Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the "Company" or "BPFH") today reported fourth quarter 2013 GAAP Net Income Attributable to the Company of $17.7 million, compared to $18.3 million in the third quarter of 2013. BPFH reported fourth quarter diluted earnings per share of $0.20 compared to $0.22 in the third quarter of 2013.

For the full year of 2013, BPFH reported GAAP Net Income Attributable to the Company of $70.5 million, compared to $53.3 million for the full year of 2012. BPFH reported diluted earnings per share of $0.68 compared to $0.61 for the full year of 2012.

"Our Company delivered on the full year targets we articulated for shareholders throughout 2013: low-to-mid single digit loan and deposit growth, double digit growth in Wealth Management revenue, expense discipline and efficient capital management," said Clayton G. Deutsch, CEO and President of the Company. "This performance strengthened our margins and significantly improved our Return on Equity over the prior year. We see momentum in our businesses, believe we have a strong balance sheet and capital base, and have decided to raise the dividend to enhance shareholder return."

Core Fees Increased 10% Linked Quarter, 12% in 2013

Core Fees and Income (Investment Management and Trust Fees, Private Banking Investment Management and Trust Fees, Wealth Advisory Fees, Other Banking Fee Income and Gain on Sale of Loans) for the fourth quarter increased 10% to $32.8 million from $29.8 million in the third quarter of 2013. The increase was driven by fee growth in all three of the Company's Wealth Management businesses. For the full year of 2013, Core Fees and Income increased 12% to $122.7 million.

Total Assets Under Management/Advisory ("AUM") increased to $24.3 billion in the fourth quarter, up 7% from $22.7 billion in the third quarter of 2013. AUM increased 19% from $20.4 billion in the fourth quarter of 2012. The Company experienced fourth quarter 2013 AUM net inflows of $147 million, as compared to third quarter 2013 AUM net inflows of $52 million. AUM net inflows for the full year of 2013 were $152 million as compared to $621 million from the full year of 2012. Full year 2012 net inflows were impacted by two lift-outs completed during the year by affiliate Anchor Capital Advisors.

Net Interest Income Increased 3% Linked Quarter

Net Interest Income in the fourth quarter was $43.5 million, up 3% from $42.3 million in the third quarter of 2013. For the full year of 2013, Net Interest Income declined 5% to $174.0 million.

Net Interest Margin was 2.98% in the fourth quarter, down one basis point from 2.99% in the third quarter. The decrease was driven by larger average cash balances. For the full year of 2013, Net Interest Margin decreased 17 basis points to 3.05%.

Total Operating Expenses Decreased 5% in 2013

Total Operating Expenses for the fourth quarter of 2013 were $55.7 million, up 7% from $52.1 million in the third quarter of 2013. For the full year of 2013, Total Operating Expenses were $221.4 million, down 5% from $232.5 million (including restructuring costs of $5.9 million) in 2012.

Criticized Loans Decreased 26% YOY

The Company recorded a $2.0 million credit to its Provision for Loan Losses in the fourth quarter of 2013, compared to a provision credit of $6.0 million in the third quarter. The provision credit was driven by recoveries of $2.3 million and a reduction in Classified Loans (Accruing Substandard Loans and Nonaccrual Loans). For the full year of 2013, the Company recorded a provision credit of $10.0 million as compared to a provision credit of $3.3 million for 2012.

Criticized Loans increased 3% to $173.6 million on a linked quarter basis, and decreased 26% year-over-year. Nonaccrual Loans ("Nonaccruals") decreased 12% to $44.8 million, down from $50.8 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 26% from $60.7 million. As a percentage of Total Loans, Nonaccruals were 87 basis points at December 31, 2013, down 16 basis points from 1.03% at September 30, 2013, and down 39 basis points from 1.26% at December 31, 2012.

