UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-35070

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Massachusetts

04-2976299

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

Ten Post Office Square

Boston, Massachusetts

02109

~~Boston,~~

~~Massachusetts~~

(Address of Principal Executive Offices)

(Zip Code)

Registrant's telephone number, including area code: (617) 912-1900

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange which registered
Common Stock	BPFH	NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒☐

Accelerated filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 30, ~~2020:~~2021:


Common Stock, Par Value $1.00 Per Share			~~81,800,550~~82,464,321
(class)			(outstanding)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)		1
	Consolidated Balance Sheets		1
	Consolidated Statements of Operations		2
	Consolidated Statements of Comprehensive Income		4
	Consolidated Statements of Changes in Shareholders’ Equity		5
	Consolidated Statements of Cash Flows		6
	Notes to Unaudited Consolidated Financial Statements		8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		4341
	Executive Summary		4442
	Announced Merger		43
	Impact of the COVID-19 Pandemic		43
	Critical Accounting Policies		4745
	Results of Operations		4745
	Financial Condition		5251
	Condensed Consolidated Balance Sheets and Discussion		5251
	Loan Portfolio and Credit Quality		5553
	Liquidity		6058
	Capital Resources		6260
	Recent Accounting Pronouncements		6361
Item 3	Quantitative and Qualitative Disclosures about Market Risk		6462
Item 4	Controls and Procedures		6462
PART II—OTHER INFORMATION
Item 1		Legal Proceedings		6563
Item 1A	Risk Factors		6563
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		6763
Item 3	Defaults Upon Senior Securities		6763
Item 4	Mine Safety Disclosures		6763
Item 5	Other Information		6763
Item 6	Exhibits		6863
	Signature Page		6964
	Certifications

PART I. FINANCIAL INFORMATION, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)									BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)
		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands, except share and per share data)							(In thousands, except share and per share data)
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	61,714	$	292,479	Cash and cash equivalents	$	1,389,943	$	1,055,588
Investment securities available-for-sale (amortized cost of $961,351 and $966,900 at March 31, 2020 and December 31, 2019, respectively)		993,166		978,284
Investment securities held-to-maturity (fair value of $46,096 and $47,949 at March 31, 2020 and December 31, 2019, respectively)		45,395		48,212
Investment securities available-for-sale (amortized cost of $1,319,395 and $1,198,513 at March 31, 2021 and December 31, 2020, respectively)						Investment securities available-for-sale (amortized cost of $1,319,395 and $1,198,513 at March 31, 2021 and December 31, 2020, respectively)	1,339,408		1,243,693
Investment securities held-to-maturity (fair value of $32,631 and $35,942 at March 31, 2021 and December 31, 2020, respectively)						Investment securities held-to-maturity (fair value of $32,631 and $35,942 at March 31, 2021 and December 31, 2020, respectively)	31,943		35,223
Equity securities at fair value	Equity securities at fair value	23,080		18,810		Equity securities at fair value	39,708		41,452
Stock in Federal Home Loan Bank and Federal Reserve Bank	Stock in Federal Home Loan Bank and Federal Reserve Bank	45,273		39,078		Stock in Federal Home Loan Bank and Federal Reserve Bank	28,651		28,663
Loans held for sale	Loans held for sale	7,671		7,386		Loans held for sale	8,434		17,421
Total loans	Total loans	7,043,338		6,976,704		Total loans	7,216,325		7,104,309
Less: Allowance for loan losses	Less: Allowance for loan losses	68,211		71,982		Less: Allowance for loan losses	74,010		81,238
Net loans	Net loans	6,975,127		6,904,722		Net loans	7,142,315		7,023,071

Premises and equipment, net	Premises and equipment, net	43,544		44,527		Premises and equipment, net	41,637		44,087
Goodwill	Goodwill	57,607		57,607		Goodwill	57,607		57,607
Intangible assets, net	Intangible assets, net	9,637		10,352		Intangible assets, net	8,389		9,056
Fees receivable	Fees receivable	4,249		4,095		Fees receivable	2,237		2,800
Accrued interest receivable	Accrued interest receivable	24,054		24,175		Accrued interest receivable	26,029		26,191
Deferred income taxes, net	Deferred income taxes, net	5,630		11,383		Deferred income taxes, net	11,353		6,774
Right-of-use assets	Right-of-use assets	98,896		102,075		Right-of-use assets	93,224		97,859
Other assets	Other assets	351,283		287,316		Other assets	317,614		359,248
Total assets	Total assets	$	8,746,326	$	8,830,501	Total assets	$	10,538,492	$	10,048,733
Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	6,835,572	$	7,241,476	Deposits	$	9,147,618	$	8,595,366
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	45,319		53,398		Securities sold under agreements to repurchase	46,262		53,472
Federal funds purchased		145,000		—

Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	491,254		350,829		Federal Home Loan Bank borrowings	115,019		114,659
Junior subordinated debentures	Junior subordinated debentures	106,363		106,363		Junior subordinated debentures	106,363		106,363
Lease liabilities	Lease liabilities	113,574		117,214		Lease liabilities	107,143		112,339
Other liabilities	Other liabilities	180,452		140,820		Other liabilities	157,664		198,526
Total liabilities	Total liabilities	7,917,534		8,010,100		Total liabilities	9,680,069		9,180,725
Redeemable Noncontrolling Interests		—		1,383

Shareholders’ Equity:	Shareholders’ Equity:					Shareholders’ Equity:

Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 81,800,486 shares at March 31, 2020 and 83,265,674 shares at December 31, 2019		81,800		83,266
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 82,455,432 shares at March 31, 2021 and 82,334,257 shares at December 31, 2020						Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 82,455,432 shares at March 31, 2021 and 82,334,257 shares at December 31, 2020	82,455		82,334
Additional paid-in capital	Additional paid-in capital	593,167		600,708		Additional paid-in capital	600,089		597,558
Retained earnings	Retained earnings	131,761		127,469		Retained earnings	162,137		156,431
Accumulated other comprehensive income/(loss)		22,064		7,575
Accumulated other comprehensive income						Accumulated other comprehensive income	13,742		31,685

Total shareholders’ equity	Total shareholders’ equity	828,792		819,018		Total shareholders’ equity	858,423		868,008
Total liabilities, redeemable noncontrolling interests and shareholders’ equity		$	8,746,326	$	8,830,501
Total liabilities and shareholders’ equity						Total liabilities and shareholders’ equity	$	10,538,492	$	10,048,733

See accompanying notes to Unaudited Consolidated Financial Statements.


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)						BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
		Three months ended March 31,						Three months ended March 31,
		2020		2019				2021		2020
		(In thousands, except share and per share data)								(In thousands, except share and per share data)
Interest and dividend income:	Interest and dividend income:					Interest and dividend income:
Loans	Loans	$	66,358	$	69,933	Loans		$	58,036	$	66,358
Taxable investment securities	Taxable investment securities	868		1,185		Taxable investment securities		782		868
Non-taxable investment securities	Non-taxable investment securities	1,998		1,901		Non-taxable investment securities		2,045		1,998
Mortgage-backed securities	Mortgage-backed securities	2,787		2,897		Mortgage-backed securities		3,437		2,787
Short-term investments and other	Short-term investments and other	1,071		908		Short-term investments and other		593		1,071
Total interest and dividend income	Total interest and dividend income	73,082		76,824		Total interest and dividend income		64,893		73,082
Interest expense:	Interest expense:					Interest expense:
Deposits	Deposits	12,796		14,058		Deposits		4,691		12,796
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	2,034		2,780		Federal Home Loan Bank borrowings		236		2,034
Junior subordinated debentures	Junior subordinated debentures	917		1,121		Junior subordinated debentures		481		917
Repurchase agreements and other short-term borrowings	Repurchase agreements and other short-term borrowings	78		527		Repurchase agreements and other short-term borrowings		8		78
Total interest expense	Total interest expense	15,825		18,486		Total interest expense		5,416		15,825
Net interest income	Net interest income	57,257		58,338		Net interest income		59,477		57,257
Provision/(credit) for loan losses	Provision/(credit) for loan losses	16,962		(1,426)		Provision/(credit) for loan losses		(7,004)		16,962
Net interest income after provision/(credit) for loan losses	Net interest income after provision/(credit) for loan losses	40,295		59,764		Net interest income after provision/(credit) for loan losses		66,481		40,295
Fees and other income:	Fees and other income:					Fees and other income:
Wealth management and trust fees	Wealth management and trust fees	18,371		19,058		Wealth management and trust fees		19,136		18,371
Investment management fees	Investment management fees	1,925		2,650		Investment management fees		489		1,925

Other banking fee income	Other banking fee income	2,490		2,499		Other banking fee income		2,411		2,490
Gain on sale of loans, net	Gain on sale of loans, net	100		73		Gain on sale of loans, net		747		100

Gain on OREO, net		—		91

Other	Other	(1,365)		877		Other		3,387		(1,365)
Total fees and other income	Total fees and other income	21,521		25,248		Total fees and other income		26,170		21,521
Operating expense:	Operating expense:					Operating expense:
Salaries and employee benefits	Salaries and employee benefits	35,096		35,726		Salaries and employee benefits		40,904		35,096
Occupancy and equipment	Occupancy and equipment	7,646		8,348		Occupancy and equipment		8,205		7,646
Information systems	Information systems	6,725		5,860		Information systems		9,719		6,725
Professional services	Professional services	3,601		3,560		Professional services		3,302		3,601
Merger costs						Merger costs		10,665		0
Marketing and business development	Marketing and business development	1,890		1,085		Marketing and business development		624		1,890
Amortization of intangibles	Amortization of intangibles	715		672		Amortization of intangibles		667		715

FDIC insurance	FDIC insurance	—		660		FDIC insurance		967		0
Restructuring		—		1,646

Other	Other	5,235		2,996		Other		870		5,235
Total operating expense	Total operating expense	60,908		60,553		Total operating expense		75,923		60,908
Income before income taxes	Income before income taxes	908		24,459		Income before income taxes		16,728		908
Income tax expense	Income tax expense	102		4,917		Income tax expense		6,076		102

Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	806		19,542		Net income before attribution to noncontrolling interests		10,652		806
(Continued)	(Continued)					(Continued)


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)						BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
		Three months ended March 31,						Three months ended March 31,
		2020		2019				2021		2020
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	6		100		Less: Net income attributable to noncontrolling interests		0		6
Net income attributable to the Company	Net income attributable to the Company	$	800	$	19,442	Net income attributable to the Company		$	10,652	$	800
Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders	Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders	414		1,557		Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders		0		414
Net income attributable to common shareholders for earnings per share calculation		$	1,214	$	20,999
Net income attributable to common shareholders						Net income attributable to common shareholders		$	10,652	$	1,214
Basic earnings per share attributable to common shareholders:	Basic earnings per share attributable to common shareholders:					Basic earnings per share attributable to common shareholders:

Total attributable to common shareholders:	Total attributable to common shareholders:	$	0.01	$	0.25	Total attributable to common shareholders:		$	0.13	$	0.01
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	83,005,064		83,285,095		Weighted average basic common shares outstanding		82,429,162		83,005,064
Diluted earnings per share attributable to common shareholders:	Diluted earnings per share attributable to common shareholders:					Diluted earnings per share attributable to common shareholders:

Total attributable to common shareholders:	Total attributable to common shareholders:	$	0.01	$	0.25	Total attributable to common shareholders:		$	0.13	$	0.01
Weighted average diluted common shares outstanding	Weighted average diluted common shares outstanding	83,318,041		84,010,450		Weighted average diluted common shares outstanding		83,934,107		83,318,041

See accompanying notes to Unaudited Consolidated Financial Statements.


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)						BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
		Three months ended March 31,						Three months ended March 31,
		2020		2019				2021		2020
		(In thousands)								(In thousands)
Net income attributable to the Company	Net income attributable to the Company	$	800	$	19,442	Net income attributable to the Company		$	10,652	$	800
Other comprehensive income, net of tax:
Other comprehensive income/(loss), net of tax:						Other comprehensive income/(loss), net of tax:
Net unrealized gain/(loss) on Investment securities available-for-sale						Net unrealized gain/(loss) on Investment securities available-for-sale		(17,993)		14,489

Net unrealized gain/(loss) on securities available-for-sale		14,489		11,568
Unrealized gain/(loss) on cash flow hedges	Unrealized gain/(loss) on cash flow hedges	—		(27)		Unrealized gain/(loss) on cash flow hedges		6		0
Reclassification adjustment for net realized (gain)/loss included in net income	Reclassification adjustment for net realized (gain)/loss included in net income	—		(220)		Reclassification adjustment for net realized (gain)/loss included in net income		44		0
Net unrealized gain/(loss) on cash flow hedges	Net unrealized gain/(loss) on cash flow hedges	—		(247)		Net unrealized gain/(loss) on cash flow hedges		50		0

Other comprehensive income, net of tax		14,489		11,321
Total comprehensive income attributable to the Company, net		$	15,289	$	30,763
Other comprehensive income/(loss), net of tax						Other comprehensive income/(loss), net of tax		(17,943)		14,489
Total comprehensive income/(loss) attributable to the Company, net of tax						Total comprehensive income/(loss) attributable to the Company, net of tax		$	(7,291)	$	15,289

See accompanying notes to Unaudited Consolidated Financial Statements.


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)																					BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
			Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total			Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)				Total
		(In thousands, except share data)																					(In thousands, except share and per share data)
Balance at December 31, 2018			$	83,656	$	600,196	$	87,821	$	(17,719)	$	753,954
Balance at December 31, 2019													Balance at December 31, 2019	$	83,266	$	600,708	$	127,469	$	7,575			$	819,018
Impact due to change in accounting principle (1)													Impact due to change in accounting principle (1)	—		—		13,492		—				13,492

Net income attributable to the Company	Net income attributable to the Company		—		—		19,442		—		19,442		Net income attributable to the Company	—		—		800		—				800
Other comprehensive income/(loss), net			—		—		—		11,321		11,321
Dividends paid to common shareholders: $0.12 per share			—		—		(10,108)		—		(10,108)

Net proceeds from issuance of:
103,991 shares of common stock			104		876		—		—		980
20,595 shares of incentive stock grants, net of 2,976 shares canceled or forfeited and 13,911 shares withheld for employee taxes			4		166		—		—		170

Amortization of stock compensation and employee stock purchase plan			—		1,352		—		—		1,352
Stock options exercised			10		40		—		—		50
Other equity adjustments			—		1,658		—		—		1,658
Balance at March 31, 2019			$	83,774	$	604,288	$	97,155	$	(6,398)	$	778,819

Balance at December 31, 2019			$	83,266	$	600,708	$	127,469	$	7,575	$	819,018

Impact due to change in accounting principle (1)			—		—		13,492		—		13,492
Net income attributable to the Company			—		—		800		—		800
Other comprehensive income/(loss), net			—		—		—		14,489		14,489
Other comprehensive income/(loss), net of tax													Other comprehensive income/(loss), net of tax	—		—		—		14,489				14,489
Dividends paid to common shareholders: $0.12 per share	Dividends paid to common shareholders: $0.12 per share		—		—		(10,000)		—		(10,000)		Dividends paid to common shareholders: $0.12 per share	—		—		(10,000)		—				(10,000)

Repurchase of 1,565,060 shares of common stock	Repurchase of 1,565,060 shares of common stock		(1,565)		(11,242)		—		—		(12,807)		Repurchase of 1,565,060 shares of common stock	(1,565)		(11,242)		—		—				(12,807)
Net proceeds from issuance of:	Net proceeds from issuance of:												Net proceeds from issuance of:
88,328 shares of common stock	88,328 shares of common stock		88		832		—		—		920		88,328 shares of common stock	88		832		—		—				920
5,539 shares of incentive stock grants, net of 964 shares withheld for employee taxes	5,539 shares of incentive stock grants, net of 964 shares withheld for employee taxes		5		57		—		—		62		5,539 shares of incentive stock grants, net of 964 shares withheld for employee taxes	5		57		—		—				62

Amortization of stock compensation and employee stock purchase plan	Amortization of stock compensation and employee stock purchase plan		—		1,348		—		—		1,348		Amortization of stock compensation and employee stock purchase plan	—		1,348		—		—				1,348
Stock options exercised	Stock options exercised		7		48		—		—		55		Stock options exercised	7		48		—		—				55
Other equity adjustments	Other equity adjustments		(1)		1,416		—		—		1,415		Other equity adjustments	(1)		1,416		—		—				1,415
Balance at March 31, 2020	Balance at March 31, 2020		$	81,800	$	593,167	$	131,761	$	22,064	$	828,792	Balance at March 31, 2020	$	81,800	$	593,167	$	131,761	$	22,064			$	828,792

Balance at December 31, 2020													Balance at December 31, 2020	$	82,334	$	597,558	$	156,431	$	31,685			$	868,008

Net income attributable to the Company													Net income attributable to the Company	—		—		10,652		—				10,652
Other comprehensive income/(loss), net of tax													Other comprehensive income/(loss), net of tax	—		—		—		(17,943)				(17,943)
Dividends paid to common shareholders: $0.06 per share													Dividends paid to common shareholders: $0.06 per share	—		—		(4,946)		—				(4,946)

Net proceeds from issuance of:													Net proceeds from issuance of:
99,008 shares of common stock													99,008 shares of common stock	99		596		—		—				695
2,782 shares of incentive stock grants, net of 964 shares withheld for employee taxes													2,782 shares of incentive stock grants, net of 964 shares withheld for employee taxes	2		24		—		—				26

Amortization of stock compensation													Amortization of stock compensation	—		1,520		—		—				1,520
Stock options exercised													Stock options exercised	20		241		—		—				261
Other equity adjustments													Other equity adjustments	—		150		—		0				150
Balance at March 31, 2021													Balance at March 31, 2021	$	82,455	$	600,089	$	162,137	$	13,742			$	858,423

_____________________

(1) Impact due to the adoption of ASU 2016-13, Financial Instruments (Topic 326) (“ASU 2016-13”). See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements.”

See accompanying notes to Unaudited Consolidated Financial Statements.


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)									BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		Three months ended March 31,							Three months ended March 31,
		2020		2019			2021		2020
		(In thousands)							(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income attributable to the Company	Net income attributable to the Company	$	800	$	19,442	Net income attributable to the Company	$	10,652	$	800
Adjustments to arrive at net income:	Adjustments to arrive at net income:					Adjustments to arrive at net income:
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	6		100		Net income attributable to noncontrolling interests	0		6

Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	806		19,542		Net income before attribution to noncontrolling interests	10,652		806
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:	Adjustments to reconcile net income to net cash provided by/(used in) operating activities:					Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization	Depreciation and amortization	6,345		5,933		Depreciation and amortization	4,692		6,345
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(6)		(100)		Net income attributable to noncontrolling interests	0		(6)
Stock compensation, net of cancellations	Stock compensation, net of cancellations	1,421		1,677		Stock compensation, net of cancellations	1,559		1,421
Provision/(credit) for loan losses	Provision/(credit) for loan losses	16,962		(1,426)		Provision/(credit) for loan losses	(7,004)		16,962
Loans originated for sale	Loans originated for sale	(15,324)		(6,796)		Loans originated for sale	(38,308)		(15,324)
Proceeds from sale of loans held for sale		15,127		9,401
Proceeds from sale of Loans held for sale						Proceeds from sale of Loans held for sale	48,060		15,127

Deferred income tax expense/(benefit)		(5,731)		(523)
Decrease/(increase) in right-of-use assets		3,179		3,817
Increase/(decrease) in operating lease liabilities		(3,640)		(4,102)
Net decrease/(increase) in other operating activities		(27,617)		(19,247)
Deferred Income tax expense/(benefit)						Deferred Income tax expense/(benefit)	2,575		(5,731)
Decrease in Right-of-use assets						Decrease in Right-of-use assets	4,635		3,179
Decrease in operating Lease liabilities						Decrease in operating Lease liabilities	(5,196)		(3,640)
Increase in Merger cost liabilities						Increase in Merger cost liabilities	8,665		0
Net (increase) in other operating activities						Net (increase) in other operating activities	(8,612)		(27,617)

Net cash provided by/(used in) operating activities	Net cash provided by/(used in) operating activities	(8,478)		8,176		Net cash provided by/(used in) operating activities	21,718		(8,478)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Investment securities available-for-sale:	Investment securities available-for-sale:					Investment securities available-for-sale:
Purchases	Purchases	(8,874)		—		Purchases	(160,756)		(8,874)

Maturities, calls, redemptions, and principal payments	Maturities, calls, redemptions, and principal payments	12,472		26,265		Maturities, calls, redemptions, and principal payments	37,278		12,472
Investment securities held-to-maturity:	Investment securities held-to-maturity:					Investment securities held-to-maturity:

Principal payments	Principal payments	2,730		2,860		Principal payments	3,182		2,730
Equity securities at fair value:	Equity securities at fair value:					Equity securities at fair value:
Transfers out		(19,713)		(15,149)
Transfers in		15,443		21,886
Purchases						Purchases	(8,256)		(19,713)
Sales						Sales	10,000		15,443
(Investments)/distributions in trusts, net	(Investments)/distributions in trusts, net	569		853		(Investments)/distributions in trusts, net	(429)		569

Contingent considerations from divestitures	Contingent considerations from divestitures	1,277		836		Contingent considerations from divestitures	1,258		1,277
(Purchase)/redemption of Federal Home Loan Bank and Federal Reserve Bank stock	(Purchase)/redemption of Federal Home Loan Bank and Federal Reserve Bank stock	(6,195)		2,210		(Purchase)/redemption of Federal Home Loan Bank and Federal Reserve Bank stock	12		(6,195)
Net increase in portfolio loans	Net increase in portfolio loans	(67,890)		(34,670)		Net increase in portfolio loans	(110,006)		(67,890)
Proceeds from recoveries of loans previously charged off		180		492
Proceeds from sale of OREO		—		492
Proceeds from recoveries of loans previously charged-off						Proceeds from recoveries of loans previously charged-off	73		180

Capital expenditures	Capital expenditures	(1,975)		(750)		Capital expenditures	(1,268)		(1,975)

Net cash provided by/(used in) investing activities		(71,976)		5,325
Net cash provided (used in) investing activities						Net cash provided (used in) investing activities	(228,912)		(71,976)
(Continued)	(Continued)					(Continued)


BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)									BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
		Three months ended March 31,							Three months ended March 31,
		2020		2019			2021		2020
		(In thousands)							(In thousands)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase/(decrease) in deposits	Net increase/(decrease) in deposits	(405,904)		(1,325)		Net increase/(decrease) in deposits	552,252		(405,904)
Net increase/(decrease) in securities sold under agreements to repurchase		(8,079)		21,401
Net increase/(decrease) in federal funds purchased		145,000		(250,000)
Net increase/(decrease) in short-term Federal Home Loan Bank borrowings		115,000		10,000
Net (decrease) in securities sold under agreements to repurchase						Net (decrease) in securities sold under agreements to repurchase	(7,210)		(8,079)
Net increase in federal funds purchased						Net increase in federal funds purchased	0		145,000
Net increase in short-term Federal Home Loan Bank borrowings						Net increase in short-term Federal Home Loan Bank borrowings	0		115,000
Advances of long-term Federal Home Loan Bank borrowings	Advances of long-term Federal Home Loan Bank borrowings	175,000		190,000		Advances of long-term Federal Home Loan Bank borrowings	100,424		175,000
Repayments of long-term Federal Home Loan Bank borrowings	Repayments of long-term Federal Home Loan Bank borrowings	(149,575)		(5,074)		Repayments of long-term Federal Home Loan Bank borrowings	(100,064)		(149,575)

Dividends paid to common shareholders	Dividends paid to common shareholders	(10,000)		(10,108)		Dividends paid to common shareholders	(4,946)		(10,000)

Repurchase of common stock	Repurchase of common stock	(12,807)		—		Repurchase of common stock	0		(12,807)
Proceeds from stock option exercises	Proceeds from stock option exercises	55		50		Proceeds from stock option exercises	261		55
Proceeds from issuance of common stock	Proceeds from issuance of common stock	920		980		Proceeds from issuance of common stock	695		920
Tax withholding for share based compensation awards	Tax withholding for share based compensation awards	(11)		(155)		Tax withholding for share based compensation awards	(13)		(11)
Distributions paid to noncontrolling interests	Distributions paid to noncontrolling interests	(6)		(100)		Distributions paid to noncontrolling interests	0		(6)
Other equity adjustments	Other equity adjustments	96		(218)		Other equity adjustments	150		96

Net cash provided by/(used in) financing activities	Net cash provided by/(used in) financing activities	(150,311)		(44,549)		Net cash provided by/(used in) financing activities	541,549		(150,311)
Net increase/(decrease) in cash and cash equivalents	Net increase/(decrease) in cash and cash equivalents	(230,765)		(31,048)		Net increase/(decrease) in cash and cash equivalents	334,355		(230,765)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	292,479		127,259		Cash and cash equivalents at beginning of year	1,055,588		292,479
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	61,714	$	96,211	Cash and cash equivalents at end of period	$	1,389,943	$	61,714

Supplemental disclosure of cash flow items:	Supplemental disclosure of cash flow items:					Supplemental disclosure of cash flow items:
Cash paid for interest	Cash paid for interest	$	15,628	$	16,775	Cash paid for interest	$	5,399	$	15,628
Cash paid for income taxes, (net of refunds received)	Cash paid for income taxes, (net of refunds received)	$	872	$	1,029	Cash paid for income taxes, (net of refunds received)	$	1,600	$	872

Change in unrealized gain/(loss) on available-for-sale securities, net of tax		$	14,489	$	11,568
Change in unrealized gain/(loss) on Investment securities available-for-sale, net of tax						Change in unrealized gain/(loss) on Investment securities available-for-sale, net of tax	$	(17,993)	$	14,489
Change in unrealized gain/(loss) on cash flow hedges, net of tax	Change in unrealized gain/(loss) on cash flow hedges, net of tax	$	—	$	(247)	Change in unrealized gain/(loss) on cash flow hedges, net of tax	$	50	$	0

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:

Loans charged off		$	(528)	$	(564)
Loans charged-off						Loans charged-off	$	(297)	$	(528)

See accompanying notes to Unaudited Consolidated Financial Statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies

Boston Private Financial Holdings, Inc. (the “Company” or “BPFH”), is a bank holding company (the “Holding Company”) with 2 reportable segments: (i) Private Banking and (ii) Wealth Management and Trust.

The Private Banking segment is comprised of the banking operations of Boston Private Bank & Trust Company (the “Bank” or “Boston Private Bank”), a wholly-owned subsidiary of the Company. Boston Private Bank is a trust company chartered by the Commonwealth of Massachusetts, whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”)~~, and a wholly-owned subsidiary of the Company.~~. Boston Private Bank is a member of the Board of Governors of the Federal Reserve ~~Bank of Boston. Boston Private Bank~~System (the "Federal Reserve") and primarily operates in 3 geographic markets: New England, Northern California, and Southern California. The Private Banking segment is principally engaged in providing private banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Private Banking segment is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization and small businesses.

The Wealth Management and Trust segment is comprised of Boston Private Wealth LLC (“Boston Private Wealth”), a registered investment adviser (“RIA”) and wholly-owned subsidiary of the Bank, ~~and~~as well as the trust operations of ~~Boston Private~~the Bank. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office, financial planning, tax planning, and trust services to individuals, families, institutions, and nonprofit institutions. ~~On September 1, 2019, KLS Professional Advisors Group, LLC (“KLS”) merged with and into Boston Private Wealth.~~ The results of KLS were previously reported in a third reportable segment, “Affiliate Partners”, as further discussed below. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California, and Southern California.

Prior to the third quarter of 2019, the Company had 3 reportable segments: Affiliate Partners, Private Banking, and Wealth Management and Trust. Prior to the third quarter of 2019, the Affiliate Partners segment was comprised of 2 affiliates: KLS and Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”), ~~each~~a wholly-owned subsidiary of ~~which are RIAs. With the integration of KLS into Boston Private Wealth in the third quarter of 2019,~~ the Company, reorganized its segment reporting structure to align with how its financial performance and strategy are reviewed and managed. The results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment, and the results of DGHM are included within the Holding Company and Eliminations for all periods presented. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: ~~Asset Sales and~~ Divestitures” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for additional information.

The Company conducts substantially all of its business through its 2 reportable segments. All significant intercompany accounts and transactions have been eliminated in consolidation, and the portion of income allocated to the owners other than the Company is included in “Net income attributable to noncontrolling interests”, if any, in the Consolidated Statements of Operations for the periods owned. Redeemable noncontrolling interests, if any, in the Consolidated Balance Sheets reflect the maximum redemption value of agreements with the owners of DGHM.

The unaudited interim Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include all necessary adjustments of a normal recurring nature, which, in the opinion of management, are required for a fair presentation of the results of operations and financial condition of the Company. The interim results of consolidated operations are not necessarily indicative of the results for the entire year.

The information in this report should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the Securities and Exchange Commission (“SEC”). ~~Prior period amounts are reclassified whenever necessary~~

On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB Financial Group ("SVB") pursuant to ~~conform~~which SVB will acquire the Company. On May 4, 2021, the shareholders of the Company approved the Merger Agreement. The transaction is expected to close mid-2021, subject to the ~~current period presentation. With~~satisfaction of customary closing conditions, including the ~~integration~~receipt of KLS into Boston Private Wealth and the related change to reportable segments, fee revenue from KLS is reported in Wealth management and trust fees for all periods on the Consolidated Statements of Operations, which was presented as Wealth advisory fees in prior periods.regulatory approvals.

The Company’s significant accounting policies are described in Part II. Item 8. “Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC. For interim reporting purposes, the Company follows the same significant accounting ~~policies, except for the following~~policies. There were no new accounting pronouncements from the Financial Accounting Standards Board (the “FASB”) that were adopted effective January 1, ~~2020:~~

•~~In June 2016,~~2021 with a material impact to the ~~FASB issued ASU 2016-13. Throughout 2019, the FASB issued ASU 2019-04,~~ ~~Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~ ~~(“ASU 2019-04”); ASU 2019-05,~~ ~~Financial Instruments—Credit Losses (Topic 326): Targeted~~Company.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

~~Transition Relief~~ ~~(“ASU 2019-05”); ASU 2019-10,~~ Notes to Unaudited Consolidated Financial ~~Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 942)—Effective Dates~~ ~~(“ASU 2019-10”); and ASU 2019-11,~~ ~~Codification Improvements to Topic 326, Financial Instruments—Credit Losses~~ (“ASU 2019-11”). This update and related amendments to Topic 326 are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a current expected credit losses (“CECL”) model methodology that reflects expected credit losses and requires consideration of a reasonable and supportable forecast to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 utilizing a modified retrospective approach. On adoption of ASU 2016-13 on January 1, 2020, the Company recognized a decrease in the allowance for loan losses of $20.4 million, and an increase in the reserve for unfunded loan commitments of $1.4 million. The net, after-tax impact of the decrease in the allowance for loan losses and the increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million shown in the Consolidated Statements ~~of Changes in Shareholders’ Equity.~~- (Continued)

2. Earnings Per Share

The treasury stock method of calculating earnings per share (“EPS”) is presented below for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The following tables present the computations of basic and diluted EPS:


		Three months ended March 31,					Three months ended March 31,
		2020		2019			2021		2020
		(In thousands, except share and per share data)							(In thousands, except share and per share data)
Basic earnings per share - Numerator:	Basic earnings per share - Numerator:					Basic earnings per share - Numerator:
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	$	806	$	19,542	Net income before attribution to noncontrolling interests	$	10,652	$	806
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	6		100		Less: Net income attributable to noncontrolling interests	0		6
Net income attributable to the Company	Net income attributable to the Company	800		19,442		Net income attributable to the Company	10,652		800
Decrease in noncontrolling interests’ redemption values (1)	Decrease in noncontrolling interests’ redemption values (1)	414		1,557		Decrease in noncontrolling interests’ redemption values (1)	0		414

Total adjustments to income attributable to common shareholders		414		1,557

Net income attributable to common shareholders, treasury stock method	Net income attributable to common shareholders, treasury stock method	$	1,214	$	20,999	Net income attributable to common shareholders, treasury stock method	$	10,652	$	1,214

Basic earnings per share - Denominator:	Basic earnings per share - Denominator:					Basic earnings per share - Denominator:
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	83,005,064		83,285,095		Weighted average basic common shares outstanding	82,429,162		83,005,064
Per share data - Basic earnings per share:	Per share data - Basic earnings per share:					Per share data - Basic earnings per share:

Total attributable to common shareholders	Total attributable to common shareholders	$	0.01	$	0.25	Total attributable to common shareholders	$	0.13	$	0.01


		Three months ended March 31,					Three months ended March 31,
		2020		2019			2021		2020
		(In thousands, except share and per share data)							(In thousands, except share and per share data)
Diluted earnings per share - Numerator:	Diluted earnings per share - Numerator:					Diluted earnings per share - Numerator:

Net income attributable to common shareholders, after assumed dilution	Net income attributable to common shareholders, after assumed dilution	$	1,214	$	20,999	Net income attributable to common shareholders, after assumed dilution	$	10,652	$	1,214
Diluted earnings per share - Denominator:	Diluted earnings per share - Denominator:					Diluted earnings per share - Denominator:
Weighted average basic common shares outstanding	Weighted average basic common shares outstanding	83,005,064		83,285,095		Weighted average basic common shares outstanding	82,429,162		83,005,064
Dilutive effect of:
Time-based and market-based stock options, performance-based and time-based restricted stock, and performance-based and time-based restricted stock units, and other dilutive securities (2)		312,977		725,355

Dilutive effect of: Time-based and market-based stock options, performance-based and time-based restricted stock units, and other dilutive securities (2)						Dilutive effect of: Time-based and market-based stock options, performance-based and time-based restricted stock units, and other dilutive securities (2)	1,504,945		312,977

Dilutive common shares		312,977		725,355

Weighted average diluted common shares outstanding (2)	Weighted average diluted common shares outstanding (2)	83,318,041		84,010,450		Weighted average diluted common shares outstanding (2)	83,934,107		83,318,041
Per share data - Diluted earnings per share:	Per share data - Diluted earnings per share:					Per share data - Diluted earnings per share:

Total attributable to common shareholders	Total attributable to common shareholders	$	0.01	$	0.25	Total attributable to common shareholders	$	0.13	$	0.01
Dividends per share declared and paid on common stock	Dividends per share declared and paid on common stock	$	0.12	$	0.12	Dividends per share declared and paid on common stock	$	0.06	$	0.12

_____________________

(1)See Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for a description of the redemption values related to the redeemable noncontrolling interests. In accordance with the FASB Accounting Standards Codification Distinguishing Liabilities from Equity (“ASC 480”), an increase in redemption value from period to period reduces income attributable to common shareholders. ~~Decreases~~A decrease in redemption value from period to period ~~increase~~increases income attributable to common shareholders, but only to the extent that the cumulative change in redemption value remains a cumulative increase since adoption of this standard in the first quarter of 2009.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

(2)The diluted EPS computations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 do not assume the conversion, exercise, or contingent issuance of the following shares for the following periods because the result would have been anti-dilutive for the periods indicated. This includes shares excluded from the computation of diluted EPS because the effect would have been anti-dilutive and out-of-the money options, where the exercise prices were greater than the average market price of common shares for the period, because their inclusion would have been anti-dilutive. As a result of the anti-dilution, the potential common shares excluded from the diluted EPS computation are as follows:

Three months ended March 31,
2020 2019
Shares excluded due to exercise price exceeding the average market price of common shares during the period (total outstanding): (In thousands)
Potential common shares from:
Options, restricted stock, or other dilutive securities 1,254 796
Total shares excluded due to exercise price exceeding the average market price of common shares during the period 1,254 796


	Three months ended March 31,
			2021	2020
Anti-dilutive shares excluded from computation of average dilutive EPS		(In thousands)
Potential common shares from: options, restricted stock units, or other dilutive securities			333	1,254
Total anti-dilutive shares excluded from computation of average dilutive EPS			333	1,254

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

3. Reportable Segments

Management ~~Reporting~~reporting

The Company has 2 reportable segments: (i) Private Banking and (ii) Wealth Management and Trust, as well as ~~the Parent Company (Boston~~Boston Private Financial Holdings, Inc.~~, the “Holding Company”)~~ within Holding Company and Eliminations. The financial performance of the Company is managed and evaluated according to these 2 segments. Each segment is managed by a segment leader (“Segment Leader”) who has full authority and responsibility for the performance and the allocation of resources within their segment. The Company’s Chief Executive Officer (“CEO”) is the Company’s Chief Operating Decision Maker (“CODM”).

