Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported fourth quarter 2015 GAAP Net Income Attributable to the Company of $15.0 million, compared to $13.5 million for the third quarter of 2015. Fourth quarter 2015 diluted earnings per share were $0.17, compared to $0.16 in the third quarter of 2015 and $0.13 in the fourth quarter of 2014.

For the full year of 2015, BPFH reported GAAP Net Income Attributable to the Company of $64.9 million, compared to $68.8 for the full year of 2014. BPFH reported diluted earnings per share of $0.74 compared to $0.79 for the full years of 2015 and 2014, respectively.

“2015 was an uneven performance year for Boston Private,” said Clayton G. Deutsch, CEO. “The Private Bank continued to build franchise value and expand its client base across its footprint. However, our Wealth Management businesses came under pressure from sector-based headwinds and client withdrawals. Nevertheless, all of our wealth management businesses took steps to strengthen their positions. Despite near-term challenges, we enter 2016 confident that we have the right team and client offering in place to execute on our goal of being the premier Wealth Management and Private Banking company in our select markets nationally.”

Core Fees and Income

Core Fees and Income decreased 6% year-over-year and linked quarter to $37.1 million reflecting lower levels of AUM and lower Other Banking Fee Income. For the full year 2015, Core Fees and Income increased 13% to $157.1 million, largely due to the acquisition of Banyan Partners, which was completed on October 2, 2014.

AUM increased to $27.6 billion in the fourth quarter, up 1% from $27.4 billion in the third quarter of 2015, reflecting positive market action offset by negative net flows. AUM decreased 8% year-over-year due to negative net flows and negative market action. The Company experienced fourth quarter 2015 AUM net outflows of $543 million, as compared to net outflows of $751 million and $156 million in the third quarter of 2015 and fourth quarter of 2014, respectively. AUM net outflows for 2015 were $1.9 billion as compared to net outflows of $348 million in 2014.

Net Interest Income

Net Interest Income for the fourth quarter was $48.1 million, up 4% from $46.5 million for the third quarter of 2015. On a year-over-year basis, Net Interest Income increased 9% from $44.1 million. The current quarter, third quarter of 2015 and fourth quarter of 2014, all include $0.3 million of interest recovered on previous non-accrual loans.

Net Interest Margin was 2.88% for the fourth quarter, up four basis points from 2.84% for the third quarter of 2015. Net Interest Margin was up five basis points from 2.83% for the fourth quarter of 2014. Excluding interest recovered on previous nonaccrual loans, Net Interest Margin was up four basis points both linked quarter and year-over-year to 2.86%.

Total Operating Expenses

Total Operating Expenses for the fourth quarter of 2015 were $67.4 million, up 9% from $61.9 million for the third quarter of 2015. On a year-over-year basis, Total Operating Expenses increased 6% from $63.8 million, primarily due to higher marketing and occupancy expenses. Restructuring Expense in the fourth quarter of 2015 was $2.0 million, while the third quarter of 2015 and fourth quarter of 2014 include Restructuring Expense of $1.5 million and $0.7 million, respectively.

Provision and Asset Quality

The Company recorded a provision credit of $1.7 million for the fourth quarter of 2015, compared to a provision expense of $2.6 million for the third quarter of 2015 and $2.4 million for the fourth quarter of 2014. The provision credit was driven by net recoveries of $0.9 million and a reduction in criticized and classified loans, offset by loan growth.

Criticized Loans decreased 4% on a linked quarter basis and 3% year-over-year to $154.1 million. Nonaccrual Loans (“Nonaccruals”) decreased 14% to $26.6 million on a linked quarter basis. On a year-over-year basis, Nonaccruals decreased 40% from $44.2 million. As a percentage of Total Loans, Nonaccruals were 46 basis points at December 31, 2015, down 9 basis points from September 30, 2015, and down 38 basis points from December 31, 2014.

