
Net income attributable to the Company $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except share and per share data) Three Months Ended Year Ended
PER SHARE DATA: 12/31/14 9/30/14 12/31/13 12/31/14 12/31/13
Calculation of Income for EPS:
Net income attributable to the Company $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535

Adjustments to Net Income Attributable to the Company to Arrive
at Net Income Attributable to Common Shareholders (3)

(1,176 ) (796 ) (1,467 ) (4,228 ) (15,057 )
Net Income Attributable to the Common Shareholders 11,001 17,469 16,201 64,587 55,478
LESS: Amount allocated to participating securities (27 ) (75 ) (133 ) (335 ) (1,579 )

Net Income Attributable to the Common Shareholders, after
allocation to participating securities

$ 10,974 $ 17,394 $ 16,068 $ 64,252 $ 53,899
End of Period Common Shares Outstanding 82,961,855 80,464,390 79,837,612
Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities

80,880,508

79,222,590 78,719,000

79,605,355

80,859,229
LESS: Participating securities

(487,596)

(535,528 ) (976,760 )

(683,875)

(3,485,412 )
PLUS: Dilutive potential common shares 2,096,172 1,923,896 1,758,720 1,957,751 1,379,707
Weighted Average Diluted Shares (4) 82,489,084 80,610,958 79,500,960 80,879,231 78,753,524
Diluted Total Earnings per Share $ 0.13 $ 0.22 $ 0.20 $ 0.79 $ 0.68
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In thousands, except per share data)
FINANCIAL DATA: 12/31/14 9/30/14 12/31/13
Book Value Per Common Share $ 7.91 $ 7.80 $ 7.34
Tangible Book Value Per Share (5) $ 5.60 $ 6.22 $ 5.70
Market Price Per Share $ 13.47 $ 12.39 $ 12.62
ASSETS UNDER MANAGEMENT AND ADVISORY:
Wealth Management and Trust $ 9,274,000 $ 4,701,000 $ 4,565,000
Investment Managers 10,772,000 10,376,000 10,401,000
Wealth Advisory 9,883,000 9,731,000 9,336,000
Less: Inter-company Relationship (22,000 ) (22,000 ) (22,000 )
Total Assets Under Management and Advisory $ 29,907,000 $ 24,786,000 $ 24,280,000
FINANCIAL RATIOS:

Total Equity/ Total Assets

10.35 % 10.10 % 9.84 %

Tangible Common Equity/ Tangible Assets (5)

7.03 % 7.62 % 7.22 %

Tier I Common Equity/ Risk Weighted Assets (5)

9.76 % 10.63 % 9.93 %

Allowance for Loan Losses/ Total Loans

1.44 % 1.44 % 1.49 %

Allowance for Loan Losses/ Nonaccrual Loans

172 % 224 % 171 %
Return on Average Assets – Three Months Ended (Annualized) 0.71 % 1.10 % 1.11 %
Return on Average Common Equity – Three Months Ended (Annualized) (6) 6.97 % 11.20 % 11.56 %
Return on Average Tangible Common Equity – Three Months Ended (Annualized) (6) 9.74 % 14.10 % 14.93 %
Efficiency Ratio – Three Months Ended (7) 70.83 % 65.47 % 68.02 %
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: 12/31/14 9/30/14 12/31/13 12/31/14 9/30/14 12/31/13 12/31/14 9/30/14 12/31/13
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 305,118 $ 295,395 $ 237,342 $ 920 $ 876 $ 512 1.21 % 1.19 % 0.87 %
Non-taxable investment securities (8) 229,157 223,499 215,083 1,504 1,449 1,154 2.63 % 2.59 % 2.15 %
Mortgage-backed securities 350,312 325,913 267,463 1,695 1,605 1,361 1.93 % 1.97 % 2.04 %
Federal funds sold and other 389,833 359,899 352,285 381 379 335 0.39 % 0.42 % 0.37 %
Total Cash and Investments 1,274,420 1,204,706 1,072,173 4,500 4,309 3,362 1.41 % 1.43 % 1.25 %
Loans: (9)
Commercial and Construction (8) 2,852,064 2,841,869 2,707,370 30,855 31,657 31,150 4.23 % 4.36 % 4.50 %
Residential 2,120,416 2,071,326 2,022,698 16,447 16,384 16,159 3.10 % 3.16 % 3.20 %
Home Equity and Other Consumer 254,387 244,690 250,212 1,799 1,733 1,874 2.80 % 2.81 % 2.97 %
Total Loans 5,226,867 5,157,885 4,980,280 49,101 49,774 49,183 3.71 % 3.81 % 3.89 %
Total Earning Assets 6,501,287 6,362,591 6,052,453 53,601 54,083 52,545 3.26 % 3.36 % 3.43 %
LESS: Allowance for Loan Losses 75,590 76,099 78,463
Cash and due From Banks (Non-Interest Bearing) 41,595 42,080 40,332
Other Assets 411,546 341,953 364,130
TOTAL AVERAGE ASSETS $ 6,878,838 $ 6,670,525 $ 6,378,452

