BPFH Boston Private Financial Holdings Inc

Fourth Quarter and Full Year Highlights:

• Average Total Deposits increased 7% year-over-year to $6.4 billion, and Average Total Loans increased 7% year-over-year to $6.4 billion.
• Total Assets Under Management/Advisory (“AUM”), excluding Anchor Capital Advisors LLC ("Anchor"), were $21.2 billion at the end of the fourth quarter, and Net Flows during the fourth quarter were $128 million.
• Operating Return on Average Common Equity for the fourth quarter was 10.2% and Operating Return on Average Tangible Common Equity was 13.4%.
• Full year Operating Return on Average Common Equity was 10.1% and Operating Return on Average Tangible Common Equity was 13.6%.
• The Board of Directors approved a quarterly cash dividend of $0.12 per share of common stock, an increase from $0.11 per share in the prior quarter.

Notable Items impacting fourth quarter results:

• $1.3 million loss on sale, $0.4 million of legal expense, and $24.9 goodwill impairment expense related to the Held for Sale classification and previously announced divestiture of Anchor
• $12.9 million Income Tax Expense related to the Tax Cuts and Jobs Act

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported fourth quarter 2017 GAAP Net loss attributable to the Company of $18.3 million, compared to Net Income of $19.8 million for the third quarter of 2017 and $17.6 million for the fourth quarter of 2016. Fourth quarter 2017 diluted earnings per share were ($0.24), compared to $0.22 in the third quarter of 2017, and $0.19 in the fourth quarter of 2016. For the full year of 2017, BPFH reported GAAP Net Income attributable to the Company of $40.6 million or $0.42 of diluted earnings per share.

This press release includes references to Operating metrics (non-GAAP) that exclude the impact of Notable Items listed above. A full reconciliation of these adjustments can be found in the footnotes.

  Summary of fourth quarter and full year financial results (GAAP basis and Operating basis) ($ in millions, except for per share data)      

Quarter endedDecember 31, 2017

 

   

Year endedDecember 31, 2017

 

GAAP orReported

  Operating

GAAP orReported

  Operating

Net income / (loss) attributable to the Company (18)

$(18.3) $20.6 $40.6 $79.5

Diluted Total Earnings Per Share (5), (18)

$(0.24) $0.22 $0.42 $0.88   Non-GAAP Financial Measures Reported Operating Reported Operating

Return on Average Common Equity (8), (18)

(9.9)% 10.2% 5.0% 10.1%

Return on Average Tangible Common Equity (8), (18)

(11.9)% 13.4% 7.0% 13.6%  

"Our results this quarter include a combined impact of $38.9 million of charges resulting from our agreement to divest Anchor and the Tax Cuts and Jobs Act," said Clayton G. Deutsch, CEO. "Divesting Anchor will liberate capital for us, creating flexibility to reinvest in a more focused company, and the Tax Cuts and Jobs Act will result in a significantly lower effective tax rate going forward."

"Excluding the impact of these items, our Company showed a strong core earnings performance, generating $74.6 million of Operating Net Income in 2017 with an Operating Return on Average Common Equity of 10.1%. During 2017, we increased the tangible book value per share of our Company by 8%, and we raised the quarterly dividend on our common stock to $0.12 per share as of the first quarter of 2018."

Divestiture

During the fourth quarter, the Company entered into an agreement to sell its ownership interest in Anchor in a transaction that will result in Anchor being majority owned by members of its management team. The transaction is expected to close in the first quarter of 2018. Results attributed to Anchor’s performance remain consolidated in the Company’s results during current and prior periods. For presentation purposes, Anchor’s AUM is excluded from current and prior period AUM amounts, but is included in the calculation of Core Fees and Income. The Company has classified the assets and liabilities of Anchor as Held for Sale at December 31, 2017, which are included with Other Assets and Other Liabilities, respectively, on the Company’s Consolidated Balance Sheet.

Core Fees and Income/Assets Under Management

Total Core Fees and Income for the fourth quarter were $40.2 million, a 3% increase on a linked quarter basis and a 4% increase year-over-year. The increase reflects higher levels of AUM in the Wealth Management & Trust, Investment Management, and Wealth Advisory segments on both a linked quarter basis and year-over-year basis. Other Banking Fees decreased linked quarter due to lower loan fees, while increasing year-over-year due to increased BOLI income.

AUM, excluding Anchor, was $21.2 billion at the end of the fourth quarter, an increase of 3% linked quarter and 13% year-over-year. The Company experienced net flows of $128 million during the fourth quarter of 2017. Net flows by segment were $79 million for Wealth Management & Trust, $20 million for Investment Management, and $29 million for Wealth Advisory.

Net Interest Income

Net Interest Income for the fourth quarter was $57.3 million, an increase of 1% from $56.6 million for the third quarter of 2017 and an increase of 11% from $51.5 million for the fourth quarter of 2016.

Net Interest Margin was 3.04% for the fourth quarter of 2017, an increase of 2 basis points from the third quarter of 2017 and an increase of 16 basis points from the fourth quarter of 2016. Excluding interest recovered on previous nonaccrual loans, Net Interest Margin for the fourth quarter was 3.02%, flat from the third quarter of 2017 and an increase of 16 basis points from the fourth quarter of 2016.

Total Operating Expense

Total Operating Expense for the fourth quarter of 2017 was $94.0 million, up 36% linked quarter and 31% year-over-year. Notable expenses excluded from non-GAAP results include goodwill impairment charges of $24.9 million in the fourth quarter of 2017 and $9.5 million in the fourth quarter of 2016, and $0.4 of legal expense related to the divestiture of Anchor Capital in the fourth quarter of 2017.

On an operating basis (non-GAAP), Total Expense during the fourth quarter of 2017 was $68.7 million, a decrease of 1% linked quarter and an increase of 10% year-over-year. For the full year, operating basis Total Expense was $274.6 million, an increase of 8% year-over-year.

Provision and Asset Quality

The Company recorded a provision credit of $0.9 million for the fourth quarter of 2017, compared to a provision credit of $0.4 million for the third quarter of 2017 and $1.1 million for the fourth quarter of 2016. The provision credit in the fourth quarter of 2017 was due to net recoveries and improved loss factors, partially offset by an increase in Criticized Loans and loan growth.

Criticized Loans as of December 31, 2017 were $154.8 million, an increase of 6% linked quarter and an increase of 31% year-over-year. Nonaccrual Loans (“Nonaccruals”) as of December 31, 2017 were $14.3 million, an increase of 5% linked quarter and a decrease of 17% year-over-year. As a percentage of Total Loans, Nonaccruals were 22 basis points as of December 31, 2017, up 1 basis point compared to September 30, 2017, and down 6 basis points from December 31, 2016.