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

(In millions)  

December 31,
2013

  

September 30,
2013

  

December 31,
2012

Total Criticized Loans $ 173.6 $ 169.3 $ 235.0

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

 $ 13.7 $ 8.2 $ 46.4
Total Net Loans (Charged-off)/ Recovered $ 1.2 $ 2.4 $ (2.1 )
Allowance for Loan Losses/ Total Loans 1.49 % 1.57 % 1.75 %
 

Earnings Build Drives Dividend Increase

The Company maintained its strong capital position in 2013 and returned capital to shareholders via two dividend increases announced in the first and third quarters of 2013. Today the Board of Directors announced a dividend increase to $0.08 per share, up from $0.07 per share last quarter.

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

 

December 31,
2013

  

September 30,
2013

  

December 31,
2012

Total Risk-Based Capital * 14.8 % 15.2 % 14.6 %
Tier I Risk-Based Capital * 13.5 % 13.9 % 13.4 %
Tier I Leverage Capital * 10.1 % 10.3 % 9.9 %
TCE/TA 7.5 % 7.5 % 7.7 %
Tier I Common Equity/ Risk Weighted Assets * 9.9 % 10.1 % 10.0 %

*December 31, 2013 data is presented based on estimated data.

Dividend Payments

Concurrent with the release of fourth quarter 2013 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 February 7, 2014, and the payment date is February 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 February 14, 2014, and the payment date is March 17, 2014.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures, such as net income, excluding the effect of significant transactions (core earnings); earnings per share, excluding the effect of significant transactions; 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 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
Elite Entry Number: 9064061

Replay Information:
Available from January 16 at 12 noon until January 23
Dial In #: (877) 344-7529
Conference Number: 10039001

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 over $24 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 continued weakness in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans; 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) Dec 31, 2013 Sep 30, 2013 Dec 31, 2012
Assets:
Cash and cash equivalents $ 191,881 $ 323,941 $ 308,744
Investment securities available for sale 691,729 702,944 699,300
Investment securities held to maturity 112,014 -- --
Stock in Federal Home Loan Banks 38,612 39,715 41,981

Loans held for sale (1)

6,123 1,745 308,390

Total loans

5,112,459 4,922,222 4,814,136
Less: Allowance for loan losses   76,371     77,177     84,057  
Net loans 5,036,088 4,845,045 4,730,079
Other real estate owned ("OREO") 776 776 3,616
Premises and equipment, net 29,158 29,319 27,081
Goodwill 110,180 110,180 110,180
Intangible assets, net 20,604 21,656 24,874
Fees receivable 12,119 10,653 8,836
Accrued interest receivable 14,416 13,442 14,723
Deferred income taxes, net 55,364 60,853 62,245
Other assets   118,045     114,670     124,956  
Total assets $ 6,437,109   $ 6,274,939   $ 6,465,005  
Liabilities:
Deposits (1) $ 5,110,370 $ 4,942,765 $ 4,885,059
Deposits held for sale (1) -- -- 194,084
Securities sold under agreements to repurchase 102,353 92,499 116,319
Federal Home Loan Bank borrowings 367,254 391,466 408,121
Junior subordinated debentures 106,363 110,487 143,647
Other liabilities   97,613     97,461     95,386  
Total liabilities   5,783,953     5,634,678     5,842,616  

Redeemable Noncontrolling Interests

19,468 17,224 19,287

Shareholders' Equity:

Preferred stock, $1.00 par value; authorized: 2,000,000 shares 47,753 47,753 58,089

Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 79,837,612 shares at December 31, 2013; 79,821,898 shares at September 30, 2013; and 78,743,518 shares at December 31, 2012

79,838 79,822 78,744
Additional paid-in capital 616,334 623,485 640,891
Accumulated deficit (106,211 ) (123,879 ) (176,746 )
Accumulated other comprehensive income/ (loss)   (4,197 )   (4,283 )   2,124  
Total Company's shareholders' equity   633,517     622,898     603,102  
Noncontrolling interests   171     139     --  
Total shareholders' equity   633,688     623,037     603,102  

Total liabilities, redeemable noncontrolling interests and shareholders' equity

$ 6,437,109   $ 6,274,939   $ 6,465,005  
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
                   
Three Months Ended Year Ended
(In thousands, except share and per share data)   12/31/2013     9/30/2013     12/31/2012     12/31/2013     12/31/2012  

