Investor Relations

Press Release

Boston Private Financial Holdings, Inc. Reports First Quarter 2019 Results

Company Release - 4/17/2019 4:15 PM ET

First Quarter 2019 Highlights include:

  • GAAP Net income was $19.4 million, or $0.25 per diluted share, and Operating Net income was $20.7 million or $0.27 per diluted share
  • Return on average common equity was 10.3%; Operating Return on average common equity was 11.0%
  • Return on average tangible common equity was 11.6%; Operating Return on average tangible common equity was 12.4%
  • Average total deposits were $6.8 billion, a 6% increase year-over-year
  • Average total loans were $6.9 billion, a 5% increase year-over-year
  • Total assets under management/advisory (“AUM”) were $16.1 billion, a decrease of 4% year-over-year
  • Total net flows were negative $963 million, of which $508 million were attributable to the Wealth Management & Trust segment and $455 million were attributable to Affiliate Partners

Notable Items impacting First Quarter 2019 results ("Notable Items"):

  • $1.6 million restructuring expense related to executive departures

BOSTON--(BUSINESS WIRE)-- Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported first quarter 2019 GAAP Net income attributable to the Company of $19.4 million, compared to $33.3 million for the fourth quarter of 2018 and $22.7 million for the first quarter of 2018. First quarter 2019 GAAP Diluted earnings per share were $0.25, compared to $0.42 in the fourth quarter of 2018 and $0.27 in the first quarter of 2018.

         
Summary Financial Results - Reported
% Change
($ in millions, except for per share data) 1Q19 4Q18 1Q18 LQ Y/Y
Net income $19.4 $33.3 $22.7 (42 )% (14 )%
Diluted earnings per share $0.25 $0.42 $0.27 (40 )% (7 )%
 

Non-GAAP Financial Measures:

Pre-tax, pre-provision income $23.0 $42.3 $26.3 (46 )% (12 )%
Return on average common equity ("ROACE") 10.3 % 17.9 % 12.0 %
Return on average tangible common equity ("ROATCE") 11.6 % 20.5 % 15.2 %
nm = not meaningful

The Company's reported financial results decreased linked quarter primarily as a result of the gain on sale related to the divestiture of Bingham, Osborn & Scarborough ("BOS") in the fourth quarter of 2018.

In addition to presenting the Company’s results in conformity with GAAP, the Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. For additional information on non-GAAP financial measures, see page 7. A full reconciliation of GAAP to non-GAAP results can be found in the footnotes beginning on page 15.

     
Summary Financial Results - Operating Basis (non-GAAP)
    % Change
($ in millions, except for per share data) 1Q191 4Q182 1Q18 LQ Y/Y
Net income $20.7 $19.9 $22.7 4 % (9 )%
Diluted earnings per share $0.27 $0.27 $0.27 % %
 
Pre-tax, pre-provision income $24.7 $25.8 $26.3 (4 )% (6 )%
Return on average common equity 11.0 % 10.7 % 12.0 %
Return on average tangible common equity 12.4 % 12.4 % 15.2 %

1 1Q19 results adjusted to exclude the net after-tax impact of $1.6 million restructuring expense
2 4Q18 results adjusted to exclude the net after-tax impact of $18.1 million gain on sale and $3.5 million tax expense related to the divestiture of Bingham, Osborn, & Scarborough, LLC and $1.6 million restructuring expense

"First quarter GAAP results include a restructuring charge related to executive departures during the quarter," said Anthony DeChellis, CEO of Boston Private. "This charge occurred as we assemble our management team and position for growth.

"I am pleased with our Company's performance in the core business, which excludes contributions from affiliates we divested in 2018 and Notable Items. During the first quarter, we generated positive operating leverage through disciplined management of expenses, which declined 2% year-over-year. The Commercial and Private Banking business maintained strong asset quality metrics, which contributed to a provision credit during the quarter, driving an overall increase to operating basis net income. At the same time, our AUM decreased 4% year-over-year driven by negative net flows, partially offset by positive market action."

Divested Affiliates

The Company completed the sale of Anchor Capital Advisors, LLC ("Anchor") and BOS (together, "the Divested Affiliates") during 2018. Financial results from the Divested Affiliates remain consolidated in the Company's financial results through the closing dates of the divestitures. The Anchor divestiture closing date was April 13, 2018, and the BOS divestiture closing date was December 3, 2018.

For presentation purposes, the Divested Affiliates' AUM are excluded from AUM amounts, but are included in the calculation of Core fees and income. The discussion below includes non-GAAP measures that exclude the contributions from these affiliates in order to enhance comparability of trends in the core business.

