Boston Private Reports Third Quarter 2020 Results

·19-min read

Third Quarter 2020 Highlights include:

  • GAAP Net income of $22.7 million, or $0.28 per diluted share, and operating net income of $22.0 million, or $0.27 per diluted share

  • Return on average common equity (non-GAAP) of 10.7%; operating return on average common equity of 10.4%

  • Return on average tangible common equity (non-GAAP) of 11.9%; operating return on average tangible common equity of 11.6%

  • Average total deposits of $7.7 billion, a 16% increase year-over-year

  • Average total loans of $7.3 billion, a 3% increase year-over-year

  • Total assets under management/advisory ("AUM") of $16.3 billion, flat year-over-year

  • Total net flows of negative $407 million driven by net flows of negative $395 million at Dalton, Greiner, Hartman, Maher & Co, LLC ("DGHM")

  • Total net provision credit of $2.8 million

  • Notable Item: $0.9 million gain related to the revaluation of a receivable from the divestiture of Bingham, Osborn & Scarborough, LLC ("BOS")

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the "Company" or "BPFH") today reported third quarter 2020 Net income attributable to the Company of $22.7 million, compared to Net loss attributable to the Company of $(3.3) million for the second quarter of 2020 and Net income attributable to the Company of $20.0 million for the third quarter of 2019. Third quarter 2020 Diluted earnings per share were $0.28, compared to Diluted loss per share of $(0.04) in the second quarter of 2020 and Diluted earnings per share of $0.24 in the third quarter of 2019.

"We are proud of the dedication and commitment shown by the Boston Private employees guiding our clients through this challenging environment," said Anthony DeChellis, CEO of Boston Private. "This quarter's financial results include a provision credit and continued strong new business in our Wealth Management & Trust business. We strengthened our capital and liquidity position to provide flexibility as we navigate the uncertain environment. We remain committed to our strategic objectives and believe that we are well positioned for long-term success."

Summary Financial Results

% Change

($ in millions, except for per share data)

3Q20

2Q20

3Q19

LQ

Y/Y

Net income/(loss) - GAAP

$22.7

$(3.3)

$20.0

nm

14%

Net income/(loss) - Operating

22.0

(3.3)

20.0

nm

10%

Diluted earnings/(loss) per share - GAAP

$0.28

$(0.04)

$0.24

nm

17%

Diluted earnings/(loss) per share - Operating

$0.27

$(0.04)

$0.24

nm

13%

Non-GAAP Financial Measures:

Pre-tax, pre-provision income

$19.9

$20.1

$25.7

(1)%

(23)%

Return on average common equity ("ROACE")

10.7%

(1.6)%

9.8

%

Return on average tangible common equity ("ROATCE")

11.9%

(1.4)%

11.0

%

nm = not meaningful

The Company's financial results improved linked quarter primarily driven by a lower loan loss provision, which changed from a $25.4 million provision expense during the second quarter of 2020 to a $2.8 million provision credit during the third quarter of 2020. The company’s operating results exclude the after-tax effect of a $0.9 million gain related to the revaluation of a receivable from the divestiture of BOS.

Net Interest Income and Margin

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Net interest income

$57.8

$58.9

$56.2

(2)%

3%

Net interest margin

2.61%

2.75%

2.72%

Net interest income for the third quarter of 2020 was $57.8 million, a 2% decrease linked quarter and a 3% increase year-over-year. The linked quarter decrease was primarily driven by lower loan volumes, lower interest-earning asset yields, and prepayment penalties in the second quarter of 2020, partially offset by lower funding costs.

Net interest margin decreased 14 basis points on a linked quarter basis to 2.61%. The decline was primarily driven by lower asset yields, prepayment penalties in the second quarter of 2020 and excess cash balances, partially offset by lower funding costs.

Noninterest Income

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Wealth management and trust fees

$18.2

$17.3

$19.1

6

%

(4)

%

Investment management fees

1.4

1.8

2.5

(21)

%

(44)

%

Private banking fees 1

2.3

2.6

3.6

(11)

%

(35)

%

Total core fees and income

$22.0

$21.6

$25.2

2

%

(13)

%

Total other income

1.1

1.0

5

%

nm

Total noninterest income

$23.0

$22.7

$25.1

2

%

(8)

%

nm = not meaningful

1 Private banking fees includes Other banking fee income and Gain/(loss) on sale of loans, net

Total core fees and income for the third quarter of 2020 was $22.0 million, a 2% increase linked quarter. The linked quarter increase was primarily driven by higher Wealth management and trust fees, partially offset by lower Investment management fees. Total other income for the third quarter of 2020 includes a $0.9 million gain related to the revaluation of a receivable from the divestiture of BOS.

Assets Under Management / Advisory

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Wealth Management and Trust

$15,581

$14,889

$14,695

5

%

6

%

Other 3

672

1,067

1,533

(37)

%

(56)

%

Total assets under management / advisory

$16,253

$15,956

$16,228

2

%

%

Net flows

Wealth Management and Trust

$(12)

$60

$(100)

Other 3

(395)

(100)

(37)

Total net flows

$(407)

$(40)

$(137)

3 Includes results from DGHM

Total assets under management / advisory were $16.3 billion at the end of the third quarter of 2020, a 2% increase linked quarter. The linked quarter increase was primarily driven by the impact of favorable market action, partially offset by outflows at DGHM.