Interest and dividend income:

Loans $ 47,421 $ 46,484 $ 51,398 $ 191,594 $ 209,280
Taxable investment securities 516 548 650 2,071 3,875
Non-taxable investment securities 750 746 846 3,113 3,228
Mortgage-backed securities 1,361 1,338 1,443 5,441 6,186
Federal funds sold and other   331     273     208     955     719  
Total interest and dividend income   50,379     49,389     54,545     203,174     223,288  

Interest expense:

Deposits 3,283 3,206 4,096 13,395 17,640
Federal Home Loan Bank borrowings 2,564 2,750 3,295 10,963 14,488
Junior subordinated debentures 979 1,119 1,308 4,408 6,258
Repurchase agreements and other borrowings   12     12     300     390     1,626  
Total interest expense   6,838     7,087     8,999     29,156     40,012  
Net interest income 43,541 42,302 45,546 174,018 183,276
Provision/ (credit) for loan losses   (2,000 )   (6,000 )   (5,000 )   (10,000 )   (3,300 )
Net interest income after provision for loan losses   45,541     48,302     50,546     184,018     186,576  

Fees and other income:

Investment management and trust fees - Investment Management 12,371 10,511 10,094 43,816 39,163
Investment management and trust fees - Private Banking 6,768 6,508 6,086 26,550 23,645
Wealth advisory fees 11,269 10,698 9,745 42,352 37,659
Other banking fee income 2,279 1,679 1,455 7,460 5,664
Gain on sale of loans, net   156     430     1,726     2,519     3,225  
Total core fees and income   32,843     29,826     29,106     122,697     109,356  
Gain on repurchase of debt -- -- 874 620 3,444
Gain/(loss) on sale of investments, net 14 7 (7 ) 49 871
Gain/(loss) on OREO, net -- -- 624 (13 ) 845
Gain on sale of Pacific Northwest offices (1) -- -- -- 10,574 --
Other   1,488     418     (151 )   2,414     450  
Total other income   1,502     425     1,340     13,644     5,610  

Operating expense:

Salaries and employee benefits 36,156 33,102 37,781 140,761 143,852
Occupancy and equipment 7,407 7,302 7,516 29,806 30,790
Professional services 3,412 3,451 3,698 12,109 13,113
Marketing and business development 1,782 1,201 2,968 7,199 7,422
Contract services and data processing 1,313 1,462 1,391 5,827 5,380
Amortization of intangibles 1,052 1,056 1,106 4,327 4,369
FDIC insurance 883 823 1,003 3,700 3,972
Restructuring expense -- -- 1,631 -- 5,911
Other   3,700     3,713     5,795     17,631     17,645  
Total operating expense   55,705     52,110     62,889     221,360     232,454  
Income before income taxes 24,181 26,443 18,103 98,999 69,088
Income tax expense   7,303     8,557     6,115     32,308     20,330  
Net income from continuing operations 16,878 17,886 11,988 66,691 48,758
Net income from discontinued operations (2)   1,968     1,321     1,819     7,792     7,635  
Net income before attribution to noncontrolling interests 18,846 19,207 13,807 74,483 56,393
Less: Net income attributable to noncontrolling interests   1,178     871     715     3,948     3,122  
Net income attributable to the Company $ 17,668   $ 18,336   $ 13,092   $ 70,535   $ 53,271  
 
 
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:   12/31/2013     9/30/2013     12/31/2012     12/31/2013     12/31/2012  
Calculation of Income for EPS:
Net income attributable to the Company $ 17,668 $ 18,336 $ 13,092 $ 70,535 $ 53,271
Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3)   (1,467 )   (665 )   (239 )   (15,057 )   (781 )
Net Income Attributable to the Common Shareholders 16,201 17,671 12,853 55,478 52,490
LESS: Amount allocated to participating securities   (133 )   (160 )   (1,281 )   (1,579 )   (5,320 )
Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 16,068   $ 17,511   $ 11,572   $ 53,899   $ 47,170  
 
