BOSTON PRIVATE FINANCIAL HOLDINGS INC - FORM 8-K - EX-99.1 - EX 99.1 Q3-18 EARNINGS PR 10-17-2018

Attached files

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EX-99.2 - PRESS RELEASE DATED 10-17-2018 - BOSTON PRIVATE FINANCIAL HOLDINGS INC	ex992pressreleasedatedocto.htm
8-K - 2018 Q3 EARNINGS 8-K - BOSTON PRIVATE FINANCIAL HOLDINGS INC	a2018q38-kearnings10x17x20.htm

Boston Private Financial Holdings, Inc. Reports Third Quarter 2018 Results

Third Quarter 2018 Highlights include:


•	GAAP net income was $18.0 million or $0.20 per diluted share, and operating net income was $22.5 million or $0.25 per diluted share


•	Operating return on average common equity was 12.1%


•	Operating return on average tangible common equity was 14.2%


•	Average total deposits were $6.7 billion, a 5% increase year-over-year


•	Average total loans were $6.7 billion, a 6% increase year-over-year


•	Total assets under management/advisory (“AUM”) were $22.4 billion and total net flows were positive $342 million


•	Restructuring expense of $5.8 million expected to result in $11 million of annual expense reduction in 2019

Boston, MA - October 17, 2018 - Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported third quarter 2018 GAAP Net income attributable to the Company of $18.0 million, compared to $6.4 million for the second quarter of 2018 and $19.8 million for the third quarter of 2017. Third quarter 2018 Diluted earnings per share were $0.20, compared to $0.03 in the second quarter of 2018 and $0.22 in the third quarter of 2017.



Summary Financial Results - Reported
							% Change
($ in millions, except for per share data)	3Q18		2Q18		3Q17		Linked Quarter		Year over Year
Net income attributable to the Company	$18.0		$6.4		$19.8		nm		(9	)%
Diluted earnings per share	$0.20		$0.03		$0.22		nm		(9	)%

Non-GAAP Financial Measures:
Pre-tax, pre-provision income	$23.4		$25.3		$27.5		(7	)%	(15	)%
Return on average common equity ("ROACE")	9.7	%	3.0	%	9.9	%
Return on average tangible common equity ("ROATCE")	11.4	%	3.9	%	13.2	%
nm = not meaningful

Net income attributable to the Company, Diluted earnings per share, ROACE, and ROATCE for the third quarter of 2018 improved primarily due to a $12.7 million income tax expense during second quarter results associated with the divestiture of Anchor Capital Advisors, LLC ("Anchor"), partially offset by a $5.8 million restructuring expense during third quarter results.

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 18.



Summary Financial Results - Operating Basis (non-GAAP)
							% Change
($ in millions, except for per share data)	3Q18¹		2Q18²		3Q17		Linked Quarter		Year over Year
Net income attributable to the Company	$22.5		$19.1		$19.8		18	%	14	%
Diluted earnings per share	$0.25		$0.21		$0.22		21	%	15	%

Pre-tax, pre-provision income	$29.2		$25.3		$27.5		15	%	6	%
Return on average common equity	12.1	%	10.0	%	9.9	%
Return on average tangible common equity	14.2	%	11.9	%	13.2	%
¹3Q18 results adjusted to exclude the impact of $5.8 million restructuring expense less a $1.2 million tax benefit, resulting in a net $4.6 million benefit to overall results ²2Q18 results adjusted to exclude the impact of $12.7 million income tax expense related to the divestiture of Anchor Capital Advisors LLC See footnote 16 for a GAAP to non-GAAP reconciliation

"Our third quarter results demonstrate improved financial performance across our core businesses. Operating basis pre-tax, pre-provision income increased 15% linked quarter and 6% year-over-year," said Clayton G. Deutsch, CEO. "The Bank demonstrated linked quarter average deposit growth of 6%, and Boston Private Wealth continues to demonstrate strong new business generation across regions and distribution channels."

"Our third quarter results include a restructuring charge of $5.8 million, which is the result of an efficiency initiative guided by a focus of delivering expense reduction and an improved return profile. We expect restructuring benefits to include approximately $11 million of expense savings in 2019."



Divestiture

On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. Anchor’s results through the closing date remain consolidated in the Company’s results through April 13, 2018 and prior periods. For presentation purposes, Anchor’s AUM are excluded from AUM amounts, but are included in the calculation of Core fees and income.



Net Interest Income and Margin (non-GAAP, except for Net Interest Income)
										% Change
($ in millions)	3Q18			2Q18			3Q17			Linked Quarter		Year over Year
Net interest income		$59.6			$57.5			$56.6		4	%	5	%
Less: Interest recovered on previous nonaccrual loans	1.0			—			0.1			nm		nm
Core net interest income, non-FTE basis	58.7			57.5			56.5			2	%	4	%
Add: FTE adjustment	0.6			0.9			2.9			(34	)%	(80	)%
Core net interest income, FTE basis	59.2			58.4			59.4			1	%	—	%

Net interest margin (FTE basis)	2.93		%	2.89		%	3.02		%
Core net interest margin (FTE basis)	2.88		%	2.89		%	3.02		%
Core net interest margin (non-FTE basis)	2.85		%	2.85		%	2.87		%
FTE = Fully Taxable Equivalent

Net interest income for the third quarter of 2018 was $59.6 million, an increase of 4% linked quarter and 5% year-over-year. The year-over-year increase was primarily driven by interest recovered on previous nonaccrual loans, higher yields on interest-earning assets, and higher asset volumes, partially offset by higher funding costs. Core net interest income, non-FTE basis, which excludes interest recovered on previous nonaccrual loans, increased 4% year-over-year and 2% linked quarter.

The Company’s Core net interest margin (FTE basis) decreased 1 basis point on a linked quarter basis to 2.88%, primarily driven by a lower FTE adjustment. Linked quarter, the net interest margin benefited from deposit inflows that funded repayment of short-term borrowings. The year-over-year decline was primarily driven by a lower tax benefit on tax-exempt income.



Noninterest Income
				% Change
($ in millions)	3Q18	2Q18	3Q17	Linked Quarter		Year over Year
Investment management fees	$3.2	$4.2	$11.3	(23	)%	(71	)%
Wealth advisory fees	14.0	13.7	13.3	2	%	5	%
Wealth management and trust fees	11.5	11.2	11.6	3	%	(1	)%
Private banking fees³	2.8	2.8	2.9	1	%	(2	)%
Total core fees and income	$31.6	$31.9	$39.1	(1	)%	(19	)%
Total other income	0.7	0.2	1.2	nm		(40	)%
Total noninterest income	$32.3	$32.1	$40.3	1	%	(20	)%

Memo: Noninterest income lines excluding Anchor
Less: Anchor revenue	—	1.1	8.4	nm		nm
Investment management fees (non-GAAP)	3.2	3.1	2.9	5	%	12	%
Total core fees and income (non-GAAP)	$31.6	$30.7	$30.7	3	%	3	%
Total noninterest income (non-GAAP)	$32.3	$30.9	$31.9	4	%	1	%
³ 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 2018 was $31.6 million, a 1% decrease linked quarter and a 19% decrease year-over-year, primarily driven by the divestiture of Anchor. Excluding Anchor, Total core fees and income increased 3% year-over-year primarily driven by higher levels of assets under management in the Wealth Advisory and Investment Management segments. Wealth Management & Trust revenues increased 3% linked quarter driven by higher levels of AUM.