Total net flows were negative $407 million during the third quarter of 2020, driven by net outflows of $395 million at DGHM. The Wealth Management and Trust segment had net flows of negative $12 million during the third quarter of 2020. Negative flows in the Wealth Management and Trust segment were primarily the result of client assets that transferred from fixed income products into bank deposit products and tax payments made during the quarter. Overall client attrition was low, while new business at Wealth Management & Trust improved linked quarter to $299 million for the third quarter of 2020 compared to $251 million for the second quarter of 2020.

Noninterest Expense

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Salaries and employee benefits

$34.7

$33.9

$31.7

2

%

9

%

Occupancy and equipment

8.2

7.6

8.3

8

%

(1)

%

Information systems

7.1

7.1

5.2

%

37

%

Professional services

4.0

3.4

4.4

17

%

(9)

%

Marketing and business development

0.9

2.3

1.4

(60)

%

(33)

%

Amortization of intangibles

0.7

0.7

0.7

2

%

6

%

FDIC insurance

1.0

0.8

0.1

nm

nm

Other

4.4

5.6

3.9

(22)

%

14

%

Total noninterest expense

$60.9

$61.5

$55.5

(1)

%

10

%

Memo: Excluding Off-Balance Sheet Provision

Reserve for unfunded loan commitments

$1.8

$2.8

(38)

%

nm

Total noninterest expense (non-GAAP)

$59.2

$58.6

$55.5

1

%

7

%

Total noninterest expense for the third quarter of 2020 was $60.9 million, which includes $1.8 million of reserve for unfunded loan commitments recognized in Other expense.

Excluding the reserve for unfunded loan commitments, total noninterest expense (non-GAAP) for the third quarter of 2020 was $59.2 million, an increase of 1% linked quarter and an increase of 7% year-over-year. The linked quarter increase was driven primarily by higher compensation expense, while the year-over-year increase was driven primarily by higher compensation expense and higher Information systems expense from technology initiatives placed in service.

Income Tax Expense

The Company's effective tax rate for the third quarter of 2020 was 7.4% as a result of lower pre-tax income during 2020.

Loans - QTD Averages & Yields

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Commercial and industrial

$1,033

$1,037

$1,102

%

(6)

%

Paycheck Protection Program ("PPP")

373

284

32

%

nm

Commercial real estate

2,653

2,659

2,518

%

5

%

Construction and land

218

233

196

(6)

%

11

%

Residential

2,810

2,863

3,016

(2)

%

(7)

%

Home equity

84

88

89

(5)

%

(5)

%

Other consumer

112

124

128

(10)

%

(13)

%

Total loans

$7,283

$7,289

$7,049

%

3

%

Total loans, excluding PPP (non-GAAP)

$6,910

$7,005

$7,049

(1)

%

(2)

%

Total loan yields

3.23%

3.42%

3.98%

Average total loans, excluding PPP (non-GAAP) in the third quarter of 2020 decreased 1% linked quarter and year-over-year.

  • Within Commercial and industrial loans, lower revolving line of credit usage was partially offset by Commercial tax-exempt loan growth of 3%

  • Nearly all of the PPP loans remain outstanding

  • The linked quarter decline in Residential loans was driven by the sale of $72 million of Residential loans

Deposits - QTD Averages & Costs

% Change

($ in millions)

3Q20

2Q20

3Q19

LQ

Y/Y

Non-interest bearing deposits

2,321

2,214

1,953

5

%

19

%

Interest bearing deposits

5,378

5,036

4,705

7

%

14

%

Total deposits

$7,700

$7,250

$6,658

6

%

16

%

Cost of total deposits

0.33%

0.41%

0.92%

Cost of total interest-bearing deposits

0.48%

0.59%

1.31%

Average total deposits in the third quarter of 2020 increased 6% linked quarter and 16% year-over-year to $7.7 billion. The linked quarter increase was driven by a combination of existing and new client balances, client asset flows from the Wealth Management & Trust segment into deposit products, and an increase in wealth sweep deposits.

Provision and Asset Quality

($ in millions)

3Q20

2Q20

1Q20

4Q19

3Q19

Provision and Allowance

Provision/(credit) for loan losses

$(4.6)

$22.6

$17.0

$(3.7)

$0.2

Reserve for unfunded loan commitments

1.8

2.8

1.8

Total Provision for credit losses

$(2.8)

$25.4

$18.8

$(3.7)

$0.2

Allowance for loan losses as a % of Total loans

1.17%

1.22%

0.97%

1.03%

1.07%

Asset Quality

Total net loans (charged-off)/ recovered

(0.2)

(1.5)

(0.3)

0.3

0.1

Total nonaccrual loans

41.3

25.6

24.3

16.1

17.6

Nonaccrual loans as a % of Total loans

0.57%

0.35%

0.35%

0.23%

0.25%

Special mention loans (criticized loans)

$199.5

$191.9

$92.6

$52.0

$58.1

Classified loans

123.1

114.2

112.3

74.0

80.8

Total criticized and classified loans

$322.6

$306.1

$204.9

$126.1

$139.0

The Company recorded a provision credit of $2.8 million during the third quarter of 2020. The provision release was primarily driven by an improved economic forecast related to the current expected credit losses methodology and resulted in lower reserves on residential mortgages and construction and land loans. The allowance for loan losses as a percentage of total loans, excluding PPP loans (non-GAAP), was 1.23% in the third quarter of 2020, compared to 1.28% in the second quarter of 2020.

Total nonaccrual loans as of September 30, 2020 was $41.3 million, an increase of $15.7 million, or 61%, linked quarter primarily driven by the downgrade of a commercial & industrial relationship in Northern California.

