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

Second Quarter 2019 Highlights include:

GAAP Net income was $19.4 million, or $0.22 per diluted share
Return on average common equity was 9.8%
Return on average tangible common equity was 11.1%
Average total loans were $7.0 billion, a 5% increase year-over-year
Average total deposits were $6.6 billion, a 4% increase year-over-year
Total assets under management/advisory (“AUM”) were $16.2 billion, a decrease of 4% year-over-year
Total net flows were negative $269 million, of which $127 million were attributable to the Wealth Management & Trust segment and $142 million were attributable to Affiliate Partners

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2019 GAAP Net income attributable to the Company of $19.4 million, compared to $19.4 million for the first quarter of 2019 and $6.4 million for the second quarter of 2018. Second quarter 2019 GAAP Diluted earnings per share were $0.22, compared to $0.25 in the first quarter of 2019 and $0.03 in the second quarter of 2018.

Summary Financial Results - Reported

% Change

($ in millions, except for per share data)

2Q19

1Q19

2Q18

Y/Y

Net income

$19.4

$6.4

—

Diluted earnings per share

$0.22

$0.25

$0.03

(12

Non-GAAP Financial Measures:

Pre-tax, pre-provision income

$26.2

$23.0

$25.3

Return on average common equity (“ROACE”)

9.8%

10.3%

3.0%

Return on average tangible common equity (“ROATCE”)

11.1%

11.6%

3.9%

nm = not meaningful

The Company's reported financial results increased year-over-year primarily as a result of a $12.7 million income tax expense related to the divestiture of Anchor Capital Advisors LLC in the second 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 17.

Summary Financial Results - Operating Basis (non-GAAP)

% Change

($ in millions, except for per share data)

2Q19

1Q191

2Q182

Y/Y

Net income

$19.4

$20.7

$19.5

Diluted earnings per share

$0.22

$0.27

$0.21

(17

Pre-tax, pre-provision income

$26.2

$24.7

$25.7

Return on average common equity

9.8%

11.0%

10.1%

Return on average tangible common equity

11.1%

12.4%

12.2%

1 1Q19 results adjusted to exclude the net after-tax impact of $1.6 million restructuring expense 2 2Q18 results adjusted to exclude $12.7 million income tax expense related to the divestiture of Anchor and net after-tax impact of $0.4 million information services expense related to efficiency initiatives

"During the first half of 2019, we have been focused on beginning the process of implementing our strategic vision for growth," said Anthony DeChellis, CEO of Boston Private. "Our second quarter results reflect improvement in pre-tax, pre-provision profitability measures as we exercise expense discipline and realize the benefits from efficiency initiatives. Looking ahead, we will continue to improve our efficiency as we transition our company to achieve the growth objectives we discussed during our Investor Day."

Divested Affiliates

The Company completed the sale of Anchor Capital Advisors LLC ("Anchor") and Bingham, Osborn & Scarborough LLC ("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)

2Q19

1Q19

2Q18

Y/Y

Net interest income

$57.5

$58.3

$57.5

—

Less: Interest recovered on previous nonaccrual loans

—

0.3

—

Core net interest income (non-GAAP)

$57.5

$58.1

$57.5

—

Net interest margin

2.78

2.90

2.85

Core net interest margin (non-GAAP)

2.78

2.89

2.85

Net interest income for the second quarter of 2019 was $57.5 million, a decrease of 2% linked quarter while remaining flat year-over-year. Core net interest income, which excludes interest recovered on previous nonaccrual loans, decreased 1% linked quarter and while remaining flat year-over-year. The linked quarter decrease was primarily driven by higher funding costs and higher borrowing volumes, partially offset by higher average interest-earning asset volumes.

The Company’s Core net interest margin, which excludes interest recovered on previous nonaccrual loans, decreased 11 basis points on a linked quarter basis to 2.78%, primarily driven by higher funding costs and higher borrowing volumes, while interest earning asset yields remained stable.

Noninterest Income

% Change

($ in millions)

2Q19

1Q19

2Q18

Y/Y

Investment management fees

$2.5

$2.7

$4.2

(42

Wealth advisory fees

8.1

8.2

13.7

— %

(41

Wealth management and trust fees

10.8

10.9

11.2

Private banking fees 3

2.9

2.6

2.8

Total core fees and income

$24.3

$31.9

— %

(24

Total other income

0.1

1.0

0.2

(91

(56

Total noninterest income

$24.4

$25.2

$32.1

(24

Memo: Excluding Divested Affiliates

Investment management fees (non-GAAP) 4

2.5

2.7

3.1

(20

Wealth advisory fees (non-GAAP) 5

8.1

8.2

8.0

— %

Wealth management and trust fees

10.8

10.9

11.2

Private banking fees3

2.9

2.6

2.8

Total core fees and income (non-GAAP) 4 5

$24.3

$25.0

— %

Total other income (non-GAAP)

0.1

1.0

0.2

(91

(48

Total noninterest income (non-GAAP) 4 5

$24.4

$25.2

3 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net 4 Excludes Anchor revenue of $1.2 million in 2Q18 5 Excludes BOS revenue of $5.8 million in 2Q18

Total core fees and income for the second quarter of 2019 was $24.3 million, flat linked quarter and a decline of 24% year-over-year. The year-over-year decline was primarily driven by the divestitures of Anchor and BOS.

Excluding Divested Affiliates, Total core fees and income decreased 3% year-over-year, primarily driven by lower Investment management fees and Wealth management and trust fees.