Assets Under Management / Advisory
				% Change
($ in millions)	3Q18	2Q18	3Q17	Linked Quarter		Year over Year
Wealth Management and Trust	$8,335	$7,789	$7,703	7	%	8	%
Investment Management ⁴	2,125	2,031	1,902	5	%	12	%
Wealth Advisory	11,977	11,566	10,992	4	%	9	%
Total assets under management / advisory^{4 5}	$22,430	$21,379	$20,586	5	%	9	%


Net flows	3Q18	2Q18	3Q17
Wealth Management and Trust	$315	$(77)	$114
Investment Management ⁴	45	27	(5)
Wealth Advisory	(18)	(30)	(71)
Total net flows ⁴	$342	$(76)	$38
⁴Information excludes Anchor ⁵Segments do not sum to Total assets under management due to an intercompany relationship of $7 million in 3Q18 and 2Q18 and $11 million in 3Q17

Total assets under management / advisory, were $22.4 billion at the end of the third quarter of 2018, an increase of 5% linked quarter and 9% year-over-year. The year-over-year increase was driven primarily by positive market action and positive net flows in all three segments. Positive net flows in the Wealth Management & Trust segment during the third quarter of 2018 were driven by $394 million of new business and low client attrition.



Operating Expense
				% Change
($ in millions)	3Q18	2Q18	3Q17	Linked Quarter		Year over Year
Salaries and employee benefits	$38.9	$39.4	$44.9	(1	)%	(13	)%
Occupancy and equipment	8.2	8.2	7.9	(1	)%	3	%
Professional services	2.9	2.9	3.3	—	%	(13	)%
Marketing and business development	1.7	2.1	2.2	(17	)%	(23	)%
Information systems	6.2	6.8	5.3	(8	)%	18	%
Amortization of intangibles	0.8	0.7	1.4	—	%	(47	)%
FDIC insurance	0.7	0.7	0.6	(5	)%	4	%
Restructuring	5.8	—	—	nm		nm
Other	3.4	3.6	3.6	(3	)%	(5	)%
Total operating expense	$68.6	$64.4	$69.3	6	%	(1	)%

Memo: Excluding Anchor and Restructuring
Restructuring	5.8	—	—	nm		nm
Anchor operating expense	—	0.9	6.4	nm		nm
Total operating expense (non-GAAP) ⁶	$62.8	$63.4	$62.9	(1	)%	—	%
⁶For information on non-GAAP financial measures, see page 6 nm= not meaningful

Total operating expense increased 6% linked quarter primarily driven by restructuring expense, while decreasing 1% year-over-year, primarily driven by the divestiture of Anchor. The restructuring expense is related to a company-wide efficiency initiative and consists primarily of severance and other compensation related expenses.

Excluding Anchor and restructuring expense, Total operating expense for the third quarter of 2018 was $62.8 million, down 1% linked quarter, primarily driven by lower information systems expense and compensation.



Income Tax Expense

The Company's effective tax rate for continuing operations for the third quarter of 2018 was 22.4%, compared to 29.6% in the prior year with the decline primarily driven by the enactment of the Tax Cuts and Jobs Act of 2017.



Loans and Deposits - QTD Averages
							% Change
($ in millions)	3Q18		2Q18		3Q17		Linked Quarter		Year over Year
Commercial and industrial	$999		$974		$994		3	%	—	%
Commercial real estate	2,475		2,478		2,382		—	%	4	%
Construction and land	179		167		114		8	%	58	%
Residential	2,837		2,775		2,567		2	%	11	%
Home equity	94		94		107		—	%	(12	)%
Other consumer	163		180		187		(9	)%	(13	)%
Total loans	$6,747		$6,668		$6,351		1	%	6	%

Non-interest bearing deposits	2,064		1,908		1,966		8	%	5	%
Interest bearing deposits	4,668		4,441		4,439		5	%	5	%
Total deposits	$6,732		$6,349		$6,406		6	%	5	%

Non-interest bearing deposits as a % of Total deposits	31	%	30	%	31	%

Average total loans in the third quarter of 2018 increased 6% year-over-year primarily driven by increases in Residential loans in all geographic markets. End of period Commercial real estate loans increased 2% from September 30, 2017 to September 30, 2018 with New England increasing 6%, Northern California increasing 4%, and Southern California decreasing 7%.

Average total deposits increased 5% year-over-year, primarily driven by growth in money market accounts, demand deposit accounts and certificates of deposits, partially offset by net declines in savings and NOW accounts. Average non-interest bearing deposits comprised 31% of Average total deposits in the third quarter of 2018 and the third quarter of 2017. The cost of total deposits, including DDA, was 0.68%, an increase of 15 basis points linked quarter and 35 basis points year-over-year. The increase was primarily driven by increasing cost of interest bearing deposits.



Provision and Asset Quality

($ in millions)	3Q18		2Q18		1Q18		4Q17		3Q17
Provision/ (credit) for loan loss	$(0.9)		$0.5		$(1.8)		$(0.9)		$(0.4)
Total criticized loans	134.7		114.4		124.1		154.8		146.0
Total nonaccrual loans	12.1		15.7		16.4		14.3		13.6
Total loans 30-89 days past due and accruing	11.6		5.0		20.4		25.0		5.3
Total net loans (charged-off)/ recovered	1.0		0.1		—		0.8		0.3

Ratios:
Allowance for loan losses as a % of Total loans	1.09	%	1.09	%	1.10	%	1.15	%	1.17	%
Nonaccrual loans as a % of Total loans	0.18	%	0.23	%	0.25	%	0.22	%	0.21	%

The Company recorded a provision credit of $0.9 million for the third quarter of 2018, compared to an expense of $0.5 million for the second quarter of 2018 and a credit of $0.4 million for the third quarter of 2017. The provision credit in the third quarter of 2018 was primarily driven by loan recoveries and loan balance declines, partially offset by an increase in criticized and classified loans.

Total criticized loans as of September 30, 2018 was $134.7 million, an increase of 18% linked quarter and a decrease of 8% year-over-year. The linked quarter increase was driven by an increase in Southern California special mention loans and San Francisco Bay Area accruing substandard loans. Total nonaccrual loans (“Nonaccruals”) as of September 30, 2018 was $12.1 million, a decrease of 23% linked quarter and 11% year-over-year. As a percentage of Total loans, Nonaccruals were 18 basis points as of September 30, 2018, down 5 basis points from June 30, 2018, and down 3 basis points from September 30, 2017.



Capital
	3Q18		2Q18		1Q18		4Q17		3Q17
Tangible common equity/ Total assets ⁷	7.8	%	7.5	%	7.4	%	7.3	%	7.4	%
Tangible book value per share ⁷	$7.67		$7.62		$7.17		$7.12		$7.16

Regulatory Capital Ratios: ⁸
Tier 1 common equity	11.1	%	10.9	%	10.4	%	10.3	%	10.4	%
Total risk-based capital	14.1	%	13.8	%	14.2	%	14.1	%	14.3	%
Tier 1 risk-based capital	12.8	%	12.6	%	12.9	%	12.9	%	13.0	%
Tier 1 leverage capital	9.2	%	9.2	%	9.4	%	9.3	%	9.4	%
⁷ See footnote 6 for a GAAP to non-GAAP reconciliation. ⁸ Current quarter information is presented based on estimated data.

