BOSTON PRIVATE FINANCIAL HOLDINGS INC - FORM 8-K - EX-99.1 - Q2-14 EARNINGS PRESS RELEASE

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8-K - 8-K - BOSTON PRIVATE FINANCIAL HOLDINGS INC	a2014q28-kearnings7x15x2014.htm

Boston Private Financial Holdings, Inc. Reports Second Quarter 2014 Results

Second Quarter Highlights:


•	Earnings increased 25% linked quarter: Second quarter 2014 GAAP Net Income Attributable to the Company increased to $21.3 million, or $0.25 per share, from $17.0 million, or $0.20 per share, for the first quarter of 2014.


•	Loan sale: In the second quarter of 2014, the Company sold $57 million of commercial loans from the loan portfolio for a gain on sale of $1.6 million.


•	Deposit and loan growth: Average Total Deposits increased 8% year-over-year to $5.0 billion. On a linked quarter basis, Average Total Deposits were flat. Average Total Loans increased 4% year-over-year to $5.1 billion although were flat for the second quarter of 2014 as a result of the portfolio loan sale.


•	Core Fees and Income increased 13% year-over-year: Fees from Wealth Management businesses increased 3% linked quarter and 11% year-over-year to $30.8 million.


•	Net Interest Income growth: Net Interest Income grew 4% linked quarter and 5% year-over-year to $46.3 million. Included in the quarter's Net Interest Income was $1.9 million of interest recovered on previous nonaccrual loans.


•	Total Operating Expenses decreased: Total Operating Expenses decreased 1% to $54.4 million on a linked quarter basis and decreased 4% on a year-over-year basis.


•	Provision credit: The Company recorded a provision credit of $5.0 million in the quarter due to net recoveries of $2.9 million and $1.2 million as result of the commercial loan sale.

Boston, MA - July 15, 2014 - Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2014 GAAP Net Income Attributable to the Company of $21.3 million, compared to $17.0 million for the first quarter of 2014. GAAP Net Income Attributable to the Company was flat on a year-over-year basis relative to the second quarter of 2013. Second quarter diluted earnings per share were $0.25, a $0.05 increase over the first quarter of 2014. Diluted earnings per share increased by $0.14 on a year-over-year basis from $0.11 for the second quarter of 2013. Excluding the impact of significant transactions in the second quarter of 2013, diluted earnings per share was $0.18.

“The second quarter demonstrated continued strength in our Wealth Management businesses and our Private Bank,” said Clayton G. Deutsch, CEO and President. “For the Private Bank, average loan and deposit growth year-over-year was 4% and 8%, respectively. Our Wealth Advisors had another strong quarter, with fees increasing 4% linked quarter and 16% year-over-year. Especially gratifying, given our long-standing focus on target ROE attainment, is seeing second quarter ROE come in at 13.5% and first half of 2014 ROE coming in at 12.2%.”

Core Fees and Income Increased 13% Year-Over-Year

On a year-over-year basis, Core Fees and Income (Investment Management Fees, Wealth Advisory Fees, Private Banking Wealth Management and Trust Fees, Other Banking Fee Income and Gain on Sale of Loans) increased 13% to $34.1 million due to double-digit growth in Wealth Advisory Fees. On a linked quarter basis, Core Fees and Income increased 8% from $31.7 million for the first quarter of 2014, due largely to higher AUM across our Wealth Management business as well as higher gain on sale of loans.

Total Assets Under Management/Advisory (“AUM”) increased to $25.4 billion at the end of the second quarter, up 3% from $24.7 billion at the end of the first quarter of 2014. AUM increased 17% from $21.8 billion at the end of the second quarter of 2013.

Net Interest Income Increased 4% Linked Quarter

Net Interest Income for the second quarter was $46.3 million, up 4% from $44.5 million for the first quarter of 2014. On a year-over-year basis, Net Interest Income increased 5% from $43.9 million. Included in the second quarter of 2014 Net Interest Income was $1.9 million of interest recovered on previous nonaccrual loans. Excluding the interest recovered, Net Interest Income was flat compared to the first quarter of 2014 and up 1% from the second quarter of 2013.

Net Interest Margin was 3.14% at the end of the second quarter, up ten basis points from 3.04% at the end of the first quarter. Net Interest Margin was unchanged from June 30, 2013. Excluding the impact from interest recovered, June 30, 2014 Net Interest Margin was 3.01%, down three basis points from March 31, 2014.

Total Operating Expenses Decreased 1% Linked Quarter, 4% Year-Over-Year

Total Operating Expenses for the second quarter of 2014 were $54.4 million, down 1% from $55.0 million for the first quarter of 2014. First quarter expenses were elevated by seasonal compensation expenses such as increased 401(k) employee contribution matches and FICA. On a year-over-year basis, Total Operating Expenses decreased 4% from $56.7 million. The second quarter of 2013 included $2.4 million of one-time charges related to liability restructuring and tax reserves.