Assets Under Management / Advisory

% Change

($ in millions)

2Q19

1Q19

2Q18

Y/Y

Wealth Management and Trust

$7,595

$7,593

$7,789

—

Affiliate Partners 6

8,604

8,529

9,072

Total assets under management / advisory 7

$16,199

$16,122

$16,861

—

Total net flows 7

$(269)

$(963)

$(97)

6 Segment includes Dalton, Greiner, Hartman, Maher & Co., LLC ("DGHM") and KLS Professional Advisors Group, LLC ("KLS") 7 Excludes Divested Affiliates

Total assets under management / advisory were $16.2 billion at the end of the second quarter of 2019, flat linked quarter and a decrease of 4% year-over-year. The linked quarter comparison was impacted by positive market action offset by negative net flows, while the year-over-year decrease was primarily driven by negative net flows in excess of positive market action.

Net flows during the second quarter of 2019 in the Wealth Management and Trust segment were negative $127 million, while net flows in the Affiliate Partners segment were negative $142 million.

Operating Expense

% Change

($ in millions)

2Q19

1Q19

2Q18

Y/Y

Salaries and employee benefits

$32.7

$35.7

$39.4

(8)%

(17)%

Occupancy and equipment

7.9

8.3

8.2

(6)%

(5)%

Professional services

3.3

3.6

2.9

(7)%

15%

Marketing and business development

1.9

1.1

2.1

78%

(7)%

Information systems

5.1

5.9

6.8

(12)%

(24)%

Amortization of intangibles

0.7

—%

(10)%

FDIC insurance

0.6

0.7

(11)%

(17)%

Restructuring

—

1.6

—

Other

3.5

3.0

3.6

15%

(3)%

Total operating expense

$55.7

$60.6

$64.4

(8)%

(14)%

Memo: Excluding Notable Items8 and Divested Affiliates

Information systems 9

—

0.4

Restructuring

—

1.6

—

Divested Affiliates operating expense

—

4.7

Total operating expense (non-GAAP)

$55.7

$59.0

$59.2

(6)%

8 "Notable Items" include adjustments made to GAAP results in prior periods 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 8% linked quarter, primarily driven by lower salaries and employee benefits expense, restructuring expense, information systems expense, and occupancy and equipment expense, partially offset by higher marketing and business development expense. Salaries and employee benefits expense declined linked quarter primarily as a result of seasonal payroll tax expense incurred during the first quarter of 2019. Restructuring expense incurred during the first quarter of 2019 was related to executive departures. Information systems expense declined linked quarter primarily as a result of savings attributable to information technology infrastructure consolidation. The year-over-year decline in Total operating expense of 14% was primarily driven by expenses associated with Divested Affiliates that are included in the second quarter of 2018 results.

Excluding Notable Items and Divested Affiliates, Total operating expense for the second quarter of 2019 was $55.7 million, down 6% linked quarter and 6% year-over-year. The year-over-year decline was primarily attributable to efficiency initiatives primarily impacting compensation and technology.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2019 was 21.6%.

Loans and Deposits - QTD Averages

% Change

($ in millions)

2Q19

1Q19

2Q18

Y/Y

Commercial and industrial

$1,092

$1,070

$974

Commercial real estate

2,507

2,398

2,478

Construction and land

203

211

167

Residential

3,009

2,973

2,775

Home equity

Other consumer

125

134

180

(31

Total loans

$7,026

$6,877

$6,668

Non-interest bearing deposits

1,927

1,975

1,908

Interest bearing deposits

4,664

4,792

4,441

Total deposits

$6,590

$6,767

$6,349

Non-interest bearing deposits as a % of Total deposits

Average total loans in the second quarter of 2019 increased 5% year-over-year, primarily driven by increases in Residential loans and Commercial and industrial loans.

Average total deposits increased 4% year-over-year, primarily driven by growth in money market accounts, certificates of deposits, and demand deposit accounts, partially offset by declines in savings and NOW accounts. Deposits declined 3% linked quarter

The cost of total deposits was 0.88%, an increase of 4 basis points linked quarter and 35 basis points year-over-year.

Provision and Asset Quality

($ in millions)

2Q19

1Q19

4Q18

3Q18

2Q18

Provision/ (credit) for loan loss

$1.4

$(1.4)

$0.1

$(0.9)

$0.5

Total criticized loans

141.7

141.3

146.6

134.7

114.4

Total nonaccrual loans

17.2

12.0

14.1

12.1

15.7

Total loans 30-89 days past due and accruing

2.4

17.7

22.3

11.6

5.0

Total net loans (charged-off)/ recovered

(0.1)

1.7

1.0

0.1

Ratios:

Allowance for loan losses as a % of Total loans

1.06

1.07

1.09

Nonaccrual loans as a % of Total loans

0.24

0.17

0.20

0.18

0.23

The Company recorded a provision expense of $1.4 million for the second quarter of 2019, compared to a provision credit of $1.4 million for the first quarter of 2019 and an expense of $0.5 million in the second quarter of 2018. The provision expense in the second quarter of 2019 was primarily driven by loan growth.

Total criticized loans as of June 30, 2019 was $141.7 million, flat linked quarter and an increase of 24% year-over-year. Total nonaccrual loans as of June 30, 2019 was $17.2 million, or 24 basis points of total loans, compared to $12.0 million, or 17 basis points of total loans as of March 31, 2019, and $15.7 million, or 23 basis points of total loans as of June 30, 2018.