Total criticized and classified loans as of September 30, 2020 was $322.6 million, an increase of $16.5 million, or 5%, linked quarter primarily driven by the downgrade of $71 million of loans, partially offset by $54 million of payoffs, paydowns and upgrades. Of the $71 million in downgrades in the third quarter of 2020, $62 million were Commercial real estate loans across 16 relationships, primarily with hospitality and retail clients.

As of September 30, 2020:

  • Residential loans on deferral totaled approximately $100 million, or 3.6% of total residential loans, compared to a peak of approximately $220 million in the second quarter of 2020

  • Commercial & industrial loans on deferral totaled approximately $50 million, or 4.7% of total Commercial & industrial loans, compared to a peak of approximately $125 million in the second quarter of 2020

  • The majority of Commercial real estate clients that qualified for and accepted the debt service reserve program remain in the program, representing a total loan balance of approximately $78 million

Capital

3Q20

2Q20

1Q20

4Q19

3Q19

Tangible common equity/ Tangible assets (non-GAAP)

8.3%

8.3%

8.8%

8.6%

8.6%

Tangible book value per share (non-GAAP)

$9.48

$9.25

$9.31

$9.02

$8.90

Regulatory Capital Ratios: 3

Tier 1 common equity

11.3%

11.1%

11.2%

11.4%

11.2%

Tier 1 risk-based capital

12.8%

12.6%

12.7%

13.0%

12.8%

Total risk-based capital

14.1%

13.9%

13.8%

14.1%

13.9%

Tier 1 leverage capital

9.2%

9.2%

9.7%

9.8%

9.7%

3 Current quarter information is presented based on estimated data.

The Company's tangible book value per share increased to $9.48 in the third quarter of 2020, a 7% increase year-over-year. Risk-weighted regulatory capital ratios increased slightly linked quarter.

Dividend Payments

Concurrent with the release of third quarter 2020 earnings, the Board of Directors of the Company declared a cash dividend payable to common shareholders of $0.06 per share. The record date for this dividend is November 6, 2020, and the payment date is November 20, 2020.

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: return on average common equity; return on average tangible common equity; pre-tax, pre-provision income; tangible common equity / tangible assets; the efficiency ratio excluding amortization of intangibles; net income/(loss) attributable to the Company excluding notable items; net income/(loss) attributable to the common shareholders, treasury stock method, excluding notable items; diluted earnings/(loss) per share excluding notable items; and average total loans, excluding PPP.

A detailed reconciliation table of the Company’s GAAP to non-GAAP measures is included in the tables of this release and beginning on page 16 of the attached financial statements.

Conference Call

Management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, October 22, 2020, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
Elite Entry Number: 0457772

Replay Information:

Available from October 22, 2020 at 12 noon Eastern Time until October 29, 2020
Dial In #: (877) 344-7529
Conference Number: 10149141

The call will be simultaneously webcast and may be accessed on www.bostonprivate.com.

About Boston Private

Boston Private is a leading provider of integrated wealth management, trust and banking services to individuals, families, businesses and nonprofits.

For more than 30 years, Boston Private has delivered comprehensive advice coupled with deep technical expertise to help clients simplify their lives and achieve their goals. The firm offers the capabilities of a large institution with the superior service of a boutique firm to clients across the United States.

Boston Private is the corporate brand of Boston Private Financial Holdings, Inc. (NASDAQ: BPFH).

For more information, visit 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 interest rate trends and future liquidity; expectations as to changes in assets, deposits and results of operations; the impact of the COVID-19 pandemic; future operations; market position and financial position; and prospects, plans and objectives of management. 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, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in employment levels, general business and economic conditions on a national basis and in the local markets in which the Company operates; changes in customer behavior; the possibility that future credits losses are higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; turbulence in the capital and debt markets; changes in interest rates; increases in loan defaults and charge-off rates; decreases in the value of securities and other assets; changes in loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risk relating to the Company’s participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; risks that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated by the Company’s Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Consolidated Balance Sheets

Unaudited ($ in thousands, except share and per share data)

3Q20

2Q20

1Q20

4Q19

3Q19

ASSETS:

Cash and cash equivalents

$

546,263

$

179,027

$

61,714

$

292,479

$

78,010

Investment securities available-for-sale

1,011,327

1,002,970

993,166

978,284

935,538

Investment securities held-to-maturity

38,600

42,495

45,395

48,212

51,379

Equity securities at fair value

32,818

24,492

23,080

18,810

21,780

Stock in Federal Home Loan Bank and Federal Reserve Bank

36,618

42,407

45,273

39,078

47,756

Loans held for sale

15,074

9,786

7,671

7,386

6,658

Loans

7,222,569

7,332,954

7,043,338

6,976,704

7,067,151

Less: Allowance for loan losses

84,551

89,324

68,211

71,982

75,359

Loans, net of allowance for loan losses

7,138,018

7,243,630

6,975,127

6,904,722

6,991,792

Premises and equipment, net

42,907

43,805

43,544

44,527

42,658

Goodwill

57,607

57,607

57,607

57,607

57,607

Intangible assets, net

8,898

8,935

9,637

10,352

10,622

Accrued interest receivable

25,935

24,918

24,054

24,175

24,851

Deferred income taxes, net

8,250

9,116

5,630

11,383

15,704

Right-of-use assets

94,879

94,143

98,896

102,075

107,045

Other assets

374,111

375,575

355,532

291,411

299,544

TOTAL ASSETS

$

9,431,305

$

9,158,906

$

8,746,326

$

8,830,501

$

8,690,944

LIABILITIES:

Deposits

$

7,827,719

$

7,427,397

$

6,835,572

$

7,241,476

$

6,658,242

Securities sold under agreements to repurchase

42,544

46,623

45,319

53,398

48,860

Federal funds purchased

145,000

230,000

Federal Home Loan Bank borrowings

296,236

426,313

491,254

350,829

570,904

Junior subordinated debentures

106,363

106,363

106,363

106,363

106,363

Lease liabilities

108,932

108,234

113,574

117,214

122,799

Other liabilities

203,342

218,771

180,452

140,820

143,607

TOTAL LIABILITIES

8,585,136

8,333,701

7,917,534

8,010,100

7,880,775

REDEEMABLE NONCONTROLLING INTERESTS ("RNCI")

1,383

1,481

SHAREHOLDERS' EQUITY:

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

82,255

82,058

81,800

83,266

83,242

Additional paid-in capital

597,113

594,463

593,167

600,708

599,877

Retained earnings

136,394

118,647

131,761

127,469

116,210

Accumulated other comprehensive income

30,407

30,037

22,064

7,575

9,359

TOTAL SHAREHOLDERS' EQUITY

846,169

825,205

828,792

819,018

808,688

TOTAL LIABILITIES, RNCI, AND SHAREHOLDERS' EQUITY

$

9,431,305

$

9,158,906

$

8,746,326

$

8,830,501

$

8,690,944

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Consolidated Income Statements

Unaudited ($ in thousands, except share and per share data)

3Q20

2Q20

1Q20

4Q19

3Q19

REVENUE:

Interest income

$

65,453

$

68,819

$

73,082

$

75,291

$

77,604

Interest expense

7,629

9,881

15,825

19,166

21,451

Net interest income

57,824

58,938

57,257

56,125

56,153

Provision/(credit) for loan losses 4

(4,569

)

22,604

16,962

(3,668

)

167

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

62,393

36,334

40,295

59,793

55,986

Wealth management and trust fees 5

18,240

17,261

18,371

18,720

19,067

Investment management fees

1,393

1,770

1,925

2,554

2,496

Private banking fee income

1,320

2,395

2,490

2,924

2,658

Gain on sale of loans, net

1,006

204

100

557

934

Total core fees and income

21,959

21,630

22,886

24,755

25,155

Total other income

1,086

1,032

(1,365

)

2,038

(29

)

TOTAL REVENUE 6

80,869

81,600

78,778

82,918

81,279

NONINTEREST EXPENSE:

Salaries and employee benefits

34,671

33,937

35,096

34,186

31,684

Occupancy and equipment

8,150

7,560

7,646

7,578

8,260

Information systems

7,096

7,113

6,725

6,476

5,169

Professional services

4,025

3,446

3,601

3,920

4,435

Marketing and business development

935

2,313

1,890

2,017

1,403

Amortization of intangibles

714

702

715

676

671

FDIC insurance

960

...

767

(19

)

59

Other 4

4,386

5,615

5,235

3,623

3,856

TOTAL NONINTEREST EXPENSE

60,937

61,453

60,908

58,457

55,537

INCOME/(LOSS) BEFORE INCOME TAXES

24,501

(2,457

)

908

28,129

25,575

Income tax expense

1,821

841

102

6,788

5,517

Net income/(loss) before attribution to noncontrolling interests

22,680

(3,298

)

806

21,341

20,058

Less: Net income attributable to noncontrolling interests

6

97

96

NET INCOME/(LOSS) ATTRIBUTABLE TO THE COMPANY

$

22,680

$

(3,298

)

$

800

$

21,244

$

19,962

Adjustments, treasury stock method 7

414

98

304

NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

22,680

$

(3,298

)

$

1,214

$

21,342

$

20,266

COMMON SHARE DATA:

Weighted average basic shares outstanding

82,221,705

81,929,752

83,005,064

83,238,982

83,631,403

Weighted average diluted shares outstanding 8

82,362,338

81,929,752

83,318,041

83,637,786

83,956,708

Diluted earnings/(loss) per share

$

0.28

$

(0.04

)

$

0.01

$

0.26

$

0.24

4 Total Provision for credit losses includes the Provision/(credit) for loan losses and the Reserve for unfunded loan commitments within Other expense.

5 Wealth management and trust fees consists of revenue from Boston Private Wealth LLC ("BPW"), KLS Professional Advisors Group, LLC ("KLS") through the effective date of its merger with BPW, and the trust operations of Boston Private Bank & Trust Company.

6 Total revenue is the sum of Net interest income, Total core fees and income, and Total other income.

7 Adjustments to Net income/(loss) attributable to the Company to arrive at Net income/(loss) attributable to common shareholders, treasury stock method, as presented in these tables, include decrease/(increase) in Noncontrolling interests redemption value.