Provision Credit of $5.0M Driven By Net Recoveries

The Company recorded a $5.0 million credit for its Provision for Loan Losses for the second quarter of 2014, compared to a provision credit of $1.2 million for the first quarter. The provision credit was driven by net recoveries of $2.9 million and $1.2 million from the commercial loan sale. The Company recorded a provision credit of $2.0 million for the second quarter of 2013.

Criticized Loans were flat on a linked quarter basis, and decreased 2% year-over-year. Nonaccrual Loans (“Nonaccruals”) decreased 1% to $41.6 million, down from $42.1 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 20% from $52.3 million. As a percentage of Total Loans, Nonaccruals were 82 basis points at June 30, 2014, up 1 basis point from 81 basis points at March 31, 2014, and down 26 basis points from 1.08% at June 30, 2013.

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



(In millions)	June 30, 2014			March 31, 2014			June 30, 2013
Total Criticized Loans	$	188.2		$	187.3		$	191.4
Total Loans 30-89 Days Past Due and Accruing⁽¹³⁾	$	6.0		$	10.6		$	11.5
Total Net Loans (Charged-off)/ Recovered	$	2.9		$	1.4		$	0.5
Allowance for Loan Losses/ Total Loans	1.46		%	1.48		%	1.67		%

Capital Ratios Increase

The Company built upon its capital position in the second quarter of 2014. David J. Kaye, Chief Financial Officer, stated, “Strong earnings and proactive balance sheet management pushed the Tier 1 Common Equity Ratio up to 10.6%, providing the Company with additional flexibility going forward.”

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



	June 30, 2014		March 31, 2014		June 30, 2013
Total Risk-Based Capital *	15.5	%	15.0	%	15.6	%
Tier I Risk-Based Capital *	14.3	%	13.7	%	14.3	%
Tier I Leverage Capital *	10.4	%	10.2	%	10.4	%
TCE/TA	7.8	%	7.1	%	7.3	%
Tier I Common Equity/ Risk Weighted Assets *	10.6	%	10.1	%	9.9	%

*June 30, 2014 data is presented based on estimated data.

Dividend Payments

Concurrent with the release of second quarter 2014 earnings, the Board of Directors of the Company declared a cash dividend to common shareholders of $0.08 per share. The record date for this dividend is August 8, 2014, and the payment date is August 22, 2014.

The Board of Directors of the Company also declared a cash dividend to holders of the Non-Cumulative Perpetual Preferred Stock, Series D of $17.375 per share, which will result in a dividend of $0.434375 per depositary share. The record date for this dividend is August 15, 2014, and the payment date is September 15, 2014.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures, such as tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision earnings; and the efficiency ratio (FTE basis), to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. A detailed reconciliation table of the Company's GAAP to the non-GAAP measures is attached.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Wednesday, July 16, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003

Elite Entry Number: 2512612

Replay Information:

Available from July 16 at 12 noon until July 23

Dial In #: (877) 344-7529

Conference Number: 10048703

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

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization that owns Wealth Management and Private Banking affiliates in Boston, New York, Los Angeles and the San Francisco Bay Area. The Company has a $6 billion Private Banking balance sheet, and manages over $25 billion of client assets.

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

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

Forward-Looking Statements

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

Note to Editors:

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

###

CONTACT:

Steve Gaven

Vice President, Investor Relations

Boston Private Financial Holdings, Inc.