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

     
(In millions) December 31,
2015		 September 30,
2015		 December 31,
2014
Total Criticized Loans $ 154.1 $ 160.9 $ 159.6

Total Loans 30-89 Days Past Due and Accruing (12)

 $ 13.1 $ 7.0 $ 7.0
Total Net Loans (Charged-off)/ Recovered $ 0.9 $ (1.6 ) $ (1.8 )
Allowance for Loan Losses/ Total Loans 1.37 % 1.41 % 1.44 %
 

Capital Ratios

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

     
December 31,
2015		 September 30,
2015		 December 31,
2014
BPFH Ratios:
Total Risk-Based Capital * 13.8 % 13.8 % 13.8 %
Tier I Risk-Based Capital * 12.6 % 12.6 % 12.6 %
Tier I Leverage Capital * 9.5 % 9.6 % 9.5 %
TCE/TA 7.0 % 7.2 % 7.0 %
Tier I Common Equity/ Risk Weighted Assets * 9.8 % 9.7 % 9.2 %

*December 31, 2015 information is presented based on estimated data.

 

Dividend Payments

Concurrent with the release of fourth quarter 2015 earnings, the Board of Directors of the Company declared a cash dividend to common stock shareholders of $0.10 per share. The record date for this dividend is February 10, 2016, and the payment date is February 19, 2016.

The Board of Directors of the Company also declared a cash dividend to holders of the Non-Cumulative Perpetual Preferred Stock, Series D of $17.375 per share, which will result in a dividend of $0.434375 per depositary share. The record date for this dividend is February 16, 2016, and the payment date is March 15, 2016.

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; total operating expense excluding restructuring; the efficiency ratio (FTE basis); and Net Interest Income and Net Interest Margin excluding interest recovered on previous non-accrual loans; 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 Thursday, January 28, 2016, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
Elite Entry Number: 6359964

Replay Information:
Available from January 28, 2016 at 12 noon until February 4, 2016
Dial In #: (877) 344-7529
Conference Number: 10079628

The call will be simultaneously webcast and may be accessed on www.bostonprivatefinancial.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 with offices in Boston, New York, Los Angeles, San Francisco, San Jose, Atlanta, Florida, Wisconsin, and Texas. The Company has an $8 billion Private Banking balance sheet, and manages over $27 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.bostonprivatefinancial.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 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; changes in government regulation; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; the risk that the Company's deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated by the Company's Quarterly Reports on Form 10-Q and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

Note to Editors:

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

Boston Private Financial Holdings, Inc.                  
Selected Financial Data
(Unaudited)
     
(In thousands, except share and per share data)   12/31/2015     9/30/2015   12/31/2014  
Assets:
Cash and cash equivalents $ 238,694 $ 43,640 $ 172,609
Investment securities available for sale 1,084,510 1,023,255 829,993
Investment securities held to maturity 116,352 121,679 140,727
Stock in Federal Home Loan Banks 35,181 35,518 32,281
Loans held for sale 8,072 7,685 7,099
Total loans 5,719,212 5,607,472 5,269,936
Less: Allowance for loan losses   78,500     79,246   75,838  
Net loans 5,640,712 5,528,226 5,194,098
Other real estate owned (“OREO”) 776 776 929
Premises and equipment, net 31,036 30,841 32,199
Goodwill 152,082 152,082 152,082
Intangible assets, net 33,007 34,806 39,718
Fees receivable 11,258 11,308 12,517
Accrued interest receivable 17,950 17,039 16,071
Deferred income taxes, net 51,699 45,438 47,576
Other assets   121,179     128,235   119,975  
Total assets $ 7,542,508   $ 7,180,528 $ 6,797,874  
Liabilities:
Deposits $ 6,040,437 $ 5,647,859 $ 5,453,879
Securities sold under agreements to repurchase 58,215 35,698 30,496
Federal funds purchased — 60,000 —
Federal Home Loan Bank borrowings 461,324 461,899 370,150
Junior subordinated debentures 106,363 106,363 106,363
Other liabilities   111,468     109,695   112,170  
Total liabilities   6,777,807     6,421,514   6,073,058  
Redeemable Noncontrolling Interests 18,088 18,257 20,905
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; issued and outstanding: 83,410,961 shares at December 31, 2015; 83,645,364 shares at September 30, 2015; 82,961,855 shares at December 31, 2014

83,411 83,645 82,962
Additional paid-in capital 600,670 598,968 610,903
Retained earnings/ (accumulated deficit) 12,886 5,960 (37,396 )
Accumulated other comprehensive income/ (loss)   (1,500 )   1,287   (697 )