   
Net Interest Income and Margin
      % Change
($ in millions) 1Q19 4Q18 1Q18 LQ Y/Y
Net interest income $58.3 $60.0 $57.4 (3 )% 2 %
Less: Interest recovered on previous nonaccrual loans 0.3   1.0   0.1   (74 )% nm
Core net interest income (non-GAAP) 58.1 59.0 57.3

(2

)% 1 %
 
Net interest margin 2.90 % 2.94 % 2.90 %
Core net interest margin (non-GAAP) 2.89 % 2.90 % 2.90 %

Net interest income for the first quarter of 2019 was $58.3 million, a decrease of 3% linked quarter and an increase of 2% year-over-year. Core net interest income, which excludes interest recovered on previous nonaccrual loans, decreased 2% linked quarter and increased 1% year-over-year. The linked quarter decrease was primarily driven by higher funding costs and lower average interest-earning asset volumes. The year-over-year increase was primarily driven by higher yields on interest-earning assets and higher asset volumes, partially offset by higher funding costs.

The Company’s Core net interest margin, which excludes interest recovered on previous nonaccrual loans, decreased 1 basis point on a linked quarter basis to 2.89%, primarily driven by higher funding costs, partially offset by higher yields on interest-earning assets.

The current difference between Net interest margin ("NIM") and NIM on a fully taxable equivalent ("FTE") basis is immaterial, therefore the Company will only present NIM on a GAAP basis. The decline in the Federal tax rate in 2018 and the recent increases in interest expense have reduced the difference between NIM on a GAAP basis and NIM on a FTE basis.

         
Noninterest Income
% Change
($ in millions) 1Q19 4Q18 1Q18 LQ Y/Y
Investment management fees $2.7 $2.8 $11.4 (6 )% (77 )%
Wealth advisory fees 8.2 12.1 13.5 (33 )% (40 )%
Wealth management and trust fees 10.9 11.7 12.2 (7 )% (10 )%
Private banking fees 3 2.6   2.1   2.3   24 % 13 %
Total core fees and income $24.3 $28.7 $39.4 (15 )% (38 )%
Total other income 1.0   17.2   0.3   (94 )% nm
Total noninterest income $25.2 $45.8 $39.7 (45 )% (36 )%
 
Memo: Excluding Divested Affiliates and the gain on sale related to the divestiture of BOS
Investment management fees (non-GAAP) 4 2.7 2.8 3.0 (6 )% (11 )%
Wealth advisory fees (non-GAAP) 6 8.2 8.3 7.8 (1 )% 5 %
Total core fees and income (non-GAAP) 4 5 $24.3 $24.9 $25.3 (2 )% (4 )%
Total other income (non-GAAP) 6 1.0 (1.0) 0.3 nm nm
Total noninterest income (non-GAAP) 4 5 $25.2 $23.9 $25.6 5 % (2 )%

3 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net
4 Excludes Anchor revenue of $8.4 million in 1Q18
5 Excludes BOS revenue of $3.9 million in 4Q18 and $5.7 million in 1Q18
6 Excludes $18.1 million gain on sale in 4Q18

Total core fees and income for the first quarter of 2019 was $24.3 million, a decline of 15% linked quarter primarily driven by the divestiture of BOS and 38% year-over-year primarily driven by the divestitures of Anchor and BOS. Total other income declined 94% linked quarter due to an $18.1 million gain on sale related to BOS during the fourth quarter of 2018.

Excluding Divested Affiliates and the gain on sale related to the divestiture of BOS, Total core fees and income decreased 4% year-over-year primarily driven by lower AUM in the Wealth Management and Trust segment, partially offset by higher Wealth advisory fees.

         
Assets Under Management / Advisory
% Change
($ in millions) 1Q19 4Q18 1Q18 LQ Y/Y
Wealth Management and Trust $7,593 $7,602 $7,831 % (3 )%
Affiliate Partners 7 8,529 8,319 8,878 3 % (4 )%
Total assets under management / advisory 8 $16,122 $15,921 $16,709 1 % (4 )%
Total net flows 8 $(963) $(143) $122

7 Segment includes Dalton, Greiner, Hartman, Maher & Co., LLC ("DGHM") and KLS Professional Advisors Group, LLC ("KLS")
8 Excludes Anchor and BOS

Total assets under management / advisory, were $16.1 billion at the end of the first quarter of 2019, an increase of 1% linked quarter and a decrease of 4% year-over-year. The linked quarter increase was primarily driven by positive market action exceeding negative net flows, while the year-over-year decrease was primarily driven by negative net flows exceeding positive market action.

Net flows in the Wealth Management and Trust segment during the first quarter of 2019 were negative $508 million driven by elevated current client outflows, partially offset by $172 million of new business. Net flows in the Affiliate Partners segment were negative $455 million driven by lost clients.

             
Operating Expense
% Change
($ in millions) 1Q19   4Q18   1Q18   LQ Y/Y
Salaries and employee benefits $35.7 $36.0 $47.1 (1 )% (24 )%
Occupancy and equipment 8.3 8.0 7.7 5 % 8 %
Professional services 3.6 4.2 3.2 (16 )% 12 %
Marketing and business development 1.1 2.3 1.6 (52 )% (32 )%
Information systems 5.9 6.3 5.9 (7 )% %
Amortization of intangibles 0.7 0.7 0.8 (1 )% (10 )%
FDIC insurance 0.7 0.7 0.7 (11 )% (11 )%
Restructuring 1.6 2.1 (20 )% nm
Other 3.0 3.3 3.9 (9 )% (23 )%
Total operating expense $60.6 $63.6 $70.9 (5 )% (15 )%
 
Memo: Excluding Notable Items and Divested Affiliates
Information systems 9 (0.4 ) nm nm
Restructuring 1.6 2.1 (20 )% nm
Divested Affiliates operating expense 2.8 10.6 nm nm
Total operating expense (non-GAAP) $58.9 $59.1 $60.3 % (2 )%

9 $0.4 million of Information services expense was reclassified to Restructuring expense in conjunction with the Company's formal restructuring plan announced in 4Q18

Total operating expense decreased 5% linked quarter and 15% year-over-year, primarily driven by expenses associated with Divested Affiliates that are included in prior period results.