Capital

($ in millions, except for per share data)

2Q19

1Q19

4Q18

3Q18

2Q18

Tangible common equity/ Tangible assets 10

8.4%

8.3%

8.1%

7.8%

7.5%

Tangible book value per share 10

$8.71

$8.47

$8.18

$7.67

$7.62

Regulatory Capital Ratios: 11

Tier 1 common equity

11.2%

11.4%

11.1%

10.9%

Total risk-based capital

13.9%

14.2%

14.3%

14.1%

13.8%

Tier 1 risk-based capital

12.7%

13.0%

12.8%

12.6%

Tier 1 leverage capital

9.6%

9.7%

9.5%

9.2%

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

—

10 See footnote 6 for a GAAP to non-GAAP reconciliation. 11 Current quarter information is presented based on estimated data.

Tangible book value per share as of June 30, 2019 increased 3% linked quarter and 14% year-over-year to $8.71. The linked quarter increase in Tangible book value per share was primarily driven by increased retained earnings and higher Accumulated other comprehensive income related to unrealized securities gains, while the year-over-year increase was primarily driven by the divestiture of BOS, higher Accumulated other comprehensive income and increased retained earnings, partially offset by common share repurchases.

EPS Calculation

For calculation of income for EPS, second quarter 2019 Net income attributable to the common shareholders was negatively impacted by $0.8 million, or $0.01 per share, related to the changes in value of Redeemable noncontrolling interests (“RNCI”).

Dividend Payments

Concurrent with the release of second 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 August 9, 2019, and the payment date is August 23, 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 schedules.

Conference Call

Management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, July 25, 2019, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003 Elite Entry Number: 5871776

Replay Information: Available from July 25, 2019 at 12:00 p.m. Eastern Time until August 1, 2019 Dial In #: (877) 344-7529 Conference Number: 10132971

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.

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

(In thousands, except share and per share data)

Assets:

Cash and cash equivalents

65,756

96,211

127,259

92,634

364,539

Investment securities available-for-sale

966,731

981,951

994,065

1,056,261

1,069,025

Investment securities held-to-maturity

54,482

67,548

70,438

75,468

78,955

Equity securities at fair value

19,092

7,491

14,228

7,079

7,942

Stock in Federal Home Loan Bank and Federal Reserve Bank

64,453

47,053

49,263

48,727

70,127

Loans held for sale

3,640

280

2,812

3,344

4,622

Total loans

7,080,260

6,926,968

6,893,158

6,720,420

6,767,123

Less: Allowance for loan losses

75,067

73,814

75,312

73,500

73,464

Net loans

7,005,193

6,853,154

6,817,846

6,646,920

6,693,659

Other real estate owned (“OREO”)

—

401

108

Premises and equipment, net

40,244

42,938

45,412

47,399

46,421

Goodwill (1)

57,607

57,607

75,598

Intangible assets, net

10,884

11,555

12,227

13,834

14,584

Fees receivable

3,611

3,982

5,101

10,445

10,405

Accrued interest receivable

26,411

25,935

24,366

24,641

23,732

Deferred income taxes, net

17,183

22,844

26,638

27,833

26,316

Right-of-use assets

110,880

104,644

—

Other assets

266,706

248,950

246,962

245,549

230,170

Total assets

8,712,873

8,572,143

8,494,625

8,375,840

8,716,203

Liabilities:

Deposits

6,437,963

6,779,845

6,781,170

6,768,723

6,620,179

Securities sold under agreements to repurchase

62,372

58,329

36,928

39,453

58,824

Federal funds purchased

135,000

—

250,000

120,000

—

Federal Home Loan Bank borrowings

920,068

615,070

420,144

441,836

1,056,938

Junior subordinated debentures

106,363

106,363

Lease liabilities

126,740

120,162

—

Other liabilities

124,370

112,893

143,540

149,770

129,175

Total liabilities

7,912,876

7,792,662

7,738,145

7,626,145

7,971,479

Redeemable noncontrolling interests (“RNCI”)

1,786

662

2,526

11,686

10,747

Shareholders’ equity:

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

83,774

83,774

83,656

84,603

84,479

Additional paid-in capital

603,869

604,288

600,196

614,157

613,918

Retained earnings

106,443

97,155

87,821

64,618

56,912

Accumulated other comprehensive income/ (loss)

4,125

(6,398

)

(17,719

)

(27,578

)

(23,328

)

Total Company’s shareholders’ equity

798,211

778,819

753,954

735,800

731,981

Noncontrolling interests

—

2,209

1,996

Total shareholders’ equity

798,211

778,819

753,954

738,009

733,977

Total liabilities, RNCI and shareholders’ equity

8,712,873

8,572,143

8,494,625

8,375,840

8,716,203

Three Months Ended

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Interest and dividend income:

(In thousands, except share and per share data)

Loans

71,943

69,933

69,294

68,254

64,048

Investment securities

5,728

5,983

6,242

6,230

6,302

Short-term investments and other

1,057

908

1,356

1,617

1,205

Total interest and dividend income

78,728

76,824

76,892

76,101

71,555

Interest expense:

Deposits

14,515

14,058

13,470

11,487

8,365

Borrowings

6,753

4,428

3,425

4,973

5,645

Total interest expense

21,268

18,486

16,895

16,460

14,010

Net interest income

57,460

58,338

59,997

59,641

57,545

Provision/ (credit) for loan losses

1,363

(1,426

)

(949

)

453

Net interest income after provision/ (credit) for loan losses

56,097

59,764

59,904

60,590

57,092

Noninterest income:

Investment management fees

2,455

2,650

2,831

3,245

4,227

Wealth advisory fees

8,141

8,165

12,111

13,995

13,693

Wealth management and trust fees

10,771

10,893

11,677

11,510

11,169

Other banking fee income

2,867

2,499

2,033

2,775

2,745

Gain on sale of loans, net

Total core fees and income

24,292

24,280

28,691

31,592

31,897

Gain/ (loss) on sale of investments, net

—

(596

)