Tangible book value per share as of September 30, 2018 increased 7% year-over-year to $7.67.

Dividend Payments

Concurrent with the release of third quarter 2018 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 November 2, 2018, and the payment date is November 16, 2018.

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, goodwill impairment, and restructuring, if any; the efficiency ratio (FTE basis); the efficiency ratio (FTE basis) excluding amortization of intangibles, goodwill impairment, 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 margin; net income attributable to the Company excluding notable items; net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP); diluted earnings per share excluding notable items; operating basis total revenue; operating basis total operating expenses; operating basis pre-tax, pre-provision income; operating basis income before income taxes; operating basis income tax expense; operating basis net income/ (loss) attributable to the Company; operating basis net income/ (loss) attributable to the Common Shareholders; operating basis weighted average diluted shares outstanding; operating basis diluted total earnings/ (loss) per share; operating basis return on average common equity; operating basis return on average tangible common equity; and operating basis effective tax rate.

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

Conference Call

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

Dial In #: (888) 317-6003

Elite Entry Number: 3938300

Replay Information:

Available from October 18, 2018 at 12 noon ET until October 25, 2018

Dial In #: (877) 344-7529

Conference Number: 10124992

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

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization that owns Wealth Management, Trust, and Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Florida, and Wisconsin. The Company has total assets of greater than $8 billion, and manages over $22 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 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.

###

CONTACT:

Adam Bromley

(617) 912-4386

abromley@bostonprivate.com

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
	(In thousands, except share and per share data)
Assets:
Cash and cash equivalents	$	92,634		$	364,539		$	77,085		$	120,541		$	110,440
Investment securities available-for-sale	1,063,340			1,076,967			1,118,497			1,170,328			1,189,827
Investment securities held-to-maturity	75,468			78,955			70,809			74,576			84,090
Stock in Federal Home Loan Bank and Federal Reserve Bank	48,727			70,127			54,455			59,973			61,714
Loans held for sale	3,344			4,622			3,918			4,697			1,957
Total loans	6,720,420			6,767,123			6,602,327			6,505,028			6,413,201
Less: Allowance for loan losses	73,500			73,464			72,898			74,742			74,873
Net loans	6,646,920			6,693,659			6,529,429			6,430,286			6,338,328
Other real estate owned (“OREO”)	108			108			—			—			—
Premises and equipment, net	47,399			46,421			43,627			37,640			36,546
Goodwill (1)	75,598			75,598			75,598			75,598			142,554
Intangible assets, net (1)	13,834			14,584			15,334			16,083			22,447
Fees receivable	10,445			10,405			10,640			11,154			12,560
Accrued interest receivable	24,641			23,732			22,614			22,322			21,823
Deferred income taxes, net	27,833			26,316			32,058			29,031			46,088
Other assets (1)	245,549			230,170			264,295			259,515			201,024
Total assets	$	8,375,840		$	8,716,203		$	8,318,359		$	8,311,744		$	8,269,398
Liabilities:
Deposits	$	6,768,723		$	6,620,179		$	6,584,322		$	6,510,246		$	6,262,347
Securities sold under agreements to repurchase	39,453			58,824			85,257			32,169			59,903
Federal funds purchased	120,000			—			—			30,000			70,000
Federal Home Loan Bank borrowings	441,836			1,056,938			611,588			693,681			812,773
Junior subordinated debentures	106,363			106,363			106,363			106,363			106,363
Other liabilities (1)	149,770			129,175			125,004			135,880			127,069
Total liabilities	7,626,145			7,971,479			7,512,534			7,508,339			7,438,455
Redeemable noncontrolling interests (“RNCI”)	11,686			10,747			16,322			17,461			15,882
Shareholders’ equity:
Preferred stock, $1.00 par value; authorized: 2,000,000 shares	—			—			47,753			47,753			47,753
Common stock, $1.00 par value; authorized: 170,000,000 shares	84,603			84,479			84,194			84,208			84,082
Additional paid-in capital	614,157			613,918			612,526			607,929			606,802
Retained earnings	64,618			56,912			61,518			49,526			76,455
Accumulated other comprehensive income/ (loss)	(27,578		)	(23,328		)	(21,313		)	(8,658		)	(4,823		)
Total Company’s shareholders’ equity	735,800			731,981			784,678			780,758			810,269
Noncontrolling interests	2,209			1,996			4,825			5,186			4,792
Total shareholders’ equity	738,009			733,977			789,503			785,944			815,061
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	8,375,840		$	8,716,203		$	8,318,359		$	8,311,744		$	8,269,398

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Three Months Ended
	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Interest and dividend income:	(In thousands, except share and per share data)
Loans	$	68,254		$	64,048		$	60,929		$	59,496		$	58,096
Taxable investment securities	1,510			1,501			1,510			1,562			1,569
Non-taxable investment securities	1,779			1,752			1,730			1,697			1,664
Mortgage-backed securities	2,941			3,049			3,178			3,125			3,267
Short-term investments and other	1,617			1,205			1,009			978			916
Total interest and dividend income	76,101			71,555			68,356			66,858			65,512
Interest expense:
Deposits	11,487			8,365			6,524			6,048			5,356
Federal Home Loan Bank borrowings	3,877			4,447			3,344			2,626			2,657
Junior subordinated debentures	1,028			1,008			846			771			761
Repurchase agreements and other short-term borrowings	68			190			259			141			111
Total interest expense	16,460			14,010			10,973			9,586			8,885
Net interest income	59,641			57,545			57,383			57,272			56,627
Provision/ (credit) for loan losses	(949		)	453			(1,795		)	(942		)	(432		)
Net interest income after provision/ (credit) for loan losses	60,590			57,092			59,178			58,214			57,059
Fees and other income:
Investment management fees	3,245			4,227			11,425			12,321			11,274
Wealth advisory fees	13,995			13,693			13,512			13,496			13,279
Wealth management and trust fees	11,510			11,169			12,151			11,756			11,619
Other banking fee income	2,775			2,745			2,273			2,531			2,726
Gain on sale of loans, net	67			63			74			85			169
Total core fees and income	31,592			31,897			39,435			40,189			39,067
Gain/ (loss) on sale of investments, net	—			7			(24		)	(110		)	230
Gain/ (loss) on sale of affiliates or offices	—			—			—			(1,264		)	—
Other	722			191			332			360			970
Total other income	722			198			308			(1,014		)	1,200
Total revenue (2)	91,955			89,640			97,126			96,447			96,894
Operating expense:
Salaries and employee benefits	38,944			39,433			47,084			44,612			44,912
Occupancy and equipment	8,164			8,229			7,748			7,753			7,944
Professional services	2,877			2,872			3,177			4,035			3,308
Marketing and business development	1,710			2,070			1,593			1,919			2,216
Information systems	6,233			6,770			5,886			5,635			5,282
Amortization of intangibles	750			749			750			1,323			1,426
Impairment of goodwill	—			—			—			24,901			—
FDIC insurance	674			708			744			677			647
Restructuring	5,763			—			—			—			—
Other	3,442			3,553			3,875			3,134			3,611
Total operating expense	68,557			64,384			70,857			93,989			69,346
Income before income taxes	24,347			24,803			28,064			3,400			27,980
Income tax expense	5,461			17,399			6,026			21,391			8,289
Net income/ (loss) from continuing operations	18,886			7,404			22,038			(17,991		)	19,691
Net income from discontinued operations (3)	—			(2		)	1,698			989			1,186
Net income/ (loss) before attribution to noncontrolling interests	18,886			7,402			23,736			(17,002		)	20,877
Less: Net income attributable to noncontrolling interests	924			968			1,050			1,278			1,074
Net income/ (loss) attributable to the Company	$	17,962		$	6,434		$	22,686		$	(18,280	)	$	19,803