(617) 912-3793

sgaven@bostonprivate.com

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	June 30, 2014			March 31, 2014			June 30, 2013
	(In thousands, except share and per share data)
Assets:
Cash and cash equivalents	$	139,181		$	398,687		$	67,654
Investment securities available for sale	683,590			700,531			724,153
Investment securities held to maturity	138,380			127,938			—
Stock in Federal Home Loan Banks	35,276			37,450			40,622
Loans held for sale	2,841			2,297			12,414
Total loans	5,106,051			5,162,470			4,838,713
Less: Allowance for loan losses	74,547			76,605			80,800
Net loans	5,031,504			5,085,865			4,757,913
Other real estate owned (“OREO”)	921			921			776
Premises and equipment, net	28,410			29,045			29,093
Goodwill	110,180			110,180			110,180
Intangible assets, net	18,506			19,551			22,712
Fees receivable	11,957			11,039			9,950
Accrued interest receivable	14,337			15,057			14,831
Deferred income taxes, net	50,516			53,716			60,019
Other assets	123,224			113,143			116,613
Total assets	$	6,388,823		$	6,705,420		$	5,966,930
Liabilities:
Deposits	$	4,951,852		$	5,341,644		$	4,576,383
Securities sold under agreements to repurchase	137,334			93,550			26,700
Federal funds purchased	—			15,000			65,000
Federal Home Loan Bank borrowings	416,579			394,458			448,706
Junior subordinated debentures	106,363			106,363			133,168
Other liabilities	93,149			87,652			90,035
Total liabilities	5,705,277			6,038,667			5,339,992
Redeemable Noncontrolling Interests	20,895			20,774			17,661
Shareholders’ Equity:
Preferred stock, $1.00 par value; authorized: 2,000,000 shares	47,753			47,753			47,754
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 80,394,009 shares at June 30, 2014; 80,001,139 shares at March 31, 2014; 79,734,389 shares at June 30, 2013	80,394			80,001			79,734
Additional paid-in capital	603,652			610,590			626,950
Accumulated deficit	(67,838		)	(89,170		)	(142,215		)
Accumulated other comprehensive income/ (loss)	(1,542		)	(3,305		)	(3,081		)
Total Company’s shareholders’ equity	662,419			645,869			609,142
Noncontrolling interests	232			110			135
Total shareholders’ equity	662,651			645,979			609,277
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	6,388,823		$	6,705,420		$	5,966,930

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Three Months Ended									Six Months Ended
	June 30, 2014			March 31, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Interest and dividend income:	(In thousands, except share and per share data)
Loans	$	49,396		$	47,214		$	48,339		$	96,610		$	97,689
Taxable investment securities	730			636			489			1,366			1,000
Non-taxable investment securities	914			904			778			1,818			1,617
Mortgage-backed securities	1,689			1,936			1,340			3,625			2,742
Federal funds sold and other	253			346			179			599			358
Total interest and dividend income	52,982			51,036			51,125			104,018			103,406
Interest expense:
Deposits	3,375			3,216			3,120			6,591			6,906
Federal Home Loan Bank borrowings	2,359			2,326			2,818			4,685			5,649
Junior subordinated debentures	965			955			1,156			1,920			2,310
Repurchase agreements and other short-term borrowings	15			17			132			32			366
Total interest expense	6,714			6,514			7,226			13,228			15,231
Net interest income	46,268			44,522			43,899			90,790			88,175
Provision/ (credit) for loan losses	(5,000		)	(1,200		)	(2,000		)	(6,200		)	(2,000		)
Net interest income after provision for loan losses	51,268			45,722			45,899			96,990			90,175
Fees and other income:
Investment management fees	11,754			11,461			10,848			23,215			20,934
Wealth advisory fees	11,979			11,473			10,317			23,452			20,385
Private banking wealth management and trust fees	7,043			6,961			6,490			14,004			13,272
Other banking fee income	1,677			1,680			1,706			3,357			3,504
Gain on sale of loans, net	1,694			89			746			1,783			1,933
Total core fees and income	34,147			31,664			30,107			65,811			60,028
Gain on repurchase of debt	—			—			46			—			620
Gain on sale of investments, net	—			1			18			1			28
Gain/(loss) on OREO, net	19			819			(47		)	838			(13		)
Gain on sale of Pacific Northwest offices (1)	—			—			10,574			—			10,574
Other	208			249			286			457			508
Total other income	227			1,069			10,877			1,296			11,717
Operating expense:
Salaries and employee benefits	34,338			36,574			34,054			70,912			71,503
Occupancy and equipment	7,349			7,797			7,597			15,146			15,104
Professional services	3,526			2,843			2,585			6,369			5,246
Marketing and business development	2,730			1,426			2,726			4,156			4,162
Contract services and data processing	1,447			1,438			1,484			2,885			3,052
Amortization of intangibles	1,045			1,053			1,101			2,098			2,219
FDIC insurance	854			896			954			1,750			1,994
Other	3,113			2,941			6,165			6,054			9,972
Total operating expense	54,402			54,968			56,666			109,370			113,252
Income before income taxes	31,240			23,487			30,217			54,727			48,668
Income tax expense	10,333			7,138			10,701			17,471			16,741
Net income from continuing operations	20,907			16,349			19,516			37,256			31,927
Net income from discontinued operations (2)	1,450			1,928			2,781			3,378			4,503
Net income before attribution to noncontrolling interests	22,357			18,277			22,297			40,634			36,430
Less: Net income attributable to noncontrolling interests	1,025			1,236			969			2,261			1,899
Net income attributable to the Company	$	21,332		$	17,041		$	21,328		$	38,373		$	34,531