The Segment Leader for Private Banking is the CEO of Boston Private Bank, who is also the Company’s CEO. The Bank’s banking operations are reported in the Private Banking segment. The Segment Leader for Wealth Management and Trust is the President of Private Banking, Wealth and Trust. The Segment Leader of Wealth Management and Trust reports to the CEO of the Company. The Segment Leaders have authority with respect to the allocation of capital within their respective segments, management oversight responsibility, performance assessments, and overall authority and accountability within their respective segment. The Company’s CODM communicates with the President of Private Banking, Wealth and Trust regarding profit and loss responsibility, strategic planning, priority setting, and other matters. The Company’s Chief Financial Officer reviews all financial detail with the CODM on a monthly basis.

Description of ~~Reportable Segments~~reportable segments

Private Banking

The Private Banking segment operates primarily in 3 geographic markets: New England, Northern California, and Southern California. The Bank conducts business under the name of Boston Private Bank & Trust Company in all markets. ~~The Bank is chartered by the Commonwealth of Massachusetts and is insured by the FDIC.~~ The Bank is principally engaged in providing private banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Bank is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization, and small businesses.

Wealth Management and Trust

The Wealth Management and Trust segment is comprised of the trust operations of the Bank and the operations of Boston Private Wealth. On September 1, 2019, KLS merged into Boston Private Wealth. As a result, the results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment for all periods presented. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office, financial planning, tax planning, and trust services to individuals, families, institutions, and nonprofit institutions. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California, and Southern California.

~~Changes to Segment Reporting~~

With the integration of KLS into Boston Private Wealth in the third quarter of 2019, the Company reorganized the segment reporting structure to align with how the Company's financial performance and strategy is reviewed and managed. The results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment, and the results of DGHM are included in Holding Company and Eliminations for all periods presented.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

Measurement of ~~Segment Profit~~segment profit and ~~Assets~~assets

The accounting policies of the segments are the same as those described in Part I. Item 1. "Notes to Unaudited Consolidated Financial Statements - Note 1: Basis of Presentation and Summary of Significant Accounting Policies."

Reconciliation of ~~Reportable Segment Items~~reportable segment items

The following tables present a reconciliation of the revenues, ~~profits,~~expenses, assets, and other significant items of the reportable segments as of and for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.


		Three months ended March 31,						Three months ended March 31,
		2020		2019				2021		2020
Private Banking (1)	Private Banking (1)	(In thousands)					Private Banking (1)			(In thousands)
Net interest income	Net interest income	$	58,090	$	59,337	Net interest income		$	59,948	$	58,090
Fees and other income	Fees and other income	1,108		3,258		Fees and other income		4,075		1,108
Total revenue	Total revenue	59,198		62,595		Total revenue		64,023		59,198
Provision/(credit) for loan losses	Provision/(credit) for loan losses	16,962		(1,426)		Provision/(credit) for loan losses		(7,004)		16,962
Operating expense ~~(2)~~	Operating expense ~~(2)~~	42,588		41,317		Operating expense ~~(2)~~		44,460		42,588
Income/(loss) before income taxes	Income/(loss) before income taxes	(352)		22,704		Income/(loss) before income taxes		26,567		(352)
Income tax expense/(benefit)	Income tax expense/(benefit)	(931)		4,430		Income tax expense/(benefit)		4,720		(931)
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	579		18,274		Net income before attribution to noncontrolling interests		21,847		579

Net income attributable to the Company	Net income attributable to the Company	$	579	$	18,274	Net income attributable to the Company		$	21,847	$	579

Assets	Assets	$	8,692,069	$	8,481,160	Assets		$	10,485,377	$	8,692,069
Amortization of intangibles	Amortization of intangibles	$	77	$	—	Amortization of intangibles		$	189	$	77
Depreciation	Depreciation	$	2,626	$	2,670	Depreciation		$	2,971	$	2,626

Three months ended March 31,
2020 2019
Wealth Management and Trust (1) (In thousands)
Net interest income $ 72 $ 106
Fees and other income 18,485 19,126
Total revenue 18,557 19,232
Operating expense (2) 15,449 15,567
Income before income taxes 3,108 3,665
Income tax expense 1,074 1,194
Net income before attribution to noncontrolling interests 2,034 2,471
Net income attributable to the Company $ 2,034 $ 2,471
Assets $ 143,998 $ 147,771
Amortization of intangibles $ 638 $ 672
Depreciation $ 294 $ 367

Three months ended March 31,
2020 2019
Holding Company and Eliminations (1) (In thousands)
Net interest income (3) $ (905) $ (1,105)
Fees and other income 1,928 2,864
Total revenue 1,023 1,759
Operating expense 2,871 3,669
Income/(loss) before income taxes (1,848) (1,910)
Income tax expense/(benefit) (41) (707)
Net income/(loss) before attribution to noncontrolling interests (1,807) $ (1,203)
Noncontrolling interests 6 100
Net income/(loss) attributable to the Company $ (1,813) $ (1,303)
Assets (including eliminations) $ (89,741) $ (56,788)
Depreciation $ 39 $ 47

Three months ended March 31,

1110

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		Three months ended March 31,							2021		2020
		2020		2019
Total Company (1)		(In thousands)
Wealth Management and Trust (1)						Wealth Management and Trust (1)	(In thousands)
Net interest income	Net interest income	$	57,257	$	58,338	Net interest income	$	1	$	72
Fees and other income	Fees and other income	21,521		25,248		Fees and other income	19,165		18,485
Total revenue	Total revenue	78,778		83,586		Total revenue	19,166		18,557
Provision/(credit) for loan losses		16,962		(1,426)

Operating expense	Operating expense	60,908		60,553		Operating expense	17,455		15,449
Income before income taxes	Income before income taxes	908		24,459		Income before income taxes	1,711		3,108
Income tax expense	Income tax expense	102		4,917		Income tax expense	499		1,074
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	806		19,542		Net income before attribution to noncontrolling interests	1,212		2,034
Noncontrolling interests		6		100

Net income attributable to the Company	Net income attributable to the Company	$	800	$	19,442	Net income attributable to the Company	$	1,212	$	2,034

Assets	Assets	$	8,746,326	$	8,572,143	Assets	$	155,994	$	143,998
Amortization of intangibles	Amortization of intangibles	$	715	$	672	Amortization of intangibles	$	478	$	638
Depreciation	Depreciation	$	2,959	$	3,084	Depreciation	$	347	$	294


	Three months ended March 31,
		2021		2020
Holding Company and Eliminations (1)(2)		(In thousands)
Net interest income (3)		$	(472)	$	(905)
Fees and other income		2,930		1,928
Total revenue		2,458		1,023

Operating expense		14,008		2,871
Income/(loss) before income taxes		(11,550)		(1,848)
Income tax expense/(benefit)		857		(41)
Net income/(loss) before attribution to noncontrolling interests		(12,407)		$	(1,807)
Noncontrolling interests		0		6

Net income/(loss) attributable to the Company		$	(12,407)	$	(1,813)




Assets (including eliminations)		$	(102,879)	$	(89,741)

Depreciation		$	430	$	39


	Three months ended March 31,
		2021		2020
Total Company (1)		(In thousands)
Net interest income		$	59,477	$	57,257
Fees and other income		26,170		21,521
Total revenue		85,647		78,778
Provision/(credit) for loan losses		(7,004)		16,962
Operating expense		75,923		60,908
Income before income taxes		16,728		908
Income tax expense		6,076		102
Net income before attribution to noncontrolling interests		10,652		806
Noncontrolling interests		0		6

Net income attributable to the Company		$	10,652	$	800

Assets		$	10,538,492	$	8,746,326
Amortization of intangibles		$	667	$	715
Depreciation		$	3,748	$	2,959

_____________________

(1)Due to rounding, the sum of individual segment results may not add up to the Total Company results.

(2)~~Operating expense related to~~The Holding Company and Eliminations segment includes the ~~Private Banking and Wealth Management and Trust segments includes restructuring expense for the three months ended March 31, 2019~~results of ~~$1.3 million and $0.4 million, respectively.~~DGHM.

(3)Interest expense on ~~junior~~Junior subordinated debentures is included in Holding Company and Eliminations.

1211

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

4. Investments

The following table presents a summary of investment securities at March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:


		Amortized Cost			Unrealized									Fair Value	Amortized Cost		Unrealized						Fair Value
									Gains			Losses					Amortized Cost			Gains				Fair Value
				(In thousands)																(In thousands)
At March 31, 2020
Available-for-sale securities at fair value:
At March 31, 2021												At March 31, 2021
Investment securities available-for-sale at fair value:												Investment securities available-for-sale at fair value:
U.S. government and agencies	U.S. government and agencies	$	19,957		$	1,130	$	—		$	21,087	U.S. government and agencies	$	19,964	$	650		$	0		$	20,614
Government-sponsored entities	Government-sponsored entities	154,844			5,598		—			160,442		Government-sponsored entities	137,866		3,619			0			141,485
Municipal bonds	Municipal bonds	319,844			12,784		(128)			332,500		Municipal bonds	325,312		17,668		(585)			342,395
Mortgage-backed securities (1)	Mortgage-backed securities (1)	466,706			12,670		(239)			479,137		Mortgage-backed securities (1)	836,253		12,198		(13,537)			834,914
Total	Total	$	961,351		$	32,182	$	(367)		$	993,166	Total	$	1,319,395	$	34,135	$	(14,122)		$	1,339,408

Held-to-maturity securities at amortized cost:
Investment securities held-to-maturity at amortized cost:												Investment securities held-to-maturity at amortized cost:

Mortgage-backed securities (1)	Mortgage-backed securities (1)	$	45,395		$	731	$	(30)		$	46,096	Mortgage-backed securities (1)	$	31,943	$	688	$	0		$	32,631
Total	Total	$	45,395		$	731	$	(30)		$	46,096	Total	$	31,943	$	688	$	0		$	32,631

Equity securities at fair value:	Equity securities at fair value:											Equity securities at fair value:
Money market mutual funds (2)	Money market mutual funds (2)	$	23,080		$	—	$	—		$	23,080	Money market mutual funds (2)	$	39,708	$	—	$	—		$	39,708
Total	Total	$	23,080		$	—	$	—		$	23,080	Total	$	39,708	$	—	$	—		$	39,708

At December 31, 2019
Available-for-sale securities at fair value:
At December 31, 2020												At December 31, 2020
Investment securities available-for-sale at fair value:												Investment securities available-for-sale at fair value:
U.S. government and agencies	U.S. government and agencies	$	19,955		$	42	$	(57)		$	19,940	U.S. government and agencies	$	19,962	$	1,022	$	0		$	20,984
Government-sponsored entities	Government-sponsored entities	154,963			1,292		—			156,255		Government-sponsored entities	142,985		4,801		0			147,786
Municipal bonds	Municipal bonds	312,977			12,551		(73)			325,455		Municipal bonds	324,422		22,177		(11)			346,588
Mortgage-backed securities (1)	Mortgage-backed securities (1)	479,005			1,117		(3,488)			476,634		Mortgage-backed securities (1)	711,144		17,805		(614)			728,335
Total	Total	$	966,900		$	15,002	$	(3,618)		$	978,284	Total	$	1,198,513	$	45,805	$	(625)		$	1,243,693

Held-to-maturity securities at amortized cost:
Investment securities held-to-maturity at amortized cost:												Investment securities held-to-maturity at amortized cost:

Mortgage-backed securities (1)	Mortgage-backed securities (1)	48,212			53		(316)			47,949		Mortgage-backed securities (1)	$	35,223	$	719	$	0		$	35,942
Total	Total	$	48,212		$	53	$	(316)		$	47,949	Total	$	35,223	$	719	$	0		$	35,942

Equity securities at fair value:	Equity securities at fair value:											Equity securities at fair value:
Money market mutual funds (2)	Money market mutual funds (2)	$	18,810		$	—	$	—		$	18,810	Money market mutual funds (2)	$	41,452	$	—	$	—		$	41,452
Total	Total	$	18,810		$	—	$	—		$	18,810	Total	$	41,452	$	—	$	—		$	41,452

_____________________

(1)All ~~mortgage-backed~~Mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.

(2)Money market mutual funds maintain a constant net asset value of $1.00 and therefore have no unrealized gain or loss.

The Company adopted ASU 2016-13 as of January 1, 2020. Under ASU 2016-13, the Company is required to assess the investment portfolio for credit impairment. The Company considers the Investment securities held-to-maturity portfolio to meet the "zero loss" expectation requirements. All Investment securities held-to-maturity ~~securities~~ owned by the Company are ~~AAA~~AAA- rated mortgage-backed securities that are backed by the guarantees of the U.S. government, U.S. government agencies or ~~government sponsored~~government-sponsored entities. The Company has experienced ~~zero~~0 losses for these securities. In addition, as of March 31, 2021 and December 31, 2020, 0 Investment securities held-to-maturity ~~securities~~ were past due. Therefore, 0 credit allowance was recorded on the Investment securities held-to-maturity ~~investment~~ portfolio.

The Company evaluated the Investment securities available-for-sale ~~investment securities~~ on a security by security basis by assessing the extent and duration of unrealized loss positions, significant deterioration in the financial performance of the issuer, significant adverse changes in the market, or other factors that could raise significant concerns about the issuer's ability to continue as a going concern. The Company identified 0 security with ~~impairment.~~impairment as of March 31, 2021 and December 31, 2020. Therefore, 0 credit allowance was booked on the Investment securities available-for-sale ~~investment~~ portfolio. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for additional information on ASU 2016-13.

The following table presents the maturities of Investment securities available-for-sale, ~~investment securities,~~ based on contractual maturity, as of March 31, ~~2020.~~2021. Certain securities are callable before their final maturity. Additionally, certain securities (such

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

as ~~mortgage-backed~~Mortgage-backed securities) are shown within the table below based on their final (contractual) maturity, but due to prepayments and amortization are expected to have shorter lives.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~


		Available-for-sale Securities									Investment Securities Available-for-sale
				Amortized Cost			Fair Value			Amortized Cost				Fair Value
				(In thousands)									(In thousands)
Within one year	Within one year	$	33,686		$	33,916	Within one year	$					$
After one, but within five years	After one, but within five years	312,665			322,256		After one, but within five years	258,270					267,989
After five, but within ten years	After five, but within ten years	230,955			239,899		After five, but within ten years	227,730			237,588
Greater than ten years	Greater than ten years	384,045			397,095		Greater than ten years	755,189			754,741
Total	Total	$	961,351		$	993,166	Total	$	1,319,395		$	1,339,408

The following table presents the maturities of Investment securities held-to-maturity, ~~investment securities,~~ based on contractual maturity, as of March 31, ~~2020.~~2021.


		Held-to-maturity Securities									Investment Securities Held-to-maturity
				Amortized Cost			Fair Value			Amortized Cost				Fair Value
				(In thousands)									(In thousands)

After five, but within ten years	After five, but within ten years	$	37,086		$	37,569	After five, but within ten years	$		26,376					$	26,970
Greater than ten years	Greater than ten years	8,309			8,527		Greater than ten years	5,567					5,661
Total	Total	$	45,395		$	46,096	Total	$	31,943		$	32,631

The following table presents the maturities of ~~equity~~Equity securities, based on contractual maturity, as of March 31, ~~2020.~~2021.


		Equity Securities									Equity Securities
				Amortized Cost			Fair Value			Amortized Cost				Fair Value
				(In thousands)									(In thousands)
Within one year	Within one year	$	23,080		$	23,080	Within one year	$					$

Total	Total	$	23,080		$	23,080	Total	$	39,708			$	39,708

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, there were 0 sales of Investment securities available-for-sale, ~~held-to- maturity,~~Investment securities held-to-maturity, or ~~equity~~Equity securities.

The following tables present information regarding securities at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 having temporary impairment, due to the fair values having declined below the amortized cost of the individual securities, and the time period that the investments have been temporarily impaired. As of March 31, 2021, there were no Investment securities held-to-maturity having temporary impairment.


		Less than 12 months						12 months or longer						Total										Less than 12 months				12 months or longer	Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Securities
		(In thousands, except number of securities)																										(In thousands, except number of securities)
March 31, 2020
Available-for-sale securities
March 31, 2021															March 31, 2021
Investment securities available-for-sale															Investment securities available-for-sale

Municipal bonds	Municipal bonds	$	14,009	$	(128)	$	—	$	—	$	14,009	$	(128)	3	Municipal bonds	$	26,139	$	(585)	$	0	$	0	$	26,139	$	(585)	9
Mortgage-backed securities (1)	Mortgage-backed securities (1)	3,568		(25)		18,972		(214)		22,540		(239)		36	Mortgage-backed securities (1)	436,241		(13,456)		4,989		(81)		441,230		(13,537)		59

Total	Total	$	17,577	$	(153)	$	18,972	$	(214)	$	36,549	$	(367)	39	Total	$	462,380	$	(14,041)	$	4,989	$	(81)	$	467,369	$	(14,122)	68

Held-to-maturity securities

Mortgage-backed securities (1)		$	—	$	—	$	4,442	$	(30)	$	4,442	$	(30)	2
Total		$	—	$	—	$	4,442	$	(30)	$	4,442	$	(30)	2

1413

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		Less than 12 months						12 months or longer						Total										Less than 12 months				12 months or longer	Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		# of Securities
		(In thousands, except number of securities)																										(In thousands, except number of securities)
December 31, 2019
Available-for-sale securities
U.S. government and agencies		$	9,899	$	(57)	$	—	$	—	$	9,899	$	(57)	1
Government-sponsored entities		1,725		—		—		—		1,725		—		1
December 31, 2020															December 31, 2020
Investment securities available-for-sale															Investment securities available-for-sale

Municipal bonds	Municipal bonds	9,149		(73)		—		—		9,149		(73)		4	Municipal bonds	$	2,344	$	(11)	$	0	$	0	$	2,344	$	(11)	2
Mortgage-backed securities (1)	Mortgage-backed securities (1)	140,723		(1,016)		187,043		(2,472)		327,766		(3,488)		85	Mortgage-backed securities (1)	126,545		(519)		5,411		(95)		131,956		(614)		41

Total	Total	$	161,496	$	(1,146)	$	187,043	$	(2,472)	$	348,539	$	(3,618)	91	Total	$	128,889	$	(530)	$	5,411	$	(95)	$	134,300	$	(625)	43

Held-to-maturity securities
Mortgage-backed securities (1)		$	10,328	$	(11)	$	30,451	$	(305)	$	40,779	$	(316)	14
Total		$	10,328	$	(11)	$	30,451	$	(305)	$	40,779	$	(316)	14

_____________________

(1)All ~~mortgage-backed~~Mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.

As of March 31, ~~2020,~~2021, the ~~mortgage-backed~~Mortgage-backed securities in the first table above had ~~current~~ Standard and Poor’s credit ~~rating~~ratings of at least AAA. As of March 31, ~~2020,~~2021, the ~~municipal bonds~~Municipal securities in the first table above had ~~a current~~ Standard and ~~Poor’s~~Poor's credit ~~rating~~ratings of ~~at least AAA.~~AAA and AA+. As of March 31, ~~2020,~~2021, the Company determined that the unrealized losses on investments, since their purchase, is primarily attributed to changes in interest rates and not as a result of the deterioration of credit quality. As of March 31, ~~2020,~~2021, the Company had no intent to sell any securities in an unrealized loss position, and it is not more likely than not that the Company would be forced to sell any of these securities prior to the full recovery of all unrealized loss amounts.

Other investments

The ~~Company~~Bank invests in low-income housing tax credits, which are included in ~~other~~Other assets, to encourage private capital investment in the construction and rehabilitation of low-income housing. The ~~Company~~Bank makes these investments as an indirect subsidy that allows investors, such as the ~~Company,~~Bank, in a flow-through limited liability entity, such as limited partnerships or limited liability companies that manage or invest in qualified affordable housing projects, to receive the benefits of the tax credits allocated to the entity that owns the qualified affordable housing project. The ~~Company~~Bank also holds partnership interests in venture capital funds formed to provide financing to small businesses and to promote community development.

Other investments, which are included in ~~other~~Other assets, can be temporarily impaired when the fair values decline below the amortized costs of the individual investments. There were 0 other investments with unrealized losses as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020. The ~~Company’s~~Bank’s other investments primarily include ~~low income~~low-income housing partnerships which generate tax credits. The ~~Company~~Bank also holds partnership interests in ~~venture capital funds~~small business investment companies formed to provide financing to small businesses and to promote community development. The ~~Company~~Bank had ~~$66.1~~$74.0 million and ~~$65.5~~$75.7 million in other investments included in ~~other~~Other assets as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

5. Fair Value Measurements

Fair value is defined under GAAP as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy established in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value. Financial instruments are considered Level 1 when valuation can be based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.

1514

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, aggregated by the level in the fair value hierarchy within which those measurements fall:


		As of March 31, 2020			Fair value measurements at reporting date using:														As of March 31, 2021				Fair value measurements at reporting date using:
									Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			As of March 31, 2021								Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
				(In thousands)																		(In thousands)
Assets:	Assets:											Assets:
Available-for-sale securities:
Investment securities available-for-sale:												Investment securities available-for-sale:
U.S. government and agencies	U.S. government and agencies	$	21,087		$	—	$	21,087		$	—	U.S. government and agencies	$	20,614		$			0					$	20,614		$	0
Government-sponsored entities	Government-sponsored entities	160,442			—		160,442			—		Government-sponsored entities	141,485			0				141,485					0
Municipal bonds	Municipal bonds	332,500			—		332,500			—		Municipal bonds	342,395			0			342,395					0
Mortgage-backed securities	Mortgage-backed securities	479,137			—		479,137			—		Mortgage-backed securities	834,914			0			834,914				0

Total available-for-sale securities		993,166			—		993,166			—
Total												Total	1,339,408			0			1,339,408				0
Equity securities	Equity securities	23,080			23,080		—			—		Equity securities	39,708			39,708			0				0
Derivatives - interest rate customer swaps	Derivatives - interest rate customer swaps	93,391			—		93,391			—		Derivatives - interest rate customer swaps	53,682			0			53,682				0

Derivatives - risk participation agreement	Derivatives - risk participation agreement	46			—		46			—		Derivatives - risk participation agreement	28			0			28				0

Trading securities held in the “rabbi trust” (1)	Trading securities held in the “rabbi trust” (1)	5,550			5,550		—			—		Trading securities held in the “rabbi trust” (1)	7,633			7,633			0				0

Liabilities:	Liabilities:											Liabilities:
Derivatives - interest rate customer swaps	Derivatives - interest rate customer swaps	$	94,437		$	—	$	94,437		$	—	Derivatives - interest rate customer swaps	$	54,529		$	0			$	54,529			$	0

Derivatives - interest rate swaps												Derivatives - interest rate swaps	157			0			157				0
Derivatives - risk participation agreement	Derivatives - risk participation agreement	480			—		480			—		Derivatives - risk participation agreement	211			0			211				0

Deferred compensation “rabbi trust” (1)	Deferred compensation “rabbi trust” (1)	5,550			5,550		—			—		Deferred compensation “rabbi trust” (1)	7,633			7,633			0				0


					Fair value measurements at reporting date using:																				Fair value measurements at reporting date using:
				As of December 31, 2019			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			As of December 31, 2020				Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)
				(In thousands)																						(In thousands)
Assets:	Assets:												Assets:
Available-for-sale securities:
Investment securities available-for-sale:													Investment securities available-for-sale:
U.S. government and agencies	U.S. government and agencies	$	19,940		$	—		$	19,940		$	—	U.S. government and agencies	$		20,984			$	0				$		20,984		$	0
Government-sponsored entities	Government-sponsored entities	156,255			—			156,255			—		Government-sponsored entities	147,786			0				147,786				0
Municipal bonds	Municipal bonds	325,455			—			325,455			—		Municipal bonds	346,588			0				346,588				0
Mortgage-backed securities	Mortgage-backed securities	476,634			—			476,634			—		Mortgage-backed securities	728,335			0				728,335				0

Total available-for-sale securities		978,284			—			978,284			—
Total													Total	1,243,693			0				1,243,693				0
Equity securities	Equity securities	18,810			18,810			—			—		Equity securities	41,452			41,452				0				0
Derivatives - interest rate customer swaps	Derivatives - interest rate customer swaps	36,089			—			36,089			—		Derivatives - interest rate customer swaps	83,255			0				83,255				0

Derivatives - risk participation agreements	Derivatives - risk participation agreements	10			—			10			—		Derivatives - risk participation agreements	49			0				49				0

Trading securities held in the “rabbi trust” (1)	Trading securities held in the “rabbi trust” (1)	6,119			6,119			—			—		Trading securities held in the “rabbi trust” (1)	7,204			7,204				0				0

Liabilities:	Liabilities:												Liabilities:
Derivatives - interest rate customer swaps	Derivatives - interest rate customer swaps	$	36,580		$	—		$	36,580		$	—	Derivatives - interest rate customer swaps	$	84,590		$	0			$	84,590			$	0

Derivatives - interest rate swaps													Derivatives - interest rate swaps	228			0				228				0
Derivatives - risk participation agreements	Derivatives - risk participation agreements	242			—			242			—		Derivatives - risk participation agreements	375			0				375				0

Deferred compensation “rabbi trust” (1)	Deferred compensation “rabbi trust” (1)	6,112			6,112			—			—		Deferred compensation “rabbi trust” (1)	7,204			7,204				0				0

_____________________

(1) The Company has adopted a special trust for the Deferred Compensation Plan called a “rabbi ~~trust”.~~trust.” The rabbi trust is an arrangement that is used to accumulate assets that may be used to fund the Company’s obligation to pay benefits under the Deferred Compensation Plan. To prevent immediate taxation to the executives who participate in the Deferred Compensation Plan, the amounts placed in the rabbi trust must remain subject to the claims of the Company’s creditors. The investments chosen by the participants in the Deferred Compensation Plan are mirrored by the rabbi trust as a way to minimize the earnings volatility of the Deferred Compensation Plan.

As of March 31, 2020 and December 31, 2019, available-for-sale securities consisted of U.S. government and agencies securities, government-sponsored entities securities, municipal bonds, and mortgage-backed securities. Available-for-sale Level 2 securities generally have quoted prices but are traded less frequently than exchange-traded securities and can be

1615

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

As of March 31, 2021 and December 31, 2020, Investment securities available-for-sale consisted of U.S. government and agencies securities, Government-sponsored entities securities, Municipal bonds, and Mortgage-backed securities. Investment securities available-for-sale Level 2 securities generally have quoted prices but are traded less frequently than exchange-traded securities and can be priced using market data from similar assets and include ~~government-sponsored~~Government-sponsored entities securities, ~~municipal~~Municipal bonds, ~~mortgage-backed~~Mortgage-backed securities, “off-the-run” U.S. Treasury securities, and certain investments in ~~SBA~~the Small Business Administration's (the "SBA") loans (which are categorized as U.S. government and agencies securities). “Off-the-run” U.S. Treasury securities are Treasury bonds and notes issued before the most recently issued bond or note of a particular maturity. When Treasuries move to the secondary over-the-counter market, they become less frequently traded, therefore, they are considered “off-the-run.” NaN investments held as of March 31, ~~2020~~2021 or December 31, ~~2019~~2020 were categorized as Level 3.

As of March 31, ~~2020~~2021 and December 31, ~~2019, equity~~2020, Equity securities consisted of Level 1 money market mutual funds that are valued with prices quoted in active markets.

In managing its interest rate and credit risk, the Company may utilize derivative instruments including interest rate customer swaps, interest rate swaps, and risk participation agreements. As a service to its customers, the Company may utilize derivative instruments including customer foreign exchange forward contracts to manage its foreign exchange risk, if any. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities, and therefore, they have been categorized as a Level 2 measurement as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 8: Derivatives and Hedging Activities” for further details.

To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position.

The Company has determined that the majority of inputs used to value its derivatives are within Level 2. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Trading securities held in the ~~rabbi trust~~"rabbi trust" consist of publicly traded mutual fund investments that are valued at prices quoted in active markets. Therefore, they have been categorized as Level 1 as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

The Company accounts for its investments held in the rabbi trust in accordance with ASC 320, Investments - Debt and Equity Securities. The investments held in the rabbi trust are classified as trading securities. The assets of the rabbi trust are carried at their fair value within ~~other~~Other assets on the Consolidated Balance Sheets. Changes in the fair value of the securities are recorded as an increase or decrease in ~~other~~Other income each quarter. The deferred compensation liability reflects the market value of the securities selected by the participants and is included within ~~other~~Other liabilities on the Consolidated Balance Sheets. Changes in the fair value of the liability are recorded as an increase or decrease in ~~salaries~~Salaries and employee benefits expense each quarter.

There were no transfers for assets or liabilities recorded at fair value on a recurring basis as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. There were 0 Level 3 assets valued on a recurring basis at March 31, ~~2020~~2021 or December 31, ~~2019.~~2020. There were no changes in the valuation techniques used for measuring the fair value.

The following tables present the Company’s assets ~~and liabilities~~ measured at fair value on a non-recurring basis during the periods ended March 31, ~~2020~~2021 and ~~2019, respectively,~~March 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall.


		As of March 31, 2020			Fair value measurements at reporting date using:													Gain (losses) from fair value changes			As of March 31, 2021	Fair value measurements at reporting date using:								Gain (losses) from fair value changes
									Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)	Three months ended March 31, 2020				As of March 31, 2021		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)				Three months ended March 31, 2021
				(In thousands)																			(In thousands)
Assets:	Assets:															Assets:
Impaired loans (1)	Impaired loans (1)	$	97		$	—	$	—		$	97		$	21		Impaired loans (1)	$	5,205	$		0		$	0		$	5,205	$	(435)

_____________________

(1)Collateral-dependent impaired loans held as of March 31, 2021 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2021.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


	As of March 31, 2020		Fair value measurements at reporting date using:						Gain (losses) from fair value changes
			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Three months ended March 31, 2020
	(In thousands)
Assets:
Impaired loans (1)	$	97	$	0	$	0	$	97	$	21

_____________________

(1)Collateral-dependent impaired loans held as of March 31, 2020 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2020.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

As of March 31, 2019 Fair value measurements at reporting date using: Gain (losses) from fair value changes
Quoted prices in
active markets
for identical
assets (Level 1)
Significant other
observable
inputs (Level 2)
Significant
unobservable
inputs (Level 3)
Three months ended March 31, 2019
(In thousands)
Assets:
Impaired loans (1) $ 957 $ — $ — $ 957 $ 372

~~_____________________~~

~~(1)Collateral-dependent impaired loans held as of March 31, 2019 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2019.~~

The following tables present additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:

As of March 31, 2020
Fair Value Valuation
Technique Unobservable
Input Range of
Inputs
Utilized Weighted
Average of
Inputs
Utilized
(In thousands)
Impaired Loans $ 97 Appraisals of Collateral Discount for costs to sell 10% - 10% 10%
Appraisal adjustments —% —%

As of March 31, 2021

Fair Value

Valuation
Technique

Unobservable
Input

Range of
Inputs
Utilized

Weighted
Average of
Inputs
Utilized

(In thousands)

Impaired Loans

5,205

Appraisals of Collateral

Discount for costs to sell

5% - 10%

Appraisal adjustments

As of March 31, 2019
Fair Value Valuation
Technique Unobservable
Input Range of
Inputs
Utilized Weighted
Average of
Inputs
Utilized
(In thousands)
Impaired Loans $ 957 Appraisals of Collateral Discount for costs to sell —% - 6% 1%
Appraisal adjustments —% —%

As of March 31, 2020

Fair Value

Valuation
Technique

Unobservable
Input

Range of
Inputs
Utilized

Weighted
Average of
Inputs
Utilized

(In thousands)

Impaired Loans

Appraisals of Collateral

Discount for costs to sell

10% - 10%

10%

Appraisal adjustments

Impaired loans include those loans that were adjusted to the fair value of underlying collateral as required under ASC 310, Receivables. The amount does not include impaired loans that are measured based on expected future cash flows discounted at the respective loan’s original effective interest rate, as that amount is not considered a fair value measurement. The Company uses appraisals, which management may adjust to reflect estimated fair value declines, or may apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property or consideration of broker quotes. The appraisers use a market, income, and/or a cost approach in determining the value of the collateral. Therefore, they have been categorized as a Level 3 measurement.