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Nine Months Ended
	September 30, 2018			September 30, 2017
Interest and dividend income:	(In thousands, except share and per share data)
Loans	$	193,231		$	169,468
Taxable investment securities	4,521			4,831
Non-taxable investment securities	5,261			4,925
Mortgage-backed securities	9,168			10,266
Short-term investments and other	3,831			2,347
Total interest and dividend income	216,012			191,837
Interest expense:
Deposits	26,376			14,836
Federal Home Loan Bank borrowings	11,668			7,257
Junior subordinated debentures	2,882			2,148
Repurchase agreements and other short-term borrowings	517			182
Total interest expense	41,443			24,423
Net interest income	174,569			167,414
Provision/ (credit) for loan losses	(2,291		)	(6,727		)
Net interest income after provision/ (credit) for loan losses	176,860			174,141
Fees and other income:
Investment management fees	18,897			33,194
Wealth advisory fees	41,200			39,063
Wealth management and trust fees	34,830			33,606
Other banking fee income	7,793			6,384
Gain on sale of loans, net	204			366
Total core fees and income	102,924			112,613
Gain/ (loss) on sale of investments, net	(17		)	486
Gain/ (loss) on OREO, net	—			(46		)
Other	1,245			1,738
Total other income	1,228			2,178
Total revenue (2)	278,721			282,205
Operating expense:
Salaries and employee benefits	125,461			133,889
Occupancy and equipment	24,141			22,412
Professional services	8,926			9,728
Marketing and business development	5,373			5,847
Information systems	18,889			16,161
Amortization of intangibles	2,249			4,278
FDIC insurance	2,126			2,292
Restructuring	5,763			—
Other	10,870			11,340
Total operating expense	203,798			205,947
Income before income taxes	77,214			82,985
Income tax expense	28,886			24,805
Net income from continuing operations	48,328			58,180
Net income from discontinued operations (3)	1,696			3,881
Net income before attribution to noncontrolling interests	50,024			62,061
Less: Net income attributable to noncontrolling interests	2,942			3,190
Net income attributable to the Company	$	47,082		$	58,871

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Three Months Ended
PER SHARE DATA:	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
	(In thousands, except share and per share data)
Calculation of income for EPS:
Net income/ (loss) attributable to the Company	$	17,962		$	6,434		$	22,686		$	(18,280	)	$	19,803
Adjustments to Net income/ (loss) attributable to the Company to arrive at Net income/ (loss) attributable to common shareholders, treasury stock method (4)	(829		)	(3,524		)	(23		)	(1,998		)	(1,146		)
Net income/ (loss) attributable to the common shareholders, treasury stock method	$	17,133		$	2,910		$	22,663		$	(20,278	)	$	18,657

End of period common shares outstanding	84,602,519			84,478,858			84,194,267			84,208,538			84,082,250

Weighted average shares outstanding:
Weighted average basic shares outstanding	84,017,284			83,509,115			83,097,758			82,904,776			82,556,225
Weighted average diluted shares outstanding (5)	85,498,568			85,413,575			85,271,650			82,904,776			84,888,311

Diluted total earnings/ (loss) per share	$	0.20		$	0.03		$	0.27		$	(0.24	)	$	0.22



	Nine Months Ended
PER SHARE DATA:	September 30, 2018			September 30, 2017
	(In thousands, except share and per share data)
Calculation of income for EPS:
Net income attributable to the Company	$	47,082		$	58,871
Adjustments to Net income attributable to the Company to arrive at Net income attributable to common shareholders, treasury stock method (4)	(4,376		)	(2,889		)
Net income attributable to the common shareholders, treasury stock method	$	42,706		$	55,982

Weighted average shares outstanding:
Weighted average basic shares outstanding	83,544,754			82,270,849
Weighted average diluted shares outstanding (5)	85,254,295			84,741,172

Diluted total earnings per share	$	0.50		$	0.66

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In thousands, except per share data)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
FINANCIAL DATA:	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Book value per common share	$	8.72		$	8.69		$	8.81		$	8.77		$	9.13
Tangible book value per share (6)	$	7.67		$	7.62		$	7.17		$	7.12		$	7.16
Market price per share	$	13.65		$	15.90		$	15.05		$	15.45		$	16.55

ASSETS UNDER MANAGEMENT AND ADVISORY:
Wealth Management and Trust	$	8,335,000		$	7,789,000		$	7,831,000		$	7,865,000		$	7,703,000
Investment Management (7)	2,125,000			2,031,000			1,920,000			2,004,000			1,902,000
Wealth Advisory	11,977,000			11,566,000			11,446,000			11,350,000			10,992,000
Less: Inter-company relationship	(7,000		)	(7,000		)	(11,000		)	(11,000		)	(11,000		)
Total assets under management and advisory, excluding Anchor (7)	$	22,430,000		$	21,379,000		$	21,186,000		$	21,208,000		$	20,586,000
Assets under management and advisory at Anchor through March 31, 2018	—			—			9,042,000			9,277,000			9,181,000
Total assets under management and advisory, including Anchor through March 31, 2018	$	22,430,000		$	21,379,000		$	30,228,000		$	30,485,000		$	29,767,000

FINANCIAL RATIOS:
Total equity/ Total assets	8.81		%	8.42		%	9.49		%	9.46		%	9.86		%
Tangible common equity/ Tangible assets (6)	7.83		%	7.46		%	7.38		%	7.33		%	7.43		%
Tier 1 common equity/ Risk weighted assets (6)	11.14		%	10.90		%	10.39		%	10.32		%	10.42		%
Allowance for loan losses/ Total loans	1.09		%	1.09		%	1.10		%	1.15		%	1.17		%
Allowance for loan losses/ Nonaccrual loans	608		%	469		%	445		%	523		%	550		%
Return on average assets - three months ended (annualized)	0.84		%	0.31		%	1.11		%	(0.88		)%	0.96		%
Return on average common equity - three months ended (annualized) (8)	9.67		%	3.03		%	12.02		%	(9.92		)%	9.87		%
Return on average tangible common equity - three months ended (annualized) (8)	11.37		%	3.90		%	15.20		%	(11.94		)%	13.24		%
Efficiency ratio - three months ended (9)	67.04		%	70.29		%	71.46		%	68.23		%	68.06		%

DEPOSIT DETAIL:
Demand deposits (noninterest-bearing)	$	2,001,275		$	2,089,373		$	1,932,732		$	2,025,690		$	1,850,833
NOW	568,148			635,841			689,526			645,361			636,013
Savings	72,967			73,675			73,580			70,935			74,333
Money market	3,363,062			3,128,211			3,177,692			3,121,811			3,009,779
Certificates of deposit	763,271			693,079			710,792			646,449			691,389
Total deposits	$	6,768,723		$	6,620,179		$	6,584,322		$	6,510,246		$	6,262,347