End of Period Common Shares Outstanding 79,837,612 79,821,898 78,743,518
 
Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities 78,719,000 78,710,259 85,386,014 80,859,229 85,186,796
LESS: Participating securities (976,760 ) (1,040,242 ) (9,047,609 ) (3,485,412 ) (9,166,805 )
PLUS: Dilutive potential common shares   1,758,720     1,523,731     1,066,155     1,379,707     953,525  
Weighted Average Diluted Shares (4)   79,500,960     79,193,748     77,404,560     78,753,524     76,973,516  
 
Diluted Total Earnings per Share $ 0.20 $ 0.22 $ 0.15 $ 0.68 $ 0.61
 
               
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
(In thousands, except per share data)
FINANCIAL DATA:   12/31/2013     9/30/2013     12/31/2012  
Book Value Per Common Share $ 7.34 $ 7.21 $ 6.92
Tangible Book Value Per Share (5) $ 5.91 $ 5.74 $ 5.64
Market Price Per Share $ 12.62 $ 11.09 $ 9.01
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
Private Banking $ 4,565,000 $ 4,263,000 $ 3,941,000
Investment Managers 10,401,000 9,697,000 8,444,000
Wealth Advisory 9,336,000 8,809,000 8,052,000
Less: Inter-company Relationship   (22,000 )   (21,000 )   (20,000 )
Total Assets Under Management and Advisory $ 24,280,000   $ 22,748,000   $ 20,417,000  
 

FINANCIAL RATIOS:

Total Equity/Total Assets 9.84 % 9.93 % 9.33 %
Tangible Common Equity/Tangible Assets (5) 7.48 % 7.46 % 7.67 %
Tier I Common Equity/ Risk Weighted Assets (5) 9.91 % 10.15 % 9.99 %
Allowance for Loan Losses/Total Loans 1.49 % 1.57 % 1.75 %
Allowance for Loan Losses/Nonaccrual Loans

171

%

152

%

138

%
Return on Average Assets - Three Months Ended (Annualized) 1.11 % 1.18 % 0.82 %
Return on Average Common Equity - Three Months Ended (Annualized) (6) 11.56 % 12.32 % 8.72 %

Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6)

14.43

%

 15.54 %

10.90

%
Efficiency Ratio - Three Months Ended (7) 68.27 % 68.47 % 78.75 %
 
 
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:   12/31/13     9/30/13     12/31/12 12/31/13   9/30/13   12/31/12 12/31/13     9/30/13   12/31/12  
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 237,342 $ 244,408 $ 202,970 $ 516 $ 548 $ 650 0.87 % 0.90 % 1.28 %
Non-taxable investment securities (8) 215,083 209,511 202,971 1,154 1,148 1,320 2.15 % 2.19 % 2.60 %
Mortgage-backed securities 267,463 263,380 309,359 1,361 1,338 1,443 2.04 % 2.03 % 1.87 %
Federal funds sold and other   352,285   244,622   221,457   331   273   208 0.37 % 0.44 % 0.37 %
Total Cash and Investments   1,072,173   961,921   936,757   3,362   3,307   3,621 1.25 % 1.37 % 1.54 %
Loans: (9)
Commercial and Construction (8) 2,707,370 2,657,121 2,773,478 31,150 30,435 33,660 4.50 % 4.48 % 4.83 %
Residential 2,022,698 1,984,565 2,024,279 16,159 15,782 17,626 3.20 % 3.18 % 3.48 %
Home Equity and Other Consumer   250,212   258,579   269,954   1,874   2,003   2,104 2.97 % 3.07 % 3.10 %
Total Loans   4,980,280   4,900,265   5,067,711   49,183   48,220   53,390 3.89 % 3.88 % 4.20 %
Total Earning Assets   6,052,453   5,862,186   6,004,468   52,545   51,527   57,011 3.43 % 3.47 % 3.78 %
LESS: Allowance for Loan Losses 78,463 81,262 90,931
Cash and due From Banks (Non-Interest Bearing) 40,332 40,164 46,916
Other Assets   364,130   375,910   395,646

TOTAL AVERAGE ASSETS

$ 6,378,452 $ 6,196,998 $ 6,356,099

AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY

Interest-Bearing Liabilities:

Deposits: (10)

Savings and NOW $ 490,408 $ 492,983 $ 494,960 $ 94 $ 97 $ 168 0.08 % 0.08 % 0.13 %
Money Market 2,500,191 2,425,333 2,377,447 1,871 1,782 2,287 0.30 % 0.29 % 0.38 %
Certificates of Deposit   620,161   627,166   712,358   1,318   1,327   1,641 0.84 % 0.84 % 0.92 %
Total Deposits 3,610,760 3,545,482 3,584,765 3,283 3,206 4,096 0.36 % 0.36 % 0.45 %
Junior Subordinated Debentures 106,673 125,729 150,089 979 1,119 1,308 3.59 % 3.48 % 3.41 %
FHLB Borrowings and Other   487,584   501,263   599,248   2,576   2,762   3,595 2.07 % 2.16 % 2.35 %
Total Interest-Bearing Liabilities   4,205,017   4,172,474   4,334,102   6,838   7,087   8,999 0.64 % 0.67 % 0.82 %
Noninterest Bearing Demand Deposits 1,391,809 1,277,319 1,304,276
Other Liabilities   134,429   114,588   98,279
Total Average Liabilities 5,731,255 5,564,381 5,736,657
Redeemable Noncontrolling Interests 17,929 17,688 18,780
Average Shareholders' Equity   629,268   614,929   600,662
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,378,452 $ 6,196,998 $ 6,356,099
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 45,707 $ 44,440 $ 48,012
LESS: FTE Adjustment (8)   2,166   2,138   2,466
Net Interest Income (GAAP Basis) $ 43,541 $ 42,302 $ 45,546
Interest Rate Spread 2.79 % 2.80 % 2.96 %
Net Interest Margin 2.98 % 2.99 % 3.19 %
 
         
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:   12/31/13     12/31/12   12/31/13   12/31/12 12/31/13   12/31/12
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 221,677 $ 297,646 $ 2,071 $ 3,875 0.93 % 1.30 %
Non-taxable investment securities (8) 208,547 192,913 4,790 5,038 2.30 % 2.61 %
Mortgage-backed securities 285,677 266,114 5,441 6,186 1.90 % 2.32 %
Federal funds sold and other   230,542   239,371   955   719 0.41 % 0.30 %
Total Cash and Investments   946,443   996,044   13,257   15,818 1.40 % 1.59 %
Loans: (9)
Commercial and Construction (8) 2,717,707 2,706,444 125,427 134,755 4.55 % 4.98 %
Residential 1,993,729 1,962,192 64,968 71,664 3.26 % 3.65 %
Home Equity and Other Consumer   261,958   290,680   7,848   9,435 3.00 % 3.25 %
Total Loans   4,973,394   4,959,316   198,243   215,854 3.95 % 4.35 %
Total Earning Assets   5,919,837   5,955,360   211,500   231,672 3.54 % 3.89 %
LESS: Allowance for Loan Losses 81,924 97,094
Cash and due From Banks (Non-Interest Bearing) 41,402 56,022
Other Assets   383,833   424,278
TOTAL AVERAGE ASSETS $ 6,263,148 $ 6,338,566
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Deposits (10):
Savings and NOW $ 520,546 $ 500,084 $ 430 $ 827 0.08 % 0.17 %
Money Market 2,401,622 2,189,344 7,366 8,777 0.31 % 0.40 %
Certificates of Deposit   633,759   810,590   5,599   8,036 0.88 % 0.99 %
Total Deposits 3,555,927 3,500,018 13,395 17,640 0.38 % 0.50 %
Junior Subordinated Debentures 125,756 167,786 4,408 6,258 3.46 % 3.73 %
FHLB Borrowings and Other   527,377   663,165   11,353   16,114 2.12 % 2.43 %
Total Interest-Bearing Liabilities   4,209,060   4,330,969   29,156   40,012 0.69 % 0.92 %
Noninterest Bearing Demand Deposits 1,286,539 1,304,514
Other Liabilities   133,592   103,271
Total Average Liabilities 5,629,191 5,738,754
Redeemable Noncontrolling Interests 18,162 19,822
Average Shareholders' Equity   615,795   579,990
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 6,263,148 $ 6,338,566
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 182,344 $ 191,660
LESS: FTE Adjustment (8)   8,326   8,384
Net Interest Income (GAAP Basis) $ 174,018 $ 183,276
Interest Rate Spread 2.85 % 2.97 %
Net Interest Margin 3.05 % 3.22 %
 