1817

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables present the carrying values and fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis:


		As of March 31, 2020																										As of March 31, 2021
				Book Value			Fair Value			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Book Value			Fair Value			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
				(In thousands)																									(In thousands)
FINANCIAL ASSETS:	FINANCIAL ASSETS:															FINANCIAL ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	61,714		$	61,714		$	61,714		$	—		$	—	Cash and cash equivalents	$	1,389,943		$	1,389,943		$	1,389,943		$	0				$
Investment securities held-to-maturity	Investment securities held-to-maturity	45,395			46,096			—			46,096			—		Investment securities held-to-maturity	31,943		32,631			0			32,631			0
Loans held for sale	Loans held for sale	7,671			7,724			—			7,724			—		Loans held for sale	8,434		8,431			0			8,431			0
Loans, net	Loans, net	6,975,127			6,752,894			—			—			6,752,894		Loans, net	7,142,315		7,035,003			0			0			7,035,003
Other financial assets	Other financial assets	73,576			73,576			—			73,576			—		Other financial assets	56,917		56,917			0			56,917			0
FINANCIAL LIABILITIES:	FINANCIAL LIABILITIES:															FINANCIAL LIABILITIES:
Deposits	Deposits	6,835,572			6,838,860			—			6,838,860			—		Deposits	9,147,618		9,148,568			0			9,148,568			0

Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	45,319			45,319			—			45,319			—		Securities sold under agreements to repurchase	46,262		46,262			0			46,262			0
Federal funds purchased		145,000			145,000			—			145,000			—

Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	491,254			493,532			—			493,532			—		Federal Home Loan Bank borrowings	115,019		115,410			0			115,410			0
Junior subordinated debentures	Junior subordinated debentures	106,363			96,363			—			—			96,363		Junior subordinated debentures	106,363		69,863			0			0			69,863
Other financial liabilities	Other financial liabilities	2,154			2,154			—			2,154			—		Other financial liabilities	1,751		1,751			0			1,751			0


		As of December 31, 2019																										As of December 31, 2020
				Book Value			Fair Value			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)		Book Value			Fair Value			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
				(In thousands)																									(In thousands)
FINANCIAL ASSETS:	FINANCIAL ASSETS:															FINANCIAL ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	292,479		$	292,479		$	292,479		$	—		$	—	Cash and cash equivalents	$	1,055,588		$	1,055,588		$	1,055,588		$	0				$
Investment securities held-to-maturity	Investment securities held-to-maturity	48,212			47,949			—			47,949			—		Investment securities held-to-maturity	35,223		35,942			0			35,942			0
Loans held for sale	Loans held for sale	7,386			7,475			—			7,475			—		Loans held for sale	17,421		17,782			0			17,782			0
Loans, net	Loans, net	6,904,722			6,883,360			—			—			6,883,360		Loans, net	7,023,071		6,980,202			0			0			6,980,202
Other financial assets	Other financial assets	67,348			67,348			—			67,348			—		Other financial assets	57,654		57,654			0			57,654			0
FINANCIAL LIABILITIES:	FINANCIAL LIABILITIES:															FINANCIAL LIABILITIES:
Deposits	Deposits	7,241,476			7,241,739			—			7,241,739			—		Deposits	8,595,366		8,596,193			0			8,596,193			0
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	53,398			53,398			—			53,398			—		Securities sold under agreements to repurchase	53,472		53,472			0			53,472			0

Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	350,829			351,233			—			351,233			—		Federal Home Loan Bank borrowings	114,659		115,284			0			115,284			0
Junior subordinated debentures	Junior subordinated debentures	106,363			96,363			—			—			96,363		Junior subordinated debentures	106,363		69,863			0			0			69,863
Other financial liabilities	Other financial liabilities	1,957			1,957			—			1,957			—		Other financial liabilities	1,734		1,734			0			1,734			0

The estimated fair values have been determined by using available quoted market information or other appropriate valuation methodologies. The aggregate fair value amounts presented above do not represent the underlying value of the financial assets and liabilities of the Company taken as a whole as they do not reflect any premium or discount the Company might recognize if the assets were sold or the liabilities sold, settled, or redeemed. An excess of fair value over book value on financial assets represents a premium, or gain, the Company might recognize if the assets were sold, while an excess of book value over fair value on financial liabilities represents a premium, or gain, the Company might recognize if the liabilities were sold, settled, or redeemed prior to maturity. Conversely, losses would be recognized if assets were sold where the book value exceeded the fair value or liabilities were sold where the fair value exceeded the book value.

The fair value estimates provided are made at a specific point in time, based on relevant market information and the characteristics of the financial instrument. The estimates do not provide for any premiums or discounts that could result from concentrations of ownership of a financial instrument. Because no active market exists for some of the Company’s financial instruments, certain fair value estimates are based on subjective judgments regarding current economic conditions, risk characteristics of the financial instruments, future expected loss experience, prepayment assumptions, and other factors. The resulting estimates involve uncertainties and are considered best estimates. Changes made to any of the underlying assumptions could significantly affect the estimates.

1918

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

Cash and cash equivalents

The carrying value reported in the ~~balance sheet~~Consolidated Balance Sheets for ~~cash~~Cash and cash equivalents approximates fair value due to the short-term nature of their maturities, and these assets are classified as Level 1 measurements.

Investment securities held-to-maturity

Investment securities held-to-maturity consist of ~~mortgage-backed~~Mortgage-backed securities as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. The ~~mortgage-backed~~Mortgage-backed securities are fixed income instruments that are not quoted on an exchange but may be traded in active markets. The fair value of these securities is based on quoted market prices obtained from external pricing services. The principal market for our securities portfolio is the secondary institutional market, with an exit price that is predominantly reflective of bid level pricing in that market. Accordingly, Investment securities held-to-maturity ~~mortgage-backed~~Mortgage-backed securities are classified as Level 2.2 measurement.

There were no transfers of the Company's financial instruments that are not measured at fair value on a recurring basis as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Loans held for sale

Loans held for sale are recorded at the lower of cost or fair value in the aggregate. Fair value estimates are based on actual commitments to sell the loans to investors at an agreed upon price or current market prices if rates have changed since the time the loan closed. Accordingly, loans held for sale are included in the Level 2 fair value category.

Loans, net

Fair value estimates are based on loans with similar financial characteristics. The Company estimates the fair value of loans using the exit price notion under ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which includes identifying an exit price using current market information for origination rates and making certain adjustments to incorporate credit risk, transaction costs and other adjustments utilizing publicly available rates and indexes. Loans, net are included in the Level 3 fair value category based upon the inputs and valuation techniques used.

Other financial assets

Other financial assets consist of accrued interest and fees receivable, and stock in the Federal Home Loan Bank of Boston (“FHLB”) and the Federal Reserve Bank of Boston (“FRB”), for which the carrying amount approximates fair value, and these assets are classified as Level 2 measurements.

Deposits

The fair values reported for transaction accounts (demand, NOW, savings, and money market) equal their respective book values reported on the ~~balance sheet~~Consolidated Balance Sheets, and these liabilities are classified as Level 2 measurements. The fair values disclosed are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on certificates of deposit with similar remaining maturities, and these liabilities are classified as Level 2 measurements.

Securities sold under agreements to repurchase

The fair values of ~~securities~~Securities sold under agreements to repurchase are estimated based on contractual cash flows discounted at the Bank’s incremental borrowing rate for FHLB borrowings with similar maturities, and these liabilities have been classified as Level 2 measurements.

Federal funds purchased, if any

The carrying amounts of ~~federal~~Federal funds purchased, if any, approximate fair value due to their short-term nature, and therefore, these funds have been classified as Level 2 measurements.

Federal Home Loan Bank borrowings

The fair values reported for FHLB borrowings are estimated based on the discounted value of contractual cash flows. The discount rate used is based on the Bank’s estimated current incremental borrowing rate for FHLB borrowings ofwith similar maturities, and therefore, these borrowings have been classified as Level 2 measurements.

Junior subordinated debentures

The fair values of the ~~junior~~Junior subordinated debentures issued by Boston Private Capital Trust I and Boston Private Capital Trust II are estimated using Level 3 inputs such as the interest rates on these securities, current rates for similar debt, ~~a consideration for illiquidity of trading in the debt,~~ and regulatory changes that would result in an unfavorable change in the regulatory capital treatment of this type of debt.

2019

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

Other financial liabilities

Other financial liabilities ~~consists~~consist of accrued interest payable for which the carrying amount approximates fair value and is classified as Level 2 measurements.

Financial instruments with off-balance sheet risk, if any

The Bank’s commitments to originate loans and for unused lines and outstanding letters of credit are primarily at market interest rates, and therefore, the carrying amount approximates fair value.

6. Loan Portfolio and Credit Quality

The Bank’s lending activities are conducted principally in the regions of New England, Northern California, and Southern California. The Bank originates single and multi-family residential loans, commercial real estate loans, commercial and industrial loans, commercial tax-exempt loans, construction and land loans, and home equity and other consumer loans. Most loans are secured by borrowers’ personal or business assets. The ability of the Bank’s single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic conditions within the Bank’s lending areas. Commercial, construction, and land borrowers’ ability to repay is generally dependent upon the health of the economy and real estate values, including ~~in particular,~~ the performance of the construction sector. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio is susceptible to changing conditions in the New England, Northern California, and Southern California economies and real estate markets.

The following table presents a summary of the loan portfolio based on the portfolio segment as of the dates indicated:


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Commercial and industrial	Commercial and industrial	$	670,744	$	694,034	Commercial and industrial	$	668,217	$	558,343
Paycheck Protection Program						Paycheck Protection Program	351,170		312,356
Commercial tax-exempt	Commercial tax-exempt	445,319		447,927		Commercial tax-exempt	488,507		442,159

Commercial real estate	Commercial real estate	2,626,299		2,551,274		Commercial real estate	2,697,677		2,757,375
Construction and land	Construction and land	238,293		225,983		Construction and land	181,482		159,204
Residential	Residential	2,841,926		2,839,155		Residential	2,632,554		2,677,464
Home equity	Home equity	89,350		83,657		Home equity	71,752		77,364
Consumer and other	Consumer and other	131,407		134,674		Consumer and other	124,966		120,044
Total	Total	$	7,043,338	$	6,976,704	Total	$	7,216,325	$	7,104,309

The following table presents nonaccrual loans receivable by class of receivable as of the dates indicated:


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Commercial and industrial	Commercial and industrial	$	1,371	$	582	Commercial and industrial	$	4,766	$	4,394
Commercial tax-exempt		—		—

Commercial real estate	Commercial real estate	5,392		—		Commercial real estate	5,859		5,261

Residential	Residential	16,074		13,993		Residential	14,475		13,780
Home equity	Home equity	1,476		1,525		Home equity	651		415
Consumer and other	Consumer and other	1		3		Consumer and other	13		1
Total	Total	$	24,314	$	16,103	Total	$	25,764	$	23,851

The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest is in doubt. In certain instances, although infrequent, loans that have become 90 days or more past due may remain on accrual status if the value of the collateral securing the loan is sufficient to cover principal and interest and the loan is in the process of collection. There were 0no loans 90 days or more past due, but still accruing, as of both March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. The Bank’s policy for returning a loan to accrual status requires the loan to be brought current and for the client to show a history of making timely payments (generally six consecutive months). For troubled debt restructured loans (“TDRs”), a return to accrual status generally requires timely payments for a period of six months in accordance with the restructured loan terms, along with meeting other criteria.

2120

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables show the payment status of loans receivable by class of receivable as of the dates indicated:


		March 31, 2020																																	March 31, 2021
		Accruing Past Due										Nonaccrual Loans																	Accruing Past Due						Nonaccrual Loans
		30-59 Days Past Due		60-89 Days Past Due		Total Accruing Past Due		Current		30-89 Days Past Due		90 Days or Greater Past Due		Total Non-Accrual Loans		Current Accruing Loans		Total Loans Receivable			30-59 Days Past Due		60-89 Days Past Due		Total Accruing Past Due		Current		30-89 Days Past Due		90 Days or Greater Past Due		Total Non-Accrual Loans		Current Accruing Loans		Total Loans Receivable
		(In thousands)																																	(In thousands)
Commercial and industrial	Commercial and industrial	$	1,401	$	92	$	1,493	$	381	$	—	$	990	$	1,371	$	667,880	$	670,744	Commercial and industrial	$	2,914	$	0	$	2,914	$	1,832	$	1,914	$	1,020	$	4,766	$	660,537	$	668,217
Paycheck Protection Program																				Paycheck Protection Program	0		0		0		0		0		0		0		351,170		351,170
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		—		—		445,319		445,319		Commercial tax-exempt	0		0		0		0		0		0		0		488,507		488,507
Commercial real estate	Commercial real estate	—		—		—		5,392		—		—		5,392		2,620,907		2,626,299		Commercial real estate	0		0		0		601		0		5,258		5,859		2,691,818		2,697,677
Construction and land	Construction and land	—		—		—		—		—		—		—		238,293		238,293		Construction and land	0		0		0		0		0		0		0		181,482		181,482
Residential	Residential	12,967		—		12,967		9,024		2,056		4,994		16,074		2,812,885		2,841,926		Residential	4,044		0		4,044		8,838		1,655		3,982		14,475		2,614,035		2,632,554
Home equity	Home equity	—		319		319		180		—		1,296		1,476		87,555		89,350		Home equity	104		0		104		611		0		40		651		70,997		71,752
Consumer and other	Consumer and other	73		—		73		1		—		—		1		131,333		131,407		Consumer and other	173		14		187		13		0		0		13		124,766		124,966
Total	Total	$	14,441	$	411	$	14,852	$	14,978	$	2,056	$	7,280	$	24,314	$	7,004,172	$	7,043,338	Total	$	7,235	$	14	$	7,249	$	11,895	$	3,569	$	10,300	$	25,764	$	7,183,312	$	7,216,325


		December 31, 2019																																	December 31, 2020
		Accruing Past Due										Nonaccrual Loans																	Accruing Past Due						Nonaccrual Loans
		30-59 Days Past Due		60-89 Days Past Due		Total Accruing Past Due		Current		30-89 Days Past Due		90 Days or Greater Past Due		Total Non-Accrual Loans		Current Accruing Loans		Total Loans Receivable			30-59 Days Past Due		60-89 Days Past Due		Total Accruing Past Due		Current		30-89 Days Past Due		90 Days or Greater Past Due		Total Non-Accrual Loans		Current Accruing Loans		Total Loans Receivable
		(In thousands)																																	(In thousands)
Commercial and industrial	Commercial and industrial	$	828	$	—	$	828	$	—	$	241	$	341	$	582	$	692,624	$	694,034	Commercial and industrial	$	1,837	$	522	$	2,359	$	3,934	$	87	$	373	$	4,394	$	551,590	$	558,343
Paycheck Protection Program																				Paycheck Protection Program	0		0		0		0		0		0		0		312,356		312,356
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		—		—		447,927		447,927		Commercial tax-exempt	0		0		0		0		0		0		0		442,159		442,159
Commercial real estate	Commercial real estate	1,420		—		1,420		—		—		—		—		2,549,854		2,551,274		Commercial real estate	136		491		627		0		0		5,261		5,261		2,751,487		2,757,375
Construction and land	Construction and land	—		—		—		—		—		—		—		225,983		225,983		Construction and land	0		0		0		0		0		0		0		159,204		159,204
Residential	Residential	19,133		1,038		20,171		9,593		759		3,641		13,993		2,804,991		2,839,155		Residential	10,960		4,538		15,498		8,183		1,521		4,076		13,780		2,648,186		2,677,464
Home equity	Home equity	369		—		369		220		148		1,157		1,525		81,763		83,657		Home equity	1,107		256		1,363		228		0		187		415		75,586		77,364
Consumer and other	Consumer and other	1,008		2,149		3,157		1		—		2		3		131,514		134,674		Consumer and other	15		0		15		0		1		0		1		120,028		120,044
Total	Total	$	22,758	$	3,187	$	25,945	$	9,814	$	1,148	$	5,141	$	16,103	$	6,934,656	$	6,976,704	Total	$	14,055	$	5,807	$	19,862	$	12,345	$	1,609	$	9,897	$	23,851	$	7,060,596	$	7,104,309

Nonaccrual and delinquent loans are affected by many factors, such as economic and business conditions, interest rates, unemployment levels, and real estate collateral values, among others. In periods of prolonged economic decline, borrowers may become more severely affected over time as liquidity levels decline and the borrower’s ability to continue to make payments deteriorates.

With respect to real estate collateral values, the declines from the peak, as well as the value of the real estate at the time of origination versus the current value, can impact the level of problem loans. For instance, if the loan to value ratio at the time of renewal has increased due to the decline in the real estate value since origination, the loan may no longer meet the Bank’s underwriting standards and may be considered for classification as a problem loan dependent upon a review of risk factors. There could be an increase in these situations as the economic conditions brought on by the COVID-19 pandemic could lead to a decline in collateral values.

Generally, when a collateral dependent loan becomes impaired, an updated appraisal of the collateral, if appropriate, is obtained. If the impaired loan has not been upgraded to a performing status within a reasonable amount of time, the Bank will continue to obtain updated appraisals as deemed necessary, especially during periods of declining property values. ~~The COVID-19 pandemic has limited the Bank’s ability to obtain updated appraisals. In lieu of appraisals, the Bank may use other valuation techniques in the short-term.~~

The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loans with modified terms under the CARES Act are not considered past due if they are complying with the modified terms.

2221

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

Credit ~~Quality Indicators~~quality indicators

The Bank uses a risk rating system to monitor the credit quality of its loan portfolio. Loan classifications are assessments made by the Bank of the status of the loans based on the facts and circumstances known to the Bank, including management’s judgment, at the time of assessment. Some or all of these classifications may change in the future if there are unexpected changes in the financial condition of the borrower, including but not limited to, changes resulting from ~~continuing~~ deterioration in employment levels, general business and economic conditions on a national basis or in the local markets in which the Bank operates adversely affecting, among other things, real estate values. Such conditions, as well as other factors which adversely affect borrowers’ ability to service or repay loans, typically result in changes in loan default and charge-off rates, and increased provisions for loan losses, which would adversely affect the Company’s financial performance and financial condition. These circumstances are not entirely foreseeable and, as a result, it may not be possible to accurately reflect them in the Company’s analysis of credit risk. Generally, only commercial loans, including commercial real estate, other commercial and industrial loans, commercial tax-exempt loans, and construction and land loans, are given a numerical grade.

A summary of the rating system used by the Bank is included here from Part II. Item 8. “Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, follows:

Pass - All loans graded as pass are considered acceptable credit quality by the Bank and are grouped for purposes of calculating the allowance for loan losses. For residential, home equity and consumer loans, the Bank classifies loans as pass unless there is known information such as delinquency or client requests for modifications which, due to financial difficulty, would then generally result in a risk rating such as special mention or more severe depending on the factors.

Special ~~Mention~~mention - Loans rated in this category are defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the Bank’s credit position. These loans are currently protected but have the potential to deteriorate to a substandard rating. For commercial loans, the borrower’s financial performance may be inconsistent or below forecast, creating the possibility of liquidity problems and shrinking debt service coverage. In loans having this rating, the primary source of repayment is still good, but there is increasing reliance on collateral or guarantor support. Collectability of the loan is not yet in jeopardy. In particular, loans in this category are considered more variable than other categories, since they will typically migrate through categories more quickly.

Substandard - Loans rated in this category are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. A substandard credit has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans may be either still accruing or nonaccruing depending upon the severity of the risk and other factors such as the value of the collateral, if any, and past due status.

Doubtful - Loans rated in this category indicate that collection or liquidation in full on the basis of currently existing facts, conditions, and values, is highly questionable and improbable. Loans in this category are usually on nonaccrual and classified as impaired.

These above credit quality indicators are assigned upon origination with commercial loans reassessed on an annual basis while noncommercial loans are reassessed when the loan becomes past due greater than 90 days or when ad-hoc information becomes available to the loan officer. Further, the commercial loan portfolio is subject for selection of an independent review ~~also~~ on an annual basis. In addition, those loans not considered to be "Pass" rated, are subject to a Loan Committee review on a quarterly basis. Lastly, on an ad-hoc basis as new information becomes available to the loan officer on the credit quality of the borrower, the credit quality indicators are reassessed.

2322

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables present the loan portfolio’s credit risk profile by internally assigned grade and class of receivable as of the dates indicated:


		March 31, 2020																			March 31, 2021
		By Loan Grade or Nonaccrual Status																	By Loan Grade or Nonaccrual Status
		Pass		Special Mention		Accruing Classified (1)		Nonaccrual Loans		Total			Pass		Special Mention		Accruing Classified (1)		Nonaccrual Loans		Total
		(In thousands)																			(In thousands)
Commercial and industrial	Commercial and industrial	$	609,537	$	9,428	$	50,408	$	1,371	$	670,744	Commercial and industrial	$	623,253	$	12,795	$	27,403	$	4,766	$	668,217
Paycheck Protection Program												Paycheck Protection Program	351,170		0		0		0		351,170
Commercial tax-exempt	Commercial tax-exempt	434,259		2,516		8,544		—		445,319		Commercial tax-exempt	485,720		2,787		0		0		488,507
Commercial real estate	Commercial real estate	2,517,306		79,909		23,692		5,392		2,626,299		Commercial real estate	2,452,482		133,609		105,727		5,859		2,697,677
Construction and land	Construction and land	237,823		470		—		—		238,293		Construction and land	178,501		2,981		0		0		181,482
Residential	Residential	2,821,611		—		4,241		16,074		2,841,926		Residential	2,615,079		0		3,000		14,475		2,632,554
Home equity	Home equity	86,811		—		1,063		1,476		89,350		Home equity	71,101		0		0		651		71,752
Consumer and other	Consumer and other	131,106		300		—		1		131,407		Consumer and other	124,653		300		0		13		124,966
Total	Total	$	6,838,453	$	92,623	$	87,948	$	24,314	$	7,043,338	Total	$	6,901,959	$	152,472	$	136,130	$	25,764	$	7,216,325


		December 31, 2019																			December 31, 2020
		By Loan Grade or Nonaccrual Status																	By Loan Grade or Nonaccrual Status
		Pass		Special Mention		Accruing Classified (1)		Nonaccrual Loans		Total			Pass		Special Mention		Accruing Classified (1)		Nonaccrual Loans		Total
		(In thousands)																			(In thousands)
Commercial and industrial	Commercial and industrial	$	656,364	$	12,101	$	24,987	$	582	$	694,034	Commercial and industrial	$	519,680	$	11,314	$	22,955	$	4,394	$	558,343
Paycheck Protection Program												Paycheck Protection Program	312,356		0		0		0		312,356
Commercial tax-exempt	Commercial tax-exempt	436,721		7,154		4,052		—		447,927		Commercial tax-exempt	434,850		2,806		4,503		0		442,159
Commercial real estate	Commercial real estate	2,495,702		32,014		23,558		—		2,551,274		Commercial real estate	2,505,424		170,521		76,169		5,261		2,757,375
Construction and land	Construction and land	225,526		457		—		—		225,983		Construction and land	156,908		2,296		0		0		159,204
Residential	Residential	2,820,909		—		4,253		13,993		2,839,155		Residential	2,660,684		0		3,000		13,780		2,677,464
Home equity	Home equity	81,060		—		1,072		1,525		83,657		Home equity	76,693		0		256		415		77,364
Consumer and other	Consumer and other	134,371		300		—		3		134,674		Consumer and other	119,743		300		0		1		120,044
Total	Total	$	6,850,653	$	52,026	$	57,922	$	16,103	$	6,976,704	Total	$	6,786,338	$	187,237	$	106,883	$	23,851	$	7,104,309

______________________

(1) Accruing Classified may include both Substandard and Doubtful classifications.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following ~~table presents~~tables present the loan portfolio’s credit risk profile by loan origination year and class of receivable as of the dates indicated:


	March 31, 2021
	Loan Origination Year By Loan Grade or Nonaccrual Status
	2021		2020		2019		2018		2017		Prior		Revolving		Revolving Converted to Term (2)		Total
	(In thousands)
Commercial and industrial
Pass	$	22,837	$	92,124	$	71,592	$	57,958	$	12,334	$	56,994	$	301,010	$	8,404	$	623,253
Special Mention	0		321		4,919		952		0		2,588		3,764		251		12,795
Accruing Classified (1)	4,600		1,992		195		6,241		659		63		7,709��		5,944		27,403
Nonaccrual	0		0		375		346		16		903		884		2,242		4,766
Total	$	27,437	$	94,437	$	77,081	$	65,497	$	13,009	$	60,548	$	313,367	$	16,841	$	668,217
Paycheck Protection Program
Pass	$	113,041	$	238,129	$	0	$	0	$	0	$	0	$	0	$	0	$	351,170



Total	$	113,041	$	238,129	$	0	$	0	$	0	$	0	$	0	$	0	$	351,170
Commercial tax-exempt
Pass	$	0	$	89,135	$	38,215	$	40,285	$	24,410	$	290,684	$	0	$	2,991	$	485,720
Special Mention	0		0		0		0		0		2,787		0		0		2,787


Total	$	0	$	89,135	$	38,215	$	40,285	$	24,410	$	293,471	$	0	$	2,991	$	488,507
Commercial real estate
Pass	$	65,639	$	264,428	$	444,717	$	248,987	$	301,316	$	1,022,447	$	90,477	$	14,471	$	2,452,482
Special Mention	0		18,253		15,913		2,317		17,744		79,382		0		0		133,609
Accruing Classified (1)	0		5,586		49,581		23,964		12,787		13,809		0		0		105,727
Nonaccrual	0		0		5,212		0		598		0		49		0		5,859
Total	$	65,639	$	288,267	$	515,423	$	275,268	$	332,445	$	1,115,638	$	90,526	$	14,471	$	2,697,677
Construction and land
Pass	$	6,774	$	57,925	$	73,762	$	21,550	$	16,262	$	2,228	$	0	$	0	$	178,501
Special Mention	0		0		0		2,981		0		0		0		0		2,981


Total	$	6,774	$	57,925	$	73,762	$	24,531	$	16,262	$	2,228	$	0	$	0	$	181,482
Residential
Pass	$	138,273	$	599,553	$	436,633	$	338,505	$	348,499	$	753,601	$	0	$	15	$	2,615,079

Accruing Classified (1)	0		0		0		0		0		3,000		0		0		3,000
Nonaccrual	0		0		603		473		2,373		11,026		0		0		14,475
Total	$	138,273	$	599,553	$	437,236	$	338,978	$	350,872	$	767,627	$	0	$	15	$	2,632,554
Home equity
Pass	$	0	$	0	$	0	$	0	$	0	$	1,367	$	59,919	$	9,815	$	71,101


Nonaccrual	0		0		0		0		0		256		139		256		651
Total	$	0	$	0	$	0	$	0	$	0	$	1,623	$	60,058	$	10,071	$	71,752
Consumer and other
Pass	$	964	$	653	$	147	$	19	$	0	$	593	$	122,277	$	0	$	124,653
Special Mention	0		0		0		0		0		0		300		0		300

Nonaccrual	0		0		0		0		0		0		13		0		13
Total	$	964	$	653	$	147	$	19	$	0	$	593	$	122,590	$	0	$	124,966
Total
Pass	$	347,528	$	1,341,947	$	1,065,066	$	707,304	$	702,821	$	2,127,914	$	573,683	$	35,696	$	6,901,959
Special Mention	0		18,574		20,832		6,250		17,744		84,757		4,064		251		152,472
Accruing Classified (1)	4,600		7,578		49,776		30,205		13,446		16,872		7,709		5,944		136,130
Nonaccrual	0		0		6,190		819		2,987		12,185		1,085		2,498		25,764
Total	$	352,128	$	1,368,099	$	1,141,864	$	744,578	$	736,998	$	2,241,728	$	586,541	$	44,389	$	7,216,325

______________________

(1) Accruing Classified may include both Substandard and Doubtful classifications.

(2) Amounts for revolving loans converted to term loans represent only those loans that have been converted to term loans after December 31, 2016. Due to data limitations, information prior to December 31, 2016 is unavailable.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		March 31, 2020																											December 31, 2020
		Loan Origination Year By Loan Grade or Nonaccrual Status																											Loan Origination Year By Loan Grade or Nonaccrual Status
		2020		2019		2018		2017		2016		2015 & Prior		Total			2020		2019		2018		2017		2016		Prior		Revolving		Revolving Converted to Term (2)		Total
		(In thousands)																											(In thousands)
Commercial and industrial	Commercial and industrial															Commercial and industrial
Pass	Pass	$	26,987	$	149,993	$	147,350	$	51,752	$	39,825	$	193,630	$	609,537	Pass	$	96,230	$	80,949	$	65,506	$	13,378	$	17,972	$	43,592	$	191,252	$	10,801	$	519,680
Special Mention	Special Mention	—		488		1,765		3,836		232		3,107		9,428		Special Mention	358		2,413		1,008		674		0		2,688		3,911		262		11,314
Accruing Classified (1)	Accruing Classified (1)	50		25,225		3,602		14,969		2,520		4,042		50,408		Accruing Classified (1)	1,184		223		6,247		0		0		110		8,683		6,508		22,955
Nonaccrual	Nonaccrual	—		171		—		210		735		255		1,371		Nonaccrual	0		141		350		0		813		14		1,012		2,064		4,394
Total																Total	$	97,772	$	83,726	$	73,111	$	14,052	$	18,785	$	46,404	$	204,858	$	19,635	$	558,343
Paycheck Protection Program																Paycheck Protection Program
Pass																Pass	$	312,356	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	312,356

Total	Total	$	27,037	$	175,877	$	152,717	$	70,767	$	43,312	$	201,034	$	670,744	Total	$	312,356	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	312,356
Commercial tax-exempt	Commercial tax-exempt															Commercial tax-exempt
Pass	Pass	$	—	$	13,741	$	41,012	$	24,823	$	108,057	$	246,626	$	434,259	Pass	$	53,225	$	20,586	$	40,451	$	24,624	$	102,133	$	190,798	$	0	$	3,033	$	434,850
Special Mention	Special Mention	—		—		—		—		—		2,516		2,516		Special Mention	0		0		0		0		0		2,806		0		0		2,806
Accruing Classified (1)	Accruing Classified (1)	—		—		—		4,021		—		4,523		8,544		Accruing Classified (1)	0		0		0		0		0		4,503		0		0		4,503

Total	Total	$	—	$	13,741	$	41,012	$	28,844	$	108,057	$	253,665	$	445,319	Total	$	53,225	$	20,586	$	40,451	$	24,624	$	102,133	$	198,107	$	0	$	3,033	$	442,159
Commercial real estate	Commercial real estate															Commercial real estate
Pass	Pass	$	71,236	$	491,954	$	310,679	$	349,161	$	432,649	$	861,627	$	2,517,306	Pass	$	311,605	$	462,144	$	247,228	$	308,437	$	375,713	$	657,563	$	126,544	$	16,190	$	2,505,424
Special Mention	Special Mention	—		22,855		13,322		15,324		19,325		9,083		79,909		Special Mention	21,661		13,851		12,382		29,461		37,123		56,043		0		0		170,521
Accruing Classified (1)	Accruing Classified (1)	—		1,424		—		1,184		8,919		12,165		23,692		Accruing Classified (1)	3,161		49,637		14,000		0		0		9,371		0		0		76,169
Nonaccrual	Nonaccrual	—		5,392		—		—		—		—		5,392		Nonaccrual	0		5,212		0		0		0		0		49		0		5,261
Total	Total	$	71,236	$	521,625	$	324,001	$	365,669	$	460,893	$	882,875	$	2,626,299	Total	$	336,427	$	530,844	$	273,610	$	337,898	$	412,836	$	722,977	$	126,593	$	16,190	$	2,757,375
Construction and land	Construction and land															Construction and land
Pass	Pass	$	3,731	$	52,620	$	84,692	$	53,428	$	16,820	$	26,532	$	237,823	Pass	$	43,042	$	63,914	$	31,434	$	16,288	$	2,230	$	0	$	0	$	0	$	156,908
Special Mention	Special Mention	—		—		470		—		—		—		470		Special Mention	0		0		2,296		0		0		0		0		0		2,296

Total	Total	$	3,731	$	52,620	$	85,162	$	53,428	$	16,820	$	26,532	$	238,293	Total	$	43,042	$	63,914	$	33,730	$	16,288	$	2,230	$	0	$	0	$	0	$	159,204
Residential	Residential															Residential
Pass	Pass	$	131,395	$	612,100	$	480,529	$	504,672	$	471,195	$	621,720	$	2,821,611	Pass	$	603,414	$	471,237	$	366,390	$	388,845	$	352,330	$	478,468	$	0	$	0	$	2,660,684

Accruing Classified (1)	Accruing Classified (1)	—		—		—		—		—		4,241		4,241		Accruing Classified (1)	0		0		0		0		0		3,000		0		0		3,000
Nonaccrual	Nonaccrual	—		263		1,089		2,532		—		12,190		16,074		Nonaccrual	0		604		272		2,373		62		10,469		0		0		13,780
Total	Total	$	131,395	$	612,363	$	481,618	$	507,204	$	471,195	$	638,151	$	2,841,926	Total	$	603,414	$	471,841	$	366,662	$	391,218	$	352,392	$	491,937	$	0	$	0	$	2,677,464
Home equity	Home equity															Home equity
Pass	Pass	$	1,325	$	13,322	$	15,847	$	7,781	$	6,833	$	41,703	$	86,811	Pass	$	0	$	0	$	252	$	0	$	686	$	553	$	64,985	$	10,217	$	76,693

Accruing Classified (1)	Accruing Classified (1)	—		—		—		—		—		1,063		1,063		Accruing Classified (1)	0		0		0		0		0		0		0		256		256
Nonaccrual	Nonaccrual	—		—		—		—		139		1,337		1,476		Nonaccrual	0		0		0		0		0		276		139		0		415
Total	Total	$	1,325	$	13,322	$	15,847	$	7,781	$	6,972	$	44,103	$	89,350	Total	$	0	$	0	$	252	$	0	$	686	$	829	$	65,124	$	10,473	$	77,364
Consumer and other	Consumer and other															Consumer and other
Pass	Pass	$	6,326	$	15,684	$	23,993	$	31,032	$	5,227	$	48,844	$	131,106	Pass	$	728	$	158	$	25	$	0	$	81	$	574	$	118,177	$	0	$	119,743
Special Mention	Special Mention	—		—		—		300		—		—		300		Special Mention	0		0		0		0		0		0		300		0		300

Nonaccrual	Nonaccrual	—		—		—		—		—		1		1		Nonaccrual	0		0		0		0		0		0		1		0		1
Total	Total	$	6,326	$	15,684	$	23,993	$	31,332	$	5,227	$	48,845	$	131,407	Total	$	728	$	158	$	25	$	0	$	81	$	574	$	118,478	$	0	$	120,044
Total	Total															Total
Pass	Pass	$	241,000	$	1,349,414	$	1,104,102	$	1,022,649	$	1,080,606	$	2,040,682	$	6,838,453	Pass	$	1,420,600	$	1,098,988	$	751,286	$	751,572	$	851,145	$	1,371,548	$	500,958	$	40,241	$	6,786,338
Special Mention	Special Mention	—		23,343		15,557		19,460		19,557		14,706		92,623		Special Mention	22,019		16,264		15,686		30,135		37,123		61,537		4,211		262		187,237
Accruing Classified (1)	Accruing Classified (1)	50		26,649		3,602		20,174		11,439		26,034		87,948		Accruing Classified (1)	4,345		49,860		20,247		0		0		16,984		8,683		6,764		106,883
Nonaccrual	Nonaccrual	—		5,826		1,089		2,742		874		13,783		24,314		Nonaccrual	0		5,957		622		2,373		875		10,759		1,201		2,064		23,851
Total	Total	$	241,050	$	1,405,232	$	1,124,350	$	1,065,025	$	1,112,476	$	2,095,205	$	7,043,338	Total	$	1,446,964	$	1,171,069	$	787,841	$	784,080	$	889,143	$	1,460,828	$	515,053	$	49,331	$	7,104,309

______________________

(1) Accruing Classified may include both Substandard and Doubtful classifications.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The following tables present, by class of receivable, the balance of impaired loans with and without a related allowance, the associated allowance for those impaired loans with a related allowance, and the total unpaid principal on impaired loans:


		As of and for the three months ended March 31, 2020																			As of and for the three months ended March 31, 2021
		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized while Impaired			Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment			YTD Interest Income Recognized while Impaired
		(In thousands)																			(In thousands)
With no related allowance recorded:	With no related allowance recorded:											With no related allowance recorded:
Commercial and industrial	Commercial and industrial	$	555	$	632	n/a		$	667	$	6	Commercial and industrial	$	3,806	$	3,880	n/a		$	3,594		$	0
Paycheck Protection Program												Paycheck Protection Program	0		0		n/a		0			0
Commercial tax-exempt	Commercial tax-exempt	—		—		n/a		—		—		Commercial tax-exempt	0		0		n/a		0			0
Commercial real estate	Commercial real estate	6,119		6,151		n/a		2,403		9		Commercial real estate	0		0		n/a		1,303			0
Construction and land	Construction and land	—		—		n/a		—		—		Construction and land	0		0		n/a		0			0
Residential	Residential	16,352		16,612		n/a		15,587		117		Residential	14,710		14,974		n/a		14,564			90
Home equity		1,548		2,109		n/a		1,550		3
Home equity (2)												Home equity (2)	355		355		n/a		362			8
Consumer and other	Consumer and other	—		—		n/a		—		—		Consumer and other	0		0		n/a		0			0
Subtotal	Subtotal	$	24,574	$	25,504	n/a		$	20,207	$	135	Subtotal	$	18,871	$	19,209	n/a		$	19,823		$	98
With an allowance recorded:	With an allowance recorded:											With an allowance recorded:
Commercial and industrial	Commercial and industrial	$	273	$	280	$	175	$	281	$	—	Commercial and industrial	$	610	$	629	$	541	$	789		$	0
Paycheck Protection Program												Paycheck Protection Program	0		0		0		0			0
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		0			0
Commercial real estate	Commercial real estate	—		—		—		—		—		Commercial real estate	5,261		5,434		125		3,958			0
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0			0
Residential	Residential	532		532		64		535		4		Residential	341		341		51		384			2
Home equity	Home equity	270		270		20		271		2		Home equity	256		256		17		256			0
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0			0
Subtotal	Subtotal	$	1,075	$	1,082	$	259	$	1,087	$	6	Subtotal	$	6,468	$	6,660	$	734	$	5,387		$	2
Total:	Total:											Total:
Commercial and industrial	Commercial and industrial	$	828	$	912	$	175	$	948	$	6	Commercial and industrial	$	4,416	$	4,509	$	541	$	4,383		$	0
Paycheck Protection Program												Paycheck Protection Program	0		0		0		0			0
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		0			0
Commercial real estate	Commercial real estate	6,119		6,151		—		2,403		9		Commercial real estate	5,261		5,434		125		5,261			0
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0			0
Residential	Residential	16,884		17,144		64		16,122		121		Residential	15,051		15,315		51		14,948			92
Home equity		1,818		2,379		20		1,821		5
Home equity (2)												Home equity (2)	611		611		17		618			8
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0			0
Total	Total	$	25,649	$	26,586	$	259	$	21,294	$	141	Total	$	25,339	$	25,869	$	734	$	25,210		$	100

_____________________

(1)Recorded investment represents the client loan balance net of historical charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.