Excluding Notable Items and Divested Affiliates, Total operating expense for the first quarter of 2019 was $58.9 million, flat linked quarter and down 2% year-over-year. Expenses remained flat linked quarter as lower marketing expense and professional fees offset higher compensation expense associated seasonal payroll taxes during the first quarter. Year-over-year, compensation declined as a result of efficiency initiatives, partially offset by higher occupancy expense and information technology investments.

Income Tax Expense

The Company's effective tax rate, excluding Notable Items, for the first quarter of 2019 was 20.1%. The tax rate was lower than prior quarters as a result of lower disallowed executive compensation related to the recent departures of certain executives.

         
Loans and Deposits - QTD Averages
% Change
($ in millions) 1Q19 4Q18 1Q18 LQ Y/Y
Commercial and industrial $1,070 $1,027 $933 4 % 15 %
Commercial real estate 2,398 2,402 2,441 % (2 )%
Construction and land 211 209 169 1 % 25 %
Residential 2,973 2,907 2,702 2 % 10 %
Home equity 91 94 97 (3 )% (7 )%
Other consumer 134 141 186 (5 )% (28 )%
Total loans $6,877 $6,781 $6,529 1 % 5 %
 
Non-interest bearing deposits 1,975 2,092 1,872 (6 )% 5 %
Interest bearing deposits 4,792 4,826 4,516 (1 )% 6 %
Total deposits $6,767 $6,918 $6,388 (2 )% 6 %
 
Non-interest bearing deposits as a % of Total deposits 29 % 30 % 29 %

Average total loans in the first quarter of 2019 increased 5% year-over-year, primarily driven by increases in Residential loans and C&I loans.

Average total deposits increased 6% year-over-year, primarily driven by growth in money market accounts, demand deposit accounts and certificates of deposits, partially offset by declines in savings and NOW accounts. The cost of total deposits, including DDA, was 0.84%, an increase of 7 basis points linked quarter and 43 basis points year-over-year.

         
Provision and Asset Quality
 
($ in millions) 1Q19 4Q18 3Q18 2Q18 1Q18
Provision/ (credit) for loan loss $(1.4) $0.1 $(0.9) $0.5 $(1.8)
Total criticized loans 141.3 146.6 134.7 114.4 124.1
Total nonaccrual loans 12.0 14.1 12.1 15.7 16.4
Total loans 30-89 days past due and accruing 17.7 22.3 11.6 5.0 20.4
Total net loans (charged-off)/ recovered (0.1) 1.7 1.0 0.1
 

Ratios:

Allowance for loan losses as a % of Total loans 1.07 % 1.09 % 1.09 % 1.09 % 1.10 %
Nonaccrual loans as a % of Total loans 0.17 % 0.20 % 0.18 % 0.23 % 0.25 %

The Company recorded a provision credit of $1.4 million for the first quarter of 2019, compared to an expense of $0.1 million for the fourth quarter of 2018 and a credit of $1.8 million in the first quarter of 2018. The provision credit in the first quarter of 2019 was primarily driven by a decline in criticized loans, partially offset by net changes to loss factors.

Total criticized loans as of March 31, 2019 was $141.3 million, a decrease of 4% linked quarter and an increase of 14% year-over-year. Total nonaccrual loans as of March 31, 2019 was $12.0 million, or 17 basis points of total loans, compared to $14.1 million, or 20 basis points of total loans as of December 31, 2018, and $16.4 million, or 25 basis points of total loans as of March 31, 2018.

         
Capital
($ in millions, except for per share data) 1Q19 4Q18 3Q18 2Q18 1Q18
Tangible common equity/ Tangible assets 12 8.3 % 8.1% 7.8% 7.5 % 7.4 %
Tangible book value per share 12 $8.47 $8.18 $7.67 $7.62 $7.17
 

Regulatory Capital Ratios: 13

Tier 1 common equity 11.4 % 11.4% 11.1% 10.9 % 10.4 %
Total risk-based capital 14.2 % 14.3% 14.1% 13.8 % 14.2 %
Tier 1 risk-based capital 13.0 % 13.0% 12.8% 12.6 % 12.9 %
Tier 1 leverage capital 9.7 % 9.5% 9.2% 9.2 % 9.4 %
 

Common Equity Repurchase Program:

Total shares of common stock repurchased 1,505,521 137,144
Average price paid per share of common stock $12.02 $13.89
Aggregate repurchases of common equity ($ in millions) $18.1 $1.9

12 See footnote 6 for a GAAP to non-GAAP reconciliation.
13 Current quarter information is presented based on estimated data.