—

Gain/ (loss) on OREO, net

—

Gain on sale of affiliate

—

18,142

—

Other

877

(392

)

722

191

Total other income

968

17,154

722

198

Total revenue (2)

81,840

83,586

105,842

91,955

89,640

Operating expense:

Salaries and employee benefits

32,706

35,726

36,007

38,944

39,433

Occupancy and equipment

7,852

8,348

7,975

8,164

8,229

Professional services

3,313

3,560

4,229

2,877

2,872

Marketing and business development

1,934

1,085

2,275

1,710

2,070

Information systems

5,137

5,860

6,296

6,233

6,770

Amortization of intangibles

672

672

680

750

749

FDIC insurance

585

660

739

674

708

Restructuring

—

1,646

2,065

5,763

—

Other

3,460

2,996

3,291

3,442

3,553

Total operating expense

55,659

60,553

63,557

68,557

64,384

Income before income taxes

24,818

24,459

42,192

24,347

24,803

Income tax expense

5,369

4,917

8,651

5,461

17,399

Net income from continuing operations

19,449

19,542

33,541

18,886

7,404

Net income/ (loss) from discontinued operations (3)

—

306

—

)

Net income before attribution to noncontrolling interests

19,449

19,542

33,847

18,886

7,402

Less: Net income attributable to noncontrolling interests

100

545

924

968

Net income attributable to the Company

19,380

19,442

33,302

17,962

6,434

Adjustments, treasury stock method (4)

(816

)

1,557

2,694

(829

)

(3,524

)

Net income attributable to common shareholders, treasury stock method

18,564

20,999

35,996

17,133

2,910

Weighted average basic shares outstanding

83,565,780

83,285,095

83,750,785

84,017,284

83,509,115

Weighted average diluted shares outstanding (5)

84,048,972

84,010,450

84,863,779

85,498,568

85,413,575

Diluted total earnings per share

0.22

0.25

0.42

0.20

0.03

Six Months Ended

June 30, 2019

June 30, 2018

Interest and dividend income:

(In thousands, except share and per share data)

Loans

141,876

124,977

Investment securities

11,711

12,720

Short-term investments and other

1,965

2,214

Total interest and dividend income

155,552

139,911

Interest expense:

Deposits

28,573

14,889

Borrowings

11,181

10,094

Total interest expense

39,754

24,983

Net interest income

115,798

114,928

Provision/ (credit) for loan losses

(63

)

(1,342

)

Net interest income after provision/ (credit) for loan losses

115,861

116,270

Fees and other income:

Investment management fees

5,105

15,652

Wealth advisory fees

16,306

27,205

Wealth management and trust fees

21,664

23,320

Other banking fee income

5,366

5,018

Gain on sale of loans, net

131

137

Total core fees and income

48,572

71,332

Gain/ (loss) on sale of investments, net

—

(17

)

Gain/ (loss) on OREO, net

—

Other

965

523

Total other income

1,056

506

Total revenue (2)

165,426

186,766

Operating expense:

Salaries and employee benefits

68,432

86,517

Occupancy and equipment

16,200

15,977

Professional services

6,873

6,049

Marketing and business development

3,019

3,663

Information systems

10,997

12,656

Amortization of intangibles

1,344

1,499

FDIC insurance

1,245

1,452

Restructuring

1,646

—

Other

6,456

7,428

Total operating expense

116,212

135,241

Income before income taxes

49,277

52,867

Income tax expense

10,286

23,425

Net income from continuing operations

38,991

29,442

Net income from discontinued operations (3)

—

1,696

Net income before attribution to noncontrolling interests

38,991

31,138

Less: Net income attributable to noncontrolling interests

169

2,018

Net income attributable to the Company

38,822

29,120

Adjustments, treasury stock method (4)

741

(3,547

)

Net income attributable to common shareholders, treasury stock method

39,563

25,573

Weighted average basic shares outstanding

83,426,213

83,304,573

Weighted average diluted shares outstanding (5)

84,036,050

85,221,974

Diluted total earnings per share

0.47

0.30

(In thousands, except per share data)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

FINANCIAL DATA:

Book value per common share

9.53

9.30

9.01

8.72

8.69

Tangible book value per share (6)

8.71

8.47

8.18

7.67

7.62

Market price per share

12.07

10.96

10.57

13.65

15.90

ASSETS UNDER MANAGEMENT AND ADVISORY ("AUM"):

Wealth Management and Trust

7,595,000

7,593,000

7,602,000

8,335,000

7,789,000

Affiliate Partners, excluding BOS

8,604,000

8,529,000

8,319,000

9,388,000

9,072,000

Total AUM, excluding BOS (7)

16,199,000

16,122,000

15,921,000

17,723,000

16,861,000

AUM at BOS

—

4,714,000

4,525,000

Less: Inter-company relationship

—

(7,000

)

(7,000

)

Total AUM

16,199,000

16,122,000

15,921,000

22,430,000

21,379,000

FINANCIAL RATIOS:

Total equity/ Total assets

9.16

9.09

8.88

8.81

8.42

Tangible common equity/ Tangible assets (6)

8.44

8.35

8.12

7.83

7.46

Tier 1 common equity/ Risk weighted assets (6)

11.19

11.38

11.40

11.14

10.90

Allowance for loan losses/ Total loans

1.06

1.07

1.09

Allowance for loan losses/ Nonaccrual loans

438

614

536

608

469

Return on average assets (annualized)

0.90

0.93

1.56

0.84

0.31

ROACE (annualized) (non-GAAP) (8)

9.83

10.29

17.87

9.67

3.03

ROATCE (annualized) (non-GAAP) (8)