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Three Months Ended									Six Months Ended
PER SHARE DATA:	June 30, 2014			March 31, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	(In thousands, except share and per share data)
Calculation of Income for EPS:
Net income attributable to the Company	$	21,332		$	17,041		$	21,328		$	38,373		$	34,531
Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (3)	(1,195		)	(1,061		)	(12,468		)	(2,256		)	(12,925		)
Net Income Attributable to the Common Shareholders	20,137			15,980			8,860			36,117			21,606
LESS: Amount allocated to participating securities	(132		)	(117		)	(199		)	(255		)	(998		)
Net Income Attributable to the Common Shareholders, after allocation to participating securities	$	20,005		$	15,863		$	8,661		$	35,862		$	20,608

End of Period Common Shares Outstanding	80,394,009			80,001,139			79,734,389

Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities	79,195,082			79,107,968			80,472,013			79,151,765			83,039,376
LESS: Participating securities	(756,446		)	(962,783		)	(3,221,015		)	(859,044		)	(6,003,378		)
PLUS: Dilutive potential common shares	1,859,789			1,865,705			1,127,880			1,866,121			1,069,292
Weighted Average Diluted Shares (4)	80,298,425			80,010,890			78,378,878			80,158,842			78,105,290

Diluted Total Earnings per Share	$	0.25		$	0.20		$	0.11		$	0.45		$	0.26

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In thousands, except per share data)	June 30, 2014			March 31, 2014			June 30, 2013
FINANCIAL DATA:	June 30, 2014			March 31, 2014			June 30, 2013
Book Value Per Common Share	$	7.65		$	7.48		$	7.04
Tangible Book Value Per Share (5)	$	6.05		$	5.86		$	5.38
Market Price Per Share	$	13.44		$	13.53		$	10.64

ASSETS UNDER MANAGEMENT AND ADVISORY:
Private Banking	$	4,716,000		$	4,612,000		$	4,126,000
Investment Managers	10,917,000			10,505,000			9,149,000
Wealth Advisory	9,760,000			9,641,000			8,516,000
Less: Inter-company Relationship	(23,000		)	(22,000		)	(20,000		)
Total Assets Under Management and Advisory	$	25,370,000		$	24,736,000		$	21,771,000

FINANCIAL RATIOS:
Total Equity/Total Assets	10.37		%	9.63		%	10.21		%
Tangible Common Equity/ Tangible Assets (5)	7.77		%	7.12		%	7.35		%
Tier I Common Equity/ Risk Weighted Assets (5)	10.63		%	10.11		%	9.95		%
Allowance for Loan Losses/Total Loans	1.46		%	1.48		%	1.67		%
Allowance for Loan Losses/Nonaccrual Loans	179		%	182		%	155		%
Return on Average Assets - Three Months Ended (Annualized)	1.32		%	1.06		%	1.39		%
Return on Average Common Equity - Three Months Ended (Annualized) (6)	13.50		%	10.91		%	14.59		%
Return on Average Tangible Common Equity - Three Months Ended (Annualized) (6)	17.15		%	13.99		%	19.05		%
Efficiency Ratio - Three Months Ended (7)	64.39		%	67.88		%	63.94		%