Tangible book value per share as of March 31, 2019 increased 4% linked quarter and 18% year-over-year to $8.47. The increase in Tangible book value per share from March 31, 2018 to March 31, 2019 was primarily driven by the divestitures of Anchor and BOS and increased retained earnings, partially offset by common share repurchases and lower Accumulated other comprehensive income.

EPS Calculation

For calculation of income for EPS, first quarter 2019 Net income attributable to the common shareholders benefited by $1.6 million, or $0.02 per share, related to the changes in value of Redeemable noncontrolling interests ("RNCI").

Dividend Payments
Concurrent with the release of first quarter 2019 earnings, the Board of Directors of the Company declared a cash dividend payable to common shareholders of $0.12 per share. The record date for this dividend is May 3, 2019, and the payment date is May 17, 2019.

Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

These non-GAAP financial measures include tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision income; total operating expense excluding intangibles, and restructuring, if any; the efficiency ratio; the efficiency ratio excluding amortization of intangibles, and restructuring, if any; net interest income and net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as core net interest income, and core net interest margin, respectively; net income attributable to the Company excluding notable items; net income attributable to the common shareholders, treasury stock method, excluding notable items; diluted earnings per share excluding notable items; operating basis total revenue; operating basis total operating expenses.

A detailed reconciliation table of the Company’s GAAP to non-GAAP measures is included in the footnotes of the attached financial statements.

Conference Call
Management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, April 18, 2019, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
Elite Entry Number: 1277765

Replay Information:
Available from April 18, 2019 at 12:00 p.m Eastern Time until April 25, 2019
Dial In #: (877) 344-7529
Conference Number: 10130183

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, Trust, and Commercial and Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, and Florida. The Company has total assets of greater than $8 billion, and manages over $16 billion of client assets.

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

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

Forward-Looking Statements
Certain statements in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements include, among others, statements regarding our strategy, evaluations of future interest rate trends and liquidity, prospects for growth in assets, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s commercial and private banking, investment management, wealth advisory, and trust activities; changes in interest rates; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or decreases in deposit levels necessitating increased borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; changes in government regulation; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

Note to Editors:
Boston Private Financial Holdings, Inc. is not to be confused with Boston Private Bank & Trust Company. Boston Private Bank & Trust Company is a wholly-owned subsidiary of BPFH. The information reported in this press release is related to the performance and results of BPFH.

         

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
(In thousands, except share and per share data)
Assets:
Cash and cash equivalents $ 96,211 $ 127,259 $ 92,634 $ 364,539 $ 77,085
Investment securities available-for-sale 981,951 994,065 1,056,261 1,069,025 1,101,588
Investment securities held-to-maturity 67,548 70,438 75,468 78,955 70,809
Equity securities at fair value 7,491 14,228 7,079 7,942 16,909
Stock in Federal Home Loan Bank and Federal Reserve Bank 47,053 49,263 48,727 70,127 54,455
Loans held for sale 280 2,812 3,344 4,622 3,918
Total loans 6,926,968 6,893,158 6,720,420 6,767,123 6,602,327
Less: Allowance for loan losses 73,814   75,312   73,500   73,464   72,898  
Net loans 6,853,154 6,817,846 6,646,920 6,693,659 6,529,429
Other real estate owned (“OREO”) 401 108 108
Premises and equipment, net 42,938 45,412 47,399 46,421 43,627
Goodwill (1) 57,607 57,607 75,598 75,598 75,598
Intangible assets, net (1) 11,555 12,227 13,834 14,584 15,334
Fees receivable 3,982 5,101 10,445 10,405 10,640
Accrued interest receivable 25,935 24,366 24,641 23,732 22,614
Deferred income taxes, net 22,844 26,638 27,833 26,316 32,058
Right of use assets 104,644
Other assets (1) 248,950   246,962   245,549   230,170   264,295  
Total assets $ 8,572,143   $ 8,494,625   $ 8,375,840   $ 8,716,203   $ 8,318,359  
Liabilities:
Deposits $ 6,779,845 $ 6,781,170 $ 6,768,723 $ 6,620,179 $ 6,584,322
Securities sold under agreements to repurchase 58,329 36,928 39,453 58,824 85,257
Federal funds purchased 250,000 120,000
Federal Home Loan Bank borrowings 615,070 420,144 441,836 1,056,938 611,588
Junior subordinated debentures 106,363 106,363 106,363 106,363 106,363
Lease liabilities 120,162
Other liabilities (1) 112,893   143,540   149,770   129,175   125,004  
Total liabilities 7,792,662   7,738,145   7,626,145   7,971,479   7,512,534  
Redeemable noncontrolling interests (“RNCI”) 662 2,526 11,686 10,747 16,322
Shareholders’ equity:
Preferred stock, $1.00 par value; authorized: 2,000,000 shares 47,753
Common stock, $1.00 par value; authorized: 170,000,000 shares 83,774 83,656 84,603 84,479 84,194
Additional paid-in capital 604,288 600,196 614,157 613,918 612,526
Retained earnings 97,155 87,821 64,618 56,912 61,518
Accumulated other comprehensive income/ (loss) (6,398 ) (17,719 ) (27,578 ) (23,328 ) (21,313 )
Total Company’s shareholders’ equity 778,819   753,954   735,800   731,981   784,678  
Noncontrolling interests     2,209   1,996   4,825  
Total shareholders’ equity 778,819   753,954   738,009   733,977   789,503  
Total liabilities, RNCI and shareholders’ equity $ 8,572,143   $ 8,494,625   $ 8,375,840   $ 8,716,203   $ 8,318,359  
 