         
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
(In Thousands)
LOAN DATA (11):   12/31/2013   9/30/2013   12/31/2012
Commercial and Industrial Loans:
New England $ 713,484 $ 671,564 $ 691,519
San Francisco Bay 107,154 75,519 61,535
Southern California   45,415   41,342   53,272
Total Commercial and Industrial Loans $ 866,053 $ 788,425 $ 806,326
Commercial Real Estate Loans:
New England $ 721,924 $ 673,428 $ 662,964
San Francisco Bay 641,746 597,405 648,137
Southern California   449,724   451,198   380,249
Total Commercial Real Estate Loans $ 1,813,394 $ 1,722,031 $ 1,691,350
Construction and Land Loans:
New England $ 92,456 $ 106,324 $ 92,766
San Francisco Bay 45,941 34,074 33,655
Southern California   15,520   14,211   11,149
Total Construction and Land Loans $ 153,917 $ 154,609 $ 137,570
Residential Loans:
New England $ 1,228,623 $ 1,218,560 $ 1,173,741
San Francisco Bay 459,667 466,801 431,550
Southern California   344,004   321,341   300,798
Total Residential Loans $ 2,032,294 $ 2,006,702 $ 1,906,089
Home Equity Loans:
New England $ 81,010 $ 79,168 $ 79,947
San Francisco Bay 30,002 31,882 36,730
Southern California   2,648   7,044   6,874
Total Home Equity Loans $ 113,660 $ 118,094 $ 123,551
Other Consumer Loans:
New England $ 117,079 $ 116,692 $ 131,999
San Francisco Bay 8,854 8,518 9,581
Southern California 7,069 7,005 7,148
Eliminations and other, net   139   146   522
Total Other Consumer Loans $ 133,141 $ 132,361 $ 149,250
Total Loans
New England $ 2,954,576 $ 2,865,736 $ 2,832,936
San Francisco Bay 1,293,364 1,214,199 1,221,188
Southern California 864,380 842,141 759,490
Eliminations and other, net   139   146   522
Total Loans $ 5,112,459 $ 4,922,222 $ 4,814,136
 
         
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
(In Thousands)
CREDIT QUALITY (11):   12/31/2013     9/30/2013   12/31/2012  
Special Mention Loans:
New England $ 41,759 $ 34,630 $ 40,389
San Francisco Bay 25,912 20,875 24,566
Southern California   19,642     18,704   19,784  
Total Special Mention Loans $ 87,313   $ 74,209 $ 84,739  
Accruing Substandard Loans (12):
New England $ 13,304 $ 12,053 $ 27,551
San Francisco Bay 25,171 27,049 49,854
Southern California   3,540     5,207   12,724  
Total Accruing Substandard Loans $ 42,015   $ 44,309 $ 90,129  
Nonaccruing Loans:
New England $ 24,838 $ 30,160 $ 28,307
San Francisco Bay 14,016 14,218 25,105
Southern California   5,908     6,414   7,333  
Total Nonaccruing Loans $ 44,762   $ 50,792 $ 60,745  
Other Real Estate Owned:
New England $ 191 $ 191 $ 1,744
San Francisco Bay 585 585 1,395
Southern California -- -- --
Pacific Northwest (1)   N/A     N/A   477  
Total Other Real Estate Owned $ 776   $ 776 $ 3,616  
Loans 30-89 Days Past Due and Accruing (13):
New England $ 5,029 $ 2,047 $ 20,751
San Francisco Bay 3,029 2,317 11,771
Southern California   5,684     3,819   13,854  
Total Loans 30-89 Days Past Due and Accruing $ 13,742   $ 8,183 $ 46,376  
 