Total Company’s shareholders’ equity

  743,220     737,613   703,525  
Noncontrolling interests   3,393     3,144   386  
Total shareholders’ equity   746,613     740,757   703,911  
Total liabilities, redeemable noncontrolling interests and shareholders’ equity $ 7,542,508   $ 7,180,528 $ 6,797,874  
Boston Private Financial Holdings, Inc.                              
Selected Financial Data
(Unaudited)
Three Months Ended Year Ended
(In thousands, except share and per share data)   12/31/2015     9/30/2015     12/31/2014     12/31/2015     12/31/2014  
Interest and dividend income:
Loans $ 49,463 $ 48,058 $ 47,117 $ 192,184 $ 191,658
Taxable investment securities 1,239 1,094 920 4,403 3,162
Non-taxable investment securities 1,348 1,264 978 4,758 3,738
Mortgage-backed securities 2,863 2,681 1,695 10,933 6,925
Federal funds sold and other   449     425     381     1,390     1,359  
Total interest and dividend income   55,362     53,522     51,091     213,668     206,842  
Interest expense:
Deposits 4,281 4,007 3,908 16,002 14,102
Federal Home Loan Bank borrowings 1,960 2,051 2,069 7,959 9,108
Junior subordinated debentures 973 979 976 3,875 3,872
Repurchase agreements and other short-term borrowings   8     12     10     62     59  
Total interest expense   7,222     7,049     6,963     27,898     27,141  
Net interest income 48,140 46,473 44,128 185,770 179,701
Provision/ (credit) for loan losses   (1,655 )   2,600     2,400     (1,555 )   (6,400 )
Net interest income after provision/ (credit) for loan losses   49,795     43,873     41,728     187,325     186,101  
Fees and other income:
Investment management fees 10,889 11,360 11,897 45,694 47,123
Wealth advisory fees 12,569 12,515 12,352 50,437 48,082
Wealth management and trust fees 11,782 12,424 13,327 51,309 34,582
Other banking fee income 1,719 2,780 1,841 8,440 7,033
Gain on sale of loans, net   178     364     192     1,207     2,158  
Total core fees and income   37,137     39,443     39,609     157,087     138,978  
Gain/ (loss) on sale of investments, net 215 5 (16 ) 236 (7 )
Gain/ (loss) on OREO, net — 35 (31 ) 124 957
Other   366     (37 )   360     3,722     870  
Total other income   581     3     313     4,082     1,820  
Operating expense:
Salaries and employee benefits 39,520 37,938 39,881 159,401 146,648
Occupancy and equipment 9,989 9,064 8,549 37,183 31,041
Professional services 3,778 2,848 3,308 12,861 12,473
Marketing and business development 4,001 2,008 2,425 9,063 7,989
Contract services and data processing 1,505 1,600 1,527 6,037 5,816
Amortization of intangibles 1,799 1,655 1,707 6,711 4,836
FDIC insurance 1,089 916 852 3,979 3,459
Restructuring 2,000 1,504 739 3,724 739
Other   3,726     4,396     4,772     16,222     14,128  
Total operating expense   67,407     61,929     63,760     255,181     227,129  
Income before income taxes 20,106 21,390 17,890 93,313 99,770
Income tax expense   5,638     8,182     5,901     30,392     32,365  
Net income from continuing operations 14,468 13,208 11,989 62,921 67,405
Net income from discontinued operations (1)   1,455     1,316     1,510     6,411     6,160  
Net income before attribution to noncontrolling interests 15,923 14,524 13,499 69,332 73,565
Less: Net income attributable to noncontrolling interests   921     994     1,322     4,407     4,750  
Net income attributable to the Company $ 15,002   $ 13,530   $ 12,177   $ 64,925   $ 68,815  
Boston Private Financial Holdings, Inc.                          
Selected Financial Data
(Unaudited)
(In thousands, except share and per share data)   Three Months Ended Year Ended
PER SHARE DATA:   12/31/2015     9/30/2015     12/31/2014     12/31/2015     12/31/2014  
Calculation of Income for EPS:
Net income attributable to the Company $ 15,002 $ 13,530 $ 12,177 $ 64,925 $ 68,815
Adjustments to Net Income Attributable to the Company to Arrive at Net Income Attributable to Common Shareholders (2)   (1,187 )   154     (1,176 )   (3,102 )   (4,228 )
Net Income Attributable to the Common Shareholders 13,815 13,684 11,001 61,823 64,587
LESS: Amount allocated to participating securities   (5 )   (8 )   (27 )   (92 )   (335 )
Net Income Attributable to the Common Shareholders, after allocation to participating securities $ 13,810   $ 13,676   $ 10,974   $ 61,731   $ 64,252  
 