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
Three Months Ended
March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Interest and dividend income: (In thousands, except share and per share data)
Loans $ 69,933 $ 69,294 $ 68,254 $ 64,048 $ 60,929
Investment securities 5,983 6,242 6,230 6,302 6,418
Short-term investments and other 908   1,356   1,617   1,205   1,009  
Total interest and dividend income 76,824   76,892   76,101   71,555   68,356  
Interest expense:
Deposits 14,058 13,470 11,487 8,365 6,524
Borrowings 4,428   3,425   4,973   5,645   4,449  
Total interest expense 18,486   16,895   16,460   14,010   10,973  
Net interest income 58,338 59,997 59,641 57,545 57,383
Provision/ (credit) for loan losses (1,426 ) 93   (949 ) 453   (1,795 )
Net interest income after provision/ (credit) for loan losses 59,764   59,904   60,590   57,092   59,178  
Noninterest income:
Investment management fees 2,650 2,831 3,245 4,227 11,425
Wealth advisory fees 8,165 12,111 13,995 13,693 13,512
Wealth management and trust fees 10,893 11,677 11,510 11,169 12,151
Other banking fee income 2,499 2,033 2,775 2,745 2,273
Gain on sale of loans, net 73   39   67   63   74  
Total core fees and income 24,280   28,691   31,592   31,897   39,435  
Gain/ (loss) on sale of investments, net (596 ) 7 (24 )
Gain/ (loss) on OREO, net 91
Gain on sale of affiliate 18,142
Other 877   (392 ) 722   191   332  
Total other income 968   17,154   722   198   308  
Total revenue (2) 83,586 105,842 91,955 89,640 97,126
Operating expense:
Salaries and employee benefits 35,726 36,007 38,944 39,433 47,084
Occupancy and equipment 8,348 7,975 8,164 8,229 7,748
Professional services 3,560 4,229 2,877 2,872 3,177
Marketing and business development 1,085 2,275 1,710 2,070 1,593
Information systems 5,860 6,296 6,233 6,770 5,886
Amortization of intangibles 672 680 750 749 750
FDIC insurance 660 739 674 708 744
Restructuring 1,646 2,065 5,763
Other 2,996   3,291   3,442   3,553   3,875  
Total operating expense 60,553   63,557   68,557   64,384   70,857  
Income before income taxes 24,459 42,192 24,347 24,803 28,064
Income tax expense 4,917   8,651   5,461   17,399   6,026  
Net income from continuing operations 19,542 33,541 18,886 7,404 22,038
Net income/ (loss) from discontinued operations (3)   306     (2 ) 1,698  
Net income before attribution to noncontrolling interests 19,542 33,847 18,886 7,402 23,736
Less: Net income attributable to noncontrolling interests 100   545   924   968   1,050  
Net income attributable to the Company $ 19,442   $ 33,302   $ 17,962   $ 6,434   $ 22,686  
 
Adjustments, treasury stock method (4) 1,557   2,694   (829 ) (3,524 ) (23 )
Net income attributable to common shareholders, treasury stock method $ 20,999   $ 35,996   $ 17,133   $ 2,910   $ 22,663  
 
Weighted average basic shares outstanding 83,285,095 83,750,785 84,017,284 83,509,115 83,097,758
Weighted average diluted shares outstanding (5) 84,010,450 84,863,779 85,498,568 85,413,575 85,271,650
Diluted total earnings per share $ 0.25 $ 0.42 $ 0.20 $ 0.03 $ 0.27
         

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
(In thousands, except per share data) March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
FINANCIAL DATA:
Book value per common share $ 9.30 $ 9.01 $ 8.72 $ 8.69 $ 8.81
Tangible book value per share (6) $ 8.47 $ 8.18 $ 7.67 $ 7.62 $ 7.17
Market price per share $ 10.96 $ 10.57 $ 13.65 $ 15.90 $ 15.05
 
ASSETS UNDER MANAGEMENT AND ADVISORY ("AUM"):
Wealth Management and Trust $ 7,593,000 $ 7,602,000 $ 8,335,000 $ 7,789,000 $ 7,831,000
Affiliate Partners, excluding Anchor and BOS 8,529,000   8,319,000   9,388,000   9,072,000   8,878,000  
Total AUM, excluding Anchor and BOS (7) 16,122,000   15,921,000   17,723,000   16,861,000   16,709,000  
AUM at Anchor and BOS     4,714,000   4,525,000   13,530,000  
Less: Inter-company relationship     (7,000 ) (7,000 ) (11,000 )
Total AUM $ 16,122,000   $ 15,921,000   $ 22,430,000   $ 21,379,000   $ 30,228,000  
 