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Average Balance						Interest Income/Expense						Average Yield/Rate
(In Thousands)	Three Months Ended						Three Months Ended						Three Months Ended
AVERAGE BALANCE SHEET:	06/30/14		03/31/14		06/30/13		06/30/14		03/31/14		06/30/13		06/30/14		03/31/14		06/30/13
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities	$	262,253	$	254,407	$	208,717	$	730	$	636	$	489	1.12	%	1.00	%	0.94	%
Non-taxable investment securities (8)	224,634		224,054		204,219		1,406		1,391		1,197		2.50	%	2.48	%	2.34	%
Mortgage-backed securities	332,928		341,082		294,976		1,689		1,936		1,340		2.03	%	2.27	%	1.82	%
Federal funds sold and other	187,722		204,157		152,037		253		346		179		0.62	%	0.68	%	0.46	%
Total Cash and Investments	1,007,537		1,023,700		859,949		4,078		4,309		3,205		1.64	%	1.68	%	1.49	%
Loans: (9)
Commercial and Construction (8)	2,856,603		2,833,475		2,702,401		33,397		30,921		31,854		4.62	%	4.37	%	4.66	%
Residential	2,039,146		2,035,232		1,963,701		15,984		16,169		16,097		3.14	%	3.18	%	3.28	%
Home Equity and Other Consumer	242,988		245,596		271,063		1,744		1,805		1,984		2.88	%	2.98	%	2.94	%
Total Loans	5,138,737		5,114,303		4,937,165		51,125		48,895		49,935		3.95	%	3.83	%	4.02	%
Total Earning Assets	6,146,274		6,138,003		5,797,114		55,203		53,204		53,140		3.57	%	3.47	%	3.64	%
LESS: Allowance for Loan Losses	79,071		77,228		83,711
Cash and due From Banks (Non-Interest Bearing)	32,016		41,559		43,143
Other Assets	366,833		347,721		380,462
TOTAL AVERAGE ASSETS	$	6,466,052	$	6,450,055	$	6,137,008
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Interest-Bearing Deposits: (10)
Savings and NOW	$	601,104	$	545,973	$	523,229	$	111	$	98	$	107	0.07	%	0.07	%	0.08	%
Money Market	2,509,400		2,490,836		2,272,302		1,994		1,845		1,627		0.32	%	0.30	%	0.29	%
Certificates of Deposit	615,325		624,547		669,996		1,270		1,273		1,386		0.83	%	0.83	%	0.85	%
Total Interest-Bearing Deposits	3,725,829		3,661,356		3,465,527		3,375		3,216		3,120		0.36	%	0.36	%	0.37	%
Junior Subordinated Debentures	106,363		106,363		133,605		965		955		1,156		3.59	%	3.59	%	3.42	%
FHLB Borrowings and Other	527,418		506,864		584,030		2,374		2,343		2,950		1.78	%	1.85	%	2.00	%
Total Interest-Bearing Liabilities	4,359,610		4,274,583		4,183,162		6,714		6,514		7,226		0.61	%	0.61	%	0.69	%
Noninterest Bearing Demand Deposits	1,334,791		1,422,928		1,212,127
Other Liabilities	93,539		91,863		116,744
Total Average Liabilities	5,787,940		5,789,374		5,512,033
Redeemable Noncontrolling Interests	23,850		20,132		15,966
Average Shareholders' Equity	654,262		640,549		609,009
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY	$	6,466,052	$	6,450,055	$	6,137,008
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE)							$	48,489	$	46,690	$	45,914
LESS: FTE Adjustment (8)							2,221		2,168		2,015
Net Interest Income (GAAP Basis)							$	46,268	$	44,522	$	43,899
Interest Rate Spread													2.96	%	2.86	%	2.95	%
Bank only Net Interest Margin													3.21	%	3.11	%	3.23	%
Net Interest Margin													3.14	%	3.04	%	3.14	%

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Average Balance				Interest Income/Expense				Average Yield/Rate
(In Thousands)	Six Months Ended				Six Months Ended				Six Months Ended
AVERAGE BALANCE SHEET:	06/30/14		06/30/13		06/30/14		06/30/13		06/30/14		06/30/13
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities	$	258,470	$	203,873	$	1,366	$	1,000	1.06	%	0.99	%
Non-taxable investment securities (8)	224,346		204,734		2,797		2,487		2.49	%	2.43	%
Mortgage-backed securities	336,982		306,268		3,625		2,742		2.15	%	1.79	%
Federal funds sold and other	195,632		159,976		599		358		0.62	%	0.44	%
Total Cash and Investments	1,015,430		874,851		8,387		6,587		1.66	%	1.51	%
Loans: (9)
Commercial and Construction (8)	2,845,103		2,753,758		64,317		63,844		4.50	%	4.61	%
Residential	2,037,200		1,983,662		32,153		33,025		3.16	%	3.33	%
Home Equity and Other Consumer	244,285		269,635		3,548		3,971		2.93	%	2.97	%
Total Loans	5,126,588		5,007,055		100,018		100,840		3.89	%	4.02	%
Total Earning Assets	6,142,018		5,881,906		108,405		107,427		3.52	%	3.64	%
LESS: Allowance for Loan Losses	78,155		84,019
Cash and due From Banks (Non-Interest Bearing)	36,835		42,579
Other Assets	367,856		385,142
TOTAL AVERAGE ASSETS	$	6,468,554	$	6,225,608
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Interest-Bearing Deposits (10):
Savings and NOW	$	573,691	$	549,873	$	209	$	239	0.07	%	0.09	%
Money Market	2,499,981		2,329,515		3,839		3,713		0.31	%	0.32	%
Certificates of Deposit	619,884		674,367		2,543		2,954		0.83	%	0.91	%
Total Interest-Bearing Deposits	3,693,556		3,553,755		6,591		6,906		0.36	%	0.40	%
Junior Subordinated Debentures	106,363		135,311		1,920		2,310		3.59	%	3.39	%
FHLB Borrowings and Other	517,198		560,878		4,716		6,015		1.81	%	2.13	%
Total Interest-Bearing Liabilities	4,317,117		4,249,944		13,227		15,231		0.61	%	0.72	%
Noninterest Bearing Demand Deposits	1,380,285		1,238,320
Other Liabilities	100,221		112,333
Total Average Liabilities	5,797,623		5,600,597
Redeemable Noncontrolling Interests	23,285		16,697
Average Shareholders' Equity	647,646		608,314
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY	$	6,468,554	$	6,225,608
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE)					$	95,178	$	92,196
LESS: FTE Adjustment (8)					4,389		4,021
Net Interest Income (GAAP Basis)					$	90,789	$	88,175
Interest Rate Spread									2.91	%	2.92	%
Bank only Net Interest Margin									3.16	%	3.21	%
Net Interest Margin									3.09	%	3.12	%