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:	09/30/18		06/30/18		09/30/17		09/30/18		06/30/18		09/30/17		09/30/18		06/30/18		09/30/17
AVERAGE ASSETS
Interest-earning assets:
Cash and investments:
Taxable investment securities	$	324,583	$	326,482	$	353,374	$	1,510	$	1,501	$	1,569	1.86	%	1.84	%	1.77	%
Non-taxable investment securities (10)	297,710		297,852		295,727		2,256		2,217		2,559		3.03	%	2.98	%	3.46	%
Mortgage-backed securities	552,820		570,845		631,052		2,941		3,049		3,267		2.13	%	2.14	%	2.07	%
Short-term investments and other	204,814		157,878		146,285		1,617		1,205		916		3.11	%	3.03	%	2.47	%
Total cash and investments	1,379,927		1,353,057		1,426,438		8,324		7,972		8,311		2.41	%	2.35	%	2.33	%
Loans (11):
Commercial and industrial (10)	998,817		974,443		994,388		9,940		9,439		10,001		3.89	%	3.83	%	3.94	%
Commercial real estate (10)	2,475,143		2,477,634		2,381,583		29,547		27,550		25,579		4.67	%	4.40	%	4.20	%
Construction and land (10)	179,248		166,736		113,562		2,196		2,040		1,415		4.80	%	4.84	%	4.88	%
Residential	2,836,593		2,775,239		2,567,044		23,907		22,590		20,423		3.37	%	3.26	%	3.18	%
Home equity	94,050		94,445		106,744		1,089		1,041		1,128		4.59	%	4.42	%	4.19	%
Other consumer	163,224		179,684		187,184		1,689		1,818		1,554		4.11	%	4.06	%	3.29	%
Total loans	6,747,075		6,668,181		6,350,505		68,368		64,478		60,100		4.00	%	3.84	%	3.73	%
Total earning assets	8,127,002		8,021,238		7,776,943		76,692		72,450		68,411		3.73	%	3.59	%	3.48	%
LESS: Allowance for loan losses	73,861		72,998		75,166
Cash and due from banks (non-interest bearing)	46,056		45,337		42,031
Other assets	392,757		396,744		455,820
TOTAL AVERAGE ASSETS	$	8,491,954	$	8,390,321	$	8,199,628
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits (12):
Savings and NOW	$	693,419	$	719,159	$	702,182	$	301	$	304	$	205	0.17	%	0.17	%	0.12	%
Money market	3,244,628		3,033,306		3,065,059		8,110		5,543		3,436		0.99	%	0.73	%	0.44	%
Certificates of deposit	730,117		688,567		671,992		3,076		2,518		1,715		1.67	%	1.47	%	1.01	%
Total interest-bearing deposits (12)	4,668,164		4,441,032		4,439,233		11,487		8,365		5,356		0.98	%	0.76	%	0.48	%
Junior subordinated debentures	106,363		106,363		106,363		1,028		1,008		761		3.78	%	3.75	%	2.80	%
FHLB borrowings and other	768,015		1,022,636		736,035		3,945		4,637		2,768		2.01	%	1.79	%	1.47	%
Total interest-bearing liabilities (12)	5,542,542		5,570,031		5,281,631		16,460		14,010		8,885		1.17	%	1.00	%	0.66	%
Non-interest bearing demand deposits (12)	2,063,642		1,908,037		1,966,479
Payables and other liabilities	135,508		122,175		121,288
Total average liabilities	7,741,692		7,600,243		7,369,398
Redeemable noncontrolling interests	13,074		14,129		21,634
Average shareholders’ equity	737,188		775,949		808,596
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	8,491,954	$	8,390,321	$	8,199,628
Net interest income - on a fully taxable equivalent basis (FTE)							$	60,232	$	58,440	$	59,526
LESS: FTE adjustment (10)							591		895		2,899
Net interest income (GAAP basis)							$	59,641	$	57,545	$	56,627
Interest rate spread													2.56	%	2.59	%	2.82	%
Bank only net interest margin													2.98	%	2.95	%	3.07	%
Net interest margin													2.93	%	2.89	%	3.02	%

Average total deposits (12)	6,731,806		6,349,069		6,405,712								0.68	%	0.53	%	0.33	%
Average total deposits and borrowings (12)	7,606,184		7,478,068		7,248,110								0.86	%	0.75	%	0.48	%

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



	Average Balance				Interest Income/Expense				Average Yield/Rate
(In thousands)	Nine Months Ended				Nine Months Ended				Nine Months Ended
AVERAGE BALANCE SHEET:	09/30/18		09/30/17		09/30/18		09/30/17		09/30/18		09/30/17
AVERAGE ASSETS
Interest-earning assets:
Cash and investments:
Taxable investment securities	$	328,054	$	369,929	$	4,521	$	4,831	1.84	%	1.74	%
Non-taxable investment securities (10)	297,509		295,195		6,663		7,576		2.99	%	3.42	%
Mortgage-backed securities	570,578		652,159		9,168		10,266		2.14	%	2.10	%
Short-term investments and other	174,736		169,114		3,831		2,347		2.91	%	1.55	%
Total cash and investments	1,370,877		1,486,397		24,183		25,020		2.35	%	2.21	%
Loans (11):
Commercial and industrial (10)	969,063		988,449		28,135		29,077		3.83	%	3.88	%
Commercial real estate (10)	2,464,788		2,354,996		83,438		75,556		4.46	%	4.23	%
Construction and land (10)	171,825		115,629		6,201		4,036		4.76	%	4.60	%
Residential	2,771,875		2,494,151		68,263		58,988		3.28	%	3.15	%
Home equity	95,217		111,423		3,172		3,302		4.45	%	3.96	%
Other consumer	176,086		191,550		5,080		4,500		3.86	%	3.14	%
Total loans	6,648,854		6,256,198		194,289		175,459		3.87	%	3.71	%
Total earning assets	8,019,731		7,742,595		218,472		200,479		3.61	%	3.43	%
LESS: Allowance for loan losses	73,894		77,957
Cash and due from banks (non-interest bearing)	47,859		42,006
Other assets	404,375		436,373
TOTAL AVERAGE ASSETS	$	8,398,071	$	8,143,017
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits (12):
Savings and NOW	$	709,751	$	688,885	$	820	$	521	0.15	%	0.10	%
Money market	3,139,107		3,149,545		17,967		9,801		0.77	%	0.42	%
Certificates of deposit	691,670		642,820		7,589		4,514		1.47	%	0.94	%
Total interest-bearing deposits (12)	4,540,528		4,481,250		26,376		14,836		0.78	%	0.44	%
Junior subordinated debentures	106,363		106,363		2,882		2,148		3.62	%	2.66	%
FHLB borrowings and other	889,178		722,087		12,185		7,439		1.81	%	1.36	%
Total interest-bearing liabilities (12)	5,536,069		5,309,700		41,443		24,423		1.00	%	0.61	%
Non-interest bearing demand deposits (12)	1,948,573		1,903,709
Payables and other liabilities	130,410		115,622
Total average liabilities	7,615,052		7,329,031
Redeemable noncontrolling interests	16,294		21,341
Average shareholders’ equity	766,725		792,645
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	8,398,071	$	8,143,017
Net interest income - on a fully taxable equivalent basis (FTE)					$	177,029	$	176,056
LESS: FTE adjustment (10)					2,460		8,642
Net interest income (GAAP basis)					$	174,569	$	167,414
Interest rate spread									2.61	%	2.82	%
Bank only net interest margin									2.97	%	3.06	%
Net interest margin									2.92	%	3.01	%