End of Period Common Shares Outstanding

83,410,961

83,645,364

82,961,855

 
Weighted Average Shares Outstanding:
Weighted average basic shares, including participating securities 81,197,790 81,204,808 80,880,508 81,116,055 79,605,355
LESS: Participating securities (62,859 ) (100,870 ) (487,596 ) (230,802 ) (683,875 )
PLUS: Dilutive potential common shares   2,402,591     2,265,257     2,096,172     2,339,900     1,957,751  
Weighted Average Diluted Shares (3)   83,537,522     83,369,195     82,489,084     83,225,153     80,879,231  
 
Diluted Total Earnings per Share $ 0.17 $ 0.16 $ 0.13 $ 0.74 $ 0.79
Boston Private Financial Holdings, Inc.            
Selected Financial Data
(Unaudited)
(In thousands, except per share data)        
FINANCIAL DATA:

12/31/2015

9/30/2015 12/31/2014
Book Value Per Common Share $ 8.38 $ 8.29 $ 7.91
Tangible Book Value Per Share (4) $ 6.16 $ 6.05 $ 5.60
Market Price Per Share $ 11.34 $ 11.70 $ 13.47
 
ASSETS UNDER MANAGEMENT AND ADVISORY:
Wealth Management and Trust $ 7,976,000 $ 8,060,000 $ 9,274,000
Investment Managers 9,952,000 9,830,000 10,772,000
Wealth Advisory 9,688,000 9,537,000 9,883,000
Less: Inter-company Relationship   (21,000 )   (21,000 )   (22,000 )
Total Assets Under Management and Advisory $ 27,595,000   $ 27,406,000   $ 29,907,000  
 
BPFH FINANCIAL RATIOS:
Total Equity/ Total Assets 9.90 % 10.32 % 10.35 %
Tangible Common Equity/ Tangible Assets (4) 6.98 % 7.24 % 7.03 %
Tier I Common Equity/ Risk Weighted Assets (4) 9.80 % 9.73 % 9.24 %
Allowance for Loan Losses/ Total Loans 1.37 % 1.41 % 1.44 %
Allowance for Loan Losses/ Nonaccrual Loans 295 % 258 % 172 %
Return on Average Assets - Three Months Ended (Annualized) 0.81 % 0.75 % 0.71 %
Return on Average Common Equity - Three Months Ended (Annualized) (5) 8.06 % 7.32 % 6.91 %
Return on Average Tangible Common Equity - Three Months Ended (Annualized) (5) 11.92 % 10.93 % 10.60 %
Efficiency Ratio - Three Months Ended (6) 71.59 % 66.18 % 70.83 %
Boston Private Financial Holdings, Inc.                                        
Selected Financial Data
(Unaudited)
Average Balance Interest Income/Expense Average Yield/Rate
(In thousands) Three Months Ended Three Months Ended Three Months Ended
AVERAGE BALANCE SHEET:   12/31/15       9/30/15       12/31/14 12/31/15     9/30/15     12/31/14 12/31/15     9/30/15     12/31/14
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 368,573 $ 340,170 $ 305,118 $ 1,239 $ 1,094 $ 920 1.35 % 1.29 % 1.21 %
Non-taxable investment securities (8) 258,755 249,854 229,157 2,074 1,945 1,504 3.21 % 3.12 % 2.63 %
Mortgage-backed securities 526,987 526,408 350,312 2,863 2,681 1,695 2.17 % 2.04 % 1.93 %
Federal funds sold and other   220,618       213,372       389,833   449       425       381 0.80 %     0.78 %     0.39 %
Total Cash and Investments   1,374,933       1,329,804       1,274,420   6,625       6,145       4,500   1.92 %     1.85 %     1.41 %
Loans (9):
Commercial and Construction (8) 3,133,881 3,043,739 2,852,064 32,480 31,195 30,855 4.06 % 4.01 % 4.23 %
Residential 2,224,614 2,208,004 2,120,416 17,272 17,083 16,447 3.11 % 3.09 % 3.10 %
Home Equity and Other Consumer

 