FINANCIAL RATIOS:
Total equity/ Total assets 9.09 % 8.88 % 8.81 % 8.42 % 9.49 %
Tangible common equity/ Tangible assets (6) 8.35 % 8.12 % 7.83 % 7.46 % 7.38 %
Tier 1 common equity/ Risk weighted assets (6) 11.38 % 11.40 % 11.14 % 10.90 % 10.39 %
Allowance for loan losses/ Total loans 1.07 % 1.09 % 1.09 % 1.09 % 1.10 %
Allowance for loan losses/ Nonaccrual loans 614 % 536 % 608 % 469 % 445 %
Return on average assets (annualized) 0.93 % 1.56 % 0.84 % 0.31 % 1.11 %
ROACE (annualized) (non-GAAP) (8) 10.29 % 17.87 % 9.67 % 3.03 % 12.02 %
ROATCE (annualized) (non-GAAP) (8) 11.63 % 20.46 % 11.37 % 3.90 % 15.20 %
Efficiency ratio (annualized) (non-GAAP) (9) 69.67 % 57.14 % 67.04 % 70.29 % 71.46 %
 
DEPOSIT DETAIL:
Demand deposits (non-interest bearing) $ 2,016,838 $ 1,951,274 $ 2,001,275 $ 2,089,373 $ 1,932,732
NOW 605,852 626,685 568,148 635,841 689,526
Savings 68,102 73,834 72,967 73,675 73,580
Money market 3,302,244 3,338,892 3,363,062 3,128,211 3,177,692
Certificates of deposit 786,809   790,485   763,271   693,079   710,792  
Total deposits $ 6,779,845   $ 6,781,170   $ 6,768,723   $ 6,620,179   $ 6,584,322  
     

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: 03/31/19   12/31/18   03/31/18 03/31/19   12/31/18   03/31/18 03/31/19   12/31/18   03/31/18
AVERAGE ASSETS            
Interest-earning assets:
Cash and investments (10):
Taxable investment securities $ 244,230 $ 317,230 $ 333,253 $ 1,185 $ 1,486 $ 1,510 1.94 % 1.87 % 1.81 %
Non-taxable investment securities 306,868 301,242 296,958 1,901 1,833 1,730 2.48 % 2.43 % 2.33 %
Mortgage-backed securities 521,788 536,264 588,461 2,897 2,923 3,178 2.22 % 2.18 % 2.16 %
Short-term investments and other 79,603     134,182     161,573   908     1,356     1,009   4.58 %   3.98 %   2.51 %
Total cash and investments 1,152,489     1,288,918     1,380,245   6,891     7,598     7,427   2.39 %   2.35 %   2.15 %
Loans (10) (11):
Commercial and industrial 1,070,161 1,027,128 933,209 10,979 10,431 8,460 4.10 % 3.97 % 3.63 %
Commercial real estate 2,398,413 2,402,304 2,441,215 28,151 29,016 26,151 4.69 % 4.73 % 4.28 %
Construction and land 211,351 209,475 169,384 2,641 2,588 1,937 5.00 % 4.83 % 4.57 %
Residential 2,972,945 2,907,446 2,702,317 25,545 24,630 21,766 3.44 % 3.39 % 3.22 %
Home equity 90,646 93,656 97,191 1,121 1,148 1,042 5.02 % 4.86 % 4.35 %
Other consumer 133,937     140,591     185,596   1,496     1,481     1,573   4.53 %   4.18 %   3.44 %
Total loans 6,877,453     6,780,600     6,528,912   69,933     69,294     60,929   4.07 %   4.03 %   3.74 %
Total earning assets 8,029,942     8,069,518     7,909,157   76,824     76,892     68,356   3.83 %   3.76 %   3.46 %
LESS: Allowance for loan losses 75,537 75,006 74,834
Cash and due from banks (non-interest bearing) 46,172 53,633 51,944
Other assets 493,148     397,153     425,617  
TOTAL AVERAGE ASSETS $ 8,493,725     $ 8,445,298     $ 8,311,884  
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits (12):
Savings and NOW $ 674,872 $ 649,937 $ 716,930 $ 296 $ 377 $ 215 0.18 % 0.23 % 0.12 %
Money market 3,341,397 3,392,039 3,141,564 10,072 9,502 4,314 1.22 % 1.11 % 0.56 %
Certificates of deposit 775,817     784,184     657,109   3,690     3,591     1,995   1.93 %   1.82 %   1.23 %
Total interest-bearing deposits (12) 4,792,086 4,826,160 4,515,603 14,058 13,470 6,524 1.19 % 1.11 % 0.59 %
Junior subordinated debentures 106,363 106,363 106,363 1,121 1,043 846 4.22 % 3.84 % 3.18 %
FHLB borrowings and other 615,985     515,734     878,093   3,307     2,382     3,603   2.15 %   1.81 %   1.64 %
Total interest-bearing liabilities (12) 5,514,434     5,448,257     5,500,059   18,486     16,895     10,973   1.36 %   1.23 %   0.80 %
Non-interest bearing demand deposits (12) 1,974,526 2,092,070 1,872,472
Other liabilities 236,426     154,612     133,243  
Total average liabilities 7,725,386 7,694,939 7,505,774
Redeemable noncontrolling interests 2,056 11,046 22,085
Average shareholders’ equity 766,283     739,313     784,025  
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY $ 8,493,725     $ 8,445,298     $ 8,311,884  
Net interest income $ 58,338     $ 59,997     $ 57,383  
Interest rate spread 2.47 % 2.53 % 2.66 %
Bank only net interest margin 2.96 % 3.02 % 3.00 %
Net interest margin 2.90 % 2.96 % 2.95 %
 