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In Thousands)	June 30, 2014		March 31, 2014		June 30, 2013
LOAN DATA (11):	June 30, 2014		March 31, 2014		June 30, 2013
Commercial and Industrial Loans:
New England	$	715,814	$	704,056	$	670,377
San Francisco Bay	119,554		108,365		72,511
Southern California	47,095		39,780		53,745
Total Commercial and Industrial Loans	$	882,463	$	852,201	$	796,633
Commercial Real Estate Loans:
New England	$	717,166	$	730,709	$	622,529
San Francisco Bay	626,744		644,108		622,743
Southern California	436,991		483,817		433,396
Total Commercial Real Estate Loans	$	1,780,901	$	1,858,634	$	1,678,668
Construction and Land Loans:
New England	$	81,453	$	94,966	$	104,451
San Francisco Bay	58,042		62,879		34,073
Southern California	10,927		16,871		11,721
Total Construction and Land Loans	$	150,422	$	174,716	$	150,245
Residential Loans:
New England	$	1,231,902	$	1,227,114	$	1,172,993
San Francisco Bay	452,864		456,372		452,344
Southern California	354,306		352,369		313,031
Total Residential Loans	$	2,039,072	$	2,035,855	$	1,938,368
Home Equity Loans:
New England	$	81,465	$	77,470	$	81,588
San Francisco Bay	27,804		28,159		32,705
Southern California	3,235		3,334		6,301
Total Home Equity Loans	$	112,504	$	108,963	$	120,594
Other Consumer Loans:
New England	$	128,698	$	119,500	$	139,533
San Francisco Bay	6,917		7,311		8,024
Southern California	5,074		5,246		6,463
Eliminations and other, net	—		44		185
Total Other Consumer Loans	$	140,689	$	132,101	$	154,205
Total Loans
New England	$	2,956,498	$	2,953,815	$	2,791,471
San Francisco Bay	1,291,925		1,307,194		1,222,400
Southern California	857,628		901,417		824,657
Eliminations and other, net	—		44		185
Total Loans	$	5,106,051	$	5,162,470	$	4,838,713

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In Thousands)	June 30, 2014			March 31, 2014		June 30, 2013
CREDIT QUALITY (11):	June 30, 2014			March 31, 2014		June 30, 2013
Special Mention Loans:
New England	$	55,882		$	41,920	$	28,644
San Francisco Bay	24,264			25,055		21,617
Southern California	26,455			36,452		19,077
Total Special Mention Loans	$	106,601		$	103,427	$	69,338
Accruing Substandard Loans (12):
New England	$	12,849		$	12,319	$	17,657
San Francisco Bay	25,838			26,294		43,460
Southern California	1,306			3,507		8,656
Total Accruing Substandard Loans	$	39,993		$	42,120	$	69,773
Nonaccruing Loans:
New England	$	19,818		$	21,569	$	25,361
San Francisco Bay	16,487			12,541		19,379
Southern California	5,315			7,944		7,549
Total Nonaccruing Loans	$	41,620		$	42,054	$	52,289
Other Real Estate Owned:
New England	$	336		$	336	$	191
San Francisco Bay	585			585		585
Southern California	—			—		—
Total Other Real Estate Owned	$	921		$	921	$	776
Loans 30-89 Days Past Due and Accruing (13):
New England	$	3,547		$	4,472	$	7,433
San Francisco Bay	487			2,577		3,504
Southern California	1,950			3,528		605
Total Loans 30-89 Days Past Due and Accruing	$	5,984		$	10,577	$	11,542
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England	$	(622	)	$	540	$	(864	)
San Francisco Bay	1,959			640		175
Southern California	1,605			254		1,203
Total Net Loans (Charged-off)/ Recovered	$	2,942		$	1,434	$	514
Loans (Charged-off)/ Recovered, Net for the Six Months Ended:
New England	$	(82	)			$	(2,100	)
San Francisco Bay	2,599					(1,333		)
Southern California	1,859					2,176
Total Net Loans (Charged-off)/ Recovered	$	4,376				$	(1,257	)

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)

FOOTNOTES:


(1)	On December 17, 2012, Boston Private Bank & Trust Company announced that it had entered into an agreement to sell its three offices in the Pacific Northwest region. The sale closed on May 10, 2013, at which time the Company recorded a gain on sale of $10.6 million.