Additional credit metrics are listed below:

              (In millions)

December 31, 2017

September 30, 2017

June 30, 2017

March 31, 2017

December 31, 2016

Total Criticized Loans $ 154.8 $ 146.0 $ 129.5 $ 135.1 $ 118.5

Total Loans 30-89 Days Past Dueand Accruing (15)

$ 25.0 $ 5.3 $ 3.2 $ 28.7 $ 15.1

Total Net Loans (Charged-off)/Recovered

$ 0.8 $ 0.3 $ 3.1 $ 0.1 $ 1.5

Allowance for Loan Losses/Total Loans

 

1.15

%

1.17 % 1.19 % 1.25 % 1.28 %  

Income Tax Expense

The Company recorded $21.4 million of Income Tax Expense during the current quarter. As a result of the Tax Cuts and Jobs Act, the company recorded $12.2 million of Income Tax Expense due to the revaluation of the Company’s Deferred Tax Asset (“DTA”) and Deferred Tax Liability (“DTL”) and Low Income Housing Tax Credit (“LIHTC”) investments. The Company also incurred a $0.7 million Income Tax Expense due to nondeductible executive compensation as a result of the Tax Cuts and Jobs Act and the divestiture of Anchor Capital.

  Summary of Adjustments to Income Tax Expense (In millions)      

Quarter endedDecember 31,

     

Year endedDecember 31,

2017   2016 2017   2016 Income Tax Expense $       21.4 $       7.2 $       46.2 $       31.0 Adjustments:

Revaluation of DTA, DTL and LITHC

12.2 - 12.2 -

Nondeductible executive compensation

0.7 - 0.7 -

Tax impact of notable items (17)

(0.6 ) (2.3 ) (0.6 ) (3.0 ) Total Non-GAAP adjustments 12.3   (2.3 ) 12.3   (3.0 ) Operating Income Tax Expense $       9.1   $       9.5   $       33.9   $       34.0  

Effective Tax Rate on Continuing Operations(excluding Total Non-GAAP adjustments)

30.3 % 30.5 % 30.0 % 30.9 %  

Capital Ratios

The Company’s capital ratios are listed below:

              December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017   December 31, 2016 BPFH Ratios: Total Risk-Based Capital * 14.1 % 14.3 % 14.1 % 13.8 % 13.9 % Tier I Risk-Based Capital * 12.8 % 13.0 % 12.9 % 12.6 % 12.6 % Tier I Leverage Capital * 9.3 % 9.4 % 9.3 % 9.2 % 9.4 % TCE/TA (6) 7.3 % 7.4 % 7.4 % 7.0 % 7.1 %

Tier I Common Equity/Risk Weighted Assets *

 

10.3 % 10.4 % 10.3 % 10.0 % 10.0 %  

*December 31, 2017 information is presented based on estimated data.

Dividend PaymentsConcurrent with the release of fourth quarter 2017 earnings, the Board of Directors of the Company declared a cash dividend to common shareholders of $0.12 per share. The record date for this dividend is February 2, 2018, and the payment date is February 16, 2018.

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 15, 2018, and the payment date is March 15, 2018.

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

These non-GAAP financial measures include tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision income; total operating expense excluding intangibles, goodwill impairment, and restructuring; the efficiency ratio (FTE basis); the efficiency ratio (FTE basis) excluding amortization of intangibles, goodwill impairment, and restructuring; net interest income and net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as core net interest margin; net income attributable to the Company excluding notable items; net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP); diluted earnings per share excluding notable items; operating basis total revenue; operating basis total operating expenses; operating basis pre-tax, pre-provision income; operating basis income before income taxes; operating basis income tax expense; operating basis net income/ (loss) attributable to the Company; operating basis net income/ (loss) attributable to the Common Shareholders; operating basis weighted average diluted shares outstanding; operating basis diluted total earnings/ (loss) per share; operating basis return on average common equity; operating basis return on average tangible common equity; and operating basis effective tax rate.

A detailed reconciliation table of the Company’s GAAP to non-GAAP measures is attached.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Thursday, January 18, 2018, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003Elite Entry Number: 2399470

Replay Information:Available from January 18, 2018 at 12 noon until January 25, 2018Dial In #: (877) 344-7529Conference Number: 10115473

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 Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Florida, and Wisconsin. The Company has total assets of approximately $8 billion, and manages over $20 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 StatementsCertain statements in this press release that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements include, among others, statements regarding our strategy, evaluations of future interest rate trends and liquidity, prospects for growth in assets, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s private banking, investment management, wealth advisory, and trust activities; changes in interest rates; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in loan defaults and charge-off rates; changes in the value of securities and other assets, adequacy of loan loss reserves, or decreases in deposit levels necessitating increased borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; changes in government regulation; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

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

 

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

        December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016 (In thousands, except share and per share data) Assets: Cash and cash equivalents $ 120,541 $ 110,440 $ 97,032 $ 165,186 $ 106,557 Investment securities available-for-sale 1,170,328 1,189,827 1,188,720 1,256,208 1,264,132 Investment securities held-to-maturity 74,576 84,090 99,024 98,424 93,079

Stock in Federal Home Loan Bank and FederalReserve Bank

59,973 61,714 45,568 50,133 44,077 Loans held for sale 4,697 1,957 2,870 350 3,464 Total loans 6,505,028 6,413,201 6,279,928 6,250,217 6,114,354 Less: Allowance for loan losses 74,742   74,873   75,009   78,031   78,077   Net loans 6,430,286 6,338,328 6,204,919 6,172,186 6,036,277 Other real estate owned (“OREO”) — — — —

1,690

Premises and equipment, net 37,640 36,546 34,135 32,974 31,827

Goodwill (1)

75,598 142,554 142,554 142,554 142,554

Intangible assets, net (1)

16,083 22,447 23,873 25,299 26,725 Fees receivable 11,154 12,560 12,639 12,230 13,400 Accrued interest receivable 22,322 21,823 20,680 20,790 20,479 Deferred income taxes, net 29,031 46,088 49,827 53,686 55,460

Other assets (1)

259,515   201,024   185,805   185,100   130,753   Total assets $ 8,311,744   $ 8,269,398   $ 8,107,646   $ 8,215,120   $ 7,970,474   Liabilities: Deposits $ 6,510,246 $ 6,262,347 $ 6,381,339 $ 6,246,620 $ 6,085,146 Securities sold under agreements to repurchase 32,169 59,903 29,232 67,249 59,624 Federal funds purchased 30,000 70,000 40,000 — 80,000 Federal Home Loan Bank borrowings 693,681 812,773 618,989 885,445 734,205 Junior subordinated debentures 106,363 106,363 106,363 106,363 106,363

Other liabilities (1)

135,880   127,069   115,088   110,310   119,683   Total liabilities 7,508,339   7,438,455   7,291,011   7,415,987   7,185,021   Redeemable Noncontrolling Interests (“RNCI”) 17,461 15,882 17,216 17,232 16,972 Shareholders’ Equity:

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

47,753 47,753 47,753 47,753 47,753

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

84,208 84,082 84,015 84,134 83,732 Additional paid-in capital 607,929 606,802 602,507 602,748 597,454 Retained earnings 47,991 76,455 66,807 53,510 47,929 Accumulated other comprehensive income/ (loss) (7,123 ) (4,823 ) (6,038 ) (10,237 ) (12,548 ) Total Company’s shareholders’ equity 780,758   810,269   795,044   777,908   764,320   Noncontrolling interests 5,186   4,792   4,375   3,993   4,161   Total shareholders’ equity 785,944   815,061   799,419   781,901   768,481  

Total liabilities, redeemable noncontrollinginterests and shareholders’ equity

$ 8,311,744   $ 8,269,398   $ 8,107,646   $ 8,215,120   $ 7,970,474      

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

 

      Three Months Ended December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016 Interest and dividend income: (In thousands, except share and per share data) Loans $ 59,496 $ 58,096 $ 57,736 $ 53,636 $ 51,499 Taxable investment securities 1,562 1,569 1,592 1,670 1,592 Non-taxable investment securities 1,697 1,664 1,655 1,606 1,520 Mortgage-backed securities 3,125 3,267 3,495 3,504 3,290 Federal funds sold and other 978   916   831   600   508   Total interest and dividend income 66,858   65,512   65,309   61,016   58,409   Interest expense: Deposits 6,048 5,356 4,949 4,531 4,152 Federal Home Loan Bank borrowings 2,626 2,657 2,489 2,111 1,987 Junior subordinated debentures 771 761 716 671 674 Repurchase agreements and other short-term borrowings 141   111   10   61   77   Total interest expense 9,586   8,885   8,164   7,374   6,890   Net interest income 57,272 56,627 57,145 53,642 51,519 Provision/ (credit) for loan losses (942 ) (432 ) (6,114 ) (181 ) (1,128 )

Net interest income after provision/ (credit) for loanlosses

58,214   57,059   63,259   53,823   52,647   Fees and other income: Investment management fees 12,321 11,274 11,081 10,839 12,408 Wealth advisory fees 13,496 13,279 12,961 12,823 12,568 Wealth management and trust fees 11,756 11,619 11,161 10,826 11,031 Other banking fee income 2,531 2,726 1,964 1,694 2,387 Gain on sale of loans, net 85   169   59   138   105   Total core fees and income 40,189   39,067   37,226   36,320   38,499   Gain/ (loss) on sale of investments, net (110 ) 230 237 19 2 Gain/ (loss) on OREO, net — — — (46 ) (110 ) Gain/ (loss) on sale of affiliates or offices (1,264 ) — — — 2,862 Other 360   970   555   213   2,705   Total other income (1,014 ) 1,200   792   186   5,459  

Total revenue (2)

96,447 96,894 95,163 90,148 95,477 Operating expense: Salaries and employee benefits 43,920 45,168 43,493 45,825 39,669 Occupancy and equipment 7,753 7,944 7,283 7,185 7,047 Professional services 4,035 3,308 3,106 3,314 2,756 Marketing and business development 1,919 2,216 1,971 1,660 2,022 Information systems 5,635 5,282 5,500 5,379 5,030 Amortization of intangibles 1,323 1,426 1,426 1,426 1,542 Impairment of goodwill 24,901 — — — 9,528 FDIC insurance 677 647 879 766 727 Other 3,826   3,355   4,163   3,225   3,522   Total operating expense 93,989   69,346   67,821   68,780   71,843   Income before income taxes 3,400 27,980 33,456 21,549 24,762 Income tax expense 21,391   8,289   9,963   6,553   7,247   Net income/ (loss) from continuing operations (17,991 ) 19,691 23,493 14,996 17,515

Net income from discontinued operations (3)

989   1,186   1,063   1,632   1,184  

Net income/ (loss) before attribution tononcontrolling interests

(17,002 ) 20,877 24,556 16,628 18,699 Less: Net income attributable to noncontrolling interests 1,278   1,074   1,150   966   1,147   Net income/ (loss) attributable to the Company $ (18,280 ) $ 19,803   $ 23,406   $ 15,662   $ 17,552      

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

      Year Ended December 31, 2017   December 31, 2016 Interest and dividend income:

(In thousands, except shareand per share data)

Loans $ 228,964 $ 201,349 Taxable investment securities 6,393 6,230 Non-taxable investment securities 6,622 5,754 Mortgage-backed securities 13,391 12,416 Federal funds sold and other 3,325   1,890   Total interest and dividend income 258,695   227,639   Interest expense: Deposits 20,884 16,571 Federal Home Loan Bank borrowings 9,883 8,008 Junior subordinated debentures 2,919 2,427 Repurchase agreements and other short-term borrowings 323   195   Total interest expense 34,009   27,201   Net interest income 224,686 200,438 Provision/ (credit) for loan losses (7,669 ) (6,935 ) Net interest income after provision/ (credit) for loan losses 232,355   207,373   Fees and other income: Investment management fees 45,515 44,410 Wealth advisory fees 52,559 50,581 Wealth management and trust fees 45,362 43,980 Other banking fee income 8,915 12,050 Gain on sale of loans, net 451   667   Total core fees and income 152,802   151,688   Gain/ (loss) on sale of investments, net 376 521 Gain/ (loss) on OREO, net (46 ) 306 Gain/ (loss) on sale of affiliates or offices (1,264 ) 2,862 Other 2,098   3,410   Total other income 1,164   7,099  

Total revenue (2)

378,652 359,225 Operating expense: Salaries and employee benefits 178,406 163,767 Occupancy and equipment 30,165 28,007 Professional services 13,763 11,576 Marketing and business development 7,766 7,626 Information systems 21,796 19,229 Amortization of intangibles 5,601 6,282 Impairment of goodwill 24,901 9,528 FDIC insurance 2,969 3,484 Restructuring — 2,017 Other 14,569   13,437   Total operating expense 299,936   264,953   Income before income taxes 86,385 101,207 Income tax expense 46,196   30,963   Net income from continuing operations 40,189 70,244

Net income from discontinued operations (3)

4,870   5,541   Net income before attribution to noncontrolling interests 45,059 75,785 Less: Net income attributable to noncontrolling interests 4,468   4,157   Net income attributable to the Company $ 40,591   $ 71,628      

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

      Three Months Ended PER SHARE DATA: December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016 (In thousands, except share and per share data) Calculation of Income for EPS: Net income/ (loss) attributable to the Company $ (18,280 ) $ 19,803 $ 23,406 $ 15,662 $ 17,552