(2)Negative quarterly income is due to reversal of income recognized in prior quarter.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		As of and for the three months ended March 31, 2019																			As of and for the three months ended March 31, 2020
		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized while Impaired			Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment			YTD Interest Income Recognized while Impaired
		(In thousands)																			(In thousands)
With no related allowance recorded:	With no related allowance recorded:											With no related allowance recorded:
Commercial and industrial	Commercial and industrial	$	862	$	1,730	n/a		$	1,021	$	15	Commercial and industrial	$	555	$	632	n/a		$	667		$	6

Commercial tax-exempt	Commercial tax-exempt	—		—		n/a		—		—		Commercial tax-exempt	0		0		n/a		0			0
Commercial real estate	Commercial real estate	—		—		n/a		136		256		Commercial real estate	6,119		6,151		n/a		2,403			9
Construction and land	Construction and land	—		—		n/a		—		—		Construction and land	0		0		n/a		0			0
Residential	Residential	12,306		12,566		n/a		11,056		137		Residential	16,352		16,612		n/a		15,587			117
Home equity	Home equity	2,147		2,709		n/a		1,709		—		Home equity	1,548		2,109		n/a		1,550			3
Consumer and other	Consumer and other	—		—		n/a		—		—		Consumer and other	0		0		n/a		0			0
Subtotal	Subtotal	$	15,315	$	17,005	n/a		$	13,922	$	408	Subtotal	$	24,574	$	25,504	n/a		$	20,207		$	135
With an allowance recorded:	With an allowance recorded:											With an allowance recorded:
Commercial and industrial	Commercial and industrial	$	1,302	$	1,353	$	231	$	1,542	$	16	Commercial and industrial	$	273	$	280	$	175	$	281		$	0

Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		0			0
Commercial real estate	Commercial real estate	—		—		—		—		—		Commercial real estate	0		0		0		0			0
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0			0
Residential	Residential	597		597		68		732		7		Residential	532		532		64		535			4
Home equity	Home equity	—		—		—		1,290		—		Home equity	270		270		20		271			2
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0			0
Subtotal	Subtotal	$	1,899	$	1,950	$	299	$	3,564	$	23	Subtotal	$	1,075	$	1,082	$	259	$	1,087		$	6
Total:	Total:											Total:
Commercial and industrial	Commercial and industrial	$	2,164	$	3,083	$	231	$	2,563	$	31	Commercial and industrial	$	828	$	912	$	175	$	948		$	6

Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		0			0
Commercial real estate	Commercial real estate	—		—		—		136		256		Commercial real estate	6,119		6,151		0		2,403			9
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0			0
Residential	Residential	12,903		13,163		68		11,788		144		Residential	16,884		17,144		64		16,122			121
Home equity	Home equity	2,147		2,709		—		2,999		—		Home equity	1,818		2,379		20		1,821			5
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0			0
Total	Total	$	17,214	$	18,955	$	299	$	17,486	$	431	Total	$	25,649	$	26,586	$	259	$	21,294		$	141

_____________________

(1)Recorded investment represents the client loan balance net of historical ~~charge offs~~charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		As of and for the year ended December 31, 2019																	As of and for the year ended December 31, 2020
		Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized while Impaired			Recorded Investment (1)		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized while Impaired
		(In thousands)																	(In thousands)
With no related allowance recorded:	With no related allowance recorded:											With no related allowance recorded:
Commercial and industrial	Commercial and industrial	$	470	$	553	n/a		$	1,062	$	268	Commercial and industrial	$	2,262	$	2,307	n/a		$	2,512	$	141
Paycheck Protection Program												Paycheck Protection Program	0		0		n/a		0		0
Commercial tax-exempt	Commercial tax-exempt	—		—		n/a		—		—		Commercial tax-exempt	0		0		n/a		302		20
Commercial real estate	Commercial real estate	733		733		n/a		155		262		Commercial real estate	5,212		5,384		n/a		4,818		33
Construction and land	Construction and land	—		—		n/a		—		—		Construction and land	0		0		n/a		0		0
Residential	Residential	15,362		15,622		n/a		13,700		636		Residential	14,523		14,783		n/a		15,509		534
Home equity	Home equity	1,557		2,119		n/a		2,095		35		Home equity	367		367		n/a		922		16
Consumer and other	Consumer and other	—		—		n/a		—		—		Consumer and other	0		0		n/a		0		0
Subtotal	Subtotal	$	18,122	$	19,027	n/a		$	17,012	$	1,201	Subtotal	$	22,364	$	22,841	n/a		$	24,063	$	744
With an allowance recorded:	With an allowance recorded:											With an allowance recorded:
Commercial and industrial	Commercial and industrial	$	254	$	254	$	146	$	736	$	33	Commercial and industrial	$	2,053	$	2,090	$	279	$	378	$	1
Paycheck Protection Program												Paycheck Protection Program	0		0		0		0		0
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		0		0
Commercial real estate	Commercial real estate	—		—		—		—		—		Commercial real estate	50		50		50		23		0
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0		0
Residential	Residential	538		538		67		1,130		23		Residential	419		419		54		498		13
Home equity	Home equity	273		273		22		545		4		Home equity	256		256		17		264		7
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0		0
Subtotal	Subtotal	$	1,065	$	1,065	$	235	$	2,411	$	60	Subtotal	$	2,778	$	2,815	$	400	$	1,163	$	21
Total:	Total:											Total:
Commercial and industrial	Commercial and industrial	$	724	$	807	$	146	$	1,798	$	301	Commercial and industrial	$	4,315	$	4,397	$	279	$	2,890	$	142
Paycheck Protection Program												Paycheck Protection Program	0		0		0		0		0
Commercial tax-exempt	Commercial tax-exempt	—		—		—		—		—		Commercial tax-exempt	0		0		0		302		20
Commercial real estate	Commercial real estate	733		733		—		155		262		Commercial real estate	5,262		5,434		50		4,841		33
Construction and land	Construction and land	—		—		—		—		—		Construction and land	0		0		0		0		0
Residential	Residential	15,900		16,160		67		14,830		659		Residential	14,942		15,202		54		16,007		547
Home equity	Home equity	1,830		2,392		22		2,640		39		Home equity	623		623		17		1,186		23
Consumer and other	Consumer and other	—		—		—		—		—		Consumer and other	0		0		0		0		0
Total	Total	$	19,187	$	20,092	$	235	$	19,423	$	1,261	Total	$	25,142	$	25,656	$	400	$	25,226	$	765

_____________________

(1)Recorded investment represents the client loan balance net of historical ~~charge offs~~charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.

When management determines that it is probable that the Bank will not collect all principal and interest on a loan in accordance with the original loan terms, the loan is designated as impaired.

On March 22, 2020, regulators issued an interagency statement encouraging financial institutions to work with borrowers affected by the COVID-19 pandemic. The interagency statement also provided additional information regarding loan modifications. The regulators indicated they will not criticize institutions for working with borrowers in a safe and sound manner and have indicated that related modifications will not automatically result in a TDR. The regulators also provided supervisory views that loans modified under this program would not be considered past due or nonaccrual.

The regulators view prudent loan modification programs offered to financial institution customers affected by the COVID-19 pandemic as positive and proactive actions that can manage adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk. The statement indicated that short-term modifications made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief are not TDRs.

As of March 31, 2020, 10 loans with a current outstanding principal balance of approximately $5.0 million were processed under this mortgage deferment program. As of the date of this filing, the Bank has approved approximately 170 additional deferments for mortgage loans with a current outstanding principal balance of approximately $90.0 million.

Loans that are designated as impaired require an analysis to determine the amount of impairment, if any. Impairment would be indicated as a result of the carrying value of the loan exceeding either the estimated collateral value, less costs to sell, for collateral dependent loans or the net present value of the projected cash flow, discounted at the loan’s contractual effective interest rate, for loans not considered to be collateral dependent. Generally, shortfalls in the analysis on collateral dependent loans would result in the impairment amount being charged-off to the ~~allowance~~Allowance for loan losses. Shortfalls on cash flow

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

dependent loans may be carried as specific allocations to the general reserve unless a known loss is determined to have occurred, in which case, such known loss is charged-off.

Loans in the held for sale category are carried at the lower of amortized cost or estimated fair value in the aggregate and are excluded from the ~~allowance~~Allowance for loan losses analysis.

As of March 31, ~~2020,~~2021, the Bank has pledged ~~$2.3~~$2.2 billion of loans in a blanket lien agreement with the FHLB. The Bank also has ~~$386.2~~$320.7 million of loans pledged as collateral at the FRB for access to their discount window. As of December 31, ~~2019,~~2020, the Bank had pledged ~~$2.5~~$2.2 billion of loans to the FHLB and ~~$395.3~~$332.8 million of loans atto the FRB.

The Bank may, under certain circumstances, restructure loans as a concession to borrowers who are experiencing financial difficulty. These loans are outside of the guidelines to not be considered a TDR by recent regulatory guidance. Such loans are classified as TDRs and are included in impaired loans. TDRs typically result from the Bank’s loss mitigation activities which, among other things, could include rate reductions, payment extensions, and/or principal forgiveness. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, TDRs totaled ~~$14.9~~$14.0 million and ~~$12.6~~$13.9 million, respectively. As of March 31, ~~2020,~~2021, $7.1 million of the ~~$14.9~~$14.0 million in TDRs were on accrual status. As of December 31, ~~2019, $7.1~~2020, $7.2 million of the ~~$12.6~~$13.9 million in TDRs were on accrual status.

Since all TDR loans are considered impaired loans, they are individually evaluated for impairment. The resulting impairment, if any, would have an impact on the ~~allowance~~Allowance for loan losses as a specific reserve or charge-off. If, prior to the classification as a TDR, the loan was not impaired, there would have been a general reserve on the particular loan. Prior to the adoption of ASU 2016-13 on January 1, 2020, a general or allocated reserve would have been applied. Many loans initially categorized as TDRs are already on nonaccrual status and are already considered impaired. Therefore, there is generally not a material change to the ~~allowance~~Allowance for loan losses when a nonaccruing loan is categorized as a TDR.

The following tables present the balance of TDRs that were restructured or defaulted during the periods indicated:

As of and for the three months ended March 31, 2020
Restructured Year to Date TDRs that defaulted in the Year to Date that were restructured
in prior twelve months
# of
Loans Pre-
modification
recorded
investment Post-
modification
recorded
investment # of
Loans Post-
modification
recorded
investment
(In thousands, except number of loans)
Commercial and industrial (1) 1 $ 50 $ 50 — $ —
Commercial tax exempt — — — — —
Commercial real estate — — — — —
Construction and land — — — — —
Residential (2) 1 2,373 2,373 — —
Home equity — — — — —
Consumer and other — — — — —
Total 2 $ 2,423 $ 2,423 — $ —


	As of and for the three months ended March 31, 2021
	Restructured Year to Date					TDRs that defaulted in the Year to Date that were restructured in prior twelve months
	# of Loans	Pre- modification recorded investment		Post- modification recorded investment		# of Loans	Post- modification recorded investment
	(In thousands, except number of loans)





Residential and home equity (1)	1	$	220	$	220	0	$	0


Total	1	$	220	$	220	0	$	0

_____________________

(1)Represents the following type of concession: extension of maturity


	As of and for the three months ended March 31, 2020
	Restructured Year to Date					TDRs that defaulted in the Year to Date that were restructured in prior twelve months
	# of Loans	Pre- modification recorded investment		Post- modification recorded investment		# of Loans	Post- modification recorded investment
	(In thousands, except number of loans)
Commercial and industrial (1)	1	$	50	$	50	0	$	0



Residential and home equity (2)	1	2,373		2,373		0	0


Total	2	$	2,423	$	2,423	0	$	0

_____________________

(1)Represents the following type of concession: extension of maturity and reduction in interest rate.

(2)Represents the following type of concession: payment deferral.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

As of and for the three months ended March 31, 2019
Restructured Current Quarter TDRs that defaulted in the Current Quarter that were restructured in prior twelve months
# of Loans Pre- modification recorded investment Post- modification recorded investment # of Loans Post- modification recorded investment
(In thousands, except number of loans)
Commercial and industrial (1) 1 $ 179 $ 179 — $ —
Commercial tax exempt — — — — —
Commercial real estate — — — — —
Construction and land — — — — —
Residential (2) 1 3,000 3,000 — —
Home equity — — — — —
Consumer and other — — — — —
Total 2 $ 3,179 $ 3,179 — $ —

~~_____________________~~

~~(1)Represents the following type of concession: extension of term.~~

~~(2)Represents the following type of concession: temporary reduction of interest rate.~~

In ~~the first quarter of 2020, in~~ response to the COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 Residential and home equity loans totaling approximately $220.0 million have been processed under the program. As of March 31, ~~2020, 10~~2021, approximately 47 loans totaling approximately ~~$5.0~~$20.0 million ~~were approved~~remain in deferral under the program. ~~As this program was started late in the first quarter of 2020, the Bank has been experiencing increased volume in the second quarter of 2020 due to the COVID-19 pandemic. See Part I. Item 1. “Notes~~

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - ~~Note 16: Subsequent Events”~~(Continued)

Additionally, in response to the COVID-19 pandemic, the Bank initiated a program where it offered qualified Commercial and industrial borrowers principal payment deferrals for ~~additional information on~~six months, with the ~~mortgage deferment~~deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under the program. As of March 31, 2021, approximately 4 loans totaling approximately $5.7 million remain in deferral under the program.

Loan participations serviced for others and loans serviced for others are not included in the Company’s total loans.

The following table presents a summary of the loan participations serviced for others and loans serviced for others based on class of receivable as of the dates indicated:


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Commercial and industrial	Commercial and industrial	$	14,706	$	14,533	Commercial and industrial	$	110,284	$	110,589

Commercial tax-exempt	Commercial tax-exempt	17,959		18,101		Commercial tax-exempt	22,845		17,604
Commercial real estate	Commercial real estate	117,782		121,929		Commercial real estate	136,019		130,551
Construction and land	Construction and land	79,517		75,451		Construction and land	102,422		93,874
Total loan participations serviced for others	Total loan participations serviced for others	$	229,964	$	230,014	Total loan participations serviced for others	$	371,570	$	352,618

Residential	Residential	$	145,299	$	204,696	Residential	$	146,080	$	168,110
Total loans serviced for others	Total loans serviced for others	$	145,299	$	204,696	Total loans serviced for others	$	146,080	$	168,110

Total loans include deferred loan origination (fees)/costs, net, of ~~$7.7~~$(2.1) million and ~~$8.1~~$0.3 million as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020, respectively

7. Allowance for Loan Losses

The ~~allowance~~Allowance for loan losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Loan losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance when collected.

Under the CECL methodology, which the Company adopted on January 1, 2020, the Company estimates credit losses on a collective basis per segment for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address ~~forecast risk and model risk inherent~~risks not incorporated in the quantitative model output. The quantitative model utilizes ~~a factor-based approach~~economic factors and our selected peer group’s historical default and loss experience to estimate expected credit losses. The expected credit losses ~~using~~are the product of multiplying the Company’s estimates of probability of default, ~~and~~net loss given default, ~~which are derived from a selected peer group's historical~~and individual loan level exposure at default ~~and loss experience.~~on an undiscounted basis. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of estimated ~~prepayments~~prepayment and ~~curtailments.~~curtailment rates which are derived from the Company's recent historical experience on the remaining portfolio segment balance over the life of the portfolio. Reasonable and supportable economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the ~~Company's~~ historical long-run ~~average.~~average of the macroeconomic variables. Management has

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

determined a reasonable and supportable period of two years and a straight line reversion period of twelve months to be appropriate for purposes of estimating expected credit losses. Management also applies a weight to the various forecasts chosen to determine the reasonable and supportable economic forecasts. The Company's qualitative assessment ~~is based on factors outlined in regulatory guidance and include~~includes the ~~following:~~following factors:

• Volume and trend of past-due, ~~non-accrual,~~nonaccrual, and adversely-graded loans

• Trends in volume and terms of loans

• Concentration ~~Risk~~risk

• Experience and depth of management

• Risk surrounding lending policy and underwriting standards

• Risk surrounding loan review

• Banking industry conditions, other external factors, and inherent model risk

Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that will be individually assessed, the Company will use either a discounted cash flow ~~("DCF")~~ approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable.

Loan losses are charged against the Allowance for loan losses when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the Allowance for loan losses when collected.

Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within Accrued interest receivable on the ~~consolidated balance sheet.~~Consolidated Balance Sheets. Management has elected not to measure an allowance

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

for credit losses on these amounts as the Company employs a timely write-off policy as generally any loan over 89 days past-due is put on non-accrual status and any associated accrued interest is reversed.

~~For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the~~The Allowance for loan losses, was determined under the incurred loss model. Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology.

~~The allowance for loan losses, which is~~ reported as a reduction of outstanding loan balances, totaled ~~$68.2~~$74.0 million and ~~$72.0~~$81.2 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Beginning in the ~~first~~second quarter of 2020, the Company made a change to the loan portfolio segmentation as it relates to the ~~allowance~~Allowance for loan losses, ~~in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given~~adding the ~~different underlying risk characteristics.~~segment Paycheck Protection Program ("PPP"). For the period ended March 31, ~~2019,~~2020, there were no loans in this segment as the ~~provision/ (credit) for loan losses and related allowance balance~~SBA initiated the program in the ~~allowance for loan losses for tax-exempt commercial and industrial loans is included with commercial and industrial loans.~~ second quarter of 2020 in response to the COVID-19 pandemic.

The following ~~tables present~~table presents a summary of the changes in the ~~allowance~~Allowance for loan losses for the periods indicated:


	As of and for the three months ended March 31,
		2021		2020
		(In thousands)
Allowance for loan losses, beginning of period:
Commercial and industrial		$	8,985	$	10,048
Paycheck Protection Program		159		n/a
Commercial tax-exempt		2,550		6,016
Commercial real estate		51,161		40,765
Construction and land		4,041		5,119
Residential		12,864		8,857
Home equity		293		778
Consumer and other		1,185		399
Total Allowance for loan losses, beginning of period		$	81,238	$	71,982


Impact of adopting ASU 2016-13:
Commercial and industrial		n/a		(565)
Paycheck Protection Program		n/a		n/a
Commercial tax-exempt		n/a		(4,409)
Commercial real estate		n/a		(14,455)
Construction and land		n/a		(2,158)
Residential		n/a		685
Home equity		n/a		(535)
Consumer and other		n/a		1,052
Total impact of adopting ASU 2016-13		n/a		$	(20,385)

Allowance for loan losses, beginning of period, net		$	81,238	$	51,597
Provision/(credit) for loan losses:
Commercial and industrial		$	2,017	$	1,245
Paycheck Protection Program		20		n/a
Commercial tax-exempt		35		320
Commercial real estate		(5,404)		10,270
Construction and land		(788)		2,748
Residential		(2,689)		2,237
Home equity		(64)		(72)
Consumer and other		(131)		214
Total provision/(credit) for loan losses		$	(7,004)	$	16,962

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


			As of and for the three months ended March 31,					As of and for the three months ended March 31,
			2020		2019			2021		2020
		(In thousands)										(In thousands)
Allowance for loan losses, beginning of period:
Loans charged -off:							Loans charged -off:
Commercial and industrial	Commercial and industrial		$	10,048	$	15,912	Commercial and industrial	$	(297)	$	(518)
Paycheck Protection Program							Paycheck Protection Program	0		n/a
Commercial tax-exempt	Commercial tax-exempt		6,016		n/a		Commercial tax-exempt	0		0
Commercial real estate	Commercial real estate		40,765		41,934		Commercial real estate	0		0
Construction and land	Construction and land		5,119		6,022		Construction and land	0		0
Residential	Residential		8,857		10,026		Residential	0		0
Home equity	Home equity		778		1,284		Home equity	0		0
Consumer and other	Consumer and other		399		134		Consumer and other	0		(10)
Total allowance for loan losses, beginning of period			$	71,982	$	75,312
Total charge-offs							Total charge-offs	$	(297)	$	(528)

Impact of adopting ASU 2016-13:
Recoveries on loans previously charged-off:							Recoveries on loans previously charged-off:
Commercial and industrial	Commercial and industrial		$	(565)	n/a		Commercial and industrial	$	39	$	45
Commercial tax-exempt			(4,409)		n/a
Commercial real estate			(14,455)		n/a
Construction and land			(2,158)		n/a
Residential			685		n/a
Home equity			(535)		n/a
Consumer and other			1,052		n/a
Total impact of adopting ASU 2016-13			$	(20,385)	n/a

Provision/(credit) for loan losses:
Commercial and industrial			$	1,245	$	(413)
Commercial tax-exempt			320		n/a
Commercial real estate			10,270		(310)
Construction and land			2,748		(669)
Residential			2,237		(69)
Home equity			(72)		74
Consumer and other			214		(39)
Total provision/(credit) for loan losses			$	16,962	$	(1,426)

Loans charged off:
Commercial and industrial			$	(518)	$	—
Commercial tax-exempt			—		—
Commercial real estate			—		—
Construction and land			—		—
Residential			—		—
Home equity			—		(562)
Consumer and other			(10)		(2)
Total charge offs			$	(528)	$	(564)

Recoveries on loans previously charged off:
Commercial and industrial			$	45	$	188
Paycheck Protection Program							Paycheck Protection Program	0		n/a
Commercial tax-exempt	Commercial tax-exempt		—		—		Commercial tax-exempt	0		0
Commercial real estate	Commercial real estate		—		189		Commercial real estate	0		0
Construction and land	Construction and land		—		—		Construction and land	0		0
Residential	Residential		—		100		Residential	3		0
Home equity	Home equity		132		—		Home equity	0		132
Consumer and other	Consumer and other		3		15		Consumer and other	31		3
Total recoveries	Total recoveries		$	180	$	492	Total recoveries	$	73	$	180

Allowance for loan losses, end of period:	Allowance for loan losses, end of period:						Allowance for loan losses, end of period:
Commercial and industrial	Commercial and industrial		$	10,255	$	15,687	Commercial and industrial	$	10,744	$	10,255
Paycheck Protection Program							Paycheck Protection Program	179		n/a
Commercial tax-exempt	Commercial tax-exempt		1,927		n/a		Commercial tax-exempt	2,585		1,927
Commercial real estate	Commercial real estate		36,580		41,813		Commercial real estate	45,757		36,580
Construction and land	Construction and land		5,709		5,353		Construction and land	3,253		5,709
Residential	Residential		11,779		10,057		Residential	10,178		11,779
Home equity	Home equity		303		796		Home equity	229		303
Consumer and other	Consumer and other		1,658		108		Consumer and other	1,085		1,658
Total allowance for loan losses, end of period			$	68,211	$	73,814
Total Allowance for loan losses, end of period							Total Allowance for loan losses, end of period	$	74,010	$	68,211

The balance of the ~~allowance~~Allowance for loan losses of ~~$68.2~~$74.0 million as of March 31, ~~2020~~2021 represents a decrease of ~~$3.8~~$7.2 million from December 31, ~~2019. Upon~~2020. During the ~~adoption of ASU 2016-13 on January 1, 2020,~~three months ended March 31, 2021, the Company recognized a Provision credit of $7.0 million. The decrease

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

in the ~~allowance~~Allowance for loan losses ~~of $20.4 million. The adoption amount~~for the three months ended March 31, 2021 was primarily driven ~~primarily~~ by the portfolio composition, the short-term nature of many commercial loans, estimated prepayments and curtailments, a change to the loan portfolio segmentation in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics, and thelatest current reasonable and supportable economic forecasts, atwhich indicated improving economic conditions from the ~~time of adoption. During the first~~prior quarter, ~~of 2020, the Company recognized~~as well as a ~~provision for loan losses of $17.0 million. The increase~~change in the ~~allowance~~weighting of the forecast scenarios used to account for ~~loan losses of $17.0 million~~risks and assumptions not incorporated in the ~~first quarter of 2020 was primarily driven~~forecasts. These improvements were partially offset by the ~~changes in economic forecasts late~~net impact of the change in the ~~first quarter~~composition and volume of ~~2020 to reflect deteriorating economic conditions related to~~ the ~~COVID-19 pandemic.~~loan portfolio.

The balance of reserve for unfunded loan commitments of ~~$4.3~~$4.5 million as of March 31, ~~2020~~2021 represents ~~an increase~~a decrease of ~~$3.2~~$2.0 million from December 31, ~~2019. Upon~~2020. The change was primarily driven by the ~~adoption of ASU 2016-13 on January 1, 2020,~~latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the ~~Company recognized an increase~~prior quarter, as well as a change in the ~~reserve~~weighting of ~~$1.4 million~~the forecast scenarios used to account for risks and assumptions not incorporated in the ~~unfunded loan commitments expense. The net, after-tax impact of the $20.4 million decrease~~forecasts. Changes in the ~~allowance for loan losses and the increase in the~~balance of reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million. During the first quarter of 2020, the Company recognized a $1.8 million expense for the increase in the reserve for unfunded loan commitments, which isare recognized as Other expense within ~~Noninterest expense, driven by the change in economic forecasts.~~Total operating expense.

The ~~allowance~~Allowance for loan losses is an estimate of the inherent risk of loss in the loan portfolio as of the consolidated balance sheet dates. Management estimates the level of the ~~allowance~~Allowance for loan losses based on all relevant information available. Changes to the required level in the ~~allowance~~Allowance for loan losses result in either a ~~provision~~Provision for loan loss expense, if an increase is required, or a credit to the provision, if a decrease is required. Loan losses are charged to the ~~allowance~~Allowance for loan losses when available information confirms that specific loans, or portions thereof, are uncollectible. Recoveries on loans previously ~~charged off~~charged-off are credited to the ~~allowance~~Allowance for loan losses when received in cash or when the Bank takes possession of other assets.

The following tables present the Company’s ~~allowance~~Allowance for loan losses and loan portfolio as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 by portfolio segment, disaggregated by method of impairment analysis. The Company had 0 loans acquired with deteriorated credit quality as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

March 31, 2020
Individually Evaluated
for Impairment Collectively Evaluated
for Impairment Total
Recorded investment
(loan balance) Allowance for loan losses Recorded investment
(loan balance) Allowance for loan losses Recorded investment
(loan balance) Allowance for loan losses
(In thousands)
Commercial and industrial $ 828 $ 175 $ 669,916 $ 10,080 $ 670,744 $ 10,255
Commercial tax-exempt — — 445,319 1,927 445,319 1,927
Commercial real estate 6,119 — 2,620,180 36,580 2,626,299 36,580
Construction and land — — 238,293 5,709 238,293 5,709
Residential 16,884 64 2,825,042 11,715 2,841,926 11,779
Home equity 1,818 20 87,532 283 89,350 303
Consumer and other — — 131,407 1,658 131,407 1,658
Total $ 25,649 $ 259 $ 7,017,689 $ 67,952 $ 7,043,338 $ 68,211

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


		December 31, 2019																							March 31, 2021
		Individually Evaluated for Impairment						Collectively Evaluated for Impairment								Total					Individually Evaluated for Impairment				Collectively Evaluated for Impairment		Total
		Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses			Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses
		(In thousands)																							(In thousands)
Commercial and industrial	Commercial and industrial	$	724	$	146	$	1,141,237	$	15,918	$	1,141,961	$	16,064	Commercial and industrial	$	4,416	$	541	$	663,801	$	10,203	$	668,217	$	10,744
Paycheck Protection Program														Paycheck Protection Program	0		0		351,170		179		351,170		179
Commercial tax-exempt														Commercial tax-exempt	0		0		488,507		2,585		488,507		2,585
Commercial real estate	Commercial real estate	733		—		2,550,541		40,765		2,551,274		40,765		Commercial real estate	5,261		125		2,692,416		45,632		2,697,677		45,757
Construction and land	Construction and land	—		—		225,983		5,119		225,983		5,119		Construction and land	0		0		181,482		3,253		181,482		3,253
Residential	Residential	15,900		67		2,823,255		8,790		2,839,155		8,857		Residential	15,051		51		2,617,503		10,127		2,632,554		10,178
Home equity	Home equity	1,830		22		81,827		756		83,657		778		Home equity	611		17		71,141		212		71,752		229
Consumer and other	Consumer and other	—		—		134,674		399		134,674		399		Consumer and other	0		0		124,966		1,085		124,966		1,085
Total	Total	$	19,187	$	235	$	6,957,517	$	71,747	$	6,976,704	$	71,982	Total	$	25,339	$	734	$	7,190,986	$	73,276	$	7,216,325	$	74,010


	December 31, 2020
	Individually Evaluated for Impairment				Collectively Evaluated for Impairment				Total
	Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses		Recorded investment (loan balance)		Allowance for loan losses
	(In thousands)
Commercial and industrial	$	4,315	$	279	$	554,028	$	8,706	$	558,343	$	8,985
Paycheck Protection Program	0		0		312,356		159		312,356		159
Commercial tax-exempt	0		0		442,159		2,550		442,159		2,550
Commercial real estate	5,262		50		2,752,113		51,111		2,757,375		51,161
Construction and land	0		0		159,204		4,041		159,204		4,041
Residential	14,942		54		2,662,522		12,810		2,677,464		12,864
Home equity	623		17		76,741		276		77,364		293
Consumer and other	0		0		120,044		1,185		120,044		1,185
Total	$	25,142	$	400	$	7,079,167	$	80,838	$	7,104,309	$	81,238

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

8. Derivatives and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and, to a lesser extent, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are generally determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain loans, deposits, and borrowings. As a service to its customers, the Company may utilize derivative instruments including customer foreign exchange forward contracts to manage its foreign exchange risk, if any.

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

March 31, 2020

December 31, 2019

March 31, 2021

December 31, 2020

Asset derivatives

Liability derivatives

Asset derivatives

Liability derivatives

Asset derivatives

Liability derivatives

Asset derivatives

Liability derivatives

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

Balance
sheet
location

Fair
value (1)

(In thousands)

Derivatives designated as hedging instruments:

Interest rate swaps

Other assets

Other liabilities

157

Other assets

Other liabilities

228

Derivatives not designated as hedging instruments:

Interest rate customer swaps

Other assets

93,391

Other liabilities

94,437

Other assets

36,089

Other liabilities

36,580

Interest rate customer swaps

Other assets

53,682

Other liabilities

54,529

Other assets

83,255

Other liabilities

84,590

Risk participation agreements

Other assets

Other liabilities

480

Other assets

Other liabilities

242

Risk participation agreements

Other assets

Other liabilities

211

Other assets

Other liabilities

375

Total

93,437

94,917

36,099

36,822

Total

53,710

54,897

83,304

85,193

_____________________

(1)For additional details, see Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 5: Fair Value Measurements.”