8 For a description of the Company's policies regarding Diluted earnings per share, please refer to 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, 2019.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Consolidated Income Statements

Unaudited ($ in thousands, except share and per share data)

Nine months ended September 30,

2020

2019

REVENUE:

Interest income

$

207,354

$

233,156

Interest expense

33,335

61,205

Net interest income

174,019

171,951

Provision/(credit) for loan losses 4

34,997

104

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

139,022

171,847

Wealth management and trust fees 5

53,872

57,037

Investment management fees

5,088

7,601

Private banking fee income

6,205

8,024

Gain on sale of loans, net

1,310

1,065

Total core fees and income

66,475

73,727

Total other income

753

1,027

TOTAL REVENUE 6

241,247

246,705

NONINTEREST EXPENSE:

Salaries and employee benefits

103,704

100,116

Occupancy and equipment

23,356

24,460

Information systems

20,934

16,166

Professional services

11,072

11,308

Marketing and business development

5,138

4,422

Amortization of intangibles

2,131

2,015

FDIC insurance

1,727

1,304

Restructuring

1,646

Other 4

15,236

10,312

TOTAL NONINTEREST EXPENSE

183,298

171,749

INCOME BEFORE INCOME TAXES

22,952

74,852

Income tax expense

2,764

15,803

Net income before attribution to noncontrolling interests

20,188

59,049

Less: Net income attributable to noncontrolling interests

6

265

NET INCOME ATTRIBUTABLE TO THE COMPANY

$

20,182

$

58,784

Adjustments, treasury stock method 7

414

1,045

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

20,596

$

59,829

COMMON SHARE DATA

Weighted average basic shares outstanding

82,382,050

83,495,361

Weighted average diluted shares outstanding 8

82,746,866

84,003,281

Diluted earnings per share

$

0.25

$

0.71

4 Total Provision for credit losses includes the Provision/(credit) for loan losses and the Reserve for unfunded loan commitments within Other expense.

5 Wealth management and trust fees consists of revenue from Boston Private Wealth LLC ("BPW"), KLS Professional Advisors Group, LLC ("KLS") through the effective date of its merger with BPW, and the trust operations of Boston Private Bank & Trust Company.

6 Total revenue is the sum of Net interest income, Total core fees and income, and Total other income.

7 Adjustments to Net income attributable to the Company to arrive at Net income attributable to common shareholders, treasury stock method, as presented in these tables, include decrease/(increase) in Noncontrolling interests redemption value.

8 For a description of the Company's policies regarding Diluted earnings per share, please refer to 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, 2019.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Consolidated Financial Highlights

Unaudited ($ in thousands, except share and per share data)

3Q20

2Q20

1Q20

4Q19

3Q19

KEY STATISTICS:

Return on average assets (non-GAAP) 9

0.96

%

(0.15

)%

0.04

%

0.96

%

0.91

%

ROACE (non-GAAP) 9

10.68

%

(1.58

)%

0.39

%

10.29

%

9.80

%

ROATCE (non-GAAP) 9

11.88

%

(1.43

)%

0.72

%

11.51

%

10.99

%

Efficiency ratio (non-GAAP) 9

74.5

%

74.4

%

76.4

%

69.7

%

67.5

%

Noninterest income to total revenue

28.5

%

27.8

%

27.3

%

32.3

%

30.9

%

Net interest margin

2.61

%

2.75

%

2.76

%

2.70

%

2.72

%

Average loan to average deposit ratio

94.6

%

100.5

%

99.0

%

101.6

%

105.9

%

Cost of total deposits

0.33

%

0.41

%

0.72

%

0.86

%

0.92

%

Cost of interest-bearing deposits

0.48

%

0.59

%

1.02

%

1.20

%

1.31

%

Cost of total funding

0.37

%

0.50

%

0.83

%

0.99

%

1.12

%

Allowance for loan losses / Total loans

1.17

%

1.22

%

0.97

%

1.03

%

1.07

%

Nonperforming loans / Total loans

0.57

%

0.35

%

0.35

%

0.23

%

0.25

%

Net (charge-offs)/recoveries / Total loans 9

(0.01

)%

(0.08

)%

(0.02

)%

0.02

%

0.01

%

CAPITAL HIGHLIGHTS:

Tier 1 common equity 3

$

752,492

$

731,316

$

742,044

$

745,926

$

732,980

Tier 1 capital 3

$

852,514

$

831,338

$

842,066

$

846,337

$

833,431

Total capital 3

$

935,824

$

913,936

$

914,572

$

919,573

$

910,076

Risk-weighted assets ("RWA") 3

$

6,654,690

$

6,593,957

$

6,627,339

$

6,530,804

$

6,533,884

Average assets for leverage 3

$

9,237,940

$

9,009,565

$

8,691,254

$

8,659,944

$

8,588,358

Tier 1 common equity ratio 3

11.31

%

11.09

%

11.20

%

11.42

%

11.22

%

Tier 1 risk-based capital ratio 3

12.81

%

12.61

%

12.71

%

12.96

%

12.76

%

Total risk-based capital ratio 3

14.06

%

13.86

%

13.80

%

14.08

%

13.93

%

Tier 1 leverage capital ratio 3

9.23

%

9.23

%

9.69

%

9.77

%

9.70

%

Total equity / Total assets

8.97

%

9.01

%

9.48

%

9.27

%

9.30

%

Tangible common equity / Tangible assets (non-GAAP)

8.33

%

8.34

%

8.77

%

8.57

%

8.59

%

End of period market price per share

$

5.52

$

6.88

$

7.15

$

12.03

$

11.66

End of period shares outstanding

82,254,594

82,058,483

81,800,486

83,265,674

83,241,952

Book value per common share

$

10.29

$

10.06

$

10.13

$

9.84

$

9.71

Tangible book value per share (non-GAAP)

$

9.48

$

9.25

$

9.31

$

9.02

$

8.90

Common Equity Repurchase Program:

Total shares of common stock repurchased

1,565,060

678,165

Average price paid per share of common stock

$

$

$

8.18

$

$

10.61

Aggregate repurchases of common stock ($ in millions)

$

$

$

12.8

$

$

7.2

3 Current quarter information is presented based on estimated data.

9 Annualized.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Consolidated AUM and Balance Sheet - End of Period Balances