Adjustments to Net income/ (loss) attributable to theCompany to arrive at Net income/ (loss) attributable toCommon Shareholders, treasury stock method (4)

(1,998 ) (1,146 ) (577 ) (1,166 ) (1,798 )

Net income/ (loss) attributable to the Common Shareholders, treasury stock method

$ (20,278 ) $ 18,657   $ 22,829   $ 14,496   $ 15,755     End of Period Common Shares Outstanding 84,208,538 84,082,250 84,015,141 84,134,104 83,731,769   Weighted Average Shares Outstanding: Weighted average basic shares outstanding 82,904,776 82,556,225 82,298,493 81,951,179 81,217,391

Weighted average diluted shares outstanding (5)

82,904,776 84,888,311 84,741,680 84,560,918 83,438,137   Diluted Total Earnings/ (Loss) per Share $ (0.24 ) $ 0.22 $ 0.27 $ 0.17 $ 0.19         Year Ended PER SHARE DATA: December 31, 2017   December 31, 2016 (In thousands, except share

and per share data)

Calculation of Income for EPS: Net income attributable to the Company $ 40,591 $ 71,628

Adjustments to Net income attributable to the Company to arrive at Net income attributable to CommonShareholders, treasury stock method (4)

(4,887 ) (4,063 ) Net Income Attributable to the Common Shareholders, treasury stock method $ 35,704   $ 67,565     Weighted Average Shares Outstanding: Weighted average basic shares outstanding 82,430,633 81,264,273

Weighted average diluted shares outstanding (5)

84,802,565 83,209,126   Diluted Total Earnings per Share $ 0.42 $ 0.81    

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

              (In thousands, except per share data) December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 FINANCIAL DATA: Book Value Per Common Share $ 8.77 $ 9.13 $ 8.95 $ 8.73 $ 8.61

Tangible Book Value Per Share (6)

$ 7.12 $ 7.16 $ 6.97 $ 6.73 $ 6.59 Market Price Per Share $ 15.45 $ 16.55 $ 15.35 $ 16.40 $ 16.55   ASSETS UNDER MANAGEMENT AND ADVISORY: Wealth Management and Trust $ 7,865,000 $ 7,703,000 $ 7,429,000 $ 7,260,000 $ 7,008,000

Investment Managers (7)

2,004,000 1,902,000 1,829,000 1,849,000 1,803,000 Wealth Advisory 11,350,000 10,992,000 10,744,000 10,579,000 9,989,000 Less: Inter-company Relationship (11,000 ) (11,000 ) (11,000 ) (11,000 ) (11,000 )

Total Assets Under Management and Advisory, excludingAnchor (7)

$ 21,208,000   $ 20,586,000   $ 19,991,000   $ 19,677,000   $ 18,789,000   Assets Under Management and Advisory at Anchor 9,277,000   9,181,000   9,072,000   9,058,000   8,768,000  

Total Assets Under Management and Advisory, includingAnchor

$ 30,485,000   $ 29,767,000   $ 29,063,000   $ 28,735,000   $ 27,557,000     FINANCIAL RATIOS: Total Equity/ Total Assets 9.46 % 9.86 % 9.86 % 9.52 % 9.64 %

Tangible Common Equity/ Tangible Assets (6)

7.33 % 7.43 % 7.37 % 7.04 % 7.07 %

Tier I Common Equity/ Risk Weighted Assets (6)

10.29 % 10.42 % 10.28 % 9.97 % 10.00 % Allowance for Loan Losses/ Total Loans 1.15 % 1.17 % 1.19 % 1.25 % 1.28 % Allowance for Loan Losses/ Nonaccrual Loans 523 % 550 % 464 % 373 % 451 %

Return on Average Assets - Three Months Ended(Annualized)

(0.88 )% 0.96 % 1.15 % 0.79 % 0.89 %

Return on Average Common Equity - Three Months Ended(Annualized) (8)

(9.92 )% 9.87 % 12.12 % 8.26 % 9.07 %

Return on Average Tangible Common Equity - ThreeMonths Ended (Annualized) (8)

(11.94 )% 13.24 % 16.27 % 11.43 % 12.75 %

Efficiency Ratio - Three Months Ended (9)

68.23 % 68.06 % 67.69 % 72.45 % 61.87 %   DEPOSIT DETAIL: Demand deposits (noninterest-bearing) $ 2,025,690 $ 1,850,833 $ 1,935,622 $ 1,772,854 $ 1,753,648 NOW 645,361 636,013 631,973 620,280 578,657 Savings 70,935 74,333 69,892 74,293 74,162 Money market 3,121,811 3,009,779 3,055,642 3,176,472 3,102,048 Certificates of deposit 646,449   691,389   688,210   602,721   576,631   Total Deposits $ 6,510,246   $ 6,262,347   $ 6,381,339   $ 6,246,620   $ 6,085,146      

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: 12/31/17 09/30/17 12/31/16 12/31/17 09/30/17 12/31/16 12/31/17 09/30/17 12/31/16 AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 345,743 $ 353,374 $ 375,913 $ 1,562 $ 1,569 $ 1,592 1.81 % 1.77 % 1.69 %

Non-taxable investment securities (10)

298,851 295,727 285,330 2,611 2,559 2,338 3.50 % 3.46 % 3.28 % Mortgage-backed securities 608,508 631,052 679,644 3,125 3,267 3,290 2.05 % 2.07 % 1.94 % Federal funds sold and other 172,656   146,285   130,740   978   916   508   2.23 % 2.47 % 1.53 % Total Cash and Investments 1,425,758   1,426,438   1,471,627   8,276   8,311   7,728   2.32 % 2.33 % 2.10 %

Loans (11):

Commercial and Industrial (10)

962,159 994,388 1,110,268 9,603 10,001 10,892 3.91 % 3.94 % 3.84 %

Commercial Real Estate (10)

2,369,526 2,381,583 2,109,601 26,473 25,579 21,153 4.37 % 4.20 % 3.92 %

Construction and Land (10)

131,107 113,562 96,242 1,568 1,415 1,018 4.68 % 4.88 % 4.14 % Residential 2,650,014 2,567,044 2,350,644 21,248 20,423 17,999 3.21 % 3.18 % 3.06 % Home Equity 105,044 106,744 117,985 1,074 1,128 1,050 4.06 % 4.19 % 3.54 % Other Consumer 177,951   187,184   188,908   1,489   1,554   1,323   3.32 % 3.29 % 2.79 % Total Loans 6,395,801   6,350,505   5,973,648   61,455   60,100   53,435   3.79 % 3.73 % 3.53 % Total Earning Assets 7,821,559   7,776,943   7,445,275   69,731   68,411   61,163   3.52 % 3.48 % 3.25 % LESS: Allowance for Loan Losses 75,608 75,166 79,440

Cash and due From Banks (Non-InterestBearing)