11.06

11.63

20.46

11.37

3.90

Efficiency ratio (annualized) (non-GAAP) (9)

67.19

69.67

57.14

67.04

70.29

DEPOSIT DETAIL:

Demand deposits (non-interest bearing)

1,854,091

2,016,838

1,951,274

2,001,275

2,089,373

NOW

563,130

605,852

626,685

568,148

635,841

Savings

68,036

68,102

73,834

72,967

73,675

Money market

3,228,608

3,302,244

3,338,892

3,363,062

3,128,211

Certificates of deposit

724,098

786,809

790,485

763,271

693,079

Total deposits

6,437,963

6,779,845

6,781,170

6,768,723

6,620,179

Average Balance

Interest Income/Expense

Average Yield/Rate

(In thousands)

Three Months Ended

AVERAGE BALANCE SHEET:

06/30/19

03/31/19

06/30/18

06/30/19

03/31/19

06/30/18

06/30/19

03/31/19

06/30/18

AVERAGE ASSETS

Interest-earning assets:

Cash and investments (10):

Taxable investment securities

227,029

244,230

326,482

1,121

1,185

1,501

1.98

1.94

1.84

Non-taxable investment securities

304,309

306,868

297,852

1,901

1,901

1,752

2.50

2.48

2.35

Mortgage-backed securities

508,033

521,788

570,845

2,706

2,897

3,049

2.13

2.22

2.14

Short-term investments and other

130,363

79,603

157,878

1,057

908

1,205

3.23

4.58

3.03

Total cash and investments

1,169,734

1,152,489

1,353,057

6,785

6,891

7,507

2.32

2.39

2.22

Loans (10) (11):

Commercial and industrial

1,091,903

1,070,161

974,443

11,170

10,979

9,201

4.05

4.10

3.74

Commercial real estate

2,506,637

2,398,413

2,477,634

29,953

28,151

27,387

4.73

4.69

4.37

Construction and land

202,609

211,351

166,736

2,559

2,641

2,011

5.00

5.00

4.77

Residential

3,008,753

2,972,945

2,775,239

25,735

25,545

22,590

3.42

3.44

3.26

Home equity

91,384

90,646

94,445

1,146

1,121

1,041

5.03

5.02

4.42

Other consumer

124,778

133,937

179,684

1,380

1,496

1,818

4.43

4.53

4.06

Total loans

7,026,064

6,877,453

6,668,181

71,943

69,933

64,048

4.07

4.07

3.82

Total earning assets

8,195,798

8,029,942

8,021,238

78,728

76,824

71,555

3.82

3.83

3.55

LESS: Allowance for loan losses

73,856

75,537

72,998

Cash and due from banks (non-interest bearing)

45,705

46,172

45,337

Other assets

511,859

493,148

396,744

TOTAL AVERAGE ASSETS

8,679,506

8,493,725

8,390,321

AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

Interest-bearing liabilities:

Interest-bearing deposits (12):

Savings and NOW

684,507

674,872

719,159

276

296

304

0.16

0.18

0.17

Money market

3,226,569

3,341,397

3,033,306

10,476

10,072

5,543

1.30

1.22

0.73

Certificates of deposit

752,500

775,817

688,567

3,763

3,690

2,518

2.01

1.93

1.47

Total interest-bearing deposits (12)

4,663,576

4,792,086

4,441,032

14,515

14,058

8,365

1.25

1.19

0.76

Junior subordinated debentures

106,363

106,363

1,080

1,121

1,008

4.02

4.22

3.75

FHLB borrowings and other

952,645

615,985

1,022,636

5,673

3,307

4,637

2.36

2.15

1.79

Total interest-bearing liabilities (12)

5,722,584

5,514,434

5,570,031

21,268

18,486

14,010

1.48

1.36

1.00

Non-interest bearing demand deposits (12)

1,926,591

1,974,526

1,908,037

Other liabilities

238,544

236,426

122,175

Total average liabilities

7,887,719

7,725,386

7,600,243

Redeemable noncontrolling interests

943

2,056

14,129

Average shareholders’ equity

790,844

766,283

775,949

TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

8,679,506

8,493,725

8,390,321

Net interest income

57,460

58,338

57,545

Interest rate spread

2.34

2.47

2.55

Bank only net interest margin

2.84

2.96

2.90

Net interest margin

2.78

2.90

2.85

Average total deposits (12)

6,590,167

6,766,612

6,349,069

0.88

0.84

0.53

Average total deposits and borrowings (12)

7,649,175

7,488,960

7,478,068

1.11

1.00

0.75

Average Balance

Interest Income/Expense

Average Yield/Rate

(In thousands)

Six Months Ended

AVERAGE BALANCE SHEET:

06/30/19

06/30/18

06/30/19

06/30/18

06/30/19

06/30/18

AVERAGE ASSETS

Interest-earning assets:

Cash and investments:

Taxable investment securities

235,218

330,220

2,306

3,011

1.92

1.83

Non-taxable investment securities (10)

305,581

297,407

3,802

3,482

2.49

2.34

Mortgage-backed securities

514,872

579,604

5,603

6,227

2.18

2.15

Short-term investments and other

105,610

158,853

1,965

2,214

3.61

2.78

Total cash and investments

1,161,281

1,366,084

13,676

14,934

2.34

2.19

Loans (11):

Commercial and industrial (10)

1,081,092

953,940

22,150

17,661

4.08

3.68

Commercial real estate (10)

2,452,824

2,459,525

58,104

53,538

4.71

4.33

Construction and land (10)