Average total deposits (12)	6,489,101		6,384,959						0.54	%	0.31	%
Average total deposits and borrowings (12)	7,484,642		7,213,409						0.74	%	0.45	%

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In thousands)	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017
LOAN DATA (13):	September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017
Other commercial and industrial loans:
New England	$	460,409	$	481,081	$	444,419	$	438,322	$	503,322
San Francisco Bay Area	41,256		35,220		23,491		23,311		50,686
Southern California	81,549		66,892		63,183		59,359		64,248
Total other commercial and industrial loans	$	583,214	$	583,193	$	531,093	$	520,992	$	618,256
Commercial tax-exempt loans:
New England	$	330,753	$	332,572	$	313,955	$	305,792	$	320,172
San Francisco Bay Area	96,775		94,959		95,380		101,340		99,540
Southern California	11,279		11,351		11,422		11,566		11,638
Total commercial tax-exempt loans	$	438,807	$	438,882	$	420,757	$	418,698	$	431,350
Total commercial and industrial loans	$	1,022,021	$	1,022,075	$	951,850	$	939,690	$	1,049,606
Commercial real estate loans:
New England	$	1,043,494	$	1,069,942	$	1,046,178	$	1,002,092	$	988,788
San Francisco Bay Area	724,243		739,769		721,871		725,454		698,148
Southern California	631,343		694,810		696,954		712,674		676,223
Total commercial real estate loans	$	2,399,080	$	2,504,521	$	2,465,003	$	2,440,220	$	2,363,159
Construction and land loans:
New England	$	114,411	$	88,068	$	79,563	$	86,874	$	61,635
San Francisco Bay Area	40,755		37,783		34,050		27,891		20,893
Southern California	42,358		46,173		51,627		50,225		35,763
Total construction and land loans	$	197,524	$	172,024	$	165,240	$	164,990	$	118,291
Residential loans:
New England	$	1,650,989	$	1,643,039	$	1,619,856	$	1,598,072	$	1,558,587
San Francisco Bay Area	554,502		533,394		511,903		512,189		510,956
Southern California	657,388		631,773		605,610		572,272		531,245
Total residential loans	$	2,862,879	$	2,808,206	$	2,737,369	$	2,682,533	$	2,600,788
Home equity loans:
New England	$	61,291	$	61,125	$	65,434	$	67,435	$	72,149
San Francisco Bay Area	19,769		17,366		19,314		22,462		26,052
Southern California	12,330		13,310		9,583		10,061		9,026
Total home equity loans	$	93,390	$	91,801	$	94,331	$	99,958	$	107,227
Other consumer loans:
New England	$	121,685	$	145,726	$	166,413	$	149,022	$	150,309
San Francisco Bay Area	14,228		14,659		13,569		14,707		15,302
Southern California	9,613		8,111		8,552		13,908		8,519
Total other consumer loans	$	145,526	$	168,496	$	188,534	$	177,637	$	174,130
Total loans:
New England	$	3,783,032	$	3,821,553	$	3,735,818	$	3,647,609	$	3,654,962
San Francisco Bay Area	1,491,528		1,473,150		1,419,578		1,427,354		1,421,577
Southern California	1,445,860		1,472,420		1,446,931		1,430,065		1,336,662
Total loans	$	6,720,420	$	6,767,123	$	6,602,327	$	6,505,028	$	6,413,201

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)



(In thousands)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
CREDIT QUALITY (13):	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Special mention loans:
New England	$	20,382		$	18,515		$	33,282		$	45,640		$	37,569
San Francisco Bay Area	18,359			19,255			14,117			23,400			23,898
Southern California	28,665			15,678			15,689			18,134			17,207
Total special mention loans	$	67,406		$	53,448		$	63,088		$	87,174		$	78,674
Accruing substandard loans (14):
New England	$	10,083		$	11,493		$	8,767		$	10,911		$	8,196
San Francisco Bay Area	24,252			12,766			14,970			11,615			11,622
Southern California	21,045			21,194			21,436			30,826			33,923
Total accruing substandard loans	$	55,380		$	45,453		$	45,173		$	53,352		$	53,741
Nonaccruing loans:
New England	$	5,131		$	7,282		$	8,056		$	6,061		$	7,380
San Francisco Bay Area	1,169			1,319			1,442			1,473			1,494
Southern California	5,797			7,050			6,882			6,761			4,749
Total nonaccruing loans	$	12,097		$	15,651		$	16,380		$	14,295		$	13,623
Loans 30-89 days past due and accruing:
New England	$	9,193		$	4,653		$	10,571		$	19,725		$	4,664
San Francisco Bay Area	1,651			—			2,251			1,911			430
Southern California	763			324			7,554			3,412			198
Total loans 30-89 days past due and accruing	$	11,607		$	4,977		$	20,376		$	25,048		$	5,292
Loans (charged-off)/ recovered, net for the three months ended:
New England	$	232		$	(73	)	$	(285	)	$	1,020		$	73
San Francisco Bay Area	706			91			67			64			206
Southern California	47			95			169			(273		)	17
Total net loans (charged-off)/ recovered	$	985		$	113		$	(49	)	$	811		$	296
Loans (charged-off)/ recovered, net for the nine months ended:
New England	$	(126	)										$	819
San Francisco Bay Area	864												3,097
Southern California	311												(393		)
Total Net Loans (Charged-off)/ Recovered	$	1,049											$	3,523

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)

FOOTNOTES:

(1)

On December 20, 2017, Boston Private Financial Holdings, Inc. (the “Company”) announced an agreement, effective December 19, 2017, to sell all of its current equity interest in Anchor Capital Advisors LLC, an indirect, majority-owned subsidiary of the Company (“Anchor”), to the management team of Anchor for an upfront cash payment and a non-voting, revenue share participation interest in Anchor. On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. Anchor’s results remain consolidated in the Company’s results during current and prior periods through the closing date. For presentation purposes, Anchor’s AUM are excluded from current and prior period AUM amounts, but are included in the calculation of Core Fees and Income. The Company classified the assets and liabilities of Anchor as held for sale at March 31, 2018 and December 31, 2017, which are included with Other assets and Other liabilities, respectively, on the Company’s consolidated balance sheet. For regulatory purposes, the goodwill and intangible assets of Anchor will be included in consolidated calculations. See footnotes 6 and 8, below.


(2)	Total revenue is the sum of Net interest income, Total core fees and income, and Total other income.


(3)	Net income from discontinued operations consists of contingent payments net of expenses related to our divested affiliate, Westfield Capital Management Company, LLC. The Company received its final contingent payment in the first quarter of 2018 related to this affiliate.