284,076       287,102       254,387   1,982       1,982       1,799 2.77 %     2.74 %     2.80 %
Total Loans   5,642,571       5,538,845       5,226,867   51,734       50,260       49,101 3.62 %     3.58 %     3.71 %
Total Earning Assets   7,017,504       6,868,649       6,501,287   58,359       56,405       53,601 3.28 %     3.24 %     3.26 %
LESS: Allowance for Loan Losses 79,389 78,263 75,590
Cash and due From Banks (Non-Interest Bearing) 39,453 38,631 41,595
Other Assets   411,642       404,945       411,546
TOTAL AVERAGE ASSETS $ 7,389,210     $ 7,233,962     $ 6,878,838
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY

 

Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Savings and NOW $ 586,353 $ 581,041 $ 584,210 $ 105 $ 103 $ 112 0.07 % 0.07 % 0.08 %
Money Market 3,063,533 2,944,893 2,836,731 2,995 2,731 2,589 0.39 % 0.37 % 0.36 %
Certificates of Deposit   593,286       593,466       597,460   1,181       1,173       1,207 0.79 %     0.78 %     0.80 %
Total Interest-Bearing Deposits 4,243,172 4,119,400 4,018,401 4,281 4,007 3,908 0.40 % 0.39 % 0.39 %
Junior Subordinated Debentures 106,363 106,363 106,363 973 979 976 3.58 % 3.60 % 3.59 %
FHLB Borrowings and Other   491,115       526,697       447,955   1,968       2,063       2,079 1.57 %     1.53 %     1.82 %
Total Interest-Bearing Liabilities   4,840,650       4,752,460       4,572,719   7,222       7,049       6,963 0.59 %     0.59 %     0.60 %
Noninterest Bearing Demand Deposits 1,673,122 1,623,524 1,465,145
Payables and Other Liabilities   110,951       102,076       121,318
Total Average Liabilities 6,624,723 6,478,060 6,159,182
Redeemable Noncontrolling Interests 21,337 22,020 22,802
Average Shareholders' Equity   743,150       733,882       696,854
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 7,389,210     $ 7,233,962     $ 6,878,838
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 51,137 $ 49,356 $ 46,638
LESS: FTE Adjustment (8)   2,997       2,883       2,510
Net Interest Income (GAAP Basis) $ 48,140     $ 46,473     $ 44,128
Interest Rate Spread 2.69 % 2.65 % 2.66 %
Bank only Net Interest Margin 2.94 % 2.91 % 2.90 %
Net Interest Margin 2.88 % 2.84 % 2.83 %
Boston Private Financial Holdings, Inc.                              
Selected Financial Data
(Unaudited)
Average Balance Interest Income/Expense Average Yield/Rate
(In thousands) Year Ended Year Ended Year Ended
AVERAGE BALANCE SHEET: 12/31/2015     12/31/2014 12/31/2015     12/31/2014 12/31/2015     12/31/2014
AVERAGE ASSETS
Interest-Earning Assets:
Cash and Investments:
Taxable investment securities $ 343,130 $ 279,438 $ 4,403 $ 3,162 1.28 % 1.13 %
Non-taxable investment securities (8) 245,402 225,346 7,320 5,751 2.98 % 2.55 %
Mortgage-backed securities 527,057 337,552 10,933 6,925 2.07 % 2.05 %
Federal funds sold and other   167,847       285,783   1,390       1,359 0.83 %     0.47 %
Total Cash and Investments   1,283,436       1,128,119   24,046       17,197 1.87 %     1.52 %
Loans (9):
Commercial and Construction (8) 2,976,950 2,846,042 125,053 126,830 4.20 % 4.40 %
Residential 2,183,830 2,066,776 67,648 64,984 3.10 % 3.14 %
Home Equity and Other Consumer   284,817       246,934   7,956       7,080 2.79 %     2.87 %
Total Loans   5,445,597       5,159,752   200,657       198,894 3.68 %     3.82 %
Total Earning Assets   6,729,033       6,287,871   224,703       216,091 3.34 %     3.41 %
LESS: Allowance for Loan Losses 78,164 76,990
Cash and due From Banks (Non-Interest Bearing) 39,513 39,381
Other Assets   410,375       374,782
TOTAL AVERAGE ASSETS $ 7,100,757     $ 6,625,044
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
Interest-Bearing Deposits:
Savings and NOW $ 588,995 $ 578,827 $ 399 $ 431 0.07 % 0.07 %
Money Market 2,894,615 2,619,930 10,871 8,701 0.38 % 0.33 %
Certificates of Deposit   597,153       611,285   4,732       4,970 0.79 %     0.81 %
Total Interest-Bearing Deposits 4,080,763 3,810,042 16,002 14,102 0.39 % 0.37 %
Junior Subordinated Debentures 106,363 106,363 3,875 3,872 3.64 % 3.59 %
FHLB Borrowings and Other   516,237       503,995   8,021       9,167 1.55 %     1.79 %