206,956

168,052

5,200

3,948

5.00

4.67

Residential

2,990,948

2,738,980

51,280

44,356

3.43

3.24

Home equity

91,017

95,810

2,267

2,083

5.02

4.39

Other consumer

129,332

182,623

2,875

3,391

4.48

3.74

Total loans

6,952,169

6,598,930

141,876

124,977

4.07

3.78

Total earning assets

8,113,450

7,965,014

155,552

139,911

3.82

3.50

LESS: Allowance for loan losses

74,692

73,911

Cash and due from banks (non-interest bearing)

46,010

48,725

Other assets

502,068

408,810

TOTAL AVERAGE ASSETS

8,586,836

8,348,638

AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

Interest-bearing liabilities:

Interest-bearing deposits (12):

Savings and NOW

679,716

718,051

572

519

0.17

0.15

Money market

3,283,891

3,086,710

20,549

9,857

1.26

0.64

Certificates of deposit

764,094

672,736

7,452

4,513

1.97

1.35

Total interest-bearing deposits (12)

4,727,701

4,477,497

28,573

14,889

1.22

0.67

Junior subordinated debentures

106,363

106,363

2,201

1,854

4.17

3.52

FHLB borrowings and other

785,245

950,763

8,980

8,240

2.27

1.72

Total interest-bearing liabilities (12)

5,619,309

5,534,623

39,754

24,983

1.42

0.91

Non-interest bearing demand deposits (12)

1,950,088

1,890,184

Payables and other liabilities

236,894

126,601

Total average liabilities

7,806,291

7,551,408

Redeemable noncontrolling interests

1,619

17,644

Average shareholders’ equity

778,926

779,586

TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

8,586,836

8,348,638

Net interest income

115,798

114,928

Interest rate spread

2.40

2.59

Bank only net interest margin

2.89

2.92

Net interest margin

2.84

2.87

Average total deposits (12)

6,677,789

6,367,681

0.86

0.47

Average total deposits and borrowings (12)

7,569,397

7,424,807

1.06

0.68

(In thousands)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

LOAN DATA (13):

Other commercial and industrial loans:

New England

524,319

492,800

503,201

460,409

481,081

San Francisco Bay Area

41,131

39,829

43,702

41,256

35,220

Southern California

90,736

82,741

76,134

81,549

66,892

Total other commercial and industrial loans

656,186

615,370

623,037

583,214

583,193

New England

343,359

342,270

344,079

330,753

332,572

San Francisco Bay Area

95,825

96,024

96,387

96,775

94,959

Southern California

11,123

11,198

11,205

11,279

11,351

Total commercial tax-exempt loans

450,307

449,492

451,671

438,807

438,882

Total commercial and industrial loans

1,106,493

1,064,862

1,074,708

1,022,021

1,022,075

Commercial real estate loans:

New England

1,071,073

1,068,619

1,022,061

1,043,494

1,069,942

San Francisco Bay Area

770,312

720,276

714,449

724,243

739,769

Southern California

689,171

650,153

659,182

631,343

694,810

Total commercial real estate loans

2,530,556

2,439,048

2,395,692

2,399,080

2,504,521

Construction and land loans:

New England

144,986

136,097

153,929

114,411

88,068

San Francisco Bay Area

24,725

43,130

41,516

40,755

37,783

Southern California

30,667

31,391

44,861

42,358

46,173

Total construction and land loans

200,378

210,618

240,306

197,524

172,024

Residential loans:

New England

1,708,501

1,692,421

1,689,318

1,650,989

1,643,039

San Francisco Bay Area

574,937

570,132

559,578

554,502

533,394

Southern California

742,320

730,579

700,077

657,388

631,773

Total residential loans

3,025,758

2,993,132

2,948,973

2,862,879

2,808,206

Home equity loans:

New England

58,806

59,074

57,617

61,291

61,125

San Francisco Bay Area

19,232

18,279

19,722

19,769

17,366

Southern California

11,892

11,267

13,082

12,330

13,310

Total home equity loans

89,930

88,620

90,421

93,390

91,801

Other consumer loans:

New England

106,177

110,363

120,402

121,685

145,726

San Francisco Bay Area

12,279

11,956

12,663

14,228

14,659

Southern California

8,689

8,369

9,993

9,613

8,111

Total other consumer loans

127,145

130,688

143,058

145,526

168,496

Total loans:

New England

3,957,221

3,901,644

3,890,607

3,783,032

3,821,553

San Francisco Bay Area

1,538,441

1,499,626

1,488,017

1,491,528

1,473,150

Southern California

1,584,598

1,525,698

1,514,534

1,445,860

1,472,420

Total loans

7,080,260

6,926,968

6,893,158

6,720,420

6,767,123

(In thousands)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

CREDIT QUALITY (13):

Special mention loans:

New England

35,235

34,675

31,147

20,382

18,515

San Francisco Bay Area

10,360

23,486

18,585

18,359

19,255

Southern California

25,082

28,626

28,796

28,665

15,678

Total special mention loans

70,677

86,787

78,528

67,406

53,448

Accruing classified loans (14):

New England

13,012

15,830

10,392

10,083

11,493

San Francisco Bay Area

25,957

20,801

24,584

24,252

12,766

Southern California

14,914

5,890

19,119

21,045

21,194

Total accruing classified loans

53,883

42,521

54,095

55,380

45,453

Nonaccruing loans:

New England

8,837

6,161

6,728

5,131

7,282

San Francisco Bay Area

2,644

2,480

2,488

1,169

1,319

Southern California

5,674

3,378

4,841

5,797

7,050

Total nonaccruing loans

17,155

12,019

14,057

12,097

15,651

Loans 30-89 days past due and accruing (15):

New England

1,747

7,232

15,961

9,193

4,653

San Francisco Bay Area

2,021

2,246

1,651

—

Southern California

681

8,462

4,092

763

324

Total loans 30-89 days past due and accruing

2,434

17,715

22,299

11,607

4,977

Loans (charged-off)/ recovered, net:

New England

222

(100

)

232

(73

)

San Francisco Bay Area

1,804

706

Southern California

(161

)

(312

)

Total net loans (charged-off)/ recovered

(110

)

(72

)

1,719

985

113

Loans (charged-off)/ recovered, net for the year ended:

New England

253

(358

)

San Francisco Bay Area

158

Southern California

(473

)

264

Total Net Loans (Charged-off)/ Recovered

(182

)

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. 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 a 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 units, 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 Goodwill and intangible assets, net.