Unaudited ($ in thousands)

3Q20

2Q20

1Q20

4Q19

3Q19

ASSETS UNDER MANAGEMENT AND ADVISORY ("AUM"):

Wealth Management and Trust

$

15,581,000

$

14,889,000

$

13,497,000

$

15,224,000

$

14,695,000

Other 2

672,000

1,067,000

1,016,000

1,544,000

1,533,000

TOTAL AUM

$

16,253,000

$

15,956,000

$

14,513,000

$

16,768,000

$

16,228,000

AUM Rollforward:

Beginning balance

$

15,956,000

$

14,513,000

$

16,768,000

$

16,228,000

$

16,199,000

Net flows

(407,000

)

(40,000

)

150,000

(209,000

)

(137,000

)

Market returns

704,000

1,483,000

(2,405,000

)

749,000

166,000

Ending balance

$

16,253,000

$

15,956,000

$

14,513,000

$

16,768,000

$

16,228,000

AUM Net Flows:

Wealth Management and Trust

$

(12,000

)

$

60,000

$

176,000

$

(114,000

)

$

(100,000

)

Other 2

(395,000

)

(100,000

)

(26,000

)

(95,000

)

(37,000

)

TOTAL NET FLOWS

$

(407,000

)

$

(40,000

)

$

150,000

$

(209,000

)

$

(137,000

)

DEPOSITS:

Demand deposits (non-interest bearing)

$

2,346,126

$

2,293,864

$

2,020,440

$

1,971,013

$

1,947,363

Savings and NOW

756,797

758,656

653,006

646,199

666,107

Money market

4,187,657

3,753,228

3,468,701

3,969,330

3,366,623

Certificates of deposit

537,139

621,649

693,425

654,934

678,149

TOTAL DEPOSITS

$

7,827,719

$

7,427,397

$

6,835,572

$

7,241,476

$

6,658,242

LOANS:

Commercial and industrial

$

583,145

$

565,748

$

670,744

$

694,034

$

695,029

Paycheck Protection Program

371,496

370,034

Commercial tax-exempt

472,342

419,264

445,319

447,927

448,488

Commercial real estate

2,659,890

2,676,708

2,626,299

2,551,274

2,533,346

Construction and land

211,697

240,211

238,293

225,983

209,741

Residential

2,729,164

2,859,627

2,841,926

2,839,155

2,964,042

Home equity

81,797

84,588

89,350

83,657

84,432

Consumer

113,038

116,774

131,407

134,674

132,073

TOTAL LOANS

$

7,222,569

$

7,332,954

$

7,043,338

$

6,976,704

$

7,067,151

2 Includes results from Dalton, Greiner, Hartman, Maher & Co, LLC ("DGHM")

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Provision and Asset Quality

Unaudited ($ in thousands)

3Q20

2Q20

1Q20

4Q19

3Q19

PROVISION:

Provision/(credit) for loan losses

$

(4,569

)

$

22,604

$

16,962

$

(3,668

)

$

167

Reserve for unfunded loan commitments 4

1,750

2,829

1,827

(23

)

(23

)

Total Provision/(credit) for credit losses

$

(2,819

)

$

25,433

$

18,789

$

(3,691

)

$

144

CHARGE-OFFS:

Loan charge-offs

$

(245

)

$

(1,546

)

$

(528

)

$

(285

)

$

(185

)

Loan recoveries

41

55

180

576

310

NET (CHARGE-OFFS)/RECOVERIES

$

(204

)

$

(1,491

)

$

(348

)

$

291

$

125

Net charge-offs to average loans (annualized)

(0.01

)%

(0.08

)%

(0.02

)%

0.02

%

0.01

%

Net (Charge-offs)/Recoveries by Loan Type:

Commercial and industrial

$

(136

)

$

(337

)

$

(473

)

$

118

$

95

Commercial real estate

183

27

Home equity

(1,157

)

132

4

6

Consumer

(68

)

3

(7

)

(14

)

(3

)

NET (CHARGE-OFFS)/RECOVERIES

$

(204

)

$

(1,491

)

$

(348

)

$

291

$

125

LOAN QUALITY DATA:

Special mention loans

$

199,509

$

191,882

$

92,623

$

52,026

$

58,133

Accruing classified loans 10

81,827

88,586

87,948

57,922

63,278

Nonaccrual loans

41,263

25,604

24,314

16,103

17,565

Total classified

123,090

114,190

112,262

74,025

80,843

Criticized and classified loans

$

322,599

$

306,072

$

204,885

$

126,051

$

138,976

Loans 30-89 days past due and accruing 11

$

5,635

$

5,535

$

14,852

$

25,945

$

4,179

4 Total Provision for credit losses includes the Provision/(credit) for loan losses and the Reserve for unfunded loan commitments within Other expense.

10 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.