The following table presents the effect of the Company’s derivative financial instruments on ~~accumulated~~Accumulated other comprehensive income for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


Derivatives in cash flow hedging relationships	Derivatives in cash flow hedging relationships	Amount of gain or (loss) recognized in OCI on derivatives							Location of gain or (loss) reclassified from accumulated OCI into income		Amount of gain or (loss) reclassified from accumulated OCI into income							Derivatives in cash flow hedging relationships	Amount of gain or (loss) recognized in OCI on derivatives					Location of gain or (loss) reclassified from accumulated OCI into income			Amount of gain or (loss) reclassified from accumulated OCI into income
				Three months ended March 31,										Three months ended March 31,						Derivatives in cash flow hedging relationships	Three months ended March 31,						Location of gain or (loss) reclassified from accumulated OCI into income	Three months ended March 31,
				2020			2019				2020			2019		Derivatives in cash flow hedging relationships	2021		2020		Location of gain or (loss) reclassified from accumulated OCI into income
		(In thousands)									(In thousands)								(In thousands)						(In thousands)
Interest rate swaps	Interest rate swaps	$	—		$	(38)		Interest expense	$	—	$	(311)	Interest rate swaps		$		$	0	Interest income/(expense)			$	0
Total	Total	$	—		$	(38)			$	—	$	(311)	Total		$	8	$	0				$	(63)		$	0

The following table presents the effect of the Company’s derivative financial instruments in the Consolidated Statements of Operations for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


		Location of gain or (loss) reclassified from accumulated OCI into income	Amount of gain or (loss) recognized in income on cash flow hedging relationships							Location of gain or (loss) reclassified from accumulated OCI into income		Amount of gain or (loss) recognized in income on cash flow hedging relationships
					Three months ended March 31,						Location of gain or (loss) reclassified from accumulated OCI into income			Three months ended March 31,
					2020				2019				2021		2020
			(In thousands)										(In thousands)
Total amounts of income and (expense) line items presented in the statement of operations in which the effects of fair value or cash flow hedges are recorded		Interest expense	$	—	$	(311)
Total amounts of income and (expense) line items presented in the Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded							Total amounts of income and (expense) line items presented in the Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded	Interest income/(expense)				$	(63)	$	0
The effects of cash flow hedging:	The effects of cash flow hedging:						The effects of cash flow hedging:
Gain or (loss) on cash flow hedging relationships in ASC 815	Gain or (loss) on cash flow hedging relationships in ASC 815						Gain or (loss) on cash flow hedging relationships in ASC 815
Interest contracts - amount of gain or (loss) reclassified from accumulated other comprehensive income into income		Interest expense	$	—	$	(311)
Interest contracts - amount of gain or (loss) reclassified from Accumulated other comprehensive income into income							Interest contracts - amount of gain or (loss) reclassified from Accumulated other comprehensive income into income	Interest income/(expense)				$	(63)	$	0

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The Bank has agreements with its derivative counterparties that contain provisions where, if the Bank defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

Bank could also be declared in default on its derivative obligations. The Bank was in compliance with these provisions as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

The Bank also has agreements with certain of its derivative counterparties that contain provisions where, if the Bank fails to maintain its status as a well- or adequately-capitalized institution, then the counterparty could terminate the derivative positions and the Bank would be required to settle its obligations under the agreements. The Bank was in compliance with these provisions as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Certain of the Bank’s agreements with its derivative counterparties contain provisions where, if specified, events or conditions occur that materially change the Bank’s creditworthiness in an adverse manner, the Bank may be required to fully collateralize its obligations under the derivative instruments. The Bank was in compliance with these provisions as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the termination amounts related to collateral determinations of derivatives in a liability position were ~~$94.7~~$51.7 million and ~~$35.7~~$85.6 million, respectively. The ~~Company~~Bank has minimum collateral posting thresholds with its derivative counterparties. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the ~~Company~~Bank had pledged securities with a market value of ~~$96.8~~$54.3 million and ~~$40.0~~$86.7 million, respectively, against its obligations under these agreements. The collateral posted is typically greater than the current liability position; however, due to timing of liability position changes at period end, the funding of a collateral shortfall may take place shortly following period end.

Cash ~~Flow Hedges~~flow hedges of ~~Interest Rate Risk~~interest rate risk

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. ~~The Company~~

To accomplish this objective and strategy, the Bank has ~~utilized~~entered into one interest rate ~~derivatives in the past, but~~swap during 2020 with an effective date of April 14, 2020. The interest rate swap is designated as ~~of March 31, 2020, there were no active~~a cash flow ~~hedges.~~hedge and involves the receipt of variable rate amounts from a counterparty in exchange for the Bank making fixed payments.

The one interest rate swap entered into during 2020 has a notional amount of $100 million and a term of eighteen months from its effective date. The interest rate swap will effectively fix the Bank's interest payments on $100 million of rolling three-month FHLB advances at a rate of 0.48%.

Per ASU 2017-12, for derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in ~~accumulated~~Accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. For active cash flow hedges, a portion of the balance reported in ~~accumulated~~Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made or received on the ~~Company’s~~Bank’s interest rate swaps.

Non-designated ~~Hedges~~hedges

Derivatives not designated as hedges are not speculative and result from different services the Bank provides to qualified commercial clients. The Bank offers certain derivative products directly to such clients. The Bank economically hedges derivative transactions executed with commercial clients by entering into mirror-image, offsetting derivatives with third parties. Derivative transactions executed as part of these programs are not designated in ASC 815-qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. Because the derivatives have mirror-image contractual terms, the changes in fair value substantially offset through earnings. The net effect on earnings is primarily driven by changes in the credit valuation adjustment (“CVA”). The CVA represents the dollar amount of fair value adjustment related to nonperformance risk of both the Bank and its counterparties. Fees earned in connection with the execution of derivatives related to this program are recognized in the Consolidated Statements of Operations in ~~other~~Other income. The Bank has interest rate swaps and caps related to this program with an aggregate notional amount of $1.7 billion as of March 31, ~~2020~~2021 and ~~$1.6 billion as of~~ December 31, ~~2019.~~2020. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, there were 0 foreign currency exchange contracts related to this program.

In addition, as a participant lender, the Bank has guaranteed performance on the pro-rated portion of swaps executed by other financial institutions. As the participant lender, the Bank is providing a partial guarantee, but is not a direct party to the related swap transactions. The Bank has no obligations under the risk participation agreements unless the borrower defaults on their swap transaction with the lead bank and the swap is in a liability position to the borrower. In that instance, the Bank has agreed to pay the lead bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, there were 7 of these risk participation transactions with an aggregate notional amount of ~~$58.4~~$57.0 million and ~~$58.8~~$57.4 million, respectively.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

The Bank has also participated out to other financial institutions a pro-rated portion of swaps executed by the Bank. The other financial institution has no obligations under the risk participation agreements unless the borrowers default on their swap transactions with the Bank and the swaps are in liability positions to the borrower. In those instances, the other financial institution has agreed to pay the Bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. As of March 31, 2021 and December 31, 2020, there were 5 of these risk participation transactions with an aggregate notional amount of ~~$30.4~~$30.2 million. ~~As of December 31, 2019, there were 4 of these risk participation transactions with an aggregate notional amount of $20.5 million.~~

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

The following table presents the effect of the Bank’s derivative financial instruments not designated as hedging instruments in the Consolidated Statements of Operations for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.


			Amount of gain or (loss), net, recognized in income on derivatives											Amount of gain or (loss), net, recognized in income on derivatives
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income on derivatives	Three months ended March 31,						Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income on derivatives		Three months ended March 31,
							2020				Location of gain or (loss) recognized in income on derivatives					2021	2020
			(In thousands)											(In thousands)
Interest rate swaps	Interest rate swaps	Other income/ (expense)	$	(555)	$	(191)	Interest rate swaps	Other income/(expense)				$	488	$	(555)
Risk participation agreements	Risk participation agreements	Other income/ (expense)	(202)		104		Risk participation agreements	Other income/(expense)				144		(202)

Total	Total		$	(757)	$	(87)	Total					$	632	$	(757)

9. Income Taxes

The following table presents the components of ~~income~~Income tax expense and effective tax rates for the periods indicated:


		Three months ended March 31,										Three months ended March 31,
		2020			2019				2021			2020
		(In thousands)										(In thousands)

Income before income taxes	Income before income taxes	$	908		$	24,459		Income before income taxes	$	16,728		$	908
Income tax expense	Income tax expense	102			4,917			Income tax expense	6,076			102
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	$	806		$	19,542		Net income before attribution to noncontrolling interests	$	10,652		$	806
Effective tax rate	Effective tax rate	11.2		%	20.1		%	Effective tax rate	36.3		%	11.2		%

The effective tax rate for the three months ended March 31, 2021 of 36.3%, with related tax expense of $6.1 million, was calculated based on a forecasted 2021 annual effective tax rate. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.

The effective tax for the three months ended March 31, 2020 of 11.2%, with related tax expense of $0.1 million, was calculated based on a forecasted 2020 annual effective tax rate. The effective tax rate ~~for the three months ended March 31, 2019 of 20.1%, with related tax expense of $4.9 million, was calculated based on a forecasted 2019 annual effective tax rate.~~

The effective tax rates for the three months ended March 31, 2020 and March 31, 2019 of 11.2% and 20.1%, respectively, were calculated based on forecasted annual effective tax rates. The effective tax rate for both periods was less than the statutory rate of 21% due primarily to earnings from tax-exempt investments and income tax credits, ~~which were~~ partially offset by state and local income taxes and the accounting for investments in affordable housing projects.

The effective tax rate for the three months ended March 31, ~~2020~~2021 is ~~less~~more than the effective tax rate for the same period in ~~2019~~2020 due primarily to the ~~lower~~higher level of income in ~~2020~~2021 as compared to ~~2019.~~2020 and as a result of approximately $3.0 million tax expense recorded discretely in the first quarter of 2021 due to the expected non-deductible Merger costs.

10. Noncontrolling Interests

Noncontrolling interests consist of equity owned by management of the Company’s majority-owned affiliate, DGHM. Net income attributable to noncontrolling interests in the Consolidated Statements of Operations, if any, represents the net income allocated to the noncontrolling interest owners of DGHM. Net income allocated to the noncontrolling interest owners was ~~$6 thousand~~0 and ~~$100~~$6 thousand for the ~~three-month periods~~three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

On the Consolidated Balance Sheets, noncontrolling interests are included as the sum of the capital and undistributed profits allocated to the noncontrolling interest owners. Typically, this balance is included in a company’s permanent shareholders’ equity in the Consolidated Balance Sheets. When the noncontrolling interest owners’ rights include certain redemption features, as described in ASC 480, Distinguishing Liabilities from Equity, such redeemable noncontrolling interests are classified as mezzanine equity and are not included in permanent shareholders’ equity. Due to the redemption features of the noncontrolling interests of DGHM, the Company had ~~redeemable~~Redeemable noncontrolling interests held in mezzanine equity in the accompanying Consolidated Balance Sheets of 0 ~~and $1.4 million~~ as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. The aggregate amount of

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

such ~~redeemable~~Redeemable noncontrolling equity interests are recorded at the estimated maximum redemption values. The Company had 0 noncontrolling interests included in permanent shareholder’s equity at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

The DGHM operating agreement provides the Company and/or the noncontrolling interest holders with contingent call and put options and mandatory repurchase obligations used for the orderly transfer of noncontrolling equity interests between the noncontrolling interest holders and the Company at contractually predetermined values. This agreement is discussed in Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

The interests in DGHM take the form of limited liability company units. There are various events that could trigger a put, call or mandatory repurchase, such as a change in control, death, disability, retirement, resignation or termination. The terms of these rights and obligations are governed by the operating agreement of DGHM.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

The following table presents a ~~rollforward~~roll-forward of the Company’s ~~redeemable~~Redeemable noncontrolling interests for the periods indicated:


		Three months ended					Three months ended March 31,
		March 31, 2020		March 31, 2019			2021		2020

		(In thousands)							(In thousands)
Redeemable noncontrolling interests at beginning of period	Redeemable noncontrolling interests at beginning of period	$	1,383	$	2,526	Redeemable noncontrolling interests at beginning of period	$	0	$	1,383
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	6		100		Net income attributable to noncontrolling interests	0		6
Distributions	Distributions	(6)		(100)		Distributions	0		(6)
Purchases/(sales) of ownership interests	Purchases/(sales) of ownership interests	(64)		12		Purchases/(sales) of ownership interests	0		(64)

Amortization of equity compensation	Amortization of equity compensation	8		17		Amortization of equity compensation	7		8
Adjustments to fair value	Adjustments to fair value	(1,327)		(1,893)		Adjustments to fair value	(7)		(1,327)
Redeemable noncontrolling interests at end of period	Redeemable noncontrolling interests at end of period	$	—	$	662	Redeemable noncontrolling interests at end of period	$	0	$	0

11. Accumulated Other Comprehensive Income

The following table presents a summary of the amounts reclassified from the Company's Accumulated other comprehensive income/(loss) for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


Description of component of Accumulated other comprehensive income/(loss)	Description of component of Accumulated other comprehensive income/(loss)	Three months ended March 31,								Affected line item in Statement of Operations	Description of component of Accumulated other comprehensive income/(loss)	Three months ended March 31,				Affected line item in Statement of Operations
				2020			2019							2021			2020
		(In thousands)												(In thousands)

Net realized gain/(loss) on cash flow hedges:	Net realized gain/(loss) on cash flow hedges:								Net realized gain/(loss) on cash flow hedges:
Hedges related to deposits:	Hedges related to deposits:								Hedges related to deposits:
Pre-tax gain/(loss)	Pre-tax gain/(loss)	$	—		$	(311)		Interest (expense)	Pre-tax gain/(loss)			$	(63)	$	0	Interest income/(expense)

Tax (expense)/ benefit		—			(91)			Income tax (expense)/benefit
Net		$	—		$	(220)		Net income/(loss) attributable to the Company
Tax (expense)/benefit									Tax (expense)/benefit			19		0		Income tax (expense)/benefit

Total reclassifications for the period, net of tax	Total reclassifications for the period, net of tax	$	—		$	(220)			Total reclassifications for the period, net of tax			$	(44)	$	0	Net income/(loss) attributable to the Company

The following table presents the after-tax changes in the components of the Company’s Accumulated other comprehensive income/(loss) for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Components of Accumulated other comprehensive income/(loss)
Unrealized
gain/(loss)
on securities
available-for-sale Unrealized
gain/(loss)
on cash flow
hedges Unrealized
gain/(loss)
on other Accumulated
other
comprehensive
income/(loss)
(In thousands)
Balance at December 31, 2018 $ (17,556) $ 391 $ (554) $ (17,719)
Other comprehensive income/(loss) before reclassifications 11,568 (27) — 11,541
Reclassified from other comprehensive income/(loss) — (220) — (220)
Other comprehensive income/(loss), net 11,568 (247) — 11,321
Balance at March 31, 2019 $ (5,988) $ 144 $ (554) $ (6,398)
Balance at December 31, 2019 $ 8,435 $ — $ (860) $ 7,575
Other comprehensive income/(loss) before reclassifications 14,489 — — 14,489
Other comprehensive income/(loss), net 14,489 — — 14,489
Balance at March 31, 2020 $ 22,924 $ — $ (860) $ 22,064

~~12. Restructuring~~

There were 0 restructuring charges in the first quarter of 2020. In the first quarter of 2019, the Company incurred restructuring charges of $1.6 million. The charges were in connection with a previously announced reduction to the Company’s workforce, which included executive transition changes as well as other employee benefit and technology related initiatives. The restructuring is intended to improve the Company’s operating efficiency and enhance earnings.


	Components of Accumulated other comprehensive income/(loss)
	Unrealized gain/(loss) on Investment securities available-for-sale		Unrealized gain/(loss) on cash flow hedges		Unrealized gain/(loss) on other		Accumulated other comprehensive income/(loss)
	(In thousands)
Balance at December 31, 2019	$	8,435	$	0	$	(860)	$	7,575
Other comprehensive income/(loss) before reclassifications	14,489		0		0		14,489

Other comprehensive income/(loss), net	14,489		0		0		14,489

Balance at March 31, 2020	$	22,924	$	0	$	(860)	$	22,064

Balance at December 31, 2020	$	32,672	$	(162)	$	(825)	$	31,685
Other comprehensive income/(loss) before reclassifications	(17,993)		6		0		(17,987)
Reclassified from other comprehensive income/(loss)	0		44		0		44
Other comprehensive income/(loss), net	(17,993)		50		0		(17,943)

Balance at March 31, 2021	$	14,679	$	(112)	$	(825)	$	13,742

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

12. Restructuring

There were 0 restructuring charges for the three months ended March 31, 2021 and 2020.

The following table presents a summary of the restructuring activity for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


									Severance Charges		Other Associated Costs		Total
									(In thousands)
Accrued charges at December 31, 2020								Accrued charges at December 31, 2020	$	0	$	789	$	789

Costs paid								Costs paid	0		0		0
Accrued charges at March 31, 2021								Accrued charges at March 31, 2021	$	0	$	789	$	789

		Severance Charges		Other Associated Costs		Total
		(In thousands)
Accrued charges at December 31, 2019	Accrued charges at December 31, 2019	$	526	$	789	$	1,315	Accrued charges at December 31, 2019	$	526	$	789	$	1,315

Costs paid	Costs paid	(434)		—		(434)		Costs paid	(434)		0		(434)
Accrued charges at March 31, 2020	Accrued charges at March 31, 2020	$	92	$	789	$	881	Accrued charges at March 31, 2020	$	92	$	789	$	881

Accrued charges at December 31, 2018		$	3,896	$	789	$	4,685
Cost incurred		1,646		—		1,646
Costs paid		(1,986)		—		(1,986)
Accrued charges at March 31, 2019		$	3,556	$	789	$	4,345

13. Revenue Recognition

In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. ASC 606 does not apply to revenue associated with financial instruments such as loans and securities. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest income considered in-scope of ASC 606 is discussed below.

Wealth ~~Management~~management and ~~Trust Fees~~trust fees

Wealth management and trust fees are earned for providing wealth management, retirement plan advisory, family office, financial planning, trust services, and other financial advisory services to clients. The Company’s performance obligation under these contracts is satisfied over time as the services are provided. Fees are recognized monthly based on the average monthly, beginning-of-quarter, or, for a small number of clients, end-of-quarter market value of the AUM and the applicable fee rate, depending on the terms of the contracts. Fees are also recognized monthly based either on a fixed fee amount or are based on the quarter-end (in arrears) market value of the AUM and the applicable fee rate, ~~(“asset based fees”),~~ depending on the terms of the contracts. No ~~performance based~~performance-based incentives are earned onunder wealth management contracts. Receivables are recorded on the Consolidated Balance Sheets in the Fees receivable line item. Deferred revenues of ~~$6.4~~$6.3 million and ~~$6.7~~$6.1 million as of March 31, ~~2020~~2021 and ~~2019,~~December 31, 2020, respectively, are recorded on the Consolidated Balance Sheets within ~~the~~ Other ~~liabilities line item.~~liabilities.

Trust fees are earned when the Company is appointed as trustee for clients. As trustee, the Company administers the client’s trust and manages the assets of the trust, including investments and property. The Company’s performance obligation under these agreements is satisfied over time as the administration and management services are provided. Fees are recognized monthly or, in certain circumstances, quarterly based on a percentage of the market value of the account as outlined in the agreement. Payment frequency is defined in the individual contracts, which primarily stipulate monthly in arrears. No ~~performance based~~performance-based incentives are earned on trust fee contracts. Receivables are recorded on the Consolidated Balance Sheets ~~in the~~within Fees ~~receivable line item.~~receivable.

Investment ~~Management Fees~~management fees

Investment management fees are earned for the management of a series of accounts and funds in which clients invest directly, acting as a sub-advisor to larger investment management companies, or private client account management. The Company’s performance obligation is satisfied over time, and the resulting fees are recognized monthly, based upon either the beginning-of-quarter (in advance) or quarter-end (in arrears) market value of the AUM and the applicable fee rate, depending on the terms of the contracts. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company may earn performance-based incentives on certain contracts. Receivables are recorded on the Consolidated Balance Sheets ~~in the~~within Fees ~~receivable line item.~~receivable.

Other ~~Banking Fee Income~~banking fee income

The Bank charges a variety of fees to its clients for services provided on the deposit and deposit ~~management related~~management-related accounts. Each fee is either ~~transaction based~~transaction-based or assessed monthly. The types of fees include service charges on accounts, overdraft fees, maintenance fees, ATM fee ~~charges, credit card~~ charges, and other miscellaneous charges related to the accounts. These fees are not governed by individual contracts with clients. They are charges to clients based on disclosures presented to clients upon opening these accounts along with updated disclosures when changes are made to the fee structures. The transaction-based fees are

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)

recognized in revenue when charged to the client based on specific activity on the client’s account. Monthly service/maintenance charges are recognized in the month they are earned and are charged directly to the client’s account.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

The Bank also charges fees for treasury activities, such as swap fees and foreign exchange fees, for clients with a banking relationship. These fees are recorded when earned via completion of the transaction for the client. The completion of the transaction is deemed to be the performance obligation of the transaction. The related revenue is recorded through a direct charge to the client’s account. There are no individual agreements or contracts with clients relating to foreign exchange fees as they are governed by client disclosure statements and the Bank’s internal policies and procedures.

The following table presents the fee income considered in-scope of ASC 606 by contracts with customers:


			Three months ended March 31,					Three months ended March 31,
			2020		2019			2021		2020
		(In thousands)										(In thousands)
Fees and other income:	Fees and other income:						Fees and other income:
Wealth management and trust fees	Wealth management and trust fees		$	18,371	$	19,058	Wealth management and trust fees	$	19,136	$	18,371
Investment management fees	Investment management fees		1,925		2,650		Investment management fees	489		1,925

Other income	Other income		752		684		Other income	874		752

Revenue from contracts with customers	Revenue from contracts with customers		21,048		22,392		Revenue from contracts with customers	20,499		21,048
Non-interest income within the scope of other GAAP topics			473		2,856
Other non-interest income not within the scope of ASC 606							Other non-interest income not within the scope of ASC 606	5,671		473

Total non-interest income	Total non-interest income		$	21,521	$	25,248	Total non-interest income	$	26,170	$	21,521

14. Lease Accounting

~~On adoption of ASU 2016-02 on January 1, 2019,~~In accordance with ASC 842, Leases (“ASC 842”), the Company ~~recognized $124.1 million of lease~~recognizes Lease liabilities and ~~$108.5 million of right-of-use~~Right-of-use ("ROU") assets on the ~~face of the balance sheet.~~Consolidated Balance Sheets for all leases with a term longer than 12 months. ROU assets obtained in exchange for lease liabilities are net of tenant improvement allowances and deferred rent. ~~There was no impact to~~Leases are classified as operating, with respective classification impacting the ~~Company’s~~pattern and method of expense recognition in the Consolidated Statements of Cash Flows upon adoption, since the net impact of all adjustments recorded upon transition represents non-cash activity. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for additional information on the Company's adoption of this standard.Operations.

The Company, as lessee, has 4236 real estate leases for office and ATM locations classified as operating leases. The Company determines if an arrangement is a lease or contains a lease at inception. The terms of the real estate leases generally have annual increases in payments based off of a fixed or variable rate, such as the Consumer Price Index rate, that is outlined within the respective contracts. Generally, the initial terms of the leases for our leased properties range from five to fifteen years. Most of the leases also include options to renew for periods of five to ten years at contractually agreed upon rates or at market rates at the time of the extension. On a quarterly basis, the Company evaluates whether the renewal of each lease is reasonably certain. If the lease doesn’t provide the implicit interest rate, the Bank uses its incremental borrowing rate at the commencement date of the lease in determining the present value of lease payments. No other significant judgments or assumptions were made in applying the requirements of ASU 2016-02.

The Company, as lessee, has 27 equipment leases classified as operating leases. The terms of the equipment leases are fixed payments outlined within the respective contracts and generally range from three to five years. The Bank uses its incremental borrowing rate at the commencement date of the lease in determining the present value of lease payments. No other significant judgments or assumptions were made in applying the requirements of ASU 2016-02.

The following table presents information about the Company's leases as of the dates indicated.

Three months ended March 31,
2020 2019
(In thousands)
Lease cost
Operating lease cost $ 4,601 $ 4,685
Short-term lease cost 48 32
Variable lease cost (9) 2
Less: Sublease income (28) (18)
Total operating lease cost $ 4,612 $ 4,701


	~~Three months ended March 31, 2020~~
	~~(In thousands, except years and percentages)~~
~~Other information~~

~~Cash paid for amounts included in the measurement of lease liabilities~~

~~Operating cash flows from operating leases~~	$	~~5,100~~


~~ROU assets obtained in exchange for new operating lease liabilities~~	$	~~443~~

~~Weighted-average remaining lease term for operating leases~~	~~7.9 years~~

~~Weighted-average discount rate for operating leases~~	~~3.2~~		%


	Three months ended March 31,
		2021		2020
		(In thousands)
Lease cost
Operating lease cost		$	5,007	$	4,601
Short-term lease cost		58		48
Variable lease cost		3		(9)
Less: Sublease income		(38)		(28)
Total operating lease cost		$	5,030	$	4,612

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements - (Continued)


	Three months ended March 31,
	2021			2020
	(In thousands, except years and percentages)
Other information

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases	$	5,222		$	5,100


ROU assets obtained in exchange for new operating lease liabilities (1)	$	1,541		$	443

Weighted-average remaining lease term for operating leases	7.5 years			7.9 years

Weighted-average discount rate for operating leases	3.0		%	3.2		%

______________________

(1) Operating lease liabilities were impacted by the modification and addition of real estate leases and the addition of equipment leases for the three months ended March 31, 2021.

The Company is obligated for minimum payments under non-cancelable operating leases. In accordance with the terms of these leases, the Company is currently committed to minimum annual payments as follows as of March 31, ~~2020:~~2021:


		March 31, 2020			March 31, 2021
		(In thousands)			(In thousands)
Remainder of 2020		$	14,962
2021		19,974
Remainder of 2021				Remainder of 2021	$	15,814
2022	2022	19,934		2022	21,334
2023	2023	18,984		2023	19,846
2024	2024	12,961		2024	13,884
2025				2025	12,541
Thereafter	Thereafter	44,194		Thereafter	39,918
Total future minimum lease payments	Total future minimum lease payments	131,009		Total future minimum lease payments	123,337
Less: Amounts representing interest	Less: Amounts representing interest	(17,435)		Less: Amounts representing interest	(16,194)
Present value of net future minimum lease payments	Present value of net future minimum lease payments	$	113,574	Present value of net future minimum lease payments	$	107,143

15. Recent Accounting Pronouncements

In ~~February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 2016-02”). This update and the related amendments to Topic 842 require lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-10, ~~Codification Improvements to Topic 842, Leases~~ ~~(“ASU 2018-10”); ASU No. 2018-11,~~ ~~Leases (Topic 842), Targeted Improvements~~ ~~(“ASU 2018-11”); and ASU No. 2019-01,~~ ~~Leases (Topic 842), Codification Improvements~~ (“ASU 2019-01”). The standard establishes an ROU model that requires a lessee to recognize a ROU asset and lease liability on the Consolidated Balance Sheets for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Consolidated Statements of Operations. The Company adopted these provisions on January 1, 2019. The most significant effects relate to the recognition of new ROU assets and lease liabilities on the balance sheet for real estate operating leases and providing significant disclosures about leasing activities. Additionally, the Company elected the package of practical expedients, as prescribed by ASU 2016-02. On adoption, the Company recognized $124.1 million of lease liabilities and $108.5 million of ROU assets. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) (“ASU 2016-13”). ~~Throughout~~In 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”); ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”); ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 942)—Effective Dates (“ASU 2019-10”); and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2019-11”). This update and related amendments to Topic 326 are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology ~~in current GAAP~~ with a CECL model methodology that reflects expected credit losses and requires consideration of a reasonable and supportable economic forecast to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 utilizing a modified retrospective approach. On adoption of ASU 2016-13, ~~on January 1, 2020,~~ the Company recognized a decrease in the allowance for loan losses of $20.4 million and an increase in the reserve for unfunded loan commitments of $1.4 million. The net, after-tax impact of the decrease in the allowance for loan losses and the increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million as shown in the Consolidated Statements of Changes in Shareholders’ Equity. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 4: ~~Investments, Note~~Investments”, “Note 6 - Loan Portfolio and Credit ~~Quality,~~Quality”, and ~~Note~~“Note 7 - Allowance for Loan Losses” for further details.

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans~~ (“ASU 2018-14”). The amendments in ASU 2018-14 remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. This update is effective on a retrospective basis for interim and annual reporting periods beginning January 1, 2021. The Company is assessing the potential impact for this update and how it applies to the Company’s disclosures surrounding its two non-qualified supplemental executive retirement plans and a long-term incentive plan.

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

~~16. Subsequent Events~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of and for the three months ended March 31, 2021

Certain statements contained in this Quarterly Report on Form 10-Q 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, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” and similar expressions. These statements include, among others, statements regarding our strategy; evaluations of interest rate trends and future liquidity; expectations as to changes in assets, deposits and results of operations; the impact of the COVID-19 pandemic; future operations, market position and financial position; and prospects, plans, and objectives of management. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control.

Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the risk that a condition to closing of the proposed merger may not be satisfied; the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated; the effect of the announcement of the proposed merger on our ability to maintain relationships with our key partners, customers and employees, and on our operating results and business generally; the occurrence of any event, change or other circumstance that could give rise to the right of one or both parties to terminate the Merger Agreement providing for our proposed merger with SVB Financial Group; changes in customer behavior; the possibility that future credits losses are higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; turbulence in the capital and debt markets; changes in interest rates; increases in loan defaults and charge-off rates; decreases in the value of securities and other assets; changes in loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risk relating to the Company’s participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; risks that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements, as well as the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Executive Summary

The Company offers a wide range of private banking, wealth management, and trust services to high net worth individuals, families, businesses and select institutions through its two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust. This Executive Summary provides an overview of the most significant aspects of the Company's operating segments and operations in the first quarter of 2021. Details of the matters addressed in this summary are provided elsewhere in this document and, in particular, in the sections immediately following.


	As of and for the three months ended March 31,
	2021		2020		$ Change		% Change
	(In thousands, except per share data and percentages)
Total revenue	$	85,647	$	78,778	$	6,869	9	%
Provision/(credit) for loan losses	(7,004)		16,962		(23,966)		nm
Total operating expense	75,923		60,908		15,015		25	%
Net income before attribution to noncontrolling interests	10,652		806		9,846		nm
Net income attributable to noncontrolling interests	—		6		(6)		(100)	%
Net income attributable to the Company	10,652		800		9,852		nm
Diluted earnings per share attributable to common shareholders	$	0.13	$	0.01	$	0.12	nm



ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):
Wealth Management and Trust	$	17,002,000	$	13,497,000	$	3,505,000	26	%


Other (1)	196,000		1,016,000		(820,000)		(81)	%
Total AUM	$	17,198,000	$	14,513,000	$	2,685,000	19	%

_____________________

nm = not meaningful
(1) Includes results from Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”)

Net income attributable to the Company was $10.7 million and $0.8 million for the three months ended March 31, 2021 and March 31, 2020, respectively. The Company recognized Diluted earnings per share attributable to common shareholders of $0.13 and $0.01 for the three months ended March 31, 2021 and March 31, 2020, respectively. Key items that affected the Company’s results in the first quarter of 2021 compared to the same period of 2020 include:

▪The provision for loan losses was a credit of $7.0 million for the three months ended March 31, 2021, compared to an expense of $17.0 million for the same period of 2020. During the first quarter of 2021, the Company recognized a total provision credit of $9.0 million, which included a Provision credit for loan losses of $7.0 million, and separately, a reserve credit of $2.0 million for unfunded loan commitments, recognized as Other expense within Operating expense.

•The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.

▪Total revenue increased $6.9 million to $85.6 million for the three months ended March 31, 2021, compared to the same period of 2020 as described below.

•Total fees and other income increased $4.6 million, or 22%, to $26.2 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase was primarily driven by higher Other income as a result of a gain related to the revaluation of a receivable from the divestiture of former affiliate Bingham, Osborn & Scarborough, LLC ("BOS"), the impact of mark-to-market on derivatives and deferred compensation securities, and higher gain on sale of secondary loans. Total fees and other income represents 31% of Total revenue for the three months ended March 31, 2021, compared to 27% of Total revenue for the same period of 2020.

•Net interest income increased $2.2 million, or 4%, to $59.5 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase in Net interest income was primarily driven by the addition of income related to the Paycheck Protection Program ("PPP") and lower funding costs, partially offset by lower interest on interest-earning assets. Net interest margin (“NIM”) was 2.45% for the three months ended March 31, 2021, a decrease of 31 basis points compared to the same period in 2020. Although Net interest income increased, the decrease in NIM was primarily driven by excess cash balances held at lower yields.

▪Total operating expense increased $15.0 million, or 25%, to $75.9 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase was primarily driven by costs related to the proposed merger with SVB Financial Group ("SVB"), increases in Salaries and employee benefits expense due to increases in variable compensation, and Information systems expense as a result of new IT initiatives being placed in service, partially offset by lower Other expense driven by the off-balance sheet provision credit.

▪For the three months ended March 31, 2021, total loans increased $112.0 million, or 2%, while total deposits increased $552.3 million, or 6%, from December 31, 2020. The increase in loans was primarily driven by higher Commercial and industrial loans, as well as higher PPP loans, while the increase in deposits was primarily driven by new and existing clients maintaining additional cash liquidity. The Company’s loan-to-deposit ratio decreased from 83% as of December 31, 2020 to 79% as of March 31, 2021, driven by strong deposit inflows. Deposits are the Company’s primary source of funds to originate loans. If the Company has excess deposits, the Company may seek to earn a better yield by investing excess cash in loan growth, purchasing investment securities or other cash management strategies.

▪Income tax expense for the three months ended March 31, 2021 was $6.1 million, compared to $0.1 million for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 36.3%, compared to an effective tax rate of 11.2% for the same period of 2020. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.

The Company’s Private Banking segment reported Net income attributable to the Company of $21.8 million in the first quarter of 2021, compared to $0.6 million for the same period of 2020. Net income attributable to the Company increased $21.3 million from the same period in 2020, primarily driven by a decrease in Provision for loan losses of $24.0 million, as well as an increase in Total revenue of $4.8 million. These items were partially offset by an increase in Income tax expense of $5.7 million, as well as an increase of $1.9 million in Operating expense primarily due to increases in Salaries and employee benefits expense, and Information systems expense as a result of new IT initiatives being placed in service.

The Company’s Wealth Management and Trust segment reported Net income attributable to the Company of $1.2 million in the first quarter of 2021, compared to $2.0 million for the same period of 2020. The decrease of $0.8 million, or 40%, was primarily driven by an increase of $2.0 million in Operating expense, partially offset by an increase of $0.6 million in Total revenue. The increase in Operating expense was primarily driven by increases in Salaries and employee benefits expense, and Information systems expense as a result of new IT initiatives being placed in service to support the Company's strategic objectives. The increase in Total revenue was driven by the impact of higher AUM on fee revenues. Wealth Management and Trust AUM increased $3.5 billion, or 26%, to $17.0 billion at March 31, 2021 from $13.5 billion at March 31, 2020. The increase in AUM was primarily driven by favorable market returns of $3.6 billion, partially offset by total net outflows of $0.1 billion for the twelve months ended March 31, 2021.

Announced Merger

On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB, pursuant to which SVB will acquire the Company. On May 4, 2021, the shareholders of the Company approved the Merger Agreement. The transaction is expected to close mid-2021, subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals.

Impact of the COVID-19 ~~pandemic~~Pandemic

The COVID-19 pandemic has caused, and continues to cause, substantial disruptions to the global economy and to the customers and communities that we serve. In response to the pandemic, the Company ~~has~~ implemented business continuity contingency plans, including company-wide remote working arrangements. We are also focused on supporting our clients who may be experiencing a financial hardship due to the COVID-19 pandemic, including by participating in the Small Business Administration’s (the “SBA”) ~~Paycheck Protection Program (the “PPP”)~~PPP and offering loan deferrals and forbearance ~~and second mortgages~~ as ~~appropriate,~~needed, including ~~through~~ our mortgage deferment ~~program.~~

~~As of March 31, 2020,~~program and Commercial and industrial loan deferment program, and creating the ~~COVID-19 pandemic did not have a significant impact on the Company’s financial condition, results of operations, or capital position other than the provision for~~Commercial real estate second loan ~~loss expense described in Part I. Item 1. “Notes~~program. We will continue to ~~Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan Losses.” Below is a summary of the impact to the Company subsequent to March 31, 2020 until the filing date of~~evaluate this ~~Form 10-Q.~~fluid situation and take additional actions as necessary.