AVERAGE LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS, AND
SHAREHOLDERS’ EQUITY

Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Savings and NOW $ 584,210 $ 583,547 $ 490,408 $ 112 $ 110 $ 94 0.08 % 0.07 % 0.08 %
Money Market 2,836,731 2,640,762 2,500,191 2,589 2,273 1,871 0.36 % 0.34 % 0.30 %
Certificates of Deposit 597,460 607,940 620,161 1,207 1,220 1,318 0.80 % 0.80 % 0.84 %
Total Interest-Bearing Deposits 4,018,401 3,832,249 3,610,760 3,908 3,603 3,283 0.39 % 0.37 % 0.36 %
Junior Subordinated Debentures 106,363 106,363 106,673 976 976 979 3.59 % 3.59 % 3.59 %
FHLB Borrowings and Other 447,955 534,062 487,584 2,079 2,371 2,576 1.82 % 1.74 % 2.07 %
Total Interest-Bearing Liabilities 4,572,719 4,472,674 4,205,017 6,963 6,950 6,838 0.60 % 0.61 % 0.64 %
Noninterest Bearing Demand Deposits 1,465,145 1,404,875 1,391,809
Other Liabilities 121,318 100,106 134,429
Total Average Liabilities 6,159,182 5,977,655 5,731,255
Redeemable Noncontrolling Interests 22,802 23,584 17,929
Average Shareholders’ Equity 696,854 669,286 629,268

TOTAL AVERAGE LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS, AND
SHAREHOLDERS’ EQUITY

$ 6,878,838 $ 6,670,525 $ 6,378,452
Net Interest Income – on a Fully Taxable Equivalent Basis (FTE) $ 46,638 $ 47,133 $ 45,707
LESS: FTE Adjustment (8) 2,510 2,350 2,166
Net Interest Income (GAAP Basis) $ 44,128 $ 44,783 $ 43,541
Interest Rate Spread 2.66 % 2.75 % 2.79 %
Bank only Net Interest Margin 2.90 % 3.00 % 3.05 %
Net Interest Margin 2.83 % 2.93 % 2.98 %
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
Average Balance Interest Income/Expense Average Yield/Rate
(In Thousands) Year Ended Year Ended Year Ended
AVERAGE BALANCE SHEET: 12/31/14 12/31/13 12/31/14 12/31/13 12/31/14 12/31/13
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 279,438 $ 221,677 $ 3,162 $ 2,056 1.13 % 0.93 %
Non-taxable investment securities (8) 225,346 208,547 5,751 4,790 2.55 % 2.30 %
Mortgage-backed securities 337,552 285,677 6,925 5,441 2.05 % 1.90 %
Federal funds sold and other 285,783 230,542 1,359 970 0.47 % 0.41 %
Total Cash and Investments 1,128,119 946,443 17,197 13,257 1.52 % 1.40 %