Average total deposits (12) 6,766,612 6,918,230 6,388,075 0.84 % 0.77 % 0.41 %
Average total deposits and borrowings (12) 7,488,960 7,540,327 7,372,531 1.00 % 0.89 % 0.60 %
         

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
(In thousands) March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
LOAN DATA (13):
Other commercial and industrial loans:
New England $ 492,800 $ 503,201 $ 460,409 $ 481,081 $ 444,419
San Francisco Bay Area 39,829 43,702 41,256 35,220 23,491
Southern California 82,741   76,134   81,549   66,892   63,183
Total other commercial and industrial loans $ 615,370   $ 623,037   $ 583,214   $ 583,193   $ 531,093
New England $ 342,270 $ 344,079 $ 330,753 $ 332,572 $ 313,955
San Francisco Bay Area 96,024 96,387 96,775 94,959 95,380
Southern California 11,198   11,205   11,279   11,351   11,422
Total commercial tax-exempt loans $ 449,492   $ 451,671   $ 438,807   $ 438,882   $ 420,757
Total commercial and industrial loans $ 1,064,862   $ 1,074,708   $ 1,022,021   $ 1,022,075   $ 951,850
Commercial real estate loans:
New England $ 1,068,619 $ 1,022,061 $ 1,043,494 $ 1,069,942 $ 1,046,178
San Francisco Bay Area 720,276 714,449 724,243 739,769 721,871
Southern California 650,153   659,182   631,343   694,810   696,954
Total commercial real estate loans $ 2,439,048   $ 2,395,692   $ 2,399,080   $ 2,504,521   $ 2,465,003
Construction and land loans:
New England $ 136,097 $ 153,929 $ 114,411 $ 88,068 $ 79,563
San Francisco Bay Area 43,130 41,516 40,755 37,783 34,050
Southern California 31,391   44,861   42,358   46,173   51,627
Total construction and land loans $ 210,618   $ 240,306   $ 197,524   $ 172,024   $ 165,240
Residential loans:
New England $ 1,692,421 $ 1,689,318 $ 1,650,989 $ 1,643,039 $ 1,619,856
San Francisco Bay Area 570,132 559,578 554,502 533,394 511,903
Southern California 730,579   700,077   657,388   631,773   605,610
Total residential loans $ 2,993,132   $ 2,948,973   $ 2,862,879   $ 2,808,206   $ 2,737,369
Home equity loans:
New England $ 59,074 $ 57,617 $ 61,291 $ 61,125 $ 65,434
San Francisco Bay Area 18,279 19,722 19,769 17,366 19,314
Southern California 11,267   13,082   12,330   13,310   9,583
Total home equity loans $ 88,620   $ 90,421   $ 93,390   $ 91,801   $ 94,331
Other consumer loans:
New England $ 110,363 $ 120,402 $ 121,685 $ 145,726 $ 166,413
San Francisco Bay Area 11,956 12,663 14,228 14,659 13,569
Southern California 8,369   9,993   9,613   8,111   8,552
Total other consumer loans $ 130,688   $ 143,058   $ 145,526   $ 168,496   $ 188,534
Total loans:
New England $ 3,901,644 $ 3,890,607 $ 3,783,032 $ 3,821,553 $ 3,735,818
San Francisco Bay Area 1,499,626 1,488,017 1,491,528 1,473,150 1,419,578
Southern California 1,525,698   1,514,534   1,445,860   1,472,420   1,446,931
Total loans $ 6,926,968   $ 6,893,158   $ 6,720,420   $ 6,767,123   $ 6,602,327
         