~~Participation in the PPP~~Executive Summary

The ~~CARES Act appropriated $349 billion for “paycheck protection loans”~~Company offers a wide range of private banking, wealth management, and trust services to high net worth individuals, families, businesses and select institutions through ~~the PPP. The amount appropriated was subsequently increased to $659 billion. The CARES Act provided funding to the SBA for use for the PPP. Under the terms~~its two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust. This Executive Summary provides an overview of the PPP, certain businesses can apply for loans through qualified financial institutions, such as the Bank, based on eligibility criteria. The PPP provides loans to eligible businesses with an initial term of two years at an interest rate of 1.0%. Payments can be deferred for a period of six months. Loans issued under the PPP will be forgiven if the borrower uses at least 75%most significant aspects of the ~~proceeds on payroll, rent, utilities~~Company's operating segments and ~~other qualified benefits for a period of eight weeks, following the loan funding date, and are 100% guaranteed by the SBA. The SBA has issued an interim final rule~~operations in which it has provided that a lender may rely on certifications made by a borrower to determine the borrower’s eligibility for a PPP loan and use of loan proceeds, subject to a good faith review, and to determine the qualifying loan amount and eligibility for loan forgiveness.

Loans issued by participating financial institutions are 100% guaranteed by the SBA. Banks will receive a processing fee from the SBA from 1.0% to 5.0% based on the size of the loan. Loans up to $350 thousand will have a 5.0% fee, loans between $350 thousand and $2.0 million will have a 3.0% fee, and loans greater than $2.0 million will have a 1.0% fee.

In conjunction with the PPP, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection Program Liquidity Facility (the “PPPLF”) will extend credit to depository institutions with a term of up to two years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility.

The Bank is participating in the PPP and PPPLF programs. As of March 31, 2020, an immaterial amount of loans were processed under the PPP program, though the Company expects increased volume in the second quarter of 2020. As of the date of this filing, the Bank has approved approximately 1,100 PPP loans totaling approximately $425.0 million and does not anticipate to approve any additional loans under the current conditions.

~~Mortgage Deferment Program~~

In the first quarter of ~~2020,~~2021. Details of the matters addressed in ~~response~~this summary are provided elsewhere in this document and, in particular, in the sections immediately following.


	As of and for the three months ended March 31,
	2021		2020		$ Change		% Change
	(In thousands, except per share data and percentages)
Total revenue	$	85,647	$	78,778	$	6,869	9	%
Provision/(credit) for loan losses	(7,004)		16,962		(23,966)		nm
Total operating expense	75,923		60,908		15,015		25	%
Net income before attribution to noncontrolling interests	10,652		806		9,846		nm
Net income attributable to noncontrolling interests	—		6		(6)		(100)	%
Net income attributable to the Company	10,652		800		9,852		nm
Diluted earnings per share attributable to common shareholders	$	0.13	$	0.01	$	0.12	nm



ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):
Wealth Management and Trust	$	17,002,000	$	13,497,000	$	3,505,000	26	%


Other (1)	196,000		1,016,000		(820,000)		(81)	%
Total AUM	$	17,198,000	$	14,513,000	$	2,685,000	19	%

_____________________

nm = not meaningful
(1) Includes results from Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”)

Net income attributable to the ~~COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal~~Company was $10.7 million and interest payments on qualifying mortgage loans are generally deferred for three months and the loan term is extended three months. Loans that meet the requirements for deferral under the program are not considered TDRs or past due based on current regulatory guidance. As of March 31, 2020, 10 loans totaling approximately $5.0$0.8 million were processed under this program, though the Company expects increased volume in the second quarter of 2020. As of the date of this filing, the Bank has initially approved approximately 170 deferments for loans totaling approximately $90.0 million.

~~Massachusetts COVID-19 Emergency Legislation~~

On April 20, 2020, legislation enacted in Massachusetts in response to the COVID-19 emergency declared by Governor Baker was signed into law by the Governor. The legislation establishes a temporary moratorium on foreclosures on one- to four-family, owner occupied residential real estate in Massachusetts. The legislation also requires a creditor to grant to a borrower of a mortgage loan secured by one- to four-family, owner occupied residential real estate in Massachusetts a forbearance of up to 180 days, if requested by the borrower, who must affirm that the borrower has experienced a financial impact from the COVID-19 pandemic. A borrower is entitled to request a forbearance while the legislation is in effect even if the borrower is already in default. In connection with a forbearance, a creditor may not charge fees, penalties or interest beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in full under the terms of the relevant loan agreement. The legislation specifies that a payment subject to forbearance shall be added to the end of the term of the loan unless otherwise agreed by the parties. The legislation also prohibits a creditor from furnishing negative information to a consumer reporting agency related to mortgage payments subject to forbearance. Because the legislation was enacted on an emergency basis, it went into effect immediately upon being signed into law. The legislation provides that the temporary moratorium on foreclosures expires 120 days after the effective date of the legislation, which is August 18, 2020, or 45 days after the COVID-19 emergency declaration has been lifted, whichever is sooner, but the Governor may extend the moratorium in increments of up 90 days as long as the moratorium ends not later than 45 days after the COVID-19 emergency declaration

~~BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Consolidated Financial Statements - (Continued)~~

has been lifted. A borrower may request a forbearance under the legislation at any time while the foreclosure moratorium is in effect. Forbearances, if any, granted under the Massachusetts legislation to borrowers who are currently in default may not qualify for the reporting exclusion as a TDR or delinquency status as was provided under the national guidance from regulators.

~~Commercial Real Estate Second Loan Program~~

In the first quarter of 2020, in response to the COVID-19 pandemic, the Bank also initiated a program to offer qualifying Commercial real estate borrowers a second mortgage to cover up to one year of principal and interest payments. In order to qualify for the loan, the total exposure for each borrower could not exceed a 75% loan-to-value ratio and the loans were current at the time of application, amongst other conditions. As of March 31, 2020, approximately 70% of our total Commercial real estate portfolio balance qualified for the plan. As of the date of this filing, borrowers for approximately 260 existing loans totaling $1.4 billion have requested and been approved for these second mortgages, representing approximately 50% of the Commercial real estate loan balance. Approximately $90.0 million in new loans are expected to be funded under this program. The entire Commercial real estate portfolio will continue to be monitored regardless of their participation in the plan.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~As of and~~ for the three months ended March 31, 2021 and March 31, 2020, respectively. The Company recognized Diluted earnings per share attributable to common shareholders of $0.13 and $0.01 for the three months ended March 31, 2021 and March 31, 2020, respectively. Key items that affected the Company’s results in the first quarter of 2021 compared to the same period of 2020 include:

~~Certain statements contained~~▪The provision for loan losses was a credit of $7.0 million for the three months ended March 31, 2021, compared to an expense of $17.0 million for the same period of 2020. During the first quarter of 2021, the Company recognized a total provision credit of $9.0 million, which included a Provision credit for loan losses of $7.0 million, and separately, a reserve credit of $2.0 million for unfunded loan commitments, recognized as Other expense within Operating expense.

•The decrease in ~~this Quarterly Report on Form 10-Q that are not historical facts may constitute forward-looking statements within~~ the ~~meaning of Section 27A~~Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the ~~Securities Act of 1933, as amended,~~forecast scenarios used to account for risks and ~~Section 21E of~~assumptions not incorporated in the ~~Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to be covered~~forecasts. These improvements were partially offset by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” and similar expressions. These statements include, among others, statements regarding our strategy; evaluations of interest rate trends and future liquidity; expectations as to changes in assets, deposits and results of operations; thenet impact of the ~~COVID-19 pandemic; future operations, market position~~change in the composition and ~~financial position; and prospects, plans and objectives~~volume of ~~management. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject~~the loan portfolio.

▪Total revenue increased $6.9 million to ~~significant risks, uncertainties~~$85.6 million for the three months ended March 31, 2021, compared to the same period of 2020 as described below.

•Total fees and other ~~factors which are, in some cases, beyond~~income increased $4.6 million, or 22%, to $26.2 million for the ~~Company’s control.~~

~~Forward-looking statements are based on~~three months ended March 31, 2021, compared to the ~~current assumptions and beliefs~~same period of ~~management and are only expectations of future results.~~2020. The ~~Company’s actual results could differ materially from those projected in the forward-looking statements~~increase was primarily driven by higher Other income as a result of ~~among others, factors referenced herein under~~a gain related to the ~~section captioned “Risk Factors”;~~revaluation of a receivable from the ~~negative impacts~~divestiture of former affiliate Bingham, Osborn & Scarborough, LLC ("BOS"), the impact of mark-to-market on derivatives and ~~disruptions~~deferred compensation securities, and higher gain on sale of secondary loans. Total fees and other income represents 31% of Total revenue for the ~~COVID-19 pandemic~~three months ended March 31, 2021, compared to 27% of Total revenue for the same period of 2020.

•Net interest income increased $2.2 million, or 4%, to $59.5 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase in Net interest income was primarily driven by the addition of income related to the Paycheck Protection Program ("PPP") and ~~measures taken~~lower funding costs, partially offset by lower interest on interest-earning assets. Net interest margin (“NIM”) was 2.45% for the three months ended March 31, 2021, a decrease of 31 basis points compared to ~~contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity~~the same period in 2020. Although Net interest income increased, the decrease in NIM was primarily driven by excess cash balances held at lower yields.

▪Total operating expense increased $15.0 million, or 25%, to $75.9 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase was primarily driven by costs related to the proposed merger with SVB Financial Group ("SVB"), increases in Salaries and ~~results of operations; the length~~employee benefits expense due to increases in variable compensation, and ~~extent of the economic contraction~~Information systems expense as a result of new IT initiatives being placed in service, partially offset by lower Other expense driven by the ~~COVID-19 pandemic; continued deterioration~~off-balance sheet provision credit.

▪For the three months ended March 31, 2021, total loans increased $112.0 million, or 2%, while total deposits increased $552.3 million, or 6%, from December 31, 2020. The increase in ~~general business~~loans was primarily driven by higher Commercial and ~~economic conditions on a national basis~~industrial loans, as well as higher PPP loans, while the increase in deposits was primarily driven by new and inexisting clients maintaining additional cash liquidity. The Company’s loan-to-deposit ratio decreased from 83% as of December 31, 2020 to 79% as of March 31, 2021, driven by strong deposit inflows. Deposits are the ~~local markets in which~~Company’s primary source of funds to originate loans. If the Company ~~operates; changes in customer behavior due~~has excess deposits, the Company may seek to ~~changing business and economic conditions or legislative or regulatory initiatives; continued turbulence in the capital and debt markets; changes in interest rates; increases~~earn a better yield by investing excess cash in loan ~~defaults and charge-off rates; decreases~~growth, purchasing investment securities or other cash management strategies.

▪Income tax expense for the three months ended March 31, 2021 was $6.1 million, compared to $0.1 million for the same period in 2020. The effective tax rate for the ~~value~~three months ended March 31, 2021 was 36.3%, compared to an effective tax rate of ~~securities and other assets; changes in loan loss reserves; decreases in deposit levels necessitating increased borrowing~~11.2% for the same period of 2020. The effective tax rate is more than the statutory rate of 21% due primarily to fund loans and investments; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risk relating to the Company’s participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; risks that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risksMerger costs related to the ~~identification~~proposed merger with SVB, state and ~~implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements;~~local income taxes, and the ~~other risks~~accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and ~~uncertainties detailed~~income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.

The Company’s ~~Annual Report on Form 10-K~~Wealth Management and ~~updated~~Trust segment reported Net income attributable to the Company of $1.2 million in the ~~Company’s Quarterly Reports~~first quarter of 2021, compared to $2.0 million for the same period of 2020. The decrease of $0.8 million, or 40%, was primarily driven by an increase of $2.0 million in Operating expense, partially offset by an increase of $0.6 million in Total revenue. The increase in Operating expense was primarily driven by increases in Salaries and employee benefits expense, and Information systems expense as a result of new IT initiatives being placed in service to support the Company's strategic objectives. The increase in Total revenue was driven by the impact of higher AUM on ~~Form 10-Q~~fee revenues. Wealth Management and ~~other filings submitted~~Trust AUM increased $3.5 billion, or 26%, to $17.0 billion at March 31, 2021 from $13.5 billion at March 31, 2020. The increase in AUM was primarily driven by favorable market returns of $3.6 billion, partially offset by total net outflows of $0.1 billion for the twelve months ended March 31, 2021.

Announced Merger

On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB, pursuant to which SVB will acquire the Company. On May 4, 2021, the shareholders of the Company approved the Merger Agreement. The transaction is expected to close mid-2021, subject to the ~~Securities and Exchange Commission. Forward-looking statements speak only as~~satisfaction of customary closing conditions, including the receipt of regulatory approvals.

Impact of the ~~date~~COVID-19 Pandemic

The COVID-19 pandemic has caused, and continues to cause, substantial disruptions to the global economy and to the customers and communities that we serve. In response to the pandemic, the Company implemented business continuity contingency plans, including company-wide remote working arrangements. We are also focused on ~~which they are made. The Company does not undertake any obligation~~supporting our clients who may be experiencing a financial hardship due to ~~update any forward-looking statement~~the COVID-19 pandemic, including by participating in the Small Business Administration’s (the “SBA”) PPP and offering loan deferrals and forbearance as needed, including our mortgage deferment program and Commercial and industrial loan deferment program, and creating the Commercial real estate second loan program. We will continue to ~~reflect circumstances or events that occur after the date the forward-looking statements are made~~evaluate this fluid situation and take additional actions as necessary.

Executive Summary

The Company offers a wide range of private banking, wealth management, and trust services to high net worth individuals, families, businesses and select institutions through its two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust. This Executive Summary provides an overview of the most significant aspects of the Company's operating segments and operations in the first quarter of ~~2020.~~2021. Details of the matters addressed in this summary are provided elsewhere in this document and, in particular, in the sections immediately following.


		As of and for the three months ended March 31,											As of and for the three months ended March 31,
		2020		2019		$ Change		% Change			2021		2020		$ Change		% Change
		(In thousands, except per share data)													(In thousands, except per share data and percentages)
Total revenue	Total revenue	$	78,778	$	83,586	$	(4,808)	(6)	%	Total revenue	$	85,647	$	78,778	$	6,869	9	%
Provision/(credit) for loan losses	Provision/(credit) for loan losses	16,962		(1,426)		18,388		nm		Provision/(credit) for loan losses	(7,004)		16,962		(23,966)		nm
Total operating expense	Total operating expense	60,908		60,553		355		1	%	Total operating expense	75,923		60,908		15,015		25	%
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests	806		19,542		(18,736)		(96)	%	Net income before attribution to noncontrolling interests	10,652		806		9,846		nm
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	6		100		(94)		(94)	%	Net income attributable to noncontrolling interests	—		6		(6)		(100)	%
Net income attributable to the Company	Net income attributable to the Company	800		19,442		(18,642)		(96)	%	Net income attributable to the Company	10,652		800		9,852		nm
Diluted earnings per share attributable to common shareholders	Diluted earnings per share attributable to common shareholders	$	0.01	$	0.25	$	(0.24)	(96)	%	Diluted earnings per share attributable to common shareholders	$	0.13	$	0.01	$	0.12	nm

ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):	ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):											ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):
Wealth Management and Trust	Wealth Management and Trust	$	13,497,000	$	14,564,000	(1,067,000)		(7)	%	Wealth Management and Trust	$	17,002,000	$	13,497,000	$	3,505,000	26	%

Other(1)	Other(1)	1,016,000		1,558,000		(542,000)		(35)	%	Other(1)	196,000		1,016,000		(820,000)		(81)	%
Total AUM	Total AUM	$	14,513,000	$	16,122,000	$	(1,609,000)	(10)	%	Total AUM	$	17,198,000	$	14,513,000	$	2,685,000	19	%

_____________________

nm = not meaningful
(1) Includes results from Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”)

Net income attributable to the Company was $10.7 million and $0.8 million for the three months ended March 31, 2021 and March 31, 2020, ~~and $19.4 million for the same period of 2019.~~respectively. The Company recognized ~~diluted~~Diluted earnings per share attributable to common shareholders of ~~$0.01~~$0.13 and ~~$0.25~~$0.01 for the three months ended March 31, 2021 and March 31, 2020, ~~and 2019,~~ respectively.

Key items that affected the Company’s results in the first quarter of ~~2020~~2021 compared to the same period of ~~2019~~2020 include:

▪~~Provision expense~~The provision for loan losses ~~increased $18.4 million to $17.0~~was a credit of $7.0 million for the three months ended March 31, ~~2020,~~2021, compared to an expense of $17.0 million for the same period of ~~2019.~~2020. During the first quarter of ~~2020,~~2021, the Company recognized a total provision credit of $9.0 million, which included a Provision credit for loan losses ~~and unfunded loan commitments expense~~ of ~~$18.8 million, which includes a provision for loan loss expense of $17.0~~$7.0 million, and ~~$1.8~~separately, a reserve credit of $2.0 million for unfunded loan commitments, ~~which is~~ recognized as Other expense within ~~Noninterest~~Operating expense.

•The ~~provision~~decrease in the Allowance for loan losses infor the ~~first quarter of 2020~~three months ended March 31, 2021 was primarily driven by ~~changes in~~the latest current reasonable and supportable economic forecasts, ~~late~~which indicated improving economic conditions from the prior quarter, as well as a change in the ~~first quarter~~weighting of ~~2020~~the forecast scenarios used to ~~reflect deteriorating economic conditions related to the COVID-19 pandemic.~~

•~~Upon adoption of ASU 2016-13 on January 1, 2020, the Company recognized a decrease~~account for risks and assumptions not incorporated in the ~~allowance for loan losses of $20.4 million, and an increase in~~forecasts. These improvements were partially offset by the ~~reserve for unfunded loan commitments of $1.4 million. The~~ net ~~after-tax~~ impact of the ~~decrease~~change in the ~~allowance for~~composition and volume of the loan ~~losses and the increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million.~~portfolio.

▪Total revenue ~~decreased $4.8~~increased $6.9 million ~~or 6%,~~ to ~~$78.8~~$85.6 million for the three months ended March 31, ~~2020,~~2021, compared to the same period of ~~2019~~2020 as described below.

•Total fees and other income ~~decreased $3.7~~increased $4.6 million, or ~~15%~~22%, to ~~$21.5~~$26.2 million for the three months ended March 31, ~~2020,~~2021, compared to the same period of ~~2019.~~2020. The ~~decrease~~increase was primarily driven by ~~lower~~higher Other income ~~Investment management fees,~~as a result of a gain related to the revaluation of a receivable from the divestiture of former affiliate Bingham, Osborn & Scarborough, LLC ("BOS"), the impact of mark-to-market on derivatives and ~~Wealth management~~deferred compensation securities, and ~~trust fees.~~higher gain on sale of secondary loans. Total fees and other income represents ~~27%~~31% of Total revenue for the three months ended March 31, ~~2020,~~2021, compared to ~~30%~~27% of Total revenue for the same period of ~~2019.~~2020.

•Net interest income ~~decreased $1.1~~increased $2.2 million, or 2%4%, to ~~$57.3~~$59.5 million for the three months ended March 31, ~~2020,~~2021, compared to the same period of ~~2019.~~2020. The increase in Net interest income was primarily driven by the addition of income related to the Paycheck Protection Program ("PPP") and lower funding costs, partially offset by lower interest on interest-earning assets. Net interest margin (“NIM”) was ~~2.76%~~2.45% for the three months ended March 31, ~~2020,~~2021, a decrease of 1431 basis points compared to the same period in ~~2019. The decreases in net~~2020. Although Net interest income ~~and~~increased, the decrease in NIM ~~were~~was primarily driven by ~~the impact of recent rate cuts as~~excess cash balances held at lower ~~interest on interest-earning assets was partially offset by lower funding costs.~~yields.

▪Total operating ~~expenses~~expense increased ~~$0.4~~$15.0 million, or 1%25%, to ~~$60.9~~$75.9 million for the three months ended March 31, ~~2020,~~2021, compared to the same period of ~~2019.~~2020. The increase was primarily driven by ~~an increase~~costs related to the proposed merger with SVB Financial Group ("SVB"), increases in ~~Other expense, Information systems, and Marketing and business development, partially offset by a restructuring charge of $1.6 million in the first~~

~~quarter of 2019 as well as a decrease in Occupancy and equipment, FDIC insurance, and~~ Salaries and employee benefits expense due to ~~accrual adjustments.~~increases in variable compensation, and Information systems expense as a result of new IT initiatives being placed in service, partially offset by lower Other expense driven by the off-balance sheet provision credit.

▪For the three months ended March 31, ~~2020,~~2021, total loans increased ~~by $66.6~~$112.0 million, or 1%2%, while total deposits ~~decreased $405.9~~increased $552.3 million, or 6%, from ~~prior quarter.~~December 31, 2020. The increase in loans was primarily driven by higher Commercial and industrial loans, as well as higher PPP loans, while the increase in deposits was primarily driven by new and existing clients maintaining additional cash liquidity. The Company’s loan-to-deposit ratio ~~was 103%~~decreased from 83% as of December 31, 2020 to 79% as of March 31, ~~2020.~~2021, driven by strong deposit inflows. Deposits are the Company’s primary source of funds to originate loans. ~~When the Company’s loan-to-deposit ratio exceeds 100%, the Company relies on other funding sources such as FHLB borrowings or federal funds to fund loan growth.~~ If the Company ~~is unable~~has excess deposits, the Company may seek to ~~grow deposits~~earn a better yield by investing excess cash in ~~line with~~ loan growth, ~~we will evaluate~~purchasing investment securities or other ~~options such as slowing loan growth, selling~~cash management strategies.

▪Income tax expense for the three months ended March 31, 2021 was $6.1 million, compared to $0.1 million for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 36.3%, compared to an effective tax rate of 11.2% for the same period of 2020. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a ~~portion~~tax expense of ~~portfolio loans, or originating mortgage loans as held-for-sale.~~approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.

The Company’s Private Banking segment reported Net income attributable to the Company of ~~$0.6~~$21.8 million in the first quarter of ~~2020,~~2021, compared to ~~$18.3~~$0.6 million for the same period of ~~2019.~~2020. Net income attributable to the Company ~~decreased $17.7~~increased $21.3 million ~~or 97%,~~ from the same period in ~~2019~~2020, primarily driven by ~~an increase of $18.4 million to the~~a decrease in Provision for loan losses ~~a decrease~~ of ~~$3.4~~$24.0 million, as well as an increase in Total revenue ~~primarily due to lower Fees and other income, and~~of $4.8 million. These items were partially offset by an increase in Income tax expense of $5.7 million, as well as an increase of ~~$1.3~~$1.9 million in Operating expense primarily due to ~~higher Other~~increases in Salaries and employee benefits expense, ~~related to the reserve for unfunded loan commitments expense.~~and Information systems expense as a result of new IT initiatives being placed in service.

The Company’s Wealth Management and Trust segment reported Net income attributable to the Company of ~~$2.0~~$1.2 million in the first quarter of ~~2020,~~2021, compared to ~~$2.5~~$2.0 million for the same period of ~~2019.~~2020. The decrease of ~~$0.4~~$0.8 million, or ~~18%~~40%, was primarily driven by ~~a decrease~~an increase of ~~$0.7~~$2.0 million in Total revenue due to the impact of lower AUM on accounts that are billed based on AUM levels, partially offset by a decrease of $0.1 million in Total operating expense. The decrease in Total operating expense was primarily due to a $0.4 million restructuring charge in the first quarter of 2019, a decrease in Occupancy and equipment expense, and a decrease in Professional servicesOperating expense, partially offset by an increase of $0.6 million in ~~Information systems~~Total revenue. The increase in Operating expense ~~and~~was primarily driven by increases in Salaries and employee benefits ~~expense.~~expense, and Information systems expense as a result of new IT initiatives being placed in service to support the Company's strategic objectives. The increase in Total revenue was driven by the impact of higher AUM on fee revenues. Wealth Management and Trust AUM ~~decreased $1.1~~increased $3.5 billion, or 7%26%, to $17.0 billion at March 31, 2021 from $13.5 billion at March 31, ~~2020 from $14.6 billion at March 31, 2019.~~2020. The ~~decrease~~increase in AUM was primarily driven by ~~lost business of $1.2 billion and unfavorable~~favorable market returns of ~~$0.8~~$3.6 billion, partially offset by ~~new business~~total net outflows of ~~$1.0~~$0.1 billion for the twelve months ended March 31, ~~2020.~~2021.

Announced Merger

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has caused, and continues to cause, substantial disruptions to the global economy and to the customers and communities that we serve. In response to the pandemic, ~~we have~~the Company implemented business continuity contingency plans, including company-wide remote working arrangements. We are also focused on supporting our clients who may be experiencing a financial hardship due to the COVID-19 pandemic, including by participating in the ~~SBA's~~Small Business Administration’s (the “SBA”) PPP and offering loan deferrals and forbearance as needed, including our mortgage deferment program and Commercial and industrial loan deferment program, and creating the Commercial real estate second loan program. We will continue to evaluate this fluid situation and take additional actions as necessary. ~~See Part I. Item 1. “Notes~~

Participation in the PPP

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") initially appropriated $349 billion for “paycheck protection loans” through the PPP. The amount appropriated was subsequently increased to ~~Unaudited Consolidated Financial Statements - Note 16: Subsequent events”~~$659 billion. The CARES Act provided funding to the SBA for ~~further details~~use for the PPP. Under the terms of the PPP, certain businesses can apply for loans through qualified financial institutions, such as the Bank, based on eligibility criteria. The PPP provides loans to eligible businesses with an initial term of up to five years at an interest rate of 1.0%. Loans issued under the PPP will be forgiven if the borrower uses at least 60% of the proceeds on payroll costs and other eligible costs such as utilities or rent for a period of up to

24 weeks, following the loan funding date. This was changed from 75% and 8 weeks by the Paycheck Protection Program Flexibility Act signed into law on June 5, 2020. The SBA has issued an interim final rule in which it has provided that a lender may rely on certifications made by a borrower to determine the borrower’s eligibility for a PPP loan and use of loan proceeds, subject to a good faith review, and to determine the qualifying loan amount and eligibility for loan forgiveness. Additionally, on December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "Economic Aid Act") was enacted which, among other items, provides for a second round of PPP loans.

Loans issued by participating financial institutions are 100% guaranteed by the SBA. Banks will receive a processing fee from the SBA from 1.0% to 5.0% based on the ~~Company's participation in these programs.~~size of the loan. Loans up to $350 thousand will have a 5.0% fee, loans between $350 thousand and $2.0 million will have a 3.0% fee, and loans greater than $2.0 million will have a 1.0% fee.

In conjunction with the PPP, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection Program Liquidity Facility (the “PPPLF”) will extend credit to depository institutions with a term of up to five years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility. As of March 31, 2021, the Bank has not participated in the PPPLF.

As of March 31, 2021, the Bank processed 1,594 loans totaling $511.1 million under the PPP program, primarily in the second quarter of 2020 and the first quarter of 2021. The Bank has received $15.5 million in processing fees from the SBA, which is netted against the principal balance on the Consolidated Balance Sheets and will be accreted through net interest income on a straight-line basis over the life of the loan. If a loan is forgiven or otherwise paid off, the remainder of the processing fee will be accreted through net interest income. As of March 31, 2021, the balance of PPP loans was $351.2 million, and $8.2 million was accreted through net interest income. On May 5, 2021, the SBA stopped accepting PPP loan applications from most lenders, including the Company, because PPP funding has been exhausted.

Mortgage deferment program

In response to the COVID-19 pandemic, ~~did~~the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 residential and home equity loans totaling approximately $220.0 million have ~~a material impact~~been processed under the program. As of March 31, 2021, approximately 47 loans totaling approximately $20.0 million remain in deferral under the program. Approximately 13 loans totaling $1.5 million are delinquent on payment terms as of March 31, 2021 after the ~~Company’s financial condition, results~~deferral expired, primarily First Time Home Buyer loans as defined by the U.S. Department of ~~operations, or capital position other than~~Housing and Urban Development, while the ~~provision for~~remainder have expired with the loans returning to payment.

Commercial and industrial loan ~~loss expense discussed below. As described~~deferment program

Also in ~~Part II. Item 1A. "Risk Factors",~~response to the COVID-19 pandemic, the Bank initiated a program offering qualified Commercial and industrial borrowers principal payment deferral for six months, with the deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under the program. As of March 31, 2021, approximately four loans totaling approximately $5.7 million remain in deferral under the program, while the remainder have expired with the loans returning to payment. Of the loans that came off deferral, no loans are delinquent on payment terms as of March 31, 2021.

Commercial real estate second loan program

In response to the COVID-19 pandemic, the Bank also initiated a program to offer qualifying Commercial real estate borrowers a second mortgage to cover up to one year of principal and interest payments. In order to qualify for the loan, the total exposure after receiving the second mortgage for each borrower could ~~have~~not exceed a 75% loan-to-value ratio, and the loans were required to be current at the time of application, amongst other conditions. In total, borrowers with approximately 240 existing loans totaling $1.3 billion requested and were approved for these second mortgages, representing approximately 50% of the Commercial real estate loan balance. As of March 31, 2021, the borrowers associated with the $1.3 billion of existing loans received approximately $69.9 million in additional funding under this program. The Company does not anticipate a material increase in the $69.9 million balance of new loans in the future, and the principal balance will amortize down over the life of the loan, generally five years. The 12 month coverage period for debt service reserve balances will elapse in the second quarter of 2021.

In addition to, and outside of the Commercial real estate second loan program, the Bank offered qualified Commercial real estate borrowers principal payment deferral for up to twelve months, with the deferred principal added to the balance due at maturity. In total, approximately ten Commercial real estate borrowers with loans totaling approximately $55.0 million accepted this accommodation. As of March 31, 2021, one borrower with loans totaling $4.7 million remains in deferral. Of the loans that came off deferral, no loans are delinquent on payment terms as of March 31, 2021. The entire Commercial real estate portfolio will continue to be monitored for credit deterioration regardless of their participation in the plan.

Credit quality and Allowance for loan loss

The Company continues to monitor and evaluate the impact of the COVID-19 pandemic on the ~~Company’s financial condition, results~~credit quality of ~~operations~~our assets. Total criticized and classified loans as of March 31, 2021 was $314.4 million, an increase of $3.6 million, or ~~capital position in the future.~~

1%, linked quarter. During the first quarter of ~~2020,~~2021, the Company recognized a total net provision credit of $9.0 million. The decrease in the Allowance for loan losses ~~expense of $18.8 million~~ for ~~loans and off-balance sheet commitments~~the three months ended March 31, 2021 was primarily driven by the ~~changes in~~latest current reasonable and supportable economic forecasts, ~~late~~which indicated improving economic conditions from the prior quarter, as well as a change in the ~~first quarter~~weighting of ~~2020~~the forecast scenarios used to ~~reflect deteriorating economic conditions related to~~account for risks and assumptions not incorporated in the ~~COVID-19 pandemic.~~ forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.

Other accounting matters

There have been no significant changes to judgments in determining the fair value of assets or liabilities, and there have been no material impairments of financial assets. The Company will continue to monitor the fair value of assets to determine if trigger events exist to warrant further impairment testing.

~~Company-wide remote working arrangements have not adversely affected our ability to maintain operations, including financial reporting systems and internal controls over financial reporting.~~

~~Regulatory Developments~~

~~The CARES Act~~

~~On March 27, 2020, Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to address the economic effects of the COVID-19 pandemic.~~

•~~Paycheck Protection Program~~. The CARES Act appropriated $349 billion for “paycheck protection loans” through the PPP. The amount appropriated was subsequently increased to $659 billion. Loans under the PPP that meet SBA requirements may be forgiven in certain circumstances, and are 100% guaranteed by the SBA. As of the date of this filing, the Bank has initially approved approximately 1,100 PPP loans totaling approximately $425.0 million. In conjunction with the PPP, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection Program Liquidity Facility (the “PPPLF”)

~~will extend credit to depository institutions with a term of up to two years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility.~~

•~~Troubled Debt Restructuring Relief~~. From March 1, 2020 through the earlier of December 31, 2020 or 60 days after the termination date of the national emergency declared by the President on March 13, 2020 concerning the COVID–19 outbreak (the “national emergency”), a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a troubled debt restructured (“TDR”), including impairment accounting. The Company elected this accounting policy. This TDR relief is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which TDR relief is applicable. In the first quarter of 2020, the Company initiated a mortgage loan deferment program in line with the preceding guidance. As of March 31, 2020, 10 loans totaling approximately $5.0 million were processed under this program. As of the date of this filing, the Bank has initially approved approximately 170 deferments for loans totaling approximately $90.0 million.

•~~CECL Delay~~. Banks, savings associations, credit unions, bank holding companies and their affiliates are not required to comply with the Financial Accounting Standards Board Accounting Standards Update No. 2016–13 (“~~Measurement of Credit Losses on Financial Instruments~~”), including the current expected credit losses methodology for estimating allowances for credit losses (“CECL”), from the date of the law’s enactment until the earlier of the end of the national emergency or December 31, 2020. On March 27, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation (the “FDIC”), and the Office of the Comptroller of the Currency issued an interim final rule that allows banking organizations that are required to adopt CECL this year to mitigate the estimated cumulative regulatory capital effects for up to two years. The relief afforded by the CARES Act and interim final rule is in addition to the three-year transition period already in place. The Company adopted CECL effective January 1, 2020.

•~~Reduction of the Community Bank Leverage Ratio~~. The CARES Act reduced the community bank leverage ratio from 9% to 8% until the earlier of the end of the national emergency or December 31, 2020. In response to the CARES Act, federal banking regulators set the community bank leverage ratio at 8% for the remainder of 2020, 8.5% for 2021 and 9% thereafter.

•~~Revival of Bank Debt Guarantee Program~~. The CARES Act amends the Dodd-Frank Act to provide the FDIC with the authority to guarantee bank-issued debt and noninterest-bearing transaction accounts that exceed the FDIC's $250,000 limit through December 31, 2020. The FDIC has discretion to determine whether and how to exercise this authority.

•~~Forbearance.~~ The CARES Act codifies in part recent guidance from state and federal regulators and government-sponsored enterprises, including the 60-day suspension of foreclosures on federally-backed mortgages and requirements that servicers grant forbearance to borrowers affected by COVID-19.

•~~Moratorium on Negative Credit Reporting~~. Any furnisher of credit information that agrees to defer payments, forbear on any delinquent credit or account, or provide any other relief to consumers affected by the COVID-19 pandemic must report the credit obligation or account as current if the credit obligation or account was current before the accommodation.