43,648 42,031 39,133 Other Assets 452,744   455,820   427,545   TOTAL AVERAGE ASSETS $ 8,242,343   $ 8,199,628   $ 7,832,513  

AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits (11):

NOW $ 614,198 $ 630,282 $ 567,538 $ 186 $ 189 $ 126 0.12 % 0.12 % 0.09 % Savings 72,974 71,900 76,033 (38 ) 16 18 (0.21 )% 0.09 % 0.09 % Money Market 3,177,687 3,065,059 2,969,292 3,998 3,436 2,807 0.50 % 0.44 % 0.38 % Certificates of Deposit 685,136   671,992   563,045   1,902   1,715   1,201   1.10 % 1.01 % 0.85 %

Total Interest-Bearing Deposits (12)

4,549,995 4,439,233 4,175,908 6,048 5,356 4,152 0.53 % 0.48 % 0.40 % Junior Subordinated Debentures 106,363 106,363 106,363 771 761 674 2.84 % 2.80 % 2.48 % FHLB Borrowings and Other 728,374   736,035   742,247   2,767   2,768   2,064   1.49 % 1.47 % 1.09 % Total Interest-Bearing Liabilities 5,384,732   5,281,631   5,024,518   9,586   8,885   6,890   0.70 % 0.66 % 0.54 %

Non-interest Bearing DemandDeposits (11) (12)

 

1,894,924 1,966,479 1,870,130 Payables and Other Liabilities 128,075   121,288   140,006   Total Average Liabilities 7,407,731 7,369,398 7,034,654 Redeemable Noncontrolling Interests 21,094 21,634 20,393 Average Shareholders’ Equity 813,518   808,596   777,466  

TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

$ 8,242,343   $ 8,199,628   $ 7,832,513  

Net Interest Income - on a Fully TaxableEquivalent Basis (FTE)

$ 60,145 $ 59,526 $ 54,273

LESS: FTE Adjustment (10)

2,873   2,899   2,754   Net Interest Income (GAAP Basis) $ 57,272   $ 56,627   $ 51,519   Interest Rate Spread 2.82 % 2.82 % 2.71 % Bank only Net Interest Margin 3.08 % 3.07 % 2.91 % Net Interest Margin 3.04 % 3.02 % 2.88 %    

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: 12/31/17 12/31/16 12/31/17 12/31/16 12/31/17 12/31/16 AVERAGE ASSETS Interest-Earning Assets: Cash and Investments: Taxable investment securities $ 363,760 $ 373,937 $ 6,393 $ 6,230 1.76 % 1.67 %

Non-taxable investment securities (10)

296,117 270,320 10,187 8,850 3.44 % 3.27 % Mortgage-backed securities 641,157 615,873 13,391 12,416 2.09 % 2.02 % Federal funds sold and other 170,017   152,616   3,325   1,890   1.96 % 1.24 % Total Cash and Investments 1,471,051   1,412,746   33,296   29,386   2.26 % 2.08 %

Loans (11):

Commercial and Industrial (10)

981,822 1,081,658 38,680 43,250 3.94 % 4.00 %

Commercial Real Estate (10)

2,358,658 1,964,544 102,030 80,369 4.33 % 4.09 %

Construction and Land (10)

119,530 134,651 5,604 5,385 4.69 % 4.00 % Residential 2,533,437 2,284,478 80,236 70,553 3.17 % 3.09 % Home Equity 109,815 120,878 4,376 4,310 3.99 % 3.57 % Other Consumer 188,122   176,683   5,989   4,516   3.18 % 2.56 % Total Loans 6,291,384   5,762,892   236,915   208,383   3.77 % 3.62 % Total Earning Assets 7,762,435   7,175,638   270,211   237,769   3.48 % 3.31 % LESS: Allowance for Loan Losses 77,365 78,368 Cash and due From Banks (Non-Interest Bearing) 42,420 39,669 Other Assets 440,268   430,972   TOTAL AVERAGE ASSETS $ 8,167,758   $ 7,567,911  

AVERAGE LIABILITIES, RNCI, ANDSHAREHOLDERS’ EQUITY

Interest-Bearing Liabilities:

Interest-Bearing Deposits (11):

NOW $ 615,586 $ 553,981 $ 658 $ 437 0.11 % 0.08 % Savings 72,867 75,977 12 89 0.02 % 0.12 % Money Market 3,156,305 2,960,702 13,799 11,422 0.44 % 0.39 % Certificates of Deposit 653,486   565,274   6,416   4,623   0.98 % 0.82 %

Total Interest-Bearing Deposits (12)

4,498,244 4,155,934 20,885 16,571 0.46 % 0.40 % Junior Subordinated Debentures 106,363 106,363 2,919 2,427 2.71 % 2.28 % FHLB Borrowings and Other 723,672   652,998   10,205   8,203   1.41 % 1.26 % Total Interest-Bearing Liabilities 5,328,279   4,915,295   34,009   27,201   0.64 % 0.55 %

Non-interest Bearing DemandDeposits (11) (12)

1,901,510 1,736,637 Payables and Other Liabilities 118,904   126,039   Total Average Liabilities 7,348,693 6,777,971 Redeemable Noncontrolling Interests 21,309 20,323 Average Shareholders’ Equity 797,756   769,617  

TOTAL AVERAGE LIABILITIES, RNCI, ANDSHAREHOLDERS’ EQUITY

$ 8,167,758   $ 7,567,911  

Net Interest Income - on a Fully Taxable Equivalent Basis(FTE)

$ 236,202 $ 210,568

LESS: FTE Adjustment (10)

11,515   10,130   Net Interest Income (GAAP Basis) $ 224,687   $ 200,438   Interest Rate Spread 2.84 % 2.76 % Bank only Net Interest Margin 3.09 % 2.95 % Net Interest Margin 3.04 % 2.93 %                

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

  (In thousands) December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016

LOAN DATA (13):