(In thousands, except share and per share data)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Total balance sheet assets

8,712,873

8,572,143

8,494,625

8,375,840

8,716,203

LESS: Goodwill and intangible assets, net

(68,491

)

(69,162

)

(69,834

)

(89,432

)

(90,182

)

Tangible assets (non-GAAP)

8,644,382

8,502,981

8,424,791

8,286,408

8,626,021

Total shareholders’ equity

798,211

778,819

753,954

738,009

733,977

LESS: Goodwill and intangible assets, net

(68,491

)

(69,162

)

(69,834

)

(89,432

)

(90,182

)

Tangible common equity (non-GAAP)

729,720

709,657

684,120

648,577

643,795

Total equity/ Total assets

9.16

9.09

8.88

8.81

8.42

Tangible common equity/ Tangible assets (non-GAAP)

8.44

8.35

8.12

7.83

7.46

Total risk weighted assets *

6,494,049

6,304,444

6,161,677

6,057,002

6,104,586

Tier 1 common equity *

726,872

717,138

702,728

674,641

665,628

Tier 1 common equity/ Risk weighted assets *

11.19

11.38

11.40

11.14

10.90

End of period shares outstanding

83,774,335

83,773,650

83,655,651

84,602,519

84,478,858

Book value per common share

9.53

9.30

9.01

8.72

8.69

Tangible book value per share (non-GAAP)

8.71

8.47

8.18

7.67

7.62

* Risk weighted assets and Tier 1 common equity for June 30, 2019 are presented based on estimated data.

(7)

Assets under management and advisory have been reduced to exclude those assets managed or advised by BOS for periods when BOS was owned by the Company.

(8)

The Company uses certain non-GAAP financial measures, such as ROACE and ROATCE 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 ROACE and the non-GAAP ROATCE ratios 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, if any. The Company calculates Average tangible common equity by adjusting Average equity to exclude Average goodwill and intangible assets, net and Average preferred equity, if any.

Three Months Ended

(In thousands)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Total average shareholders’ equity

790,844

766,283

739,313

737,188

775,949

LESS: Average Series D preferred stock

—

(39,881

)

Average common equity (non-GAAP)

790,844

766,283

739,313

737,188

736,068

LESS: Average goodwill and intangible assets, net

(68,889

)

(69,498

)

(83,153

)

(89,830

)

(102,533

)

Average tangible common equity (non-GAAP)

721,955

696,785

656,160

647,358

633,535

Net income attributable to the Company

19,380

19,442

33,302

17,962

6,434

LESS: Dividends on Series D preferred stock

—

(869

)

Common net income (non-GAAP)

19,380

19,442

33,302

17,962

5,565

ADD: Amortization of intangibles, net of tax

531

531

537

593

592

Tangible common net income (non-GAAP)

19,911

19,973

33,839

18,555

6,157

Return on average equity - (annualized)

9.83

10.29

17.87

9.67

3.33

ROACE - (annualized) (non-GAAP)

9.83

10.29

17.87

9.67

3.03

ROATCE - (annualized) (non-GAAP)

11.06

11.63

20.46

11.37

3.90

Six Months Ended

(In thousands)

June 30, 2019

June 30, 2018

Total average shareholders’ equity

778,926

779,586

LESS: Average Series D preferred stock (non-convertible)

—

(43,795

)

Average common equity (non-GAAP)

778,926

735,791

LESS: Average goodwill and intangible assets, net

(69,211

)

(117,839

)

Average tangible common equity (non-GAAP)

709,715

617,952

Net income attributable to the Company

38,822

29,120

LESS: Dividends on Series D preferred stock

—

(1,738

)

Common net income (non-GAAP)

38,822

27,382

ADD: Amortization of intangibles, net of tax

1,062

1,184

Tangible common net income (non-GAAP)

39,884

28,566

Return on average equity

10.05

7.53

Return on average common equity (non-GAAP)

10.05

7.50

Return on average tangible common equity (non-GAAP)

11.33

9.32

(9)

The Company uses certain non-GAAP financial measures, such as Pre-tax, pre-provision income; Total operating expenses excluding amortization of intangibles and restructuring expense, if any; 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 and restructuring, if any; and from GAAP Efficiency ratio to non-GAAP Efficiency ratio, excluding amortization of intangibles, impairment of goodwill, and restructuring, if any, are presented below:

Three Months Ended

(In thousands)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Income before income taxes (GAAP)

24,818

24,459

42,192

24,347

24,803

ADD BACK: Provision/ (credit) for loan losses

1,363

(1,426

)

(949

)

453

Pre-tax, pre-provision income (non-GAAP)

26,181

23,033

42,285

23,398

25,256

Total operating expense (GAAP)

55,659

60,553

63,557

68,557

64,384

Less: Amortization of intangibles

672

672

680

750

749

Less: Restructuring

—

1,646

2,065

5,763

—

Total operating expense (non-GAAP)