Loans (9):

Commercial and Construction (8) 2,846,042 2,717,707 126,830 125,427 4.40 % 4.55 %
Residential 2,066,776 1,993,729 64,984 64,968 3.14 % 3.26 %
Home Equity and Other Consumer 246,934 261,958 7,080 7,848 2.87 % 3.00 %
Total Loans 5,159,752 4,973,394 198,894 198,243 3.82 % 3.95 %
Total Earning Assets 6,287,871 5,919,837 216,091 211,500 3.41 % 3.54 %
LESS: Allowance for Loan Losses 76,990 81,924
Cash and due From Banks (Non-Interest Bearing) 39,381 41,402
Other Assets 374,782 383,833
TOTAL AVERAGE ASSETS $ 6,625,044 $ 6,263,148

AVERAGE LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS, AND
SHAREHOLDERS’ EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits (10):

Savings and NOW $ 578,827 $ 520,546 $ 431 $ 430 0.07 % 0.08 %
Money Market 2,619,930 2,401,622 8,701 7,366 0.33 % 0.31 %
Certificates of Deposit 611,285 633,759 4,970 5,599 0.81 % 0.88 %
Total Interest-Bearing Deposits 3,810,042 3,555,927 14,102 13,395 0.37 % 0.38 %
Junior Subordinated Debentures 106,363 125,756 3,872 4,408 3.59 % 3.46 %
FHLB Borrowings and Other 503,995 527,377 9,167 11,353 1.79 % 2.12 %
Total Interest-Bearing Liabilities 4,420,400 4,209,060 27,141 29,156 0.61 % 0.69 %
Noninterest Bearing Demand Deposits 1,406,007 1,286,539
Other Liabilities 111,664 133,592
Total Average Liabilities 5,938,071 5,629,191
Redeemable Noncontrolling Interests 20,757 18,162
Average Shareholders’ Equity 666,216 615,795

TOTAL AVERAGE LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS, AND
SHAREHOLDERS’ EQUITY