(4)

Adjustments to Net income attributable to the Company to arrive at Net income attributable to the common shareholders, as presented in these tables, include decrease/ (increase) in Noncontrolling interests redemption value and dividends paid on preferred stock, including deemed dividends on redemption of the 6.95% Non-Cumulative Perpetual Preferred Stock, Series D (“the Series D preferred stock”). 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/ (loss) per share calculation. These additional shares reflect the assumed exercise, conversion, or contingent issuance of dilutive securities. If the additional shares would result in anti-dilution they would be excluded from the diluted earnings per share calculation. The potential dilutive shares relate to: unexercised stock options, unvested restricted stock, and unexercised stock warrants. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 16: Earnings Per Share” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for additional information.


(6)	The Company uses certain non-GAAP financial measures, such as: Tangible book value per share and the Tangible common equity (“TCE”) to Tangible assets (“TA”) ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

Reconciliations from the Company’s GAAP Total equity to Total assets ratio to the Non-GAAP TCE to TA ratio, and from GAAP Book value to Non-GAAP Tangible book value are presented below:

The Company calculates Tangible assets by adjusting Total assets to exclude Goodwill and intangible assets.

The Company calculates Tangible common equity by adjusting Total equity to exclude non-convertible Series D preferred stock and exclude Goodwill and intangible assets, net. On June 15, 2018, the Company redeemed all $50 million of the outstanding Series D preferred stock.



(In thousands, except share and per share data)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Total balance sheet assets	$	8,375,840		$	8,716,203		$	8,318,359		$	8,311,744		$	8,269,398
LESS: Goodwill and intangible assets, net *	(89,432		)	(90,182		)	(138,026		)	(138,775		)	(165,001		)
Tangible assets (non-GAAP)	$	8,286,408		$	8,626,021		$	8,180,333		$	8,172,969		$	8,104,397
Total shareholders’ equity	$	738,009		$	733,977		$	789,503		$	785,944		$	815,061
LESS: Series D preferred stock (non-convertible)	—			—			(47,753		)	(47,753		)	(47,753		)
LESS: Goodwill and intangible assets, net *	(89,432		)	(90,182		)	(138,026		)	(138,775		)	(165,001		)
Total adjusting items	(89,432		)	(90,182		)	(185,779		)	(186,528		)	(212,754		)
Tangible common equity (non-GAAP)	$	648,577		$	643,795		$	603,724		$	599,416		$	602,307
Total equity/ Total assets	8.81		%	8.42		%	9.49		%	9.46		%	9.86		%
Tangible common equity/ Tangible assets (non-GAAP)	7.83		%	7.46		%	7.38		%	7.33		%	7.43		%

Total risk weighted assets **	$	6,057,099		$	6,104,586		$	5,974,866		$	5,892,286		$	5,831,558
Tier 1 common equity **	$	674,641		$	665,628		$	621,084		$	607,800		$	607,822
Tier 1 common equity/ Risk weighted assets **	11.14		%	10.90		%	10.39		%	10.32		%	10.42		%

End of period shares outstanding	84,602,519			84,478,858			84,194,267			84,208,538			84,082,250

Book value per common share	$	8.72		$	8.69		$	8.81		$	8.77		$	9.13
Tangible book value per share (non-GAAP)	$	7.67		$	7.62		$	7.17		$	7.12		$	7.16

* Includes goodwill and intangible assets at affiliates held for sale at March 31, 2018 and December 31, 2017.

** Risk weighted assets and Tier 1 common equity for September 30, 2018 are presented based on estimated data.

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)


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


(8)	The Company uses certain non-GAAP financial measures, such as: Return on average common equity and Return on average tangible common equity to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.

Reconciliations from the Company’s GAAP Return on average equity ratio to the non-GAAP Return on average common equity ratio, and the non-GAAP Return on average tangible common equity ratio are presented below:

The Company annualizes income data based on the number of days in the period presented and a 365 day year. The Company calculates Average common equity by adjusting Average equity to exclude Average preferred equity. The Company calculates Average tangible common equity by adjusting Average equity to exclude Average goodwill and intangible assets, net and Average preferred equity.



	Three Months Ended
(In thousands)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Total average shareholders’ equity	$	737,188		$	775,949		$	784,025		$	813,518		$	808,596
LESS: Average Series D preferred stock (non-convertible)	—			(39,881		)	(47,753		)	(47,753		)	(47,753		)
Average common equity (non-GAAP)	737,188			736,068			736,272			765,765			760,843
LESS: Average goodwill and intangible assets, net *	(89,830		)	(102,533		)	(138,451		)	(157,978		)	(165,766		)
Average tangible common equity (non-GAAP)	$	647,358		$	633,535		$	597,821		$	607,787		$	595,077

Net income/ (loss) attributable to the Company	$	17,962		$	6,434		$	22,686		$	(18,280	)	$	19,803
LESS: Dividends on Series D preferred stock	—			(869		)	(869		)	(869		)	(868		)
Common net income/ (loss) (non-GAAP)	17,962			5,565			21,817			(19,149		)	18,935
ADD: Amortization of intangibles, net of tax (35% in 2017, 21% in 2018)	593			592			593			860			927
Tangible common net income/ (loss) (non-GAAP)	$	18,555		$	6,157		$	22,410		$	(18,289	)	$	19,862

Return on average equity - (annualized)	9.67		%	3.33		%	11.73		%	(8.91		)%	9.72		%
Return on average common equity - (annualized) (non-GAAP)	9.67		%	3.03		%	12.02		%	(9.92		)%	9.87		%
Return on average tangible common equity - (annualized) (non-GAAP)	11.37		%	3.90		%	15.20		%	(11.94		)%	13.24		%



	Nine Months Ended
(In thousands)	September 30, 2018			September 30, 2017
Total average shareholders’ equity	$	766,725		$	792,645
LESS: Average Series D preferred stock (non-convertible)	(29,037		)	(47,753		)
Average common equity (non-GAAP)	737,688			744,892
LESS: Average goodwill and intangible assets, net *	(109,324		)	(167,209		)
Average tangible common equity (non-GAAP)	$	628,364		$	577,683

Net income/ (loss) attributable to the Company	$	47,082		$	58,871
LESS: Dividends on Series D preferred stock	(1,738		)	(2,606		)
Common net income/ (loss) (non-GAAP)	45,344			56,265
ADD: Amortization of intangibles, net of tax (35% in 2017, 21% in 2018)	1,777			2,781
Tangible common net income/ (loss) (non-GAAP)	$	47,121		$	59,046

Return on average equity - (annualized)	8.21		%	9.93		%
Return on average common equity - (annualized) (non-GAAP)	8.22		%	10.10		%
Return on average tangible common equity - (annualized) (non-GAAP)	10.03		%	13.67		%

* Includes goodwill and intangible assets at affiliates held for sale at March 31, 2018 and December 31, 2017.