Other Commercial and Industrial Loans: New England $ 438,322 $ 503,322 $ 429,598 $ 458,687 $ 493,451 San Francisco Bay Area 23,311 50,686 49,163 55,289 50,578 Southern California 59,359   64,248   62,995   66,378   67,341 Total Other Commercial and Industrial Loans $ 520,992   $ 618,256   $ 541,756   $ 580,354   $ 611,370 Commercial Tax Exempt Loans: New England $ 305,792 $ 320,172 $ 312,783 $ 318,137 $ 317,691 San Francisco Bay Area 101,340 99,540 91,666 79,517 69,064 Southern California 11,566   11,638   11,708   11,778   11,849 Total Commercial Tax Exempt Loans $ 418,698   $ 431,350   $ 416,157   $ 409,432   $ 398,604 Total Commercial and Industrial Loans $ 939,690   1,049,606   957,913   989,786   1,009,974 Commercial Real Estate Loans: New England $ 1,002,092 $ 988,788 $ 993,426 $ 1,017,565 $ 1,012,284 San Francisco Bay Area 725,454 698,148 688,751 686,019 637,042 Southern California 712,674   676,223   674,168   665,043   652,918 Total Commercial Real Estate Loans $ 2,440,220   $ 2,363,159   $ 2,356,345   $ 2,368,627   $ 2,302,244 Construction and Land Loans: New England $ 86,874 $ 61,635 $ 74,919 $ 58,737 $ 47,434 San Francisco Bay Area 27,891 20,893 22,177 28,148 29,629 Southern California 50,225   35,763   33,808   30,122   27,776 Total Construction and Land Loans $ 164,990   $ 118,291   $ 130,904   $ 117,007   $ 104,839 Residential Loans: New England $ 1,598,072 $ 1,558,587 $ 1,540,393 $ 1,508,138 $ 1,456,592 San Francisco Bay Area 512,189 510,956 488,854 474,294 473,102 Southern California 572,272   531,245   495,978   481,184   450,167 Total Residential Loans $ 2,682,533   $ 2,600,788   $ 2,525,225   $ 2,463,616   $ 2,379,861 Home Equity Loans: New England $ 67,435 $ 72,149 $ 71,953 $ 80,904 $ 87,280 San Francisco Bay Area 22,462 26,052 28,400 26,006 25,129 Southern California 10,061   9,026   8,196   7,626   6,408 Total Home Equity Loans $ 99,958   $ 107,227   $ 108,549   $ 114,536   $ 118,817 Other Consumer Loans: New England $ 149,022 $ 150,309 $ 175,644 $ 175,096 $ 186,680 San Francisco Bay Area 14,707 15,302 17,909 17,163 7,517 Southern California 13,908   8,519   7,439   4,386   4,422 Total Other Consumer Loans $ 177,637   $ 174,130   $ 200,992   $ 196,645   $ 198,619 Total Loans: New England $ 3,647,609 $ 3,654,962 $ 3,598,716 $ 3,617,264 $ 3,601,412 San Francisco Bay Area 1,427,354 1,421,577 1,386,920 1,366,436 1,292,061 Southern California 1,430,065   1,336,662   1,294,292   1,266,517   1,220,881 Total Loans $ 6,505,028   $ 6,413,201   $ 6,279,928   $ 6,250,217   $ 6,114,354    

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

              (In thousands) December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016

CREDIT QUALITY (13):

Special Mention Loans: New England $ 45,640 $ 37,569 $ 34,538 $ 21,596 $ 14,750 San Francisco Bay Area 23,400 23,898 23,399 23,850 21,901 Southern California 18,134   17,207   4,327   4,350   884   Total Special Mention Loans $ 87,174   $ 78,674   $ 62,264   $ 49,796   $ 37,535  

Accruing Substandard Loans (14):

New England $ 10,911 $ 8,196 $ 10,185 $ 12,157 $ 10,972 San Francisco Bay Area 11,615 11,622 6,574 15,824 15,890 Southern California 30,826   33,923   34,339   36,398   36,809   Total Accruing Substandard Loans $ 53,352   $ 53,741   $ 51,098   $ 64,379   $ 63,671   Nonaccruing Loans: New England $ 6,061 $ 7,380 $ 9,880 $ 14,407 $ 10,081 San Francisco Bay Area 1,473 1,494 1,857 2,312 2,989 Southern California 6,761   4,749   4,439   4,226   4,245   Total Nonaccruing Loans $ 14,295   $ 13,623   $ 16,176   $ 20,945   $ 17,315   Other Real Estate Owned: New England $ — $ — $ — $ — $ 1,690 San Francisco Bay Area — — — — — Southern California —   —   —   —   —   Total Other Real Estate Owned $ —   $ —   $ —   $ —   $ 1,690  

Loans 30-89 Days Past Due and Accruing (15):

New England $ 19,725 $ 4,664 $ 3,182 $ 9,843 $ 10,311 San Francisco Bay Area 1,911 430 12 10,111 591 Southern California 3,412   198   —   8,771   4,235   Total Loans 30-89 Days Past Due and Accruing $ 25,048   $ 5,292   $ 3,194   $ 28,725   $ 15,137  

Loans (Charged-off)/ Recovered, Net for the Three MonthsEnded:

New England $ 1,020 $ 73 $ 667 $ 79 $ 1,120 San Francisco Bay Area 64 206 2,856 35 384 Southern California (273 ) 17   (431 ) 21   33   Total Net Loans (Charged-off)/ Recovered $ 811   $ 296   $ 3,092   $ 135   $ 1,537   Loans (Charged-off)/ Recovered, Net for the Year Ended: New England $ 1,839 $ 1,954 San Francisco Bay Area 3,161 4,693 Southern California (666 ) (135 ) Total Net Loans (Charged-off)/ Recovered $ 4,334   $ 6,512      

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

 

 

FOOTNOTES:

(1)

On December 20, 2017, Boston Private Financial Holdings, Inc. (the “Company”) announced an agreement, effective December 19, 2017, to sell all of its current equity interest in Anchor Capital Advisors LLC, an indirect, majority-owned subsidiary of the Company (“Anchor”), to the management team of Anchor for an upfront cash payment and a non-voting, revenue share participation interest in Anchor. The transaction is expected to close in the first quarter of 2018. Completion of the transaction is subject to Anchor raising financing and obtaining client consents, as well as customary closing conditions. At December 31, 2017 the assets and liabilities of Anchor, including goodwill and intangible assets, have been classified as held for sale and are included within Other assets and Other liabilities, respectively, on the Company’s consolidated balance sheet. For regulatory purposes, the goodwill and intangible assets of Anchor will be included in consolidated calculations. 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 or expenses related to our divested affiliates, including Westfield Capital Management Company, LLC.