(2)	Net income from discontinued operations consists of contingent payments or expenses related to our divested affiliates, including Davidson Trust Company; Boston Private Value Investors, Inc.; Sand Hill Advisors, LLC; RINET Company, LLC; Gibraltar Private Bank & Trust Company; and Westfield Capital Management Company, LLC.


(3)	Adjustments to net income attributable to the Company to arrive at net income attributable to the common shareholders, as presented in these tables, include decrease/ (increase) in noncontrolling interests redemption value, dividends paid on preferred stock, and dividends on participating securities.

(4)

When the Company has positive net income from continuing operations attributable to the common shareholders, the Company adds additional shares to basic weighted average shares outstanding to arrive at diluted weighted average shares outstanding for the diluted earnings per share calculation. These additional shares reflect the assumed exercise, conversion, or contingent issuance of dilutive securities. If the additional shares would result in anti-dilution they would be excluded from the diluted earnings per share calculation. The potential dilutive shares relate to: unexercised stock options, unvested non-participating restricted stock, and unexercised stock warrants. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 16: Earnings Per Share” in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 for additional information.


(5)	The Company uses certain non-GAAP financial measures, such as: Tangible Book Value Per Share and the Tangible Common Equity (“TCE”) to Tangible Assets (“TA”) ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

Reconciliations from the Company's GAAP Total Equity to Total Assets ratio to the Non-GAAP TCE to TA ratio, and from GAAP Book Value to Non-GAAP Tangible Book Value are presented below:

The Company calculates Tangible Assets by adjusting Total Assets to exclude Goodwill and Intangible Assets.

The Company calculates Tangible Common Equity by adjusting Total Equity to exclude non-convertible Series D Preferred stock and exclude Goodwill and Intangible Assets, net.



(In thousands, except per share data)	June 30, 2014			March 31, 2014			June 30, 2013
Total Balance Sheet Assets	$	6,388,823		$	6,705,420		$	5,966,930
LESS: Goodwill and Intangible Assets, net	(128,686		)	(129,731		)	(132,892		)
Tangible Assets (non-GAAP)	$	6,260,137		$	6,575,689		$	5,834,038
Total Shareholders' Equity	$	662,651		$	645,979		$	609,277
LESS: Series D Preferred Stock (non-convertible)	(47,753		)	(47,753		)	(47,754		)
LESS: Goodwill and Intangible Assets, net	(128,686		)	(129,731		)	(132,892		)
Total adjusting items	(176,439		)	(177,484		)	(180,646		)
Tangible Common Equity (non-GAAP)	$	486,212		$	468,495		$	428,631
Total Equity/Total Assets	10.37		%	9.63		%	10.21		%
Tangible Common Equity/Tangible Assets (non-GAAP)	7.77		%	7.12		%	7.35		%

Total Risk Weighted Assets *	$	4,629,247		$	4,707,604		$	4,379,436
Tier I Common Equity *	$	491,982		$	475,930		$	435,630
Tier I Common Equity/ Risk Weighted Assets	10.63		%	10.11		%	9.95		%

End of Period Shares Outstanding	80,394			80,001			79,734

Book Value Per Common Share	$	7.65		$	7.48		$	7.04
Tangible Book Value Per Share (non-GAAP)	$	6.05		$	5.86		$	5.38

* Risk Weighted Assets and Tier I Common Equity for June 30, 2014 are presented based on estimated data.

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)


(6)	The Company uses certain non-GAAP financial measures, such as: Return on Average Common Equity and Return on Average Tangible Common Equity to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

Reconciliations from the Company's GAAP Return on Average Equity ratio to the Non-GAAP Return on Average Common Equity ratio, and the Non-GAAP Return on Average Tangible Common Equity ratio are presented below:

The Company calculates Average Common Equity by adjusting Average Equity to exclude Average Preferred Equity.

The Company calculates Average Tangible Common Equity by adjusting Average Equity to exclude Average Goodwill and Intangible Assets, net and Average Preferred Equity.



(In thousands, except per share data)	June 30, 2014			March 31, 2014			June 30, 2013
Total average shareholders' equity	$	654,262		$	640,549		$	609,009
LESS: Average Series D preferred stock (non-convertible)	(47,753		)	(47,753		)	(39,501		)
Average common equity (non-GAAP)	606,509			592,796			569,508
LESS: Average goodwill and intangible assets, net	(129,216		)	(130,272		)	(133,451		)
Total adjusting items	(129,216		)	(130,272		)	(133,451		)
Average Tangible Common Equity (non-GAAP)	$	477,293		$	462,524		$	436,057

Net income attributable to the Company	$	21,332		$	17,041		$	21,328
Less: Dividends on Series D preferred stock	(869		)	(869		)	(560		)
Net income, after dividends on Series D preferred stock (non-GAAP)	$	20,463		$	16,172		$	20,768