~~Massachusetts COVID-19 Emergency Legislation~~

Critical Accounting Policies

Critical accounting policies reflect significant judgments and uncertainties, which could potentially result in materially different results under different assumptions and conditions. The Company believes that its most critical accounting ~~policies~~policy upon which its financial condition depends, which ~~involve~~involves the most complex or subjective decisions or assessments, ~~are~~is the ~~allowance~~Allowance for loan ~~losses, the valuation of goodwill and intangible assets and the analysis for impairment, and income tax estimates. These policies are~~losses. This policy is discussed in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~There was one change to these policies through the filing of this Quarterly Report on Form 10-Q.~~ Upon the adoption of ASU 2016-13, Financial Instruments (Topic 326) ("(“ASU ~~2016-13"~~2016-13”) on January 1, 2020, management's policy and processes for the ~~allowance~~Allowance for loan losses ~~has~~have changed. The updates in this standard replace the incurred loss impairment methodology ~~in current GAAP~~ with a CECL model methodology. The CECL model methodology incorporates current conditions, reasonable and ~~“reasonable~~supportable economic forecasts, and ~~supportable” forecasts, as well as~~ prepayments to estimate loan losses over the life of the loan. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan ~~Losses"~~Losses” for further discussion on the new policy and processes. There have been no other changes to the Company's policies through the filing of this Quarterly Report on Form 10-Q.

Results of operations for the three months ended March 31, ~~2020~~2021 versus March 31, ~~2019~~2020

Net ~~Income.~~income. The Company recorded ~~Net income before attribution to noncontrolling interestsfor the three months ended March 31, 2020 of $0.8 million, compared to $19.5 million for the same respective period in 2019.~~ Net income attributable to the Company for the three months ended March 31, ~~2020 was $0.8~~2021 of $10.7 million, compared to ~~$19.4~~Net income attributable to the Company of $0.8 million for the same respective period in ~~2019.~~2020.

The Company recognized Diluted ~~EPS~~earnings per share attributable to common shareholders for the three months ended March 31, ~~2020~~2021 of ~~$0.01~~$0.13 per share, compared to ~~$0.25~~Diluted earnings per share attributable to common shareholders of $0.01 per share for the same respective period in 2019. Net income attributable to the Company for 2020 and 2019 was positively impacted by decreases in the redemption value of certain redeemable noncontrolling interests, which increases Net income available to common shareholders.2020. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 2: Earnings Per Share” for further detail on ~~these charges~~adjustments made to arrive at income available to common shareholders.

The following table presents selected financial highlights:


			Three months ended March 31,						$ Change			% Change	Three months ended March 31,				$ Change				% Change
			2020		2019								2021		2020
		(In thousands)																					(In thousands, except percentages)
Net interest income	Net interest income		$	57,257	$	58,338	$	(1,081)	(2)	%	Net interest income		$	59,477	$	57,257			$	2,220			4	%
Fees and other income	Fees and other income		21,521		25,248		(3,727)		(15)	%	Fees and other income		26,170		21,521		4,649				22	%
Total revenue	Total revenue		78,778		83,586		(4,808)		(6)	%	Total revenue		85,647		78,778		6,869				9	%
Provision/(credit) for loan losses	Provision/(credit) for loan losses		16,962		(1,426)		18,388		nm		Provision/(credit) for loan losses		(7,004)		16,962		(23,966)				nm
Operating expense	Operating expense		60,908		60,553		355		1	%	Operating expense		75,923		60,908		15,015				25	%
Income tax expense	Income tax expense		102		4,917		(4,815)		(98)	%	Income tax expense		6,076		102		5,974				nm
Net income before attribution to noncontrolling interests	Net income before attribution to noncontrolling interests		806		19,542		(18,736)		(96)	%	Net income before attribution to noncontrolling interests		10,652		806		9,846				nm

Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests		6		100		(94)		(94)	%	Less: Net income attributable to noncontrolling interests		—		6		(6)				(100)	%
Net income attributable to the Company	Net income attributable to the Company		$	800	$	19,442	$	(18,642)	(96)	%	Net income attributable to the Company		$	10,652	$	800	$	9,852			nm

_____________________

nm = not meaningful

Net interest income. Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits and borrowings. Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. NIM is the amount of net interest income expressed as a percentage of average interest-earning assets. The average rate earned

on interest-earning assets is the amount of annualized interest income expressed as a percentage of average interest-earning assets. The average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities. When credit quality declines and loans are placed on nonaccrual status, NIM can decrease because the same assets are earning less income. Loans graded as substandard but still accruing interest income totaled ~~$87.9~~$136.1 million at March 31, ~~2020~~2021 and could be placed on nonaccrual status if their credit quality declines further.

Net interest income for the three months ended March 31, ~~2020~~2021 was ~~$57.3~~$59.5 million, ~~a decrease~~an increase of ~~$1.1~~$2.2 million, or 2%4%, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase was primarily driven by the ~~impact~~addition of ~~recent rate cuts as~~PPP-related income and lower ~~interest on interest-earning assets was~~funding costs, partially offset by lower ~~funding costs.~~interest earned on interest-earning assets. NIM was ~~2.76%~~2.45% for the three months ended March 31, ~~2020,~~2021, a decrease of 1431 basis points compared to the same period in ~~2019. The~~2020. Although Net interest income increased, the decrease in NIM was ~~also~~ primarily driven by ~~the impact of recent rate cuts as~~excess cash balances held at lower ~~interest on interest-earning assets was partially offset by lower funding costs.~~yields.

4746

The following tables present the composition of the Company’s NIM for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.


		Average Balance						Interest Income/Expense								Average Yield/Rate (1)						Average Balance				Interest Income/Expense			Average Yield/Rate (1)
		As of and for the three months ended March 31,																								As of and for the three months ended March 31,
AVERAGE BALANCE SHEET:	AVERAGE BALANCE SHEET:	2020		2019		2020		2019		2020		2019		AVERAGE BALANCE SHEET:	2021		2020		2021			2020		2021		2020
AVERAGE ASSETS	AVERAGE ASSETS	(In thousands)																			AVERAGE ASSETS	(In thousands)
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Cash and investments: (2)	Cash and investments: (2)													Cash and investments: (2)
Taxable investment securities	Taxable investment securities	$	201,174	$	244,230	$	868	$	1,185	1.73	%	1.94	%	Taxable investment securities	$	203,856	$	201,174	$	782		$	868	1.54	%	1.73		%
Non-taxable investment securities	Non-taxable investment securities	315,681		306,868		1,998		1,901		2.53	%	2.48	%	Non-taxable investment securities	322,057		315,681		2,045			1,998		2.54	%	2.53		%
Mortgage-backed securities	Mortgage-backed securities	520,629		521,788		2,787		2,897		2.14	%	2.22	%	Mortgage-backed securities	810,754		520,629		3,437			2,787		1.70	%	2.14		%
Short-term investments and other	Short-term investments and other	147,482		79,603		1,071		908		2.89	%	4.58	%	Short-term investments and other	1,238,677		147,482		593			1,071		0.19	%	2.89		%
Total cash and investments	Total cash and investments	1,184,966		1,152,489		6,724		6,891		2.27	%	2.39	%	Total cash and investments	2,575,344		1,184,966		6,857			6,724		1.07	%	2.27		%
Loans: (3)	Loans: (3)													Loans: (3)
Commercial and industrial	Commercial and industrial	1,148,986		1,070,161		10,724		10,979		3.69	%	4.10	%	Commercial and industrial	1,034,369		1,148,986		8,352			10,724		3.23	%	3.69		%
Paycheck Protection Program														Paycheck Protection Program	326,695		—		3,629			—		4.44	%	—		%
Commercial real estate	Commercial real estate	2,582,305		2,398,413		27,482		28,151		4.21	%	4.69	%	Commercial real estate	2,723,249		2,582,305		23,187			27,482		3.41	%	4.21		%
Construction and land	Construction and land	233,324		211,351		2,572		2,641		4.36	%	5.00	%	Construction and land	165,350		233,324		1,605			2,572		3.88	%	4.36		%
Residential	Residential	2,850,833		2,972,945		23,468		25,545		3.29	%	3.44	%	Residential	2,667,440		2,850,833		20,226			23,468		3.03	%	3.29		%
Home equity	Home equity	86,048		90,646		952		1,121		4.45	%	5.02	%	Home equity	76,336		86,048		551			952		2.93	%	4.45		%
Other consumer		132,237		133,937		1,160		1,496		3.53	%	4.53	%
Consumer and other														Consumer and other	121,900		132,237		486			1,160		1.62	%	3.53		%
Total loans	Total loans	7,033,733		6,877,453		66,358		69,933		3.75	%	4.07	%	Total loans	7,115,339		7,033,733		58,036			66,358		3.26	%	3.75		%
Total earning assets	Total earning assets	8,218,699		8,029,942		73,082		76,824		3.54	%	3.83	%	Total earning assets	9,690,683		8,218,699		64,893			73,082		2.68	%	3.54		%
LESS: Allowance for loan losses		51,730		75,537
Less: Allowance for loan losses														Less: Allowance for loan losses	81,125		51,730
Cash and due from banks (non-interest bearing)	Cash and due from banks (non-interest bearing)	49,571		46,172										Cash and due from banks (non-interest bearing)	38,897		49,571
Other assets	Other assets	562,851		493,148										Other assets	631,970		562,851
TOTAL AVERAGE ASSETS	TOTAL AVERAGE ASSETS	$	8,779,391	$	8,493,725									TOTAL AVERAGE ASSETS	$	10,280,425	$	8,779,391
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY																										AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Interest-bearing deposits:	Interest-bearing deposits:													Interest-bearing deposits:

Savings and NOW	Savings and NOW	$	638,926	$	674,872	$	232	$	296	0.15	%	0.18	%	Savings and NOW	$	877,100	$	638,926	$	180		$	232	0.08	%	0.15		%
Money market	Money market	3,753,045		3,341,397		9,657		10,072		1.03	%	1.22	%	Money market	4,911,146		3,753,045		3,831			9,657		0.32	%	1.03		%
Certificates of deposit	Certificates of deposit	668,818		775,817		2,907		3,690		1.75	%	1.93	%	Certificates of deposit	489,037		668,818		680			2,907		0.56	%	1.75		%
Total interest-bearing deposits	Total interest-bearing deposits	5,060,789		4,792,086		12,796		14,058		1.02	%	1.19	%	Total interest-bearing deposits	6,277,283		5,060,789		4,691			12,796		0.30	%	1.02		%
Junior subordinated debentures	Junior subordinated debentures	106,363		106,363		917		1,121		3.41	%	4.22	%	Junior subordinated debentures	106,363		106,363		481			917		1.81	%	3.41		%
FHLB borrowings and other	FHLB borrowings and other	455,813		615,985		2,112		3,307		1.83	%	2.15	%	FHLB borrowings and other	180,234		455,813		244			2,112		0.54	%	1.83		%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,622,965		5,514,434		15,825		18,486		1.13	%	1.36	%	Total interest-bearing liabilities	6,563,880		5,622,965		5,416			15,825		0.33	%	1.13		%
Non-interest bearing demand deposits		2,046,102		1,974,526
Noninterest bearing demand deposits														Noninterest bearing demand deposits	2,551,651		2,046,102
Payables and other liabilities	Payables and other liabilities	270,371		236,426										Payables and other liabilities	285,453		270,371
Total average liabilities	Total average liabilities	7,939,438		7,725,386										Total average liabilities	9,400,984		7,939,438
Redeemable noncontrolling interests	Redeemable noncontrolling interests	1,018		2,056										Redeemable noncontrolling interests	—		1,018
Average shareholders’ equity	Average shareholders’ equity	838,935		766,283										Average shareholders’ equity	879,441		838,935
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	8,779,391	$	8,493,725									TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	10,280,425	$	8,779,391
Net interest income	Net interest income					$	57,257	$	58,338					Net interest income					$	59,477		$	57,257

Interest rate spread	Interest rate spread									2.41	%	2.47	%	Interest rate spread										2.35	%	2.41		%
NIM	NIM									2.76	%	2.90	%	NIM										2.45	%	2.76		%

__________________

(1) Annualized.

(2) Investments classified as available-for-sale and held-to-maturity are shown in the average balance sheet at amortized cost.

(3) Includes loans held for sale and nonaccrual loans.

Interest and dividend income. Total interest and dividend income for the three months ended March 31, ~~2020~~2021 was ~~$73.1~~$64.9 million, a decrease of ~~$3.7~~$8.2 million, or 5%11%, compared to the same period in ~~2019.~~2020. The decrease was primarily driven by lower yields on loans and investments, partially offset by a higher ~~volume~~volumes of loans and investments.

The Bank generally has interest related to nonaccrual loans that is either collected or reversed each quarter. When a loan is placed on nonaccrual, the interest income previously accrued but uncollected, is reversed which will have a negative

effect on the related yield. Interest collected on loans while on nonaccrual status is generally applied to the principal balance. If

a nonaccruing loan pays off, previously collected interest income that was applied to principal may be recorded as interest income if the principal balance was paid in full. Based on the net amount collected or reversed, the impact on interest income and related yields can be either positive or negative. In addition, the Bank collects prepayment penalties on certain commercial loans that pay off prior to maturity which could also impact interest income and related yields positively. The amount and timing of prepayment penalties varies from quarter to quarter.

Interest income on ~~commercial~~Commercial and industrial loans (including ~~commercial~~Commercial loans and ~~commercial~~Commercial tax-exempt loans) for the three months ended March 31, ~~2020~~2021 was ~~$10.7~~$8.4 million, a decrease of ~~$0.3~~$2.4 million, or 2%22%, compared to the same period in ~~2019,~~2020, as a result of a 4146 basis point decrease in the average yield ~~partially offset by~~and a ~~7% increase~~10% decrease in the average balance. The decrease in the average yield was primarily the result of ~~lower yields on recent loan originations and~~ decreases to the interest rate benchmarks to which the variable rate loans are ~~tied.~~tied and lower yields on recent loan originations. The decrease in the average balance was related primarily to lower revolving line of credit usage.

Interest income on PPP loans for the three months ended March 31, 2021 was $3.6 million. The Company began earning interest income on PPP loans in the second quarter of 2020. Interest income on PPP loans includes interest earned on the loans and the accretion of origination fees over the life of the loans. If a loan is forgiven or otherwise paid off, the remainder of the processing fee will be accreted through Net interest income. As of March 31, 2021, approximately $151.4 million of loans were forgiven by the SBA and a total of $8.2 million was accreted through Net interest income.

Interest income on Commercial real estate loans for the three months ended March 31, 2021 was $23.2 million, a decrease of $4.3 million, or 16%, compared to the same period in 2020, as a result of a 80 basis point decrease in the average yield, partially offset by a 5% increase in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied and lower yields on recent loan originations. The increase in the average balance was related primarily to ~~growth in all regions in which~~ the ~~Bank operates.~~addition of approximately $80.0 million of loans under the Commercial real estate second loan program as part of relief measures provided to clients as a result of the COVID-19 pandemic, and the conversion of two loans from construction to permanent financing during the fourth quarter of 2020.

Interest income on ~~commercial real estate~~Construction and land loans for the three months ended March 31, ~~2020~~2021 was ~~$27.5~~$1.6 million, a decrease of ~~$0.7~~$1.0 million, or 2%38%, compared to the same period in ~~2019,~~2020, as a result of a 48 basis point decrease in the average yield, ~~partially offset by an 8% increase in the average balance. The~~and a 29% decrease in the average yield was the result of lower yields on recent loan originations and decreases to the interest rate benchmarks to which the variable rate loans are tied. The increase in the average balance was primarily driven by organic growth in the Southern California and Northern California regions.

Interest income on construction and land loans for the three months ended March 31, 2020 was $2.6 million, a decrease of $0.1 million, or 3%, compared to the same period in 2019, as a result of a 64 basis point decrease in the average yield partially offset by a 10% increase in the average balance. The overall yields on ~~construction~~Construction and land loans fluctuate due to the short-term nature of the loans and the related impact of draws and payoffs. Due to the relatively low balances in ~~construction~~Construction and land loans, a large ~~draw-~~drawdown or ~~pay-down~~paydown can result in a significant change in the overall yield depending on the interest rate of the particular loans that caused the balance changes. The decrease in the average yield was primarily driven by decreases to the interest rate benchmarks to which the variable rate loans are tied. The increase in the average balance was driven primarily by increased utilization of existing loans in the Southern California and New England regions.

Interest income on residential mortgage loans for the three months ended March 31, 2020 was $23.5 million, a decrease of $2.1 million, or 8%, from the same period in 2019, as a result of a 15 basis point decrease in the average yield and 4% decrease in the average balance. The decrease in the average yield was the result of ~~lower yields on recent loan originations and~~ decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance was ~~primary driven by~~related primarily to payoffs in New England and Southern California, as well as the ~~sale~~conversion of ~~$190.7 million~~two loans from construction to permanent financing during the fourth quarter of ~~residential loans in the third and fourth quarters of 2019.~~2020.

Interest income on ~~home equity~~Residential mortgage loans for the three months ended March 31, ~~2020~~2021 was ~~$1.0~~$20.2 million, a decrease of ~~15% compared to~~$3.2 million, or 14%, from the same period in ~~2019,~~2020, as a result of a 5726 basis point decrease in the average yield and a 5%6% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the ~~timing of changes~~interest rate benchmarks to ~~benchmark interest rates, while~~which the variable rate loans are tied and lower yields on recent loan originations. The decrease in the average balance was primarily driven by ~~reduced demand.~~the sale of approximately $72.0 million of Residential loans in the third quarter of 2020 and slowed originations throughout 2020 and the first quarter of 2021.

Interest income on ~~other consumer~~Home equity loans for the three months ended March 31, ~~2020~~2021 was ~~$1.2~~$0.6 million, a decrease of ~~$0.3~~$0.4 million, or ~~22%~~42%, compared to the same period in ~~2019,~~2020, as a result of a ~~100~~152 basis point decrease in the average yield and ~~a 1%~~an 11% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the ~~timing of changes in~~ interest rate benchmarks to which the variable rate loans are ~~tied, while~~tied. The decrease in the average balance was primarily driven by reduced demand as a result of economic uncertainty related to the COVID-19 pandemic.

Interest income on Other consumer loans for the three months ended March 31, 2021 was $0.5 million, a decrease of $0.7 million, or 58%, compared to the same period in 2020, as a result of a 191 basis point decrease in the average yield and an 8% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance was primarily driven by strategic decisions to ~~run off non-core balances.~~slow new consumer loan growth.

Investment income for the three months ended March 31, ~~2020~~2021 was ~~$6.7~~$6.9 million, ~~a decrease~~an increase of ~~$0.2~~$0.1 million, or 2%, ~~from~~compared to the same period in ~~2019,~~2020, as a result of a 12117% increase in the average balance, partially offset by a 120 basis point decrease in the average ~~yield, partially offset by a 3% increase in the average balance. The decrease in the average yield is primarily due to recent purchases made at lower interest rates.~~yield. The increase in the average balance was primarily due to ~~short-term fluctuations~~investing additional cash from higher client deposit balances. The decrease in ~~liquidity from deposits.~~the average yield was primarily due to the lower interest rate environment.

Interest expense. Total interest expense for the three months ended March 31, ~~2020~~2021 was ~~$15.8~~$5.4 million, a decrease of ~~$2.7~~$10.4 million, or ~~14%~~66%, compared to the same period in ~~2019.~~2020. The decrease in interest expense was primarily driven by the impact of lower rates on interest-bearing deposits and borrowings, ~~and~~as well as a decrease in the average volume of borrowings due to higher deposits, partially offset by an increase in the volume of interest-bearing deposits.

Interest expense on interest-bearing deposits for the three months ended March 31, ~~2020~~2021 was ~~$12.8~~$4.7 million, a decrease of ~~$1.3~~$8.1 million, or 9%63%, compared to the same period in ~~2019,~~2020, as a result of a 1772 basis point decrease in the average rate, partially offset by a 6%24% increase in the average balance. The decrease in the average rate paid on deposits was driven primarily by wholesale reductions in rates paid for deposit accounts given ~~the recent~~ decreases in interest rates. The increase in the average balance for interest-bearing deposits was primarily driven by ~~an increase~~increases in ~~money market balances in the New England region.~~

deposits as clients hold additional cash deposit balances.

Interest expense paid on non-deposit interest-bearing liabilities for the three months ended March 31, ~~2020~~2021 was ~~$3.0~~$0.7 million, a decrease of ~~$1.4~~$2.3 million, or ~~32%~~76%, compared to the same period in ~~2019,~~2020, as a result of a 32129 basis point decrease in the average rate paid on FHLB borrowings and other borrowings, a ~~26%~~60% decrease in the average balance of FHLB borrowings and other borrowings, and ~~an 81~~a 160 basis point decrease in the average rate on ~~junior~~Junior subordinated debentures. The decreases in the average rates paid were primarily driven by the decreases in benchmark interest rates to which the instruments are tied. The decrease in the average balance ~~for non-deposit interest-bearing liabilities~~ was primarily driven by anthe increase in client deposits reducing the need for higher-cost borrowings.

Provision/(credit) for loan losses. The Company recorded a Provision credit of $7.0 million for the three months ended March 31, 2021, compared to a Provision for loan losses of $17.0 million for the same period in 2020. The decrease in the Allowance for loan losses for the three months ended March 31, ~~2020, compared~~2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to ~~a credit to~~account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio. Under the CECL methodology, the Provision for loan losses of $1.4 million for the same period in 2019. The provision for loan losses in the first quarter of 2020 was primarily driven by changes in economic forecasts late in the first quarter of 2020 to reflect deteriorating economic conditions due to the COVID-19 pandemic. Under the CECL methodology, the provision for loan loss required may be significantly affected by reasonable and supportable economic forecasts. Under the CECL methodology, the provision for loan loss required may be significantly affected by reasonable and supportable economic forecasts.

The ~~provision/~~Provision/(credit) for loan losses is determined as a result of the required level of the ~~allowance~~Allowance for loan losses, estimated by management, which reflects the inherent risk of loss in the loan portfolio as of the balance sheet dates. The Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The quantitative model utilizes a factor-based approach to estimate expected credit losses using probability of default and loss given default, which are derived from a selected peer group's historical default and loss experience. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments and curtailments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical long-run average. Qualitative factors are estimated by management and include trends in problem loans, strength of management, concentration risk and underwriting standards. For further details, see “Loan Portfolio and Credit Quality” below. For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Allowance for loan losses was determined under the incurred loss model. Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology.

Fees and other income


		Three months ended March 31,						$ Change			% Change	Three months ended March 31,				$ Change				% Change
		2020		2019								2021		2020
		(In thousands)																		(In thousands, except percentages)
Wealth management and trust fees	Wealth management and trust fees	$	18,371	$	19,058	$	(687)	(4)	%	Wealth management and trust fees		$	19,136	$	18,371			$	765			4	%
Investment management fees	Investment management fees	1,925		2,650		(725)		(27)	%	Investment management fees		489		1,925		(1,436)				(75)	%

Other banking fee income	Other banking fee income	2,490		2,499		(9)		—	%	Other banking fee income		2,411		2,490		(79)				(3)	%
Gain on sale of loans, net	Gain on sale of loans, net	100		73		27		37	%	Gain on sale of loans, net		747		100		647				nm
Total core fees and income	Total core fees and income	22,886		24,280		(1,394)		(6)	%	Total core fees and income		22,783		22,886		(103)				—	%

Total other income	Total other income	(1,365)		968		(2,333)		nm		Total other income		3,387		(1,365)		4,752				nm
Total fees and other income	Total fees and other income	$	21,521	$	25,248	$	(3,727)	(15)	%	Total fees and other income		$	26,170	$	21,521	$	4,649			22	%

_____________________

nm = not meaningful

Total fees and other income for the three months ended March 31, ~~2020 decreased $3.7~~2021 increased $4.6 million, or ~~15%~~22%, compared to the same period in ~~2019~~2020, primarily driven by ~~lower~~higher Total other income, ~~lower~~ Wealth ~~management~~Management and trust fees, and Gain on sale of loans, net, partially offset by lower Investment management fees. ~~The decrease~~

•Total other income for the three months ended March 31, 2021 increased $4.8 million, compared to the same period in ~~Wealth management~~2020, driven primarily by a gain related to the revaluation of a receivable from the divestiture of former affiliate, BOS, and ~~trust fees and Investment management fees was driven by~~ the impact of ~~lower AUM.~~mark-to-market adjustments on derivatives and deferred compensation securities.

•Wealth management and trust fees for the three months ended March 31, ~~2020 decreased $0.7~~2021 increased $0.8 million, or 4%, compared to the same period in ~~2019, while Investment management fees decreased $0.7 million,~~2020, driven primarily by higher AUM. Wealth Management and Trust AUM was $17.0 billion at March 31, 2021, an increase of $3.5 billion, or ~~27%~~26%, compared to the same period in ~~2019.~~2020. The ~~decreases were primarily driven by the impact of lower AUM.~~

•~~Total~~increase in AUM ~~managed or advised by the Company was $14.5 billion at March 31, 2020, a decrease of $1.6 billion, or 10%, compared to March 31, 2019. The decrease~~ was primarily driven by ~~the impact of negative~~favorable market returns of ~~$1.1~~$3.6 billion, ~~and~~partially offset by net outflows of ~~$0.5~~$0.1 billion for the twelve months ended March 31, ~~2020.~~2021.

•~~Total other income~~Gain on sale of loans, net, for the three months ended March 31, ~~2020 decreased $2.3~~2021 increased $0.6 million, compared to the same period in ~~2019~~2020, primarily driven by increased volume in the ~~impact~~sale of ~~unfavorable mark-to-market adjustments~~secondary loans.

•Investment management fees for the three months ended March 31, 2021 decreased $1.4 million, or 75%, compared to the same period in 2020, driven primarily by lower AUM at DGHM. DGHM AUM was $0.2 billion at March 31, 2021, a decrease of $0.8 ~~million~~billion, or 81%, compared to the same period in 2020. The decrease in AUM was primarily driven by net outflows of $1.2 billion, partially offset by favorable market returns of $0.3 billion for ~~derivatives and $0.8 million for deferred compensation securities in~~ the ~~first quarter of 2020.~~twelve months ended March 31, 2021.

Operating ~~Expense~~expense


		Three months ended March 31,						$ Change			% Change	Three months ended March 31,				$ Change				% Change
		2020		2019								2021		2020
		(In thousands)																		(In thousands, except percentages)
Salaries and employee benefits	Salaries and employee benefits	$	35,096	$	35,726	$	(630)	(2)	%	Salaries and employee benefits		$	40,904	$	35,096			$	5,808			17	%
Occupancy and equipment	Occupancy and equipment	7,646		8,348		(702)		(8)	%	Occupancy and equipment		8,205		7,646		559				7	%
Information systems	Information systems	6,725		5,860		865		15	%	Information systems		9,719		6,725		2,994				45	%
Professional services	Professional services	3,601		3,560		41		1	%	Professional services		3,302		3,601		(299)				(8)	%
Merger costs										Merger costs		10,665		—		10,665				nm
Marketing and business development	Marketing and business development	1,890		1,085		805		74	%	Marketing and business development		624		1,890		(1,266)				(67)	%
Amortization of intangibles	Amortization of intangibles	715		672		43		6	%	Amortization of intangibles		667		715		(48)				(7)	%

FDIC insurance	FDIC insurance	—		660		(660)		(100)	%	FDIC insurance		967		—		967				nm
Restructuring		—		1,646		(1,646)		(100)	%

Other	Other	5,235		2,996		2,239		75	%	Other		870		5,235		(4,365)				(83)	%
Total operating expense	Total operating expense	$	60,908	$	60,553	$	355	1	%	Total operating expense		$	75,923	$	60,908	$	15,015			25	%

_____________________

nm = not meaningful

Total operating expense for the three months ended March 31, ~~2020~~2021 increased ~~$0.4~~$15.0 million, or 1%25%, to ~~$60.9~~$75.9 million, compared to the same period in ~~2019. The increase was primarily due~~2020, driven by increases in Merger costs expense related to ~~an increase in Other~~the proposed merger with SVB, Salaries and employee benefits expense, Information systems expense, and ~~Marketing and business development~~FDIC insurance expense, partially offset by ~~a decrease~~decreases in ~~Restructuring expense, Occupancy and equipment expense, FDIC insurance~~Other expense and Marketing and business development.

•Merger costs expense for the three months ended March 31, 2021 was $10.7 million, and consisted primarily of legal and advisory fees related to the proposed merger with SVB that was announced in the first quarter of 2021.

•Salaries and employee benefits ~~expense.~~

•~~Other~~ expense increased ~~$2.2~~$5.8 million, or ~~75%~~17%, for the three months ended March 31, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The increase was primarily driven by increased variable compensation, the ~~reserve for unfunded loan commitments expense of $1.8 million in the first quarter of 2020,~~mark-to-market adjustment on deferred compensation securities, vacation accruals, and ~~an increase in non-service pension costs.~~severance.

•Information systems expense increased ~~$0.9~~$3.0 million, or ~~15%~~45%, for the three months ended March 31, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The increase was primarily driven by ~~new~~ information technology initiatives placed into service ~~during~~to support the ~~fourth quarter of 2019.~~Company's strategic objectives.

•~~Marketing and business development~~FDIC insurance expense increased ~~$0.8~~$1.0 million ~~or 74%,~~ for the three months ended March 31, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The increase ~~was primarily driven by new advertising campaigns and timing of spend.~~

•Restructuring expense decreased for the three months ended March 31, 2020, compared to the same period of 2019. In the first quarter of 2019, there was a restructuring expense of $1.6 million related to executive departures.

•Occupancy and equipment expense decreased $0.7 million, or 8%, for the three months ended March 31, 2020, compared to the same period in 2019. The decrease was primarily driven by a decrease in depreciation expense on leasehold improvements and a decrease in rent expense due to lease expirations.

•~~FDIC insurance decreased for the three months ended March 31, 2020, compared to the same period in 2019. The decrease~~ was driven by an FDIC insurance assessment credit received in the ~~first~~third quarter of ~~2020. In January~~ 2019, ~~the Bank received notification from the FDIC that it was eligible for small bank assessment credits of $2.0 million because~~as the FDIC's Deposit Insurance Fund reserve ratio exceeded the target level. The credit was utilized in full ~~$2.0 million~~by the end of ~~credits have been utilized as~~the first quarter of ~~March 31, 2020.~~2020, and the Bank has resumed paying FDIC insurance.

•~~Salaries and employee benefits~~Other expense decreased ~~$0.6~~$4.4 million, or 2%83%, for the three months ended March 31, ~~2020,~~2021, compared to the same period in ~~2019.~~2020. The decrease was primarily driven by ~~an unfavorable adjustment on deferred compensation securities held~~a decrease to the reserve for unfunded loan commitments of $3.8 million for the three months ended March 31, 2021, compared to the same period in 2020. The change in the ~~rabbi trust,~~reserve was driven by the ~~effect of accrual adjustments,~~latest current reasonable and ~~lower medical insurance premiums, partially offset by higher salary expense~~supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the ~~first quarter~~weighting of ~~2020.~~the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts.

Income ~~Tax Expense.~~tax expense. Income tax expense for the three months ended March 31, ~~2020~~2021 was ~~$0.1~~$6.1 million, compared to ~~$4.9~~$0.1 million for the same period in ~~2019.~~2020. The effective tax rate for the three months ended March 31, ~~2020~~2021 was ~~11.2%~~36.3%, compared to an effective tax rate of ~~20.1%~~11.2% for the same period of ~~2019.~~2020. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to

certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 9: Income Taxes” for further detail.

Financial Condition

Condensed Consolidated Balance Sheets and Discussion


		March 31, 2020		December 31, 2019		Increase/ (decrease)		% Change			March 31, 2021		December 31, 2020		$ Change		% Change
		(In thousands)															(In thousands, except percentages)
Assets:	Assets:									Assets:
Total cash and investments	Total cash and investments	$	1,168,628	$	1,376,863	$	(208,235)	(15)	%	Total cash and investments	$	2,829,653	$	2,404,619	$	425,034	18	%
Loans held for sale	Loans held for sale	7,671		7,386		285		4	%	Loans held for sale	8,434		17,421		(8,987)		(52)	%
Total loans	Total loans	7,043,338		6,976,704		66,634		1	%	Total loans	7,216,325		7,104,309		112,016		2	%
Less: Allowance for loan losses	Less: Allowance for loan losses	68,211		71,982		(3,771)		(5)	%	Less: Allowance for loan losses	74,010		81,238		(7,228)		(9)	%
Net loans	Net loans	6,975,127		6,904,722		70,405		1	%	Net loans	7,142,315		7,023,071		119,244		2	%
Goodwill and intangible assets, net	Goodwill and intangible assets, net	67,244		67,959		(715)		(1)	%	Goodwill and intangible assets, net	65,996		66,663		(667)		(1)	%
Right-of-use assets	Right-of-use assets	98,896		102,075		(3,179)		(3)	%	Right-of-use assets	93,224		97,859		(4,635)		(5)	%
Total other assets		428,760		371,496		57,264		15	%
Other assets										Other assets	398,870		439,100		(40,230)		(9)	%
Total assets	Total assets	$	8,746,326	$	8,830,501	$	(84,175)	(1)	%	Total assets	$	10,538,492	$	10,048,733	$	489,759	5	%
Liabilities and Equity:	Liabilities and Equity:									Liabilities and Equity:
Deposits	Deposits	$	6,835,572	$	7,241,476	$	(405,904)	(6)	%	Deposits	$	9,147,618	$	8,595,366	$	552,252	6	%
Total borrowings	Total borrowings	787,936		510,590		277,346		54	%	Total borrowings	267,644		274,494		(6,850)		(2)	%
Lease liabilities	Lease liabilities	113,574		117,214		(3,640)		(3)	%	Lease liabilities	107,143		112,339		(5,196)		(5)	%
Total other liabilities		180,452		140,820		39,632		28	%
Other liabilities										Other liabilities	157,664		198,526		(40,862)		(21)	%
Total liabilities	Total liabilities	7,917,534		8,010,100		(92,566)		(1)	%	Total liabilities	9,680,069		9,180,725		499,344		5	%
Redeemable noncontrolling interests (“RNCI”)		—		1,383		(1,383)		(100)	%

Total shareholders’ equity	Total shareholders’ equity	828,792		819,018		9,774		1	%	Total shareholders’ equity	858,423		868,008		(9,585)		(1)	%
Total liabilities, RNCI and shareholders’ equity		$	8,746,326	$	8,830,501	$	(84,175)	(1)	%
Total liabilities and shareholders’ equity										Total liabilities and shareholders’ equity	$	10,538,492	$	10,048,733	$	489,759	5	%

Total assets. Total assets ~~decreased $84.2~~increased $489.8 million, or 1%5%, to ~~$8.7~~$10.5 billion at March 31, ~~2020~~2021 from ~~$8.8~~$10.0 billion at December 31, ~~2019,~~2020, primarily driven by ~~a decrease~~increases in Total cash and investments ~~partially offset by~~and Net loans due to an increase in ~~Total loans and Total other assets.~~client deposits, which generated additional liquidity.