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ (344 ) $ 22 $ (1,148 )
San Francisco Bay 1,798 2,111 (1,094 )
Southern California (260 ) 244 168
Pacific Northwest  

N/A

    

N/A

  2  
Total Net Loans (Charged-off)/ Recovered $ 1,194   $ 2,377 $ (2,072 )
Loans (Charged-off)/ Recovered, Net for the Twelve Months Ended:
New England $ (2,422 ) $ (5,593 )
San Francisco Bay 2,576 (2,768 )
Southern California 2,160 289
Pacific Northwest  

N/A

     (685 )
Total Net Loans (Charged-off)/ Recovered $ 2,314   $ (8,757 )
 
             
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. Accordingly, the assets and liabilities to be sold as part of this transaction were classified as held for sale at December 31, 2012. Within loans held for sale on the consolidated balance sheet at December 31, 2012, $276.7 million relate to the Pacific Northwest transaction. All of the deposits held for sale at December 31, 2012 relate to the Pacific Northwest transaction.  All other assets and liabilities that were identified be included in the Pacific Northwest transaction were classified as other assets held for sale or other liabilities held for sale and were included within other assets or other liabilities on the consolidated balance sheet at December 31, 2012.

 

 

(2)

 

Net income from discontinued operations consists of contingent payments from certain of 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. In the second quarter of 2013, the Company repurchased its Series B Preferred stock, and the deemed dividend related to this repurchase of $11.7 million is considered a dividend for the calculation of earnings per share for the twelve months ended December 31, 2013.
 

(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 earning per share calculation. The potential dilutive shares relate to: unexercised stock options, unvested non-participating restricted stock, and unexercised stock warrants. The amount of shares that were anti-dilutive for the three and twelve months ended December 31, 2013 was less than 0.1 million. The amount of shares that were anti-dilutive for the three months ended September 30, 2013 was less than 0.1 million. The amount of shares that were anti-dilutive for the three and twelve months ended December 31, 2012 was 0.3 million in both periods. 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, 2012 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; exclude Goodwill and Intangible Assets, net; and include the difference between Redemption Value and value per ASC 810, Consolidation ("ASC 810"), for Redeemable Noncontrolling Interests.
 
(In thousands, except per share data)   12/31/13     9/30/13     12/31/12  
Total Balance Sheet Assets $ 6,437,109 $ 6,274,939

$

6,465,005
LESS: Goodwill and Intangible Assets, net   (130,784 )   (131,836 )   (135,054 )
Tangible Assets (non-GAAP) $ 6,306,325 $ 6,143,103 $ 6,329,951
Total Shareholders' Equity $ 633,688 $ 623,037 $ 603,102
LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) --
LESS: Goodwill and Intangible Assets, net (130,784 ) (131,836 ) (135,054 )
ADD: Difference between Redemption Value of Noncontrolling Interests and value under ASC 810   16,821     14,522     17,201  
Total adjusting items   (161,716 )   (165,067 )   (117,853 )
Tangible Common Equity (non-GAAP) $ 471,972   $ 457,970   $ 485,249  
Total Equity/Total Assets 9.84 % 9.93 % 9.33 %
Tangible Common Equity/Tangible Assets (non-GAAP) 7.48 % 7.46 % 7.67 %
 
Total Risk Weighted Assets * $ 4,677,346 $ 4,462,531 $ 4,627,791
Tier I Common Equity * $ 463,627 $ 452,879 $ 462,177
Tier I Common Equity/ Risk Weighted Assets 9.91 % 10.15 % 9.99 %
 
End of Period Shares Outstanding 79,838 79,822 78,744
End of Period Carlyle Common Convertible Shares   --     --     7,261  
Common Equivalent Shares   79,838     79,822     86,005  
 
Book Value Per Common Share $ 7.34 $ 7.21 $ 6.92
Tangible Book Value Per Share (non-GAAP) $ 5.91 $ 5.74 $ 5.64
* Risk Weighted Assets and Tier I Common Equity for December 31, 2013 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, and includes the Average Difference between Redemption Value and value per ASC 810 for Redeemable Noncontrolling Interests.
 