 

(4)

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 and dividends paid on 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 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 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, 2016 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 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 share and per share data) December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 Total Balance Sheet Assets $ 8,311,744 $ 8,269,398 $ 8,107,646 $ 8,215,120 $ 7,970,474 LESS: Goodwill and Intangible Assets, net * (138,775 ) (165,001 ) (166,427 ) (167,853 ) (169,279 ) Tangible Assets (non-GAAP) $ 8,172,969 $ 8,104,397 $ 7,941,219 $ 8,047,267 $ 7,801,195 Total Shareholders’ Equity $ 785,944 $ 815,061 $ 799,419 $ 781,901 $ 768,481 LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) (47,753 ) (47,753 ) LESS: Goodwill and Intangible Assets, net * (138,775 ) (165,001 ) (166,427 ) (167,853 ) (169,279 ) Total adjusting items (186,528 ) (212,754 ) (214,180 ) (215,606 ) (217,032 ) Tangible Common Equity (non-GAAP) $ 599,416   $ 602,307   $ 585,239   $ 566,295   $ 551,449   Total Equity/Total Assets 9.46 % 9.86 % 9.86 % 9.52 % 9.64 % Tangible Common Equity/Tangible Assets (non-GAAP) 7.33 % 7.43 % 7.37 % 7.04 % 7.07 %   Total Risk Weighted Assets ** $ 5,892,286 $ 5,831,558 $ 5,765,471 $ 5,806,853 $ 5,716,037 Tier I Common Equity ** $ 606,265 $ 607,822 $ 592,845 $ 578,941 $ 571,663 Tier I Common Equity/ Risk Weighted Assets 10.29 % 10.42 % 10.28 % 9.97 % 10.00 %   End of Period Shares Outstanding 84,208,538 84,082,250 84,015,141 84,134,104 83,731,769   Book Value Per Common Share $ 8.77 $ 9.13 $ 8.95 $ 8.73 $ 8.61 Tangible Book Value Per Share (non-GAAP) $ 7.12 $ 7.16 $ 6.97 $ 6.73 $ 6.59

* Includes goodwill and intangible assets at affiliates held for sale.

** Risk Weighted Assets and Tier I Common Equity for December 31, 2017 are presented based on estimated data.

 

(7)

Assets Under Management and Advisory (“AUM”) for all periods shown have been reduced to exclude those assets managed or advised by Anchor.

 

(8)

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 annualizes income data based on the number of days in the period presented and a 365 day year. 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 (In thousands) December 31, 2017   September 30, 2017   June 30, 2017 March 31, 2017   December 31, 2016 Total average shareholders’ equity $ 813,518 $ 808,596 $ 793,526 $ 774,251 $ 777,466 LESS: Average Series D preferred stock (non-convertible) (47,753 ) (47,753 ) (47,753 ) (47,753 ) (47,753 ) Average common equity (non-GAAP) 765,765   760,843   745,773   726,498   729,713   LESS: Average goodwill and intangible assets, net * (157,978 ) (165,766 ) (167,204 ) (168,681 ) (179,535 ) Average Tangible Common Equity (non-GAAP) $ 607,787   $ 595,077   $ 578,569   $ 557,817   $ 550,178     Net income/ (loss) attributable to the Company $ (18,280 ) $ 19,803 $ 23,406 $ 15,662 $ 17,552 LESS: Dividends on Series D preferred stock (869 ) (868 ) (869 ) (869 ) (869 ) Common net income/ (loss) (non-GAAP) (19,149 ) 18,935 22,537 14,793 16,683 ADD: Amortization of intangibles, net of tax (35%) 860   927   927   927   1,002   Tangible common net income/ (loss) (non-GAAP) $ (18,289 ) $ 19,862   $ 23,464   $ 15,720   $ 17,685     Return on Average Equity - (Annualized) (8.91 )% 9.72 % 11.83 % 8.20 % 8.96 % Return on Average Common Equity - (Annualized) (non-GAAP) (9.92 )% 9.87 % 12.12 % 8.26 % 9.07 % Return on Average Tangible Common Equity - (Annualized) (non-GAAP) (11.94 )% 13.24 % 16.27 % 11.43 % 12.75 %   Year Ended (In thousands) December 31, 2017 December 31, 2016 Total average shareholders’ equity $ 797,756 $ 769,617 LESS: Average Series D preferred stock (non-convertible) (47,753 ) (47,753 ) Average common equity (non-GAAP) 750,003   721,864   LESS: Average goodwill and intangible assets, net * (164,530 ) (181,976 ) Average Tangible Common Equity (non-GAAP) $ 585,473   $ 539,888     Net income attributable to the Company $ 40,591 $ 71,628 LESS: Dividends on Series D preferred stock (3,475 ) (3,475 ) Common net income (non-GAAP) 37,116 68,153 ADD: Amortization of intangibles, net of tax (35%) 3,641   4,083   Tangible common net income (non-GAAP) $ 40,757   $ 72,236     Return on Average Equity - (Annualized) 5.09 % 9.31 % Return on Average Common Equity - (Annualized) (non-GAAP) 4.95 % 9.44 % Return on Average Tangible Common Equity - (Annualized) (non-GAAP) 6.96 % 13.38 %

*  Includes goodwill and intangible assets at affiliates held for sale.

 

(9)

The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision income, total operating expenses excluding amortization of intangibles, goodwill impairment, and restructuring expense, 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 income; from GAAP total operating expense to non-GAAP total operating expense excluding amortization of intangibles, goodwill impairment, and restructuring; and from GAAP efficiency ratio to Non-GAAP efficiency ratio (FTE basis), excluding amortization of intangibles, goodwill impairment, and restructuring, are presented below:

  Three Months Ended (In thousands) December 31, 2017   September 30, 2017   June 30, 2017 March 31, 2017   December 31, 2016 Income before income taxes (GAAP) $ 3,400 $ 27,980 $ 33,456 $ 21,549 $ 24,762 ADD BACK: Provision/ (credit) for loan losses (942 ) (432 ) (6,114 ) (181 ) (1,128 ) Pre-tax, pre-provision income (non-GAAP) $ 2,458 $ 27,548 $ 27,342 $ 21,368 $ 23,634   Total operating expense (GAAP) $ 93,989 $ 69,346 $ 67,821 $ 68,780 $ 71,843 Less: Amortization of intangibles 1,323 1,426 1,426 1,426 1,542 Less: Goodwill impairment 24,901   —   —   —   9,528   Total operating expense (excluding amortization of intangibles, goodwill impairment, and restructuring) (non-GAAP) $ 67,765 $ 67,920 $ 66,395 $ 67,354 $ 60,773   Net interest income $ 57,272 $ 56,627 $ 57,145 $ 53,642 $ 51,519 Total core fees and income 40,189 39,067 37,226 36,320 38,499 Total other income (1,014 ) 1,200 792 186 5,459 FTE income 2,873   2,899   2,923   2,820   2,754   Total revenue (FTE basis) $ 99,320 $ 99,793 $ 98,086 $ 92,968 $ 98,231 Efficiency Ratio (GAAP) 97.45 % 71.57 % 71.27 % 76.30 % 75.25 % Efficiency Ratio, FTE Basis excluding amortization of intangibles, goodwill impairment, and restructuring (non-GAAP) 68.23 % 68.06 % 67.69 % 72.45 % 61.87 %   Year Ended (In thousands) December 31, 2017 December 31, 2016 Income before income taxes (GAAP) $ 86,385 $ 101,207 ADD BACK: Provision/ (credit) for loan losses (7,669 ) (6,935 ) Pre-tax, pre-provision income (non-GAAP) $ 78,716 $ 94,272   Total operating expense (GAAP) $ 299,936 $ 264,953 Less: Amortization of intangibles 5,601 6,282 Less: Goodwill impairment 24,901 9,528 Less: Restructuring —   2,017   Total operating expense (excluding amortization of intangibles, goodwill impairment, and restructuring) (non-GAAP) $ 269,434 $ 247,126   Net interest income $ 224,686 $ 200,438 Total core fees and income 152,802 151,688 Total other income 1,164 7,099 FTE income 11,515   10,130   Total revenue (FTE basis) $ 390,167 $ 369,355 Efficiency Ratio (GAAP) 79.21 % 73.76 % Efficiency Ratio, FTE Basis excluding amortization of intangibles, goodwill impairment, and restructuring (non-GAAP) 69.06 % 66.91 %  

(10)

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.