$ 6,625,044 $ 6,263,148
Net Interest Income – on a Fully Taxable Equivalent Basis (FTE) $ 188,950 $ 182,344
LESS: FTE Adjustment (8) 9,249 8,326
Net Interest Income (GAAP Basis) $ 179,701 $ 174,018
Interest Rate Spread 2.80 % 2.85 %
Bank only Net Interest Margin 3.05 % 3.13 %
Net Interest Margin 2.98 % 3.05 %
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)
LOAN DATA (11): 12/31/14 9/30/14 12/31/13
Commercial and Industrial Loans:
New England $ 781,646 $ 758,728 $ 713,484
San Francisco Bay 117,105 124,993 107,154
Southern California 54,334 47,107 45,415
Total Commercial and Industrial Loans $ 953,085 $ 930,828 $ 866,053
Commercial Real Estate Loans:
New England $ 690,965 $ 712,464 $ 721,924
San Francisco Bay 619,222 628,149 641,746
Southern California 478,216 467,428 449,724
Total Commercial Real Estate Loans $ 1,788,403 $ 1,808,041 $ 1,813,394
Construction and Land Loans:
New England $ 85,272 $ 82,492 $ 92,456
San Francisco Bay 31,329 35,668 45,941
Southern California 8,748 12,385 15,520
Total Construction and Land Loans $ 125,349 $ 130,545 $ 153,917
Residential Loans:
New England $ 1,299,568 $ 1,273,544 $ 1,228,623
San Francisco Bay 462,497 456,355 459,667
Southern California 370,030 367,628 344,004
Total Residential Loans $ 2,132,095 $ 2,097,527 $ 2,032,294
Home Equity Loans:
New England $ 82,877 $ 76,142 $ 81,010
San Francisco Bay 27,575 30,060 30,002
Southern California 4,407 3,025 2,648
Total Home Equity Loans $ 114,859 $ 109,227 $ 113,660
Other Consumer Loans:
New England $ 143,166 $ 124,449 $ 117,079
San Francisco Bay 6,505 6,738 8,854
Southern California 6,474 6,136 7,069
Eliminations and other, net - 139
Total Other Consumer Loans $ 156,145 $ 137,323 $ 133,141
Total Loans:
New England $ 3,083,494 $ 3,027,819 $ 2,954,576
San Francisco Bay 1,264,233 1,281,963 1,293,364
Southern California 922,209 903,709 864,380
Eliminations and other, net - 139
Total Loans $ 5,269,936 $ 5,213,491 $ 5,112,459
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
(In Thousands)
CREDIT QUALITY (11): 12/31/14 9/30/14 12/31/13
Special Mention Loans:
New England $ 32,254 $ 45,788 $ 41,759
San Francisco Bay 18,161 24,623 25,912
Southern California 26,325 32,614 19,642
Total Special Mention Loans $ 76,740 $ 103,025 $ 87,313
Accruing Substandard Loans (12):
New England $ 11,126 $ 13,589 $ 13,304
San Francisco Bay 23,403 24,267 25,171
Southern California 4,331 5,331 3,540
Total Accruing Substandard Loans $ 38,860 $ 43,187 $ 42,015
Nonaccruing Loans:
New England $ 26,205 $ 16,205 $ 24,838
San Francisco Bay 13,430 15,133 14,016
Southern California 4,547 2,203 5,908
Total Nonaccruing Loans $ 44,182 $ 33,541 $ 44,762
Other Real Estate Owned:
New England $ 344 $ 489 $ 191
San Francisco Bay 585 585 585
Southern California -
Total Other Real Estate Owned $ 929 $ 1,074 $ 776
Loans 30-89 Days Past Due and Accruing (13):
New England $ 6,572 $ 1,825 $ 5,029
San Francisco Bay 375 653 3,029
Southern California 13 1,145 5,684
Total Loans 30-89 Days Past Due and Accruing $ 6,960 $ 3,623 $ 13,742
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ (2,516 ) $ 912 $ (344 )
San Francisco Bay 607 465 1,798
Southern California 64 1,959 (260 )
Total Net Loans (Charged-off)/ Recovered $ (1,845 ) $ 3,336 $ 1,194
Loans (Charged-off)/ Recovered, Net for the Twelve Months Ended:
New England $ (1,686 ) $ (2,422 )
San Francisco Bay 3,671 2,576
Southern California 3,882 2,160
Total Net Loans (Charged-off)/ Recovered $ 5,867 $ 2,314
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) 12/31/14 9/30/14 12/31/13
Total Balance Sheet Assets $ 6,797,874 $ 6,689,085 $ 6,437,109
LESS: Goodwill and Intangible Assets, net (191,800 ) (127,655 ) (130,784 )
Tangible Assets (non-GAAP) $ 6,606,074 $ 6,561,430 $ 6,306,325
Total Shareholders’ Equity $ 703,911 $ 675,631 $ 633,688
LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 )
LESS: Goodwill and Intangible Assets, net (191,800 ) (127,655 ) (130,784 )
Total adjusting items (239,553 ) (175,408 ) (178,537 )
Tangible Common Equity (non-GAAP) $ 464,358 $ 500,223 $ 455,151
Total Equity/Total Assets 10.35 % 10.10 % 9.84 %
Tangible Common Equity/Tangible Assets (non-GAAP) 7.03 % 7.62 % 7.22 %
Total Risk Weighted Assets * $ 4,799,329 $ 4,754,417 $ 4,668,531
Tier I Common Equity * $ 468,612 $ 505,474 $ 463,627
Tier I Common Equity/ Risk Weighted Assets 9.76 % 10.63 % 9.93 %
End of Period Shares Outstanding 82,962 80,464 79,838
Book Value Per Common Share $ 7.91 $ 7.80 $ 7.34
Tangible Book Value Per Share (non-GAAP) $