Total Interest-Bearing Liabilities   4,703,363       4,420,400   27,898       27,141 0.59 %     0.61 %
Noninterest Bearing Demand Deposits 1,542,254 1,406,007
Payables and Other Liabilities   103,669       111,664
Total Average Liabilities 6,349,286 5,938,071
Redeemable Noncontrolling Interests 21,982 20,757
Average Shareholders' Equity   729,489       666,216
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS' EQUITY $ 7,100,757     $ 6,625,044
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $ 196,805 $ 188,950
LESS: FTE Adjustment (8)   11,035       9,249
Net Interest Income (GAAP Basis) $ 185,770     $ 179,701
Interest Rate Spread 2.75 % 2.80 %
Bank only Net Interest Margin 2.99 % 3.05 %
Net Interest Margin 2.92 % 2.98 %
Boston Private Financial Holdings, Inc.        
Selected Financial Data
(Unaudited)
(In thousands)      
LOAN DATA (10): 12/31/2015 9/30/2015 12/31/2014
Commercial and Industrial Loans:
New England $ 894,277 $ 827,301 $ 781,646
San Francisco Bay 122,754 125,093 117,105
Southern California   94,524   84,428   54,334
Total Commercial and Industrial Loans $ 1,111,555 $ 1,036,822 $ 953,085
Commercial Real Estate Loans:
New England $ 799,109 $ 766,253 $ 690,965
San Francisco Bay 622,123 625,145 619,222
Southern California   492,902   512,250   478,216
Total Commercial Real Estate Loans $ 1,914,134 $ 1,903,648 $ 1,788,403
Construction and Land Loans:
New England $ 106,048 $ 111,280 $ 85,272
San Francisco Bay 52,876 35,627 31,329
Southern California   24,510   23,504   8,748
Total Construction and Land Loans $ 183,434 $ 170,411 $ 125,349
Residential Loans:
New England $ 1,368,192 $ 1,356,057 $ 1,299,568
San Francisco Bay 462,327 462,630 462,497
Southern California   399,021   393,199   370,030
Total Residential Loans $ 2,229,540 $ 2,211,886 $ 2,132,095
Home Equity Loans:
New England $ 83,712 $ 81,796 $ 82,877
San Francisco Bay 28,966 27,076 27,575
Southern California   7,150   5,915   4,407
Total Home Equity Loans $ 119,828 $ 114,787 $ 114,859
Other Consumer Loans:
New England $ 152,984 $ 161,186 $ 143,166
San Francisco Bay 4,530 5,782 6,505
Southern California   3,207   2,950   6,474
Total Other Consumer Loans $ 160,721 $ 169,918 $ 156,145
Total Loans:
New England $ 3,404,322 $ 3,303,873 $ 3,083,494
San Francisco Bay 1,293,576 1,281,353 1,264,233
Southern California   1,021,314   1,022,246   922,209
Total Loans $ 5,719,212 $ 5,607,472 $ 5,269,936
Boston Private Financial Holdings, Inc.              
Selected Financial Data
(Unaudited)
(In thousands)
CREDIT QUALITY (10): 12/31/2015 9/30/2015 12/31/2014
Special Mention Loans:
New England $ 40,121 $ 46,924 $ 32,254
San Francisco Bay 15,764 11,087 18,161
Southern California   13,326     12,718     26,325  
Total Special Mention Loans $ 69,211   $ 70,729   $ 76,740  
Accruing Substandard Loans (11):
New England $ 22,026 $ 16,996 $ 11,126
San Francisco Bay 19,990 20,108 23,403
Southern California   16,398     22,405     4,331  
Total Accruing Substandard Loans $ 58,414   $ 59,509   $ 38,860  
Nonaccruing Loans:
New England $ 19,572 $ 22,815 $ 26,205
San Francisco Bay 4,977 5,096 13,430
Southern California   2,022     2,816     4,547  
Total Nonaccruing Loans $ 26,571   $ 30,727   $ 44,182  
Other Real Estate Owned:
New England $ 191 $ 191 $ 344
San Francisco Bay 585 585 585
Southern California   —     —     —  
Total Other Real Estate Owned $ 776   $ 776   $ 929  
Loans 30-89 Days Past Due and Accruing (12):
New England $ 7,118 $ 6,733 $ 6,572
San Francisco Bay 2,806 14 375
Southern California   3,170     227     13  
Total Loans 30-89 Days Past Due and Accruing $ 13,094   $ 6,974   $ 6,960  
Loans (Charged-off)/ Recovered, Net for the Three Months Ended:
New England $ 120 $ (1,618 ) $ (2,516 )
San Francisco Bay 703 (57 ) 607
Southern California   86     70     64  
Total Net Loans (Charged-off)/ Recovered $ 909   $ (1,605 ) $ (1,845 )
Loans (Charged-off)/ Recovered, Net for the Twelve Months Ended:
New England $ (502 ) $ (1,686 )
San Francisco Bay 4,217 3,671
Southern California   502     3,882  
Total Net Loans (Charged-off)/ Recovered $ 4,217   $ 5,867  
Boston Private Financial Holdings, Inc.        