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
(In thousands) March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
CREDIT QUALITY (13):
Special mention loans:
New England $ 34,675 $ 31,147 $ 20,382 $ 18,515 $ 33,282
San Francisco Bay Area 23,486 18,585 18,359 19,255 14,117
Southern California 28,626   28,796   28,665   15,678   15,689  
Total special mention loans $ 86,787   $ 78,528   $ 67,406   $ 53,448   $ 63,088  
Accruing classified loans (14):
New England $ 15,830 $ 10,392 $ 10,083 $ 11,493 $ 8,767
San Francisco Bay Area 20,801 24,584 24,252 12,766 14,970
Southern California 5,890   19,119   21,045   21,194   21,436  
Total accruing classified loans $ 42,521   $ 54,095   $ 55,380   $ 45,453   $ 45,173  
Nonaccruing loans:
New England $ 6,161 $ 6,728 $ 5,131 $ 7,282 $ 8,056
San Francisco Bay Area 2,480 2,488 1,169 1,319 1,442
Southern California 3,378   4,841   5,797   7,050   6,882  
Total nonaccruing loans $ 12,019   $ 14,057   $ 12,097   $ 15,651   $ 16,380  
Loans 30-89 days past due and accruing:
New England $ 7,232 $ 15,961 $ 9,193 $ 4,653 $ 10,571
San Francisco Bay Area 2,021 2,246 1,651 2,251
Southern California 8,462   4,092   763   324   7,554  
Total loans 30-89 days past due and accruing $ 17,715   $ 22,299   $ 11,607   $ 4,977   $ 20,376  
Loans (charged-off)/ recovered, net:
New England $ 222 $ (100 ) $ 232 $ (73 ) $ (285 )
San Francisco Bay Area 18 1,804 706 91 67
Southern California (312 ) 15   47   95   169  
Total net loans (charged-off)/ recovered $ (72 ) $ 1,719   $ 985   $ 113   $ (49 )
 

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 

FOOTNOTES:

(1) On April 13, 2018, the Company completed the sale of its ownership interest in Anchor to the management team of Anchor for an upfront cash payment and future payments. Anchor’s results remain consolidated in the Company’s results through the closing date. For presentation purposes, Anchor’s AUM is excluded from prior period AUM amounts, whereas it is included in the calculation of Core fees and income through the closing date. The Company classified the assets and liabilities of Anchor as held for sale at March 31, 2018, which are included with Other assets and Other liabilities, respectively, on the Company’s consolidated balance sheet. For regulatory purposes, the goodwill and intangible assets of Anchor are included in consolidated calculations through the closing date.
 
On December 3, 2018, the Company completed the sale of its ownership interest in BOS to the management team of BOS for an upfront cash payment and an eight-year revenue sharing agreement with BOS. For presentation purposes, BOS' AUM is excluded from prior period AUM amounts, whereas it is included in the calculation of Core fees and income through the closing date. For regulatory purposes, the goodwill and intangible assets of BOS are included in consolidated calculations through the closing date.
 
See footnotes 6 and 8, below.
 
(2) Total revenue is the sum of Net interest income, Total core fees and income, and Total other income.
 
(3) Net income from discontinued operations consists of contingent payments, net of expenses, related to our divested affiliate, Westfield Capital Management Company, LLC. The Company received its final contingent payment in the first quarter of 2018 related to this affiliate and a tax benefit related to deferred taxes in the fourth quarter of 2018 when annual tax returns were filed.
 
(4) Adjustments to Net income attributable to the Company to arrive at Net income attributable to the common shareholders, treasury stock method, as presented in these tables, include decrease/ (increase) in Noncontrolling interests redemption value and dividends paid on preferred stock, if any, including deemed dividends on redemption of the 6.95% Non-Cumulative Perpetual Preferred Stock, Series D (“the Series D preferred stock”), if any. On June 15, 2018, the Company redeemed all $50 million of the outstanding Series D preferred stock.
 
(5) 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 Weighted average diluted 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 restricted stock and unexercised stock warrants, if any. 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, 2018 for additional information.
 
(6) 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 TA by adjusting Total assets to exclude Goodwill and intangible assets.
 
The Company calculates TCE by adjusting Total equity to exclude non-convertible Series D preferred stock, if any, and exclude Goodwill and intangible assets, net. On June 15, 2018, the Company redeemed all $50 million of the outstanding Series D preferred stock.
         

Boston Private Financial Holdings, Inc.
Selected Financial Data (Unaudited)

 
(In thousands, except share and per share data) March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Total balance sheet assets $ 8,572,143 $ 8,494,625 $ 8,375,840 $ 8,716,203 $ 8,318,359
LESS: Goodwill and intangible assets, net * (69,162 ) (69,834 ) (89,432 ) (90,182 ) (138,026 )
Tangible assets (non-GAAP) $ 8,502,981 $ 8,424,791 $ 8,286,408 $ 8,626,021 $ 8,180,333
Total shareholders’ equity $ 778,819 $ 753,954 $ 738,009 $ 733,977 $ 789,503
LESS: Series D preferred stock (non-convertible) (47,753 )
LESS: Goodwill and intangible assets, net * (69,162 ) (69,834 ) (89,432 ) (90,182 ) (138,026 )
Total adjusting items (69,162 ) (69,834 ) (89,432 ) (90,182 ) (185,779 )
Tangible common equity (non-GAAP) $ 709,657   $ 684,120   $ 648,577   $ 643,795   $ 603,724  
Total equity/ Total assets 9.09 % 8.88 % 8.81 % 8.42 % 9.49 %
Tangible common equity/ Tangible assets (non-GAAP) 8.35 % 8.12 % 7.83 % 7.46 % 7.38 %
 
Total risk weighted assets ** $ 6,301,912