54,987

58,235

60,812

62,044

63,635

Net interest income

57,460

58,338

59,997

59,641

57,545

Total core fees and income

24,292

24,280

28,691

31,592

31,897

Gain on sale of affiliate

—

18,142

—

Total other income

968

(988

)

722

198

Total revenue (10)

81,840

83,586

105,842

91,955

89,640

Efficiency ratio (GAAP)

68.01

72.44

60.05

74.55

71.83

Efficiency ratio, excluding amortization of intangibles and restructuring, if any (non-GAAP) (10)

67.19

69.67

57.14

67.04

70.29

Six Months Ended

(In thousands)

June 30, 2019

June 30, 2018

Income before income taxes (GAAP)

49,277

52,867

ADD BACK: Provision/ (credit) for loan losses

(63

)

(1,342

)

Pre-tax, pre-provision income (non-GAAP)

49,214

51,525

Total operating expense (GAAP)

116,212

135,241

Less: Amortization of intangibles

1,344

1,499

Less: Restructuring

1,646

—

Total operating expense (non-GAAP)

113,222

133,742

Net interest income

115,798

114,928

Total core fees and income

48,572

71,332

Total other income

1,056

506

Total revenue (10)

165,426

186,766

Efficiency ratio (GAAP)

70.25

72.41

Efficiency ratio, excluding amortization of intangibles and restructuring, if any (non-GAAP) (10)

68.44

70.90

(10)

Currently, the FTE adjustment for interest income on Non-taxable investments and loans is immaterial and therefore has not been applied. For comparison purposes, GAAP amounts are shown for all periods presented.

(11)

Average loans includes Loans held for sale and Nonaccrual loans.

(12)

Average total deposits is the sum of Average total interest-bearing deposits and Average non-interest bearing demand deposits. Average total deposits and borrowings is the sum of Average total interest-bearing liabilities and Average non-interest bearing demand deposits.

(13)

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lenders' regional offices.

(14)

Accruing classified 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)

In addition to loans 30-89 days past due and accruing, at June 30, 2019, the Company had one loan totaling $0.9 million that was more than 90 days past due but still on accrual status. This loan originated in the New England region. The Company had no loans outstanding more than 90 days past due but still on accrual status in comparative periods.

(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)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Net interest income (GAAP basis)

57,460

58,338

59,997

59,641

57,545

LESS: Interest recovered on previous nonaccrual loans

—

258

986

—

Net interest income, excluding interest recovered while loans on nonaccrual status (non-GAAP) - also referred to as Core net interest income (non-GAAP)

57,460

58,080

59,011

58,655

57,545

Net interest margin, excluding interest recovered while loans on nonaccrual status (non-GAAP) - also referred to as Core net interest margin (non-GAAP)

2.78

2.89

2.90

2.85

(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)

June 30, 2019

March 31, 2019

December 31, 2018

September 30, 2018

June 30, 2018

Net income attributable to the Company (GAAP)

19,380

19,442

33,302

17,962

6,434

LESS: Gain on sale of affiliate

—

18,142

—

ADD BACK: Information services *

—

(441

)

—

441

ADD BACK: Restructuring

—

1,646

2,065

5,763

—

ADD BACK: Tax adjustments **

—

3,502

—

12,706

Tax effect at statutory rate

—

(346

)

(341

)

(1,210

)

(93

)

Net income attributable to the Company excluding notable items (non-GAAP)

19,380

20,742

19,945

22,515

19,488

Net income attributable to the common shareholders, treasury stock method (GAAP)

18,564

20,999

35,996

17,133

2,910

ADD BACK: Deemed dividend due to redemption of Series D preferred stock

—

2,247

LESS: Gain on sale of affiliate

—

18,142

—

ADD BACK: Information services *

—

(441

)

—

441

ADD BACK: Restructuring

—

1,646

2,065

5,763

—

ADD BACK: Tax adjustments **

—

3,502

—

12,706

Tax effect at statutory rate

—

(346

)

(341

)

(1,210

)

(93

)

Net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP)

18,564

22,299

22,639

21,686

18,211

Weighted average diluted shares outstanding

84,048,972

84,010,450

84,863,779

85,498,568

85,413,575

Diluted total earnings per share (GAAP)

0.22

0.25

0.42

0.20

0.03

Diluted total earnings per share, excluding notable items (non-GAAP)

0.22

0.27

0.25

0.21

Average common equity (non-GAAP)

790,844

766,283

739,313

737,188

736,068

Average tangible common equity (non-GAAP)

721,955

696,785

656,160

647,358

633,535

Return on average common equity - (annualized), excluding notable items (non-GAAP)

9.83

10.98

10.70

12.12

10.15

Return on average tangible common equity - (annualized), excluding notable items (non-GAAP)

11.06

12.38

14.16

12.16

Pre-tax, pre-provision income (non-GAAP)

26,181

23,033

42,285

23,398

25,256

LESS: Gain on sale of affiliate

—

18,142

—

ADD BACK: Information services *

—

(441

)

—

441

ADD BACK: Restructuring

—

1,646

2,065

5,763

—

Pre-tax, pre-provision income, excluding notable items (non-GAAP)

26,181

24,679

25,767

29,161

25,697

In the fourth quarter of 2018, $0.4 million of Information services expense was reclassified to Restructuring expense in conjunction with the announcement of the Company's formal restructuring plan.

Additional tax expense in the second quarter of 2018 relates to the tax impact of the April 2018 completion of the sale of Anchor and additional expense in the fourth quarter of 2018 relates to the completion of the sale of BOS.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190724005788/en/

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

Boston Private Financial (NASDAQ:BPFH)
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