 

(11)

Average Loans includes Loans Held for Sale and Nonaccrual Loans. Average Deposits includes Deposits Held for Sale, if any.

 

(12)

Average Total Deposits is the sum of Average Total Interest-Bearing Deposits and Average Noninterest Bearing Demand Deposits.

 

(13)

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender’s regional offices.

 

(14)

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.

 

(15)

At December 31, 2017, September 30, 2017 June 30, 2017, March 31, 2017, and December 31, 2016, the Company had no loans outstanding more than 90 days past due but still on accrual status.

 

(16)

The Company uses certain non-GAAP financial measures, such as: net interest income excluding interest recovered on previous nonaccrual loans and net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as core net interest margin, 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 net interest income to non-GAAP net interest income excluding interest recovered on previous nonaccrual loans; and from GAAP net interest margin to non-GAAP net interest margin excluding interest recovered on previous nonaccrual loans, are presented below:

  Three Months Ended (In thousands) December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016 Net interest income (GAAP basis) $ 57,272 $ 56,627 $ 57,145 $ 53,642 $ 51,519 ADD: FTE income 2,873   2,899   2,923   2,820   2,754   Net interest income, FTE basis 60,145 59,526 60,068 56,462 54,273 LESS: Interest recovered on previously nonaccrual loans 429   133   1,971   299   365   Net interest income, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) 59,716   59,393   58,097   56,163   53,908     Net Interest Margin (FTE basis) 3.04 % 3.02 % 3.07 % 2.94 % 2.88 % Net Interest Margin, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as core Net Interest Margin 3.02 % 3.02 % 2.97 % 2.92 % 2.86 %  

(17)

The Company uses certain non-GAAP financial measures, such as: net income attributable to the Company excluding notable items and diluted earnings per share excluding notable items 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 net income attributable to the Company to non-GAAP net income attributable to the Company excluding notable items and from GAAP diluted earnings per share to non-GAAP diluted earnings per share excluding notable items are presented below:

  Three Months Ended (In thousands, except share and per share data) December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016 Net income/ (loss) attributable to the Company (GAAP) $ (18,280 ) $ 19,803 $ 23,406 $ 15,662 $ 17,552 LESS: Gain/ (loss) on sale of affiliates or offices (1,264 ) — — — 2,862 ADD BACK: Additional deal expenses 400 — — — — ADD BACK: Impairment of goodwill 24,901 — — — 9,528 ADD BACK: Tax adjustments 12,880 — — — — Tax effect at 35% statutory rate * (582 ) —   —   —   (2,333 ) Net income attributable to the Company

excluding notable items (non-GAAP)

$ 20,583 $ 19,803 $ 23,406 $ 15,662 $ 21,885   Net income/ (loss) attributable to the Common Shareholders, treasury stock method (GAAP) $ (20,278 ) $ 18,657 $ 22,829 $ 14,496 $ 15,755 LESS: Gain/ (loss) on sale of affiliates or offices (1,264 ) — — — 2,862 ADD BACK: additional deal expenses 400 — — — — ADD BACK: Impairment of goodwill 24,901 — — — 9,528 ADD BACK: Tax adjustments 12,880 — — — — Tax effect at 35% statutory rate * (582 ) —   —   —   (2,333 ) Net Income Attributable to the Common Shareholders, treasury stock method, excluding notable items (non-GAAP) $ 18,585 $ 18,657 $ 22,829 $ 14,496 $ 20,088   Weighted average diluted shares outstanding (3) 85,196,760 84,888,311 84,741,680 84,560,918 83,438,137   Diluted Total Earnings/ (Loss) per Share (GAAP) $ (0.24 ) $ 0.22 $ 0.27 $ 0.17 $ 0.19 Diluted Total Earnings per Share, excluding notable items (non-GAAP) $ 0.22 $ 0.22 $ 0.27 $ 0.17 $ 0.24

* Tax effect is applied to both the impairment of goodwill and the gain on sale of offices in the fourth quarter 2016. However, due to the nature of the goodwill related to Anchor, no tax effect is applied to the goodwill impairment in the four th quarter of 2017.

 

(18)

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

 

Reconciliations from the Company’s GAAP financial measures to non-GAAP operating basis financial measures are presented below.

  Three Months Ended Year Ended December 31, 2017 December 31, 2017 (In thousands, except share and per share data) GAAP or

Reported

Value

  Notable

Items

  Operating

Basis

(Non-GAAP)

GAAP or

Reported

Value

  Notable

Items

  Operating

Basis

(Non-GAAP)

Total revenue $ 96,447 $ 1,264 $ 97,711 $ 378,652 $ 1,264 $ 379,916 Total operating expense 93,989 (25,301 ) 68,688 299,936 (25,301 ) 274,635 Pre-tax, pre-provision income 2,458 26,565 29,023 78,716 26,565 105,281 Income before income taxes 3,400 26,565 29,965 86,385 26,565 112,950 Income tax expense 21,391 (12,298 ) 9,093 46,196 (12,298 ) 33,898 Net income/ (loss) attributable to the Company (18,280 ) 38,863 20,583 40,591 38,863 79,454 Net income/ (loss) attributable to the Common Shareholders (20,278 ) 38,863 18,585 35,704 38,863 74,567   Weighted average diluted shares outstanding 82,904,776 85,196,760 85,196,760 84,802,565 84,802,565 84,802,565 Diluted total Earnings/ (Loss) Per Share $ (0.24 ) $ 0.46 $ 0.22 $ 0.42 $ 0.46 $ 0.88   Average Common Equity 765,765 765,765 750,003 750,003 Return on Average Common Equity (9.92 )% 10.21 % 4.95 % 10.13 %   Average Tangible Common Equity 607,787 607,787 585,473 585,473 Return on Average Tangible Common Equity (11.94 )% 13.43 % 6.96 % 13.60 %   Effective Tax Rate on Continuing Operations nm 30.3 % 53.5 % 30.0 %   nm not meaningful

View source version on businesswire.com: http://www.businesswire.com/news/home/20180117006443/en/

Adam Bromley(617) 912-4386abromley@bostonprivate.com