11 At June 30, 2020, the Company had one loan totaling less than $0.1 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 other loans outstanding more than 90 days past due but still on accrual status in comparative periods.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Average Balances, Yields, and Rates

Unaudited ($ in thousands)

Average Balance

Interest Income/Expense

Average Yield/Rate

3Q20

2Q20

3Q19

3Q20

2Q20

3Q19

3Q20

2Q20

3Q19

INTEREST-EARNING ASSETS

Cash and investments:

Taxable investment securities

$

201,515

$

198,337

$

198,655

$

853

$

859

$

938

1.69

%

1.73

%

1.95

%

Non-taxable investment securities

313,130

316,513

305,108

1,974

2,005

1,924

2.52

%

2.53

%

2.52

%

Mortgage-backed securities

515,813

505,669

492,514

2,354

2,566

2,622

1.83

%

2.03

%

2.13

%

Short-term investments and other

432,117

186,895

101,958

654

582

1,084

0.59

%

1.23

%

4.06

%

Total cash and investments

1,462,575

1,207,414

1,098,235

5,835

6,012

6,568

1.59

%

1.99

%

2.39

%

Loans: 12

Commercial and industrial

1,032,816

1,037,285

1,101,672

8,314

9,708

11,523

3.15

%

3.70

%

4.09

%

Paycheck Protection Program

373,047

283,619

2,390

1,573

2.51

%

2.19

%

%

Commercial real estate

2,652,770

2,659,074

2,518,048

23,546

24,602

29,118

3.47

%

3.66

%

4.52

%

Construction and land

218,211

233,305

195,843

2,109

2,251

2,410

3.78

%

3.82

%

4.82

%

Residential

2,809,871

2,862,708

3,016,265

22,089

23,079

25,567

3.14

%

3.22

%

3.39

%

Home equity

84,226

88,307

89,068

623

650

1,121

2.94

%

2.96

%

4.99

%

Other consumer

111,657

124,346

127,987

547

944

1,297

1.95

%

3.05

%

4.02

%

Total loans

7,282,598

7,288,644

7,048,883

59,618

62,807

71,036

3.23

%

3.42

%

3.98

%

Total earning assets

8,745,173

8,496,058

8,147,118

65,453

68,819

77,604

2.96

%

3.22

%

3.76

%

LESS: Allowance for loan losses

89,370

68,473

75,199

Cash and due from banks

34,761

39,959

49,065

Other assets

655,999

641,657

544,368

TOTAL AVERAGE ASSETS

$

9,346,563

$

9,109,201

$

8,665,352

INTEREST-BEARING LIABILITIES

Interest-bearing deposits: 13

Savings and NOW

$

722,742

$

680,758

$

615,730

$

197

$

187

$

275

0.11

%

0.11

%

0.18

%

Money market

4,070,026

3,684,147

3,378,006

4,790

4,848

11,523

0.47

%

0.53

%

1.35

%

Certificates of deposit

585,729

671,470

711,299

1,447

2,300

3,689

0.98

%

1.38

%

2.06

%

Total interest-bearing deposits 13

5,378,497

5,036,375

4,705,035

6,434

7,335

15,487

0.48

%

0.59

%

1.31

%

Junior subordinated debentures

106,363

106,363

106,363

508

764

1,022

1.87

%

2.84

%

3.76

%

FHLB borrowings and other

388,412

610,856

833,535

687

1,782

4,942

0.69

%

1.15

%

2.32

%

Total interest-bearing liabilities 13

5,873,272

5,753,594

5,644,933

7,629

9,881

21,451

0.52

%

0.69

%

1.50

%

Non-interest bearing demand deposits 13

2,321,223

2,213,829

1,953,214

Payables and other liabilities

309,462

306,896

258,371

Total average liabilities

8,503,957

8,274,319

7,856,518

Redeemable noncontrolling interests

944

Average shareholders’ equity

842,606

834,882

807,890

TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

$

9,346,563

$

9,109,201

$

8,665,352

Net interest income

$

57,824

$

58,938

$

56,153

Interest rate spread

2.44

%

2.53

%

2.26

%

Net interest margin

2.61

%

2.75

%

2.72

%

Average total deposits 13

$

7,699,720

$

7,250,204

$

6,658,249

0.33

%

0.41

%

0.92

%

Average total deposits and borrowings 13

$

8,194,495

$

7,967,423

$

7,598,147

0.37

%

0.50

%

1.12

%

12 Average loans includes Loans held for sale and Nonaccrual loans

13 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.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Average Balances, Yields, and Rates

Unaudited ($ in thousands)

Average Balance

Interest Income/Expense

Average Yield/Rate

Nine Months Ended

Nine Months Ended

Nine Months Ended

INTEREST-EARNING ASSETS

9/30/20

9/30/19

9/30/20

9/30/19

9/30/20

9/30/19

Cash and investments:

Taxable investment securities

$

200,346

$

223,072

$

2,580

$

3,244

1.72

%

1.94

%

Non-taxable investment securities

315,101

305,422

5,977

5,726

2.53

%

2.50

%

Mortgage-backed securities

514,043

507,338

7,707

8,225

2.00

%

2.16

%

Short-term investments and other

256,143

104,225

2,307

3,049

1.19

%

3.78

%

Total cash and investments

1,285,633

1,140,057

18,571

20,244

1.92

%

2.36

%

Loans: 12

Commercial and industrial

1,074,159

1,088,027

28,746

33,673

3.51

%

4.08

%

Paycheck Protection Program

218,175

3,963

2.41

%

%

Commercial real estate

2,631,461

2,474,804

75,630

87,222

3.78

%

4.65

%

Construction and land

228,243

203,211

6,932

7,610

3.99

%

4.94

%

Residential

2,841,023

2,999,480

68,636

76,847

3.22

%

3.42

%

Home equity

86,186

90,361

2,225

3,388

3.44

%

5.01

%

Other consumer

122,706

128,879

2,651

4,172

2.88

%

4.33

%

Total loans

7,201,953

6,984,762

188,783

212,912

3.46

%

4.04

%

Total earning assets

8,487,586

8,124,819

207,354

233,156

3.23

%

3.80

%

LESS: Allowance for loan losses

69,929

74,863

Cash and due from banks

41,461

46,906

Other assets

620,313

516,642

TOTAL AVERAGE ASSETS

$

9,079,431

$

8,613,504

INTEREST-BEARING LIABILITIES

Interest-bearing deposits: 13

Savings and NOW

$

680,962

$

658,154

$

616

$

847

0.12

%

0.17

%

Money market

3,835,219

3,317,117

19,295

32,072

0.67

%

1.29

%

Certificates of deposit

641,800

746,453

6,654

11,141

1.38

%

2.00

%

Total interest-bearing deposits 13

5,157,981

4,721,724

26,565

44,060

0.69

%

1.25

%

Junior subordinated debentures

106,363

106,363

2,189

3,223

2.74

%

4.05

%

FHLB borrowings and other

484,674

801,519

4,581

13,922

1.24

%

2.29

%

Total interest-bearing liabilities 13

5,749,018

5,629,606

33,335

61,205

0.77

%

1.45

%

Non-interest bearing demand deposits 13

2,194,237

1,949,948

Payables and other liabilities

295,327

243,370

Total average liabilities

8,238,582

7,822,924

Redeemable noncontrolling interests

400

1,642

Average shareholders’ equity

840,449

788,938

TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY

$

9,079,431

$

8,613,504

Net interest income

$

174,019

$

171,951

Interest rate spread

2.46

%

2.35

%

Net interest margin

2.71

%

2.80

%

Average total deposits 13

$

7,352,218

$

6,671,672

0.48

%

0.88

%

Average total deposits and borrowings 13

$

7,943,255

$

7,579,554

0.56

%

1.08

%

12 Average loans includes Loans held for sale and Nonaccrual loans

13 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.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Regional Loan Data

Unaudited ($ in thousands)

3Q20

2Q20

1Q20

4Q19

3Q19

New England

$

3,669,746

$

3,781,603

$

3,724,959

$

3,776,747

$

3,868,690

Northern California

1,763,556

1,741,255

1,618,668

1,532,786

1,559,569

Southern California

1,789,267

1,810,096

1,699,711

1,667,171

1,638,892

Total loans

$

7,222,569

$

7,332,954

$

7,043,338

$

6,976,704

$

7,067,151

Loans (charged-off)/recovered, net:

New England

$

(111

)

$

7

$

15

$

414

$

275

Northern California

3

122

(10

)

6

Southern California

(93

)

(1,501

)

(485

)

(113

)

(156

)

Total net loans (charged-off)/recovered

$

(204

)

$

(1,491

)

$

(348

)

$

291

$

125

Special mention loans:

New England

$

103,060

$

83,026

$

61,741

$

21,691

$

19,828

Northern California

63,192

75,609

5,947

5,227

4,821

Southern California

33,257

33,247

24,935

25,108

33,484

Total special mention loans

$

199,509

$

191,882

$

92,623

$

52,026

$

58,133

Accruing classified loans:

New England

$

74,682

$

53,124

$

50,483

$

20,428

$

21,830

Northern California

4,589

21,712

24,843

24,946

23,938

Southern California

2,556

13,750

12,622

12,548

17,510

Total accruing classified loans

$

81,827

$

88,586

$

87,948

$

57,922

$

63,278

Nonaccruing loans:

New England

$

11,807

$

11,630

$

11,965

$

9,764

$

8,999

Northern California

25,133

9,459

6,575

319

2,395

Southern California

4,323

4,515

5,774

6,020

6,171

Total nonaccruing loans

$

41,263

$

25,604

$

24,314

$

16,103

$

17,565

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

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

Reconciliations of Non-GAAP Financial Measures

Unaudited ($ in thousands, except share and per share data)

3Q20

2Q20

1Q20

4Q19

3Q19

ROACE AND ROATCE:

Net income/(loss) attributable to the Company (GAAP) (A)

$

22,680

$

(3,298

)

$

800

$

21,244

$

19,962

ADD: Amortization of intangibles, net of tax

564

555

565

534

530

Tangible common net income/(loss) (non-GAAP) (B)

$

23,244

$

(2,743

)

$

1,365

$

21,778

$

20,492

Total average shareholders’ equity (C)

$

842,606

$

834,882

$

838,935

$

818,816

$

807,890

LESS: Average goodwill and intangibles, net

(66,246

)

(66,877

)

(67,586

)

(68,031

)

(68,359

)

Average tangible common equity (non-GAAP) (D)

$

776,360

$

768,005

$

771,349

$

750,785

$

739,531

ROACE (annualized) (A/C)

10.68

%

(1.58

)%

0.39

%

10.29

%

9.80

%

ROATCE (annualized) (B/D)

11.88

%

(1.43

)%

0.72

%

11.51

%

10.99

%

PRE-TAX, PRE-PROVISION INCOME:

Income/(loss) before income taxes (GAAP)

$

24,501

$

(2,457

)

$

908

$

28,129

$

25,575

ADD BACK: Provision/(credit) for loan losses

(4,569

)

22,604

16,962

(3,668

)

167

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

$

19,932

$

20,147

$

17,870

$

24,461

$

25,742

TANGIBLE COMMON EQUITY:

Total shareholders’ equity (GAAP)

$

846,169

$

825,205

$

828,792

$

819,018

$

808,688

LESS: Goodwill and intangibles, net

(66,505

)

(66,542

)

(67,244

)

(67,959

)

(68,229

)

Tangible common equity (non-GAAP) (A)

$

779,664

$

758,663

$

761,548

$

751,059

$

740,459

Total assets (GAAP)

$

9,431,305

$