(In thousands, except per share data)   12/31/13     9/30/13     12/31/12  
Total average shareholders' equity $ 629,268 $ 614,929 $ 600,662
LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,754 )   --  
Average common equity (non-GAAP)   581,515     567,175     600,662  

LESS: Average goodwill and intangible assets, net

(131,375 ) (132,373 )

(135,311

)
ADD: Average difference between redemption value of noncontrolling interests and value under ASC 810  

15,672

     14,834    

14,973

 
Total adjusting items  

(115,703

)   (117,539 )  

(120,338

)
Average Tangible Common Equity (non-GAAP) $

465,812

   $ 449,636   $

480,324

 
 
Net income attributable to the Company $ 17,668 $ 18,336 $ 13,092
Less: Dividends on Series D preferred stock   (869 )   (869 )   --  
Net income, after dividends on Series D preferred stock (non-GAAP) $ 16,799   $ 17,467   $ 13,092  
 
Return on Average Equity - Three Months Ended (Annualized) 11.23 % 11.93 % 8.72 %
Return on Average Common Equity - Three Months Ended (Annualized) (non-GAAP) 11.56 % 12.32 % 8.72 %
Return on Average Tangible Common Equity - Three Months Ended (Annualized) (non-GAAP)

14.43

% 15.54 %

10.90

%
 

(7)

 

The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision earnings; net income excluding the effect of significant transactions; earnings per share excluding the effect of significant transactions; 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 significant transactions; 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 Year ended
(In thousands, except per share data)   12/31/13     9/30/13     12/31/12     12/31/13     12/31/12  
Income before income taxes (GAAP) $ 24,181 $ 26,443 $ 18,103 $ 98,999 $ 69,088
ADD BACK: Provision/ (credit) for loan losses   (2,000 )   (6,000 )   (5,000 )   (10,000 )   (3,300 )
Pre-tax, pre-provision earnings (Non-GAAP) $ 22,181 $ 20,443 $ 13,103 $ 88,999 $ 65,788
 
Net income attributable to the Company (GAAP) $ 17,668 $ 18,336 $ 13,092 $ 70,535 $ 53,271
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) $ 17,668 $ 18,336 $ 13,092 $ 64,268 $ 53,271
 
Net Income Attributable to the Common Shareholders, after allocation to participating securities (GAAP) $ 16,068 $ 17,511 $ 11,572 $ 53,899 $ 47,170
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) $ 16,068 $ 17,511 $ 11,572 $ 59,370 $ 47,170
 
Diluted Total Earnings per Share (GAAP) $ 0.20 $ 0.22 $ 0.15 $ 0.68 $ 0.61
Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP) $ 0.20 $ 0.22 $ 0.15 $ 0.75 $ 0.61
 
Total operating expense (GAAP) $ 55,705 $ 52,110 $ 62,889 $ 221,360 $ 232,454
Less: Amortization of intangibles   1,052     1,056     1,106     4,327     4,369  
Total operating expense (excluding amortization of intangibles) (Non-GAAP) $ 54,653 $ 51,054 $ 61,783 $ 217,033 $ 228,085
 
Net interest income $ 43,541 $ 42,302 $ 45,546 $ 174,018 $ 183,276
Total core fees and income 32,843 29,826 29,106 122,697 109,356
Total other income 1,502 425 1,340 13,644 5,610
FTE income   2,166     2,138     2,466     8,326     8,384  
Total revenue (FTE basis) $ 80,052 $ 74,691 $ 78,458 $ 318,685 $ 306,626
Efficiency Ratio, before deduction of intangible amortization (GAAP) 71.52 % 71.82 % 82.76 % 71.32 % 77.94 %
Efficiency Ratio, FTE Basis (non-GAAP) 68.27 % 68.35 % 78.75 % 68.10 % 74.39 %
 

(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 Holding 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. The Bank 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, 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. 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. At December 31, 2012, the Company had three loans totaling $3.6 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region.

Boston Private Financial Holdings, Inc.
Jeanne Hess, 617-912-3798
Vice President, Investor Relations
jhess@bostonprivate.com