(9)

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



	Three Months Ended
(In thousands)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Income before income taxes (GAAP)	$	24,347		$	24,803		$	28,064		$	3,400		$	27,980
ADD BACK: Provision/ (credit) for loan losses	(949		)	453			(1,795		)	(942		)	(432		)
Pre-tax, pre-provision income (non-GAAP)	$	23,398		$	25,256		$	26,269		$	2,458		$	27,548

Total operating expense (GAAP)	$	68,557		$	64,384		$	70,857		$	93,989		$	69,346
Less: Amortization of intangibles	750			749			750			1,323			1,426
Less: Goodwill impairment	—			—			—			24,901			—
Less: Restructuring	5,763			—			—			—			—
Total operating expense (excluding amortization of intangibles, restructuring, and goodwill impairment) (non-GAAP)	$	62,044		$	63,635		$	70,107		$	67,765		$	67,920

Net interest income	$	59,641		$	57,545		$	57,383		$	57,272		$	56,627
Total core fees and income	31,592			31,897			39,435			40,189			39,067
Total other income	722			198			308			(1,014		)	1,200
FTE income	591			895			974			2,873			2,899
Total revenue (FTE basis)	$	92,546		$	90,535		$	98,100		$	99,320		$	99,793
Efficiency ratio (GAAP)	74.55		%	71.83		%	72.95		%	97.45		%	71.57		%
Efficiency ratio, FTE Basis excluding amortization of intangibles, restructuring, and goodwill impairment (non-GAAP)	67.04		%	70.29		%	71.46		%	68.23		%	68.06		%



	Nine Months Ended
(In thousands)	September 30, 2018			September 30, 2017
Income before income taxes (GAAP)	$	77,214		$	82,985
ADD BACK: Provision/ (credit) for loan losses	(2,291		)	(6,727		)
Pre-tax, pre-provision income (non-GAAP)	$	74,923		$	76,258

Total operating expense (GAAP)	$	203,798		$	205,947
Less: Amortization of intangibles	2,249			4,278
Less: Restructuring	5,763			—
Total operating expense (excluding amortization of intangibles, restructuring, and goodwill impairment) (non-GAAP)	$	195,786		$	201,669

Net interest income	$	174,569		$	167,414
Total core fees and income	102,924			112,613
Total other income	1,228			2,178
FTE income	2,460			8,642
Total revenue (FTE basis)	$	281,181		$	290,847
Efficiency ratio (GAAP)	73.12		%	72.98		%
Efficiency ratio, FTE Basis excluding amortization of intangibles, restructuring, and goodwill impairment (non-GAAP)	69.63		%	69.34		%


(10)	Interest income on Non-taxable investments and loans are presented on an FTE basis using the federal statutory rate of 35% in 2017 and 21% in 2018 for each respective period 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 lender’s regional offices.

(14)

Accruing substandard loans include loans that are classified as substandard but are still accruing interest income. Boston Private Bank & Trust Company may classify a loan as substandard where known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present repayment terms and which may result in disclosure of such loans as nonaccrual at some time in the future.

(15)

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)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Net interest income (GAAP basis)	$	59,641		$	57,545		$	57,383		$	57,272		$	56,627
LESS: Interest recovered on previously nonaccrual loans	986			—			80			429			133
Net interest income, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest income (non-GAAP)	58,655			57,545			57,303			56,843			56,494
ADD: FTE income	591			895			974			2,873			2,899
Net interest income, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest income, FTE basis (non-GAAP)	59,246			58,440			58,277			59,716			59,393

Net interest margin (FTE basis)	2.93		%	2.89		%	2.95		%	3.04		%	3.02		%
Net interest margin, FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest margin (FTE basis)	2.88		%	2.89		%	2.94		%	3.02		%	3.02		%
Net interest margin, non-FTE basis, excluding interest recovered on previously nonaccrual loans (non-GAAP) - also referred to as Core net interest margin (non-FTE basis) (non-GAAP)	2.85		%	2.85		%	2.90		%	2.87		%	2.87		%

Boston Private Financial Holdings, Inc.

Selected Financial Data

(Unaudited)


(16)	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)	September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017
Net income/ (loss) attributable to the Company (GAAP)	$	17,962		$	6,434		$	22,686		$	(18,280	)	$	19,803
LESS: Gain/ (loss) on sale of affiliates or offices	—			—			—			(1,264		)	—
ADD BACK: Anchor divestiture legal expense	—			—			—			400			—
ADD BACK: Impairment of goodwill	—			—			—			24,901			—
ADD BACK: Restructuring	5,763			—			—			—			—
ADD BACK: Tax adjustments *	—			12,706			—			12,880			—
Tax effect at statutory rate (35% in '17, 21% in '18) **	(1,210		)	—			—			(582		)	—
Net income attributable to the Company excluding notable items (non-GAAP)	$	22,515		$	19,140		$	22,686		$	20,583		$	19,803

Net income/ (loss) attributable to the common shareholders, treasury stock method (GAAP)	$	17,133		$	2,910		$	22,663		$	(20,278	)	$	18,657
ADD BACK: Deemed dividend due to redemption of Series D preferred stock	—			2,247			—			—			—
LESS: Gain/ (loss) on sale of affiliates or offices	—			—			—			(1,264		)	—
ADD BACK: Anchor divestiture legal expense	—			—			—			400			—
ADD BACK: Impairment of goodwill	—			—			—			24,901			—
ADD BACK: Restructuring	5,763			—			—			—			—
ADD BACK: Tax adjustments *	—			12,706			—			12,880			—
Tax effect at statutory rate (35% in '17, 21% in '18) **	(1,210		)	—			—			(582		)	—
Net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP)	$	21,686		$	17,863		$	22,663		$	18,585		$	18,657

Weighted average diluted shares outstanding (GAAP)	85,498,568			85,413,575			85,271,650			82,904,776			84,888,311
Weighted average diluted shares outstanding, excluding notable items (non-GAAP) ***	85,498,568			85,413,575			85,271,650			85,196,760			84,888,311

Diluted total earnings/ (loss) per share (GAAP)	$	0.20		$	0.03		$	0.27		$	(0.24	)	$	0.22
Diluted total earnings per share, excluding notable items (non-GAAP)	$	0.25		$	0.21		$	0.27		$	0.22		$	0.22

Average common equity (non-GAAP)	$	737,188		$	736,068		$	736,272		$	765,765		$	760,843
Average tangible common equity (non-GAAP)	$	647,358		$	633,535		$	597,821		$	607,787		$	595,077
Return on average common equity - (annualized), excluding notable items (non-GAAP)	12.12		%	9.96		%	12.02		%	10.21		%	9.87		%
Return on average tangible common equity - (annualized), excluding notable items (non-GAAP)	14.16		%	11.94		%	15.20		%	13.43		%	13.24		%

Pre-tax, pre-provision income (non-GAAP)	$	23,398		$	25,256		$	26,269		$	2,458		$	27,548
LESS: Gain/ (loss) on sale of affiliates or offices	—			—			—			(1,264		)	—
ADD BACK: Anchor divestiture legal expense	—			—			—			400			—
ADD BACK: Impairment of goodwill	—			—			—			24,901			—
ADD BACK: Restructuring	5,763			—			—			—			—
Pre-tax, pre-provision income, excluding notable items (non-GAAP)	$	29,161		$	25,256		$	26,269		$	29,023		$	27,548

* Additional tax expense in the second quarter of 2018 relates to the tax impact of the April 2018 completion of the sale of Anchor.

** Due to the nature of the goodwill related to Anchor, no tax effect is applied to the goodwill impairment in the fourth quarter of 2017.


***	For the fourth quarter of 2017, Weighted average diluted shares outstanding include the dilutive effects when the excluded notable items move net income/ (loss) attributable to the common shareholders from a net loss to a net income position.

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BOSTON PRIVATE FINANCIAL HOLDINGS INC Reports