Selected Financial Data

(Unaudited)
 
FOOTNOTES:
(1) 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.
 
(2) 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.
 
(3) 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, 2014 for additional information.
 
(4) 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)

December 31,
2015

September 30,
2015

December 31,
2014

Total Balance Sheet Assets $ 7,542,508 $ 7,180,528 $ 6,797,874
LESS: Goodwill and Intangible Assets, net   (185,089 )   (186,888 )   (191,800 )
Tangible Assets (non-GAAP) $ 7,357,419 $ 6,993,640 $ 6,606,074
Total Shareholders' Equity $ 746,613 $ 740,757 $ 703,911
LESS: Series D Preferred Stock (non-convertible) (47,753 ) (47,753 ) (47,753 )
LESS: Goodwill and Intangible Assets, net   (185,089 )   (186,888 )   (191,800 )
Total adjusting items   (232,842 )   (234,641 )   (239,553 )
Tangible Common Equity (non-GAAP) $ 513,771   $ 506,116   $ 464,358  
Total Equity/Total Assets 9.90 % 10.32 % 10.35 %
Tangible Common Equity/Tangible Assets (non-GAAP) 6.98 % 7.24 % 7.03 %
 
Total Risk Weighted Assets * $ 5,450,149 $ 5,397,148 $ 5,073,973
Tier I Common Equity * $ 534,241 $ 525,004 $ 468,902
Tier I Common Equity/ Risk Weighted Assets 9.80 % 9.73 % 9.24 %
 
End of Period Shares Outstanding 83,411 83,645 82,962
 
Book Value Per Common Share $ 8.38 $ 8.29 $ 7.91
Tangible Book Value Per Share (non-GAAP) $ 6.16 $ 6.05 $ 5.60
* Risk Weighted Assets and Tier I Common Equity for December 31, 2015 are presented based on estimated data.
 
(5) 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

Year ended

(In thousands) December 31,

2015

September 30,

2015

December 31,

2014

December 31,
2015

December 31,
2014

Total average shareholders' equity $ 743,150 $ 733,882 $ 696,854 $

729,489

 $ 666,216
LESS: Average Series D preferred stock (non-convertible)   (47,753 )   (47,753 )   (47,753 )  

(47,753

)

   (47,753 )
Average common equity (non-GAAP)   695,397     686,129     649,101    

681,736

     618,463  
LESS: Average goodwill and intangible assets, net   (185,983 )   (187,728 )   (184,473 )  

(188,533

)

   (144,658 )
Total adjusting items   (185,983 )   (187,728 )   (184,473 )  

(188,533

)

   (144,658 )
Average Tangible Common Equity (non-GAAP) $ 509,414   $ 498,401   $ 464,628   $

493,203

   $ 473,805  
 
Net income attributable to the Company $ 15,002 $ 13,530 $ 12,177 $

64,925

 $ 68,815
LESS: Dividends on Series D preferred stock   (869 )   (869 )   (869 )  

(3,475

)

   (3,475 )
Common net income (non-GAAP) 14,133 12,661 11,308

61,450

 65,340
ADD: Amortization of intangibles, net of tax (35%)   1,169     1,076     1,110    