5.60

$ 6.22 $

5.70

* Risk Weighted Assets and Tier I Common Equity for December 31, 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 Year ended
(In thousands, except per share data) 12/31/14 9/30/14 12/31/13 12/31/14 12/31/13
Total average shareholders’ equity $ 696,854 $ 669,286 $ 629,268 $ 666,216 $ 615,795
LESS: Average Series D preferred stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) (47,753 ) (33,921 )
Average common equity (non-GAAP) 649,101 621,533 581,515 618,463 581,874
LESS: Average goodwill and intangible assets, net (184,473 ) (128,178 ) (131,375 ) (144,658 ) (132,908 )
Total adjusting items (184,473 ) (128,178 ) (131,375 ) (144,658 ) (132,908 )
Average Tangible Common Equity (non-GAAP) $ 464,628 $ 493,355 $ 450,140 $ 473,805 $ 448,966
Net income attributable to the Company $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535
Less: Dividends on Series D preferred stock (869 ) (869 ) (869 ) (3,475 ) (2,297 )
Net income, after dividends on Series D preferred stock (non-GAAP) $ 11,308 $ 17,396 $ 16,799 $ 65,340 $ 68,238
Return on Average Equity – (Annualized) 6.99 % 10.92 % 10.68 % 10.33 % 11.45 %
Return on Average Common Equity – (Annualized) (non-GAAP) 6.97 % 11.20 % 11.56 % 10.56 % 11.73 %
Return on Average Tangible Common Equity – (Annualized) (non-GAAP) 9.74 % 14.10 % 14.93 % 13.79 % 15.20 %
(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), excluding restructuring, are presented below:
Three Months Ended Year ended
(In thousands, except per share data) 12/31/14 9/30/14 12/31/13 12/31/14 12/31/13
Income before income taxes (GAAP) $ 17,890 $ 27,153 $ 24,386 $ 99,770 $ 99,654
ADD BACK: Provision/ (credit) for loan losses 2,400 (2,600 ) (2,000 ) (6,400 ) (10,000 )
Pre-tax, pre-provision earnings (non-GAAP) $ 20,290 $ 24,553 $ 22,386 $ 93,370 $ 89,654
Net income attributable to the Company (GAAP) $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 70,535
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) $ 12,177 $ 18,265 $ 17,668 $ 68,815 $ 64,268
Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP) $ 10,974 $ 17,394 $ 16,068 $ 64,252 $ 53,899
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) $ 10,974

$

17,394

$

16,068

$ 64,252

$

59,370

Diluted Total Earnings Per Share (GAAP) $ 0.13 $ 0.22 $ 0.20 $ 0.79 $ 0.68
Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $ 0.13 $ 0.22 $

0.20

$ 0.79 $

0.75

Total operating expense (GAAP) $ 63,760 $ 53,999 $ 55,500 $ 227,129 $ 220,705
Less: Amortization of intangibles 1,707 1,031 1,052 4,836 4,327
Less: Restructuring 739 739
Total operating expense (excluding amortization of intangibles) (non-GAAP) $ 61,314 $ 52,968 $ 54,448 $ 221,554 $ 216,378
Net interest income $ 44,128 $ 44,783 $ 43,541 $ 179,701 $ 174,018
Total core fees and income 39,609 33,558 32,843 138,978 122,697
Total other income 313 211 1,502 1,820 13,644
FTE income 2,510 2,350 2,166 9,249 8,326
Total revenue (FTE basis) $ 86,560 $ 80,902 $ 80,052 $ 329,748 $ 318,685
Efficiency Ratio, before deduction of intangible amortization (GAAP) 75.86 % 68.74 % 71.26 % 70.87 % 71.11 %

Efficiency Ratio, FTE Basis (non-GAAP)

70.83 % 65.47 % 68.02 % 67.19 % 67.90 %
(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 December 31, 2014 the Company had no loans were more than 90 days past due but still on accrual status. 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 December 31, 2013, 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.

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