Return on Average Equity - Three Months Ended (Annualized)	13.04		%	10.64		%	14.01		%
Return on Average Common Equity - Three Months Ended (Annualized) (non-GAAP)	13.50		%	10.91		%	14.59		%
Return on Average Tangible Common Equity - Three Months Ended (Annualized) (non-GAAP)	17.15		%	13.99		%	19.05		%

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)


(7)	The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision earnings and the efficiency ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

Reconciliations from the Company's GAAP income from continuing operations before income taxes to non-GAAP pre-tax, pre-provision earnings; from GAAP net income attributable to the Company to Non-GAAP net income attributable to the Company, excluding the sale of the Pacific Northwest offices; from GAAP diluted total EPS to Non-GAAP diluted total EPS, excluding the effect of significant transactions; and from GAAP efficiency ratio to Non-GAAP efficiency ratio (FTE basis) are presented below:



	Three Months Ended									Six Months Ended
(In thousands, except per share data)	June 30, 2014			March 31, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Income before income taxes (GAAP)	$	31,240		$	23,487		$	30,217		$	54,727		$	48,668
ADD BACK: Provision/ (credit) for loan losses	(5,000		)	(1,200		)	(2,000		)	(6,200		)	(2,000		)
Pre-tax, pre-provision earnings (non-GAAP)	$	26,240		$	22,287		$	28,217		$	48,527		$	46,668

Net income attributable to the Company (GAAP)	$	21,332		$	17,041		$	21,328		$	38,373		$	34,531
LESS: Gain on sale of Pacific Northwest offices, net of tax	—			—			6,267			—			6,267
Net income attributable to the Company, excluding the effect of significant transactions (Non-GAAP)	$	21,332		$	17,041		$	15,061		$	38,373		$	28,264

Net income attributable to the Common Shareholders, after allocation to participating securities (GAAP)	$	20,005		$	15,863		$	8,661		$	35,862		$	20,608
ADD BACK: Deemed dividend due to repurchase of Series B Preferred	—			—			11,738			—			11,738
LESS: Gain on sale of Pacific Northwest offices, net of tax	—			—			(6,267		)	—			(6,267		)
Net income attributable to the Common Shareholders, after allocation to participating securities, excluding the effect of significant transactions (Non-GAAP)	$	20,005		$	15,863		$	14,132		$	35,862		$	26,079

Diluted Total Earnings Per Share (GAAP)	$	0.25		$	0.20		$	0.11		$	0.45		$	0.26
Diluted Total Earnings Per Share, excluding the effect of significant transactions (Non-GAAP)	$	0.25		$	0.20		$	0.18		$	0.45		$	0.33

Total operating expense (GAAP)	$	54,402		$	54,968		$	56,666		$	109,370		$	113,252
Less: Amortization of intangibles	1,045			1,053			1,101			2,098			2,219
Total operating expense (excluding amortization of intangibles) (non-GAAP)	$	53,357		$	53,915		$	55,565		$	107,272		$	111,033

Net interest income	$	46,268		$	44,522		$	43,899		$	90,790		$	88,175
Total core fees and income	34,147			31,664			30,107			65,811			60,028
Total other income	227			1,069			10,877			1,296			11,717
FTE income	2,221			2,168			2,015			4,389			4,021
Total revenue (FTE basis)	$	82,863		$	79,423		$	86,898		$	162,286		$	163,941
Efficiency Ratio, before deduction of intangible amortization (GAAP)	67.46		%	71.15		%	66.76		%	69.27		%	70.82		%
Efficiency Ratio, FTE Basis (non-GAAP)	64.39		%	67.88		%	63.94		%	66.10		%	67.73		%

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)


(8)	Interest income on Non-taxable Investments and Loans are presented on an FTE basis using the federal statutory rate of 35% for each period presented.


(9)	Includes Loans Held for Sale and Nonaccrual Loans.


(10)	Includes Deposits Held for Sale.

(11)

The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender's regional offices. Loans in the Pacific Northwest region that were not included the sale of that region's offices are included with the offices from which they are being managed after the sale. Net loans from the Company to certain principals of the Company's affiliate partners, loans at the Company's non-banking segments, and inter-company loan eliminations are identified as “Eliminations and other, net”.

(12)

Accruing substandard loans include loans that are classified as substandard but are still accruing interest income. 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.

(13)

In addition to loans 30-89 days past due and accruing, at June 30, 2014, the Company had two loans totaling $0.1 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At March 31, 2014, the Company had three loans totaling $0.6 million that were more than 90 days past due but still on accrual status. These loans originated in the New England region. At June 30, 2013, the Company had one loan totaling $0.1 million that was more than 90 days past due but still on accrual status. This loan originated in the New England region.

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BOSTON PRIVATE FINANCIAL HOLDINGS INC Reports