4,362

     3,143  
Tangible common net income (non-GAAP) $ 15,302   $ 13,737   $ 12,418   $

65,812

   $ 68,483  
 
Return on Average Equity - (Annualized) 8.01 % 7.31 % 6.93 %

8.90

%

 10.33 %
Return on Average Common Equity - (Annualized) (non-GAAP) 8.06 % 7.32 % 6.91 %

9.01

%

 10.56 %
Return on Average Tangible Common Equity - (Annualized) (non-GAAP) 11.92 % 10.93 % 10.60 %

13.34

%

 14.45 %
 
(6) The Company uses certain non-GAAP financial measures, such as: pre-tax, pre-provision earnings, total operating expenses excluding restructuring expense, and the efficiency ratio to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector.
 
Reconciliations from the Company's GAAP income from continuing operations before income taxes to non-GAAP pre-tax, pre-provision earnings; from GAAP total operating expense to non-GAAP total operating expense excluding restructuring; and from GAAP efficiency ratio to Non-GAAP efficiency ratio (FTE basis), excluding restructuring, are presented below:
Three Months Ended Year ended
(In thousands) December 31,

2015

September 30,

2015

December 31,

2014

December 31,

2015

December 31,

2014

Income before income taxes (GAAP) $ 20,106 $ 21,390 $ 17,890 $ 93,313 $ 99,770
ADD BACK: Provision/ (credit) for loan losses   (1,655 )   2,600     2,400     (1,555 )   (6,400 )
Pre-tax, pre-provision earnings (non-GAAP) $ 18,451 $ 23,990 $ 20,290 $ 91,758 $ 93,370
 
Total operating expense (GAAP) $ 67,407 $ 61,929 $ 63,760 $ 255,181 $ 227,129
Less: Amortization of intangibles 1,799 1,655 1,707 6,711 4,836
Less: Restructuring   2,000     1,504     739     3,724     739  
Total operating expense (excluding amortization of intangibles and restructuring) (non-GAAP) $ 63,608 $ 58,770 $ 61,314 $ 244,746 $ 221,554
Total operating expense (excluding restructuring) (non-GAAP) 65,407 60,425 63,021 251,457 226,390
 
Net interest income $ 48,140 $ 46,473 $ 44,128 $ 185,770 $ 179,701
Total core fees and income 37,137 39,443 39,609 157,087 138,978
Total other income 581 3 313 4,082 1,820
FTE income   2,997     2,883     2,510     11,035     9,249  
Total revenue (FTE basis) $ 88,855 $ 88,802 $ 86,560 $ 357,974 $ 329,748
Efficiency Ratio, before deduction of intangible amortization (GAAP) 78.51 % 72.08 % 75.86 % 73.55 % 70.87 %
Efficiency Ratio, FTE Basis excluding restructuring (non-GAAP) 71.59 % 66.18 % 70.83 % 68.37 % 67.19 %
 
(7) The Company uses certain non-GAAP financial measures, such as: net interest income excluding interest recovered on previous non-accrual loans and net interest margin excluding interest recovered on previous non-accrual loans 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 non-accrual loans; and from GAAP net interest margin to non-GAAP net interest margin excluding interest recovered on previous non-accrual loans, are presented below:
Three Months Ended
(In thousands) December 31,

2015

September 30,

2015

December 31,

2014

Net interest income (GAAP basis) $ 48,140 $ 46,473 $ 44,128
ADD: FTE income   2,997     2,883     2,510  
Net interest income, FTE basis 51,137 49,356 46,638
LESS: Interest recovered on previously non-accrual loans   255     298     295  
Net interest income, FTE basis, excluding interest recovered on previously non-accrual loans (non-GAAP)   50,882     49,058     46,343  
 
Net Interest Margin (FTE basis) 2.88 % 2.84 % 2.83 %
Net Interest Margin, FTE basis, excluding interest recovered on previously non-accrual loans (non-GAAP) 2.86 % 2.82 % 2.82 %
 
(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) The concentration of the Private Banking loan data and credit quality is primarily based on the location of the lender's regional offices.
 
(11) 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.
 
(12) In addition to loans 30-89 days past due and accruing, at December 31, 2015 and 2014, the Company had no loans outstanding more than 90 days past due but still on accrual status. At September 30, 2015, 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.