Total cash and investments. Total cash and investments (consisting of Cash and cash equivalents, Investment securities available-for-sale, Investment securities held-to-maturity, Equity securities at fair value, and Stock in the ~~Federal Home Loan Bank~~FHLB and ~~Federal Reserve Bank) decreased $208.2~~FRB) increased $425.0 million, or ~~15%~~18%, from December 31, ~~2019.~~2020. The ~~decrease~~increase was primarily driven by ~~a decrease~~increases of ~~$230.8~~$334.4 million, or 32%, in Cash and cash equivalents ~~partially offset by an increase of $19.2~~and $94.0 million, or 7%, in Investment securities available-for-sale and Equity securities at fair value. The ~~Company utilized~~increase in Cash and cash ~~and proceeds from maturing investment securities to partially fund loan growth~~equivalents was primarily driven by an increase in deposits as ~~deposits declined over the same period.~~clients maintained additional cash liquidity. Total cash and investments ~~represent 13%~~represents 27% of ~~total~~Total assets at March 31, ~~2020~~2021 and ~~16%~~24% of ~~total~~Total assets at December 31, ~~2019.~~2020.

The majority of the investments held by the Company are held by the Bank. The Bank’s asset-liability management policy requires management to maintain a portfolio of securities which will provide liquidity necessary to facilitate funding of loans, to cover deposit fluctuations, and to mitigate the Bank’s overall balance sheet exposure to interest rate risk, while at the same time earning a satisfactory return on the funds invested. The securities in which the Bank may invest are subject to regulation and are generally limited to securities that are considered “investment grade.”

Investment maturities, redemptions, principal payments, and sales of securities, if any, net of purchases (includes Investment securities available-for-sale, Investment securities held-to-maturity, and Equity securities at fair value), ~~provided $2.1~~used $118.6 million of cash ~~proceeds~~ during the three months ended March 31, ~~2020,~~2021, compared to ~~$35.9~~cash proceeds of $2.1 million in the same period in ~~2019.~~2020. The timing of sales and reinvestments is based on various factors, including management’s evaluation of interest rate trends, credit risk, and the Company’s liquidity. The increase in the cash used during the three months ended March 31, 2021 was driven by the need to invest additional client deposits. The Company’s Investment securities available-for-sale ~~investment~~ portfolio carried a total of ~~$32.2~~$34.1 million of unrealized gains and ~~$0.4~~$14.1 million of unrealized losses at March 31, ~~2020,~~2021, compared to ~~$15.0~~$45.8 million of unrealized gains and ~~$3.6~~$0.6 million of unrealized losses at December 31, ~~2019.~~2020. The decrease in the total net unrealized gains was primarily driven by the increase in interest rates.

No impairment losses were recognized through earnings related to investment securities during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The Company does not consider these investments to be credit impaired as the decline in fair value on investments is primarily attributed to changes in interest rates and not due to credit quality or other risk factors.

Additionally, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company held ~~$45.4~~$31.9 million and ~~$48.2~~$35.2 million, respectively, of Investment securities held-to-maturity at amortized cost. All of the Investment securities held-to-maturity ~~securities held~~ at

March 31, ~~2020~~2021 were mortgage-backed securities guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.

Given the recent strong deposits and excess cash balances, the Company may consider investing these funds in investment securities, thereby earning a better yield and improving overall return on these assets.

See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 4: Investments” for further details of the Company’s investment securities.

Loans held for sale. Loans held for sale at March 31, ~~2020 increased $0.3~~2021 decreased $9.0 million, or 4%52%, to ~~$7.7~~$8.4 million from the balance at December 31, ~~2019.~~2020. The balance of Loans held for sale usually relates to the timing and volume of ~~residential~~Residential loans originated for sale and the ultimate sale transaction, which is typically executed within a short time following the loan origination. From time to time, the Company may also sell loans that have been held in the loan portfolio. The sale of such loans may improve the Bank’s liquidity and capital position or may provide the Bank additional flexibility for more profitable and strategic future lending opportunities.

Goodwill and intangible assets, net. Goodwill and intangible assets, net at March 31, ~~2020~~2021 decreased $0.7 million, or 1%, to ~~$67.2~~$66.0 million from the balance at December 31, ~~2019,~~2020, due to Amortization of ~~intangible assets.~~intangibles. There was no change to Goodwill during the three months ended March 31, ~~2020.~~2021.

Goodwill ~~and indefinite-lived intangible assets are~~is subject to annual impairment tests, or more frequently, if there is indication of impairment, based on guidance in ASC 350, Intangibles-Goodwill and Other. ~~Indefinite-lived~~Long-lived intangible assets such as advisory contracts are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable in accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”).

Management performed its annual goodwill ~~and indefinite-lived intangible asset~~ impairment testing during the fourth quarter of ~~2019. The estimated fair value~~2020. Based on the qualitative assessments, there was no indication of ~~Boston Private Wealth exceeded its carrying value.~~impairment. Management determined that there was not a trigger event from the economic conditions related to the COVID-19 pandemic or any other factors, and will continually monitor for triggering events that would warrant testing. Management will perform the annual goodwill ~~and indefinite-lived intangible asset~~ impairment testing for this year in the fourth quarter of ~~2020. Management determined that there was not a trigger event in~~2021. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 8: Goodwill and Other Intangible Assets” of the ~~first quarter of~~Company’s Annual Report on Form 10-K for the year ended December 31, 2020 ~~from the economic conditions related to the COVID-19 pandemic, and will continually monitor~~ for ~~triggering events that would warrant testing prior to the fourth quarter of 2020.~~additional information

Right-of-use assets. ~~Total right-of-use~~Right-of-use ("ROU") assets at March 31, ~~2020~~2021 decreased ~~$3.2~~$4.6 million, or 3%5%, to ~~$98.9~~$93.2 million, compared to the balance at December 31, ~~2019. Upon adoption of the new lease accounting standard, ASU 2016-02, the Company recognized $108.5 million~~2020 due to amortization of ROU assets onand impairment of lease assets, partially offset by the ~~face~~addition of new or renewed real estate leases and new equipment leases during the ~~Consolidated Balance Sheets as of January 1, 2019.~~three months ended March 31, 2021. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details.

~~Total other~~Other assets. ~~Total other~~Other assets, as presented in the table above, ~~consists~~consist of the following line items from the Consolidated Balance Sheets: Premises and equipment, net; Fees receivable; Accrued interest receivable; Deferred income taxes, net; and other receivables. Other ~~assets. Total other~~ assets at March 31, ~~2020 increased $57.3~~2021 decreased $40.2 million, or ~~15%~~9%, to ~~$428.8~~$398.9 million from the balance at December 31, ~~2019.~~2020. These changes resulted from the following factors:

•Other assets, which consist primarily of bank-owned life insurance, investment in partnerships, prepaid expenses, interest rate derivatives, and other receivables ~~increased $64.0~~decreased $41.6 million, or ~~22%~~12%, to ~~$351.3~~$317.6 million at March 31, ~~2020~~2021 from ~~$287.3~~$359.2 million at December 31, ~~2019.~~2020. The ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in the market value of derivative ~~assets, which was offset by an increase in the market value of derivative liabilities in Other liabilities.~~assets.

•Deferred income taxes, net, ~~decreased $5.8~~increased $4.6 million, or ~~51%~~68%, to ~~$5.6~~$11.4 million at March 31, ~~2020~~2021 from ~~$11.4~~$6.8 million at December 31, ~~2019.~~2020. The ~~decrease~~increase was ~~primarily~~ due to the current year tax effect of other comprehensive ~~income as the tax effect~~loss of ~~the adoption of ASU 2016-13 of $5.5~~$7.2 million, ~~was~~partially offset by ~~the~~deferred tax ~~effect~~expense of ~~the provision expense in the first quarter of 2020.~~$2.6 million.

Deposits. Deposits at March 31, ~~2020 decreased $405.9~~2021 increased $552.3 million, or 6%, compared to the balance at December 31, ~~2019.~~2020. The increase in deposits was primarily due to an increase in deposits from new and existing clients maintaining additional cash liquidity, as well as deposits related to the funding of PPP loans that have not yet been utilized. Average total deposits for the three months ended March 31, ~~2020~~2021 increased 5%24% from the same period in ~~2019~~2020 as shown in the average balance ~~sheet.~~sheet driven by the same factors. For further details, see “Results of Operations” above.

Deposits are the principal source of the Bank’s funds for use in lending, investments, and liquidity. Deposit levels can fluctuate from quarter to quarter as a result of large short-term transactions by commercial clients. Seasonality can also affect the deposit balances.

As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. If, as a result of general economic conditions, market interest rates, competitive pressures, or otherwise, the amount of deposits at the Bank decreases, the Bank may be limited in its ability to grow its loan portfolio or may have to rely more heavily on higher cost borrowings as a source of funds in the future.

5352

The following table presents the composition of the Company’s deposits at March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:


		March 31, 2020						December 31, 2019							March 31, 2021				December 31, 2020
		Balance		as a % of total		Balance		as a % of total			Balance		as a % of total		Balance		as a % of total
		(In thousands)															(In thousands, except percentages)
Demand deposits (non-interest bearing)	Demand deposits (non-interest bearing)	$	2,020,440	29	%	$	1,971,013	27	%	Demand deposits (non-interest bearing)	$	2,651,733	29	%	$	2,481,676	29	%
NOW (1)	NOW (1)	586,718		9	%	578,527		8	%	NOW (1)	819,995		9	%	824,226		10	%
Savings	Savings	66,288		1	%	67,673		1	%	Savings	86,897		1	%	81,466		1	%
Money market (1)	Money market (1)	3,468,701		51	%	3,969,330		55	%	Money market (1)	5,106,911		56	%	4,699,882		55	%
Certificates of deposit less than $100,000 (1)	Certificates of deposit less than $100,000 (1)	161,845		2	%	145,226		2	%	Certificates of deposit less than $100,000 (1)	30,014		—	%	30,269		—	%
Certificates of deposit $100,000 to $250,000	Certificates of deposit $100,000 to $250,000	105,866		2	%	94,095		1	%	Certificates of deposit $100,000 to $250,000	98,614		1	%	102,133		1	%
Certificates of deposit more than $250,000	Certificates of deposit more than $250,000	425,714		6	%	415,612		6	%	Certificates of deposit more than $250,000	353,454		4	%	375,714		4	%
Total deposits	Total deposits	$	6,835,572	100	%	$	7,241,476	100	%	Total deposits	$	9,147,618	100	%	$	8,595,366	100	%

_____________________

(1) Includes brokered deposits of ~~$580.5 million and $422.4~~$250.0 million at March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. Funds in the sweep deposit program between the Bank and Boston Private Wealth are not considered brokered deposits.

Total borrowings. Total borrowings (consisting of Securities sold under agreements to repurchase, ~~Federal funds purchased,~~ FHLB borrowings, and Junior subordinated debentures) at March 31, ~~2020 increased $277.3~~2021 decreased $6.9 million, or ~~54%~~2%, compared to the balance at December 31, ~~2019, primarily~~2020, driven by a decrease in repurchase agreements, partially offset by an increase in FHLB ~~borrowings and federal funds purchased, partially offset by a decrease in repurchase agreements.~~borrowings. The ~~increase in total borrowings was primarily driven by the decrease in total deposits over the same period, as~~need for higher cost borrowings ~~were needed~~has decreased due to ~~fund the balance sheet.~~increased client deposits.

•Repurchase agreements decreased $7.2 million, or 13%, to $46.3 million at March 31, 2021 from $53.5 million at December 31, 2020. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature.

•FHLB borrowings increased ~~$140.4~~$0.4 million ~~or 40%,~~ to ~~$491.3~~$115.0 million at March 31, ~~2020~~2021 from ~~$350.8~~$114.7 million at December 31, ~~2019. The increase was primarily due to asset liability management considerations to fund the balance sheet as deposits decreased over the same period.~~2020. FHLB borrowings are generally used to provide additional funding for loan growth when it is in excess of deposit growth and to manage interest rate risk, but can also be used as an additional source of liquidity for the Bank.

•From time to time, the Bank purchases federal funds from the FHLB and other banking institutions to supplement its liquidity position. At March 31, 2020, the Company had $145.0 million of federal funds purchased outstanding, compared to no federal funds purchased outstanding at December 31, 2019.

•Repurchase agreements decreased $8.1 million, or 15%, to $45.3 million at March 31, 2020 from $53.4 million at December 31, 2019. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature.

Lease liabilities. Lease liabilities decreased ~~$3.6~~$5.2 million, or 3%5%, to ~~$113.6~~$107.1 million at March 31, ~~2020~~2021 compared to the balance at December 31, ~~2019. Upon adoption~~2020 due to lease payments and impairment of leases, partially offset by the addition of new ~~lease accounting standard discussed above,~~or renewed real estate leases and new equipment leases during the ~~Company recognized $124.1 million of lease liabilities on the face of the Consolidated Balance Sheets as of January 1, 2019.~~three months ended March 31, 2021. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details of the Company’s leases.

~~Total other~~Other liabilities. ~~Total other~~Other liabilities, which consist primarily of accrued interest, accrued employee benefits, interest rate derivatives, the unfunded portion of partnership investment commitments, and other accrued expenses, ~~increased $39.6~~decreased $40.9 million, or ~~28%~~ 21%, to ~~$180.5~~$157.7 million at March 31, ~~2020~~2021, compared to the balance at December 31, ~~2019.~~2020. The ~~increase~~decrease was primarily driven by ~~an increase~~a decrease in the market value adjustment on derivative liabilities ~~partially offset~~and a decrease in accrued employee benefits driven by the payment of accrued variable compensation, bonuses, and employee benefits, partially offset by an increase in accrued legal expense driven by Merger costs related to the ~~first quarter of 2020 that had been accrued for at December 31, 2019.~~proposed merger with SVB.

Loan Portfolio and Credit Quality

~~Loans.~~Total loans. Total loans increased ~~$66.6~~$112.0 million, or 1%2%, to ~~$7.0~~$7.2 billion, or ~~81%~~68% of total assets, as of March 31, ~~2020,~~2021, from ~~$7.0~~$7.1 billion, or ~~79%~~71% of total assets, as of December 31, ~~2019.~~2020. The following table presents a summary of the loan portfolio based on the portfolio segment and changes in balances as of the dates indicated:


		March 31, 2020		December 31, 2019		$ Change		% Change			March 31, 2021		December 31, 2020		$ Change		% Change
		(In thousands)													(In thousands, except percentages)
Commercial and industrial	Commercial and industrial	$	670,744	$	694,034	$	(23,290)	(3)	%	Commercial and industrial	$	668,217	$	558,343	$	109,874	20	%
Paycheck Protection Program										Paycheck Protection Program	351,170		312,356		38,814		12	%
Commercial tax-exempt	Commercial tax-exempt	445,319		447,927		(2,608)		(1)	%	Commercial tax-exempt	488,507		442,159		46,348		10	%
Total commercial and industrial		1,116,063		1,141,961		(25,898)		(2)	%

Commercial real estate	Commercial real estate	2,626,299		2,551,274		75,025		3	%	Commercial real estate	2,697,677		2,757,375		(59,698)		(2)	%
Construction and land	Construction and land	238,293		225,983		12,310		5	%	Construction and land	181,482		159,204		22,278		14	%
Residential	Residential	2,841,926		2,839,155		2,771		—	%	Residential	2,632,554		2,677,464		(44,910)		(2)	%
Home equity	Home equity	89,350		83,657		5,693		7	%	Home equity	71,752		77,364		(5,612)		(7)	%
Consumer and other	Consumer and other	131,407		134,674		(3,267)		(2)	%	Consumer and other	124,966		120,044		4,922		4	%
Total loans	Total loans	$	7,043,338	$	6,976,704	$	66,634	1	%	Total loans	$	7,216,325	$	7,104,309	$	112,016	2	%

The Bank specializes in lending to individuals, real estate investors, and middle market businesses, including corporations, partnerships, associations and nonprofit organizations. Loans made by the Bank to individuals may include

residential mortgage loans and mortgage loans on investment or vacation properties, unsecured and secured personal lines of credit, home equity loans, and overdraft protection. Loans made by the Bank to businesses include commercial and mortgage loans, revolving lines of credit, working capital loans, equipment financing, community lending programs, and construction and land loans. The types and sizes of loans the Bank originates are limited by regulatory requirements.

Beginning in the second quarter of 2020, the Company added a segment for PPP loans originated. For the periods ended March 31, 2021 and December 31, 2020, there were $351.2 million and $312.4 million of PPP loans, respectively.

The Bank’s loans are affected by the economic and real estate markets in which they are located. Generally, commercial real estate, construction, and land loans are affected more than residential loans in an economic downturn. The ability to grow the loan portfolio is traditionally partially related to the Bank's ability to increase deposit levels. If, as a result of general economic conditions, market interest rates, competitive pressures, or otherwise, deposit levels at the Bank decrease relative to its overall banking operations, the Bank may be limited in its ability to grow its loan portfolio or may need to increase higher cost borrowings to fund growth in the loan portfolio.

The Bank’s commercial real estate loan portfolio ~~the largest portfolio segment after residential,~~ includes loans secured by the following types of collateral as of the dates indicated:

March 31, 2020 December 31, 2019
(In thousands)
Multifamily and residential investment $ 903,330 $ 899,583
Retail 632,239 631,796
Office and medical 506,086 487,133
Manufacturing, industrial, and warehouse 253,106 223,913
Hospitality 144,384 145,195
Other 187,154 163,654
Total commercial real estate loans $ 2,626,299 $ 2,551,274


	March 31, 2021		December 31, 2020
	(In thousands)
Multifamily and residential investment	$	982,493	$	982,128
Retail	584,566		593,440
Office and medical	566,262		562,805
Manufacturing, industrial, and warehouse	257,360		261,083
Hospitality	172,849		173,741
Other	134,147		184,178
Total commercial real estate loans	$	2,697,677	$	2,757,375

Geographic concentration. The following tables present the Company’s outstanding loan balance concentrations as of the dates indicated based on the location of the regional offices to which they are attributed.


		As of March 31, 2020																																As of March 31, 2021
		New England						Northern California						Southern California								Total						New England				Northern California				Southern California	Total
		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent			Amount		Percent			Amount		Percent		Amount		Percent		Amount		Percent
		(In thousands)																																(In thousands, except percentages)
Commercial and industrial	Commercial and industrial	$	504,592	7	%	$	61,243	1	%	$	104,909	2	%	$	670,744	10	%	Commercial and industrial	$	555,336	7		%	$	37,256	1	%	$	75,625	1	%	$	668,217	9	%
Paycheck Protection Program																		Paycheck Protection Program	174,443		2		%	121,607		2	%	55,120		1	%	351,170		5	%
Commercial tax-exempt	Commercial tax-exempt	335,166		5	%	99,305		1	%	10,848		—	%	445,319		6	%	Commercial tax-exempt	322,101		5		%	156,245		2	%	10,161		—	%	488,507		7	%
Commercial real estate	Commercial real estate	1,046,453		15	%	838,735		12	%	741,111		10	%	2,626,299		37	%	Commercial real estate	1,088,660		15		%	876,019		12	%	732,998		10	%	2,697,677		37	%
Construction and land	Construction and land	156,696		2	%	34,647		—	%	46,950		1	%	238,293		3	%	Construction and land	103,068		1		%	34,373		1	%	44,041		1	%	181,482		3	%
Residential	Residential	1,521,187		22	%	561,093		8	%	759,646		11	%	2,841,926		40	%	Residential	1,360,321		19		%	516,301		7	%	755,932		10	%	2,632,554		36	%
Home equity	Home equity	57,747		1	%	19,103		—	%	12,500		—	%	89,350		1	%	Home equity	45,142		1		%	16,230		—	%	10,380		—	%	71,752		1	%
Consumer and other	Consumer and other	103,118		2	%	4,542		—	%	23,747		—	%	131,407		2	%	Consumer and other	86,686		1		%	1,781		—	%	36,499		1	%	124,966		2	%
Total loans (1)	Total loans (1)	$	3,724,959	54	%	$	1,618,668	22	%	$	1,699,711	24	%	$	7,043,338	100	%	Total loans (1)	$	3,735,757	51		%	$	1,759,812	25	%	$	1,720,756	24	%	$	7,216,325	100	%


		As of December 31, 2019																																As of December 31, 2020
		New England						Northern California						Southern California								Total						New England				Northern California				Southern California	Total
		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent			Amount		Percent			Amount		Percent		Amount		Percent		Amount		Percent
		(In thousands)																																(In thousands, except percentages)
Commercial and industrial	Commercial and industrial	$	558,701	8	%	$	46,330	1	%	$	89,003	1	%	$	694,034	10	%	Commercial and industrial	$	437,235	6		%	$	38,650	1	%	$	82,458	1	%	$	558,343	8	%
Paycheck Protection Program																		Paycheck Protection Program	162,373		2		%	101,149		1	%	48,834		1	%	312,356		4	%
Commercial tax-exempt	Commercial tax-exempt	338,737		5	%	98,266		1	%	10,924		—	%	447,927		6	%	Commercial tax-exempt	286,549		4		%	145,014		2	%	10,596		—	%	442,159		6	%
Commercial real estate	Commercial real estate	1,027,133		15	%	769,777		11	%	754,364		11	%	2,551,274		37	%	Commercial real estate	1,124,232		16		%	904,174		13	%	728,969		10	%	2,757,375		39	%
Construction and land	Construction and land	152,100		2	%	31,484		—	%	42,399		1	%	225,983		3	%	Construction and land	91,765		1		%	27,775		—	%	39,664		1	%	159,204		2	%
Residential	Residential	1,540,592		22	%	558,307		8	%	740,256		11	%	2,839,155		41	%	Residential	1,357,843		19		%	539,608		8	%	780,013		11	%	2,677,464		38	%
Home equity	Home equity	55,226		1	%	17,357		—	%	11,074		—	%	83,657		1	%	Home equity	51,070		1		%	16,292		—	%	10,002		—	%	77,364		1	%
Consumer and other	Consumer and other	104,258		2	%	11,265		—	%	19,151		—	%	134,674		2	%	Consumer and other	82,858		1		%	4,020		—	%	33,166		1	%	120,044		2	%
Total loans (1)	Total loans (1)	$	3,776,747	55	%	$	1,532,786	21	%	$	1,667,171	24	%	$	6,976,704	100	%	Total loans (1)	$	3,593,925	50		%	$	1,776,682	25	%	$	1,733,702	25	%	$	7,104,309	100	%

________________________

(1)Regional percentage totals may not foot due to rounding.

Allowance for loan losses. The ~~allowance~~Allowance for loan losses is reported as a reduction of outstanding loan balances and totaled ~~$68.2~~$74.0 million and ~~$72.0~~$81.2 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

The ~~allowance~~Allowance for loan losses decreased ~~$3.8~~$7.2 million to ~~$68.2 million, or 0.97% of total loans, as of March 31, 2020 from $72.0~~$74.0 million, or 1.03% of total loans, as of March 31, 2021 from $81.2 million, or 1.14% of total loans, as of December 31, ~~2019.~~2020. The ~~decrease was a result of the adoption of ASU 2016-13 on January 1, 2020, when the~~ Company recognized a ~~decrease in~~Provision credit of $7.0 million during the ~~allowance for loan losses of $20.4 million, partially offset by a provision for loan loss expense of $17.0 million in the first quarter of 2020.~~

three months ended March 31, 2021. The decrease in the ~~allowance~~Allowance for loan losses ~~of $20.4 million on adoption~~for the three months ended March 31, 2021 was primarily driven ~~primarily~~ by the portfolio composition including the short-term nature of Commercial real estate loans, estimated prepayments, a change to the loan portfolio segmentation in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics, and thelatest current reasonable and supportable economic forecasts, atwhich indicated improving economic conditions from the ~~time of adoption. The increase~~prior quarter, as well as a change in the ~~allowance~~weighting of the forecast scenarios used to account for ~~loan losses of $17.0 million~~risks and assumptions not incorporated in the ~~first quarter of 2020 was driven primarily~~forecasts. These improvements were partially offset by the ~~changes in economic forecasts late~~net impact of the change in the first quarter of 2020 to reflect deteriorating economic conditions related to the COVID-19 pandemic. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan Losses” for an analysiscomposition and volume of the ~~Company’s allowance for~~ loan ~~losses.~~

Prior to the adoption of ASU 2016-13, the Company’s allowance for loan losses was comprised of three primary components (general reserves, allocated reserves on non-impaired special mention and substandard loans, and allocated reserves on impaired loans). Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for details on that methodology.

portfolio.

The following table presents a summary of loans ~~charged off,~~charged-off, net of recoveries, by geography for the periods indicated. The geography assigned to the data is based on the location of the regional offices to which the loans are attributed.


		Three months ended March 31,					Three months ended March 31,
		2020		2019			2021		2020
		(In thousands)							(In thousands)
Net loans (charged off)/ recovered:
Net loans (charged-off)/recovered:						Net loans (charged-off)/recovered:
New England	New England	$	15	$	222	New England	$	20	$	15
Northern California	Northern California	122		18		Northern California	9		122
Southern California	Southern California	(485)		(312)		Southern California	(253)		(485)
Total net loans (charged off)/ recovered		$	(348)	$	(72)
Total net loans (charged-off)/recovered						Total net loans (charged-off)/recovered	$	(224)	$	(348)

There were ~~$0.3~~$0.2 million in net ~~charge offs~~charge-offs recorded in the first quarter of ~~2020~~2021 compared to ~~$0.1~~$0.3 million of net charge-offs for the same period of ~~2019.~~2020.

Nonperforming assets. The Company’s nonperforming assets include nonaccrual loans and OREO, if any. OREO consists of real estate acquired through foreclosure proceedings and real estate acquired through acceptance of deeds in lieu of foreclosure. As of March 31, ~~2020,~~2021, nonperforming assets totaled ~~$24.3~~$25.8 million, or ~~0.28%~~0.24% of total assets, an increase of ~~$8.2~~$1.9 million, or ~~51%~~8%, compared to ~~$16.1~~$23.9 million, or ~~0.18%~~0.24% of total assets, as of December 31, ~~2019.~~2020.

The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest in accordance with the contractual terms of the loan agreement is in doubt. Despite a loan having a current payment status, if the Bank has reason to believe it may not collect all principal and interest on the loan in accordance with the related contractual terms, the Bank will generally discontinue the accrual of interest income and will apply any future interest payments received to principal. Of the ~~$24.3~~$25.8 million of loans on nonaccrual status as of March 31, ~~2020, $15.0~~2021, $11.9 million, or ~~62%~~46%, had a current payment status, ~~$2.0~~$3.6 million, or 8%14%, were 30-89 days past due, and ~~$7.3~~$10.3 million, or ~~30%~~40%, were 90 days or more past due. Of the ~~$16.1~~$23.9 million of loans on nonaccrual status as of December 31, ~~2019, $9.8~~2020, $12.4 million, or ~~61%~~52%, had a current payment status, ~~$1.2~~$1.6 million, or 7%, were 30-89 days past due, and ~~$5.1~~$9.9 million, or ~~32%~~41%, were 90 days or more past due.

The Bank continues to evaluate the underlying collateral of each nonperforming loan and pursue the collection of interest and principal. Where appropriate, the Bank obtains updated appraisals on collateral. Reductions in fair values of the collateral for nonaccrual loans, if they are collateral dependent, could result in additional future provision for loan losses depending on the timing and severity of the decline. See Part I. Item 1. “Financial Statements and Supplementary Data - Note 6: Loans Portfolio and Credit Quality” for further information on nonperforming loans.

Delinquencies. The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loans 30-89 days past due decreased ~~$11.0~~$12.7 million, or ~~43%~~64%, to ~~$14.9~~$7.2 million as of March 31, ~~2020~~2021 from ~~$25.9~~$19.9 million as of December 31, ~~2019.~~2020. Loan delinquencies can be attributed to many factors, such as continuing weakness in, or deteriorating, economic conditions in the region in which the collateral is located, the loss of a tenant or lower lease rates for commercial borrowers, or the loss of income for consumers and the resulting liquidity impacts on the borrowers. The economic conditions created by the COVID-19 pandemic represent an example of an event that could cause an increase in delinquencies in future quarters. The Bank has instituted programs such as ~~deferments, forbearances~~deferment programs, forbearance programs, and the commercial real estate second ~~mortgages~~mortgage program to help borrowers who have been impacted by the COVID-19 pandemic. Further deterioration in the credit condition of these delinquent loans could lead to the loans going to nonaccrual status and/or being downgraded. Downgrades would generally result in additional ~~charge offs~~charge-offs or ~~provision~~provisions for loan losses. Past due loans may be included with accruing substandard loans.

In certain instances, although very infrequently, loans that have become 90 days or more past due may remain on accrual status if the value of the collateral securing the loan is sufficient to cover principal and interest and the loan is in the process of collection. There were no loans 90 days or more past due, but still accruing, as of both March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Impaired ~~Loans.~~loans. Impaired loans individually evaluated for impairment in the ~~allowance~~Allowance for loan losses totaled ~~$25.6~~$25.3 million as of March 31, ~~2020,~~2021, an increase of ~~$6.4~~$0.2 million, or ~~34%~~.01%, compared to ~~$19.2~~$25.1 million as of December 31, ~~2019.~~2020. As of March 31, ~~2020, $1.1~~2021, $6.5 million of the individually evaluated impaired loans had ~~$0.3~~$0.7 million in specific reserve allocations. The remaining ~~$24.5~~$18.8 million of individually evaluated impaired loans did not have specific reserve allocations due to the adequacy of collateral, prior charge-offs taken, interest collected and applied to principal, or a combination of these items. As of December 31, ~~2019, $1.1~~2020, $2.7 million of individually evaluated impaired loans had ~~$0.2~~$0.4 million in specific reserve allocations, and the remaining ~~$18.1~~$22.4 million of individually evaluated impaired loans did not have specific reserve allocations.

The Bank may, under certain circumstances, restructure loans as a concession to borrowers who are experiencing financial difficulty. Such loans are classified as TDRs and are included in impaired loans. TDRs typically result from the Bank’s loss mitigation activities which, among other things, could include rate reductions, payment extensions, and/or principal

forgiveness. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, TDRs totaled ~~$14.9~~$14.0 million and ~~$12.6~~$13.9 million, respectively. As of March 31, ~~2020,~~2021, $7.1 million of the ~~$14.9~~$14.0 million in TDRs were on accrual status. As of December 31, ~~2019, $7.1~~2020, $7.2 million of the ~~$12.6~~$13.9 million in TDRs were on accrual status.

In ~~the first quarter of 2020, in~~ response to the COVID-19 pandemic, the ~~Company~~Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 residential and home equity loans totaling approximately $220.0 million have been processed under the program. As of March 31, ~~2020, 10~~2021, approximately 47 loans totaling approximately ~~$5.0~~$20.0 million ~~were~~remain in deferral under the program. Approximately 13 loans totaling $1.5 million are delinquent on payment terms as of March 31, 2021 after the deferral expired, primarily First Time Home Buyer loans as defined by the U.S. Department of Housing and Urban Development, while the remainder have expired with the loans returning to payment.

Also in response to the COVID-19 pandemic, the Bank initiated a program offering qualified Commercial and industrial borrowers principal payment deferral for six months, with the deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under ~~this~~the program. As of March 31, 2021, approximately four loans totaling approximately $5.7 million remain in deferral under the program, ~~though~~while the ~~Company expects increased volume in~~remainder have expired with the ~~second quarter~~loans returning to payment. Of the loans that came off deferral, no loans are delinquent on payment terms as of ~~2020.~~March 31, 2021.

Potential ~~Problem Loans.~~problem loans. Loans that evidence weakness or potential weakness related to repayment history, the borrower’s financial condition, or other factors are reviewed by the Bank’s management to determine if the loan should be adversely classified. Delinquent loans may or may not be adversely classified depending upon management’s judgment with respect to each individual loan. The Bank classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators. Potential problem loans consist of accruing classified loans 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 loan repayment terms and which may result in classification of such loans as nonperforming at some time in the future. Management cannot predict the extent to which economic conditions may worsen or other factors which may impact borrowers and the potential problem loans. Triggering events for loan downgrades include updated appraisal information, inability of borrowers to cover debt service payments, loss of tenants, or notification by the tenant of non-renewal of lease or inability of tenants to pay rent, inability of borrowers to sell completed construction projects, and the inability of borrowers to sell properties. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, be restructured, or require increased allowance coverage and provision for loan losses.

As of March 31, ~~2020,~~2021, the Bank has identified ~~$87.9~~$136.1 million in potential problem loans, an increase of ~~$30.0~~$29.2 million, or ~~52%~~27%, compared to ~~$57.9~~$106.9 million as of December 31, ~~2019. One New England commercial and industrial loan for $25.0 million accounted for most of this increase.~~2020. Numerous factors impact the level of potential problem loans, including economic conditions and real estate values. These factors affect the borrower’s liquidity and, in some cases, the borrower’s ability to comply with loan covenants, such as debt service coverage. For instance, when there is a loss of a major tenant in a commercial real estate building, the appraised value of the building generally declines. Loans may be downgraded when this occurs as a result of the additional risk to the borrower in obtaining a new tenant in a timely manner and negotiating a lease with similar or better terms than the previous tenant. In many cases, these loans are still current and paying as agreed, although future performance may be impacted.

The following table presents a roll-forward of nonaccrual loans for the three months ended March 31, 2021 and 2020:


	As of and for the three months ended March 31,
		2021		2020
		(In thousands)
Nonaccrual loans, beginning of period		$	23,851	$	16,103
Transfers in to nonaccrual status		2,515		11,336


Transfers out to accrual status		(203)		(2,230)
Charge-offs (1)		(218)		(528)
Paid off/paid down		(181)		(367)
Nonaccrual loans, end of period		$	25,764	$	24,314

___________________

(1) During the second quarter of 2020, one nonaccrual loan was charged-off and ~~2019:~~

As of and for the three months ended March 31,
2020 2019
(In thousands)
Nonaccrual loans, beginning of period $ 16,103 $ 14,057
Transfers in to nonaccrual status 11,336 347
Transfers out to accrual status (2,230) (33)
Charge-offs (528) (564)
Paid off/ paid down (367) (1,788)
Nonaccrual loans, end of period $ 24,314 $ 12,019

transferred to OREO with a value of zero. As of March 31, 2021, it represents the only asset in OREO.

The following table presents a summary of credit quality by geography, based on the location of the regional offices:


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Nonaccrual loans:	Nonaccrual loans:					Nonaccrual loans:
New England	New England	$	11,965	$	9,764	New England	$	14,197	$	12,643
Northern California	Northern California	6,575		319		Northern California	6,791		6,331
Southern California	Southern California	5,774		6,020		Southern California	4,776		4,877
Total nonaccrual loans	Total nonaccrual loans	$	24,314	$	16,103	Total nonaccrual loans	$	25,764	$	23,851
Loans 30-89 days past due and accruing:	Loans 30-89 days past due and accruing:					Loans 30-89 days past due and accruing:
New England	New England	$	8,955	$	20,507	New England	$	6,647	$	9,248
Northern California	Northern California	2,347		2,593		Northern California	253		3,892
Southern California	Southern California	3,550		2,845		Southern California	349		6,722
Total loans 30-89 days past due	Total loans 30-89 days past due	$	14,852	$	25,945	Total loans 30-89 days past due	$	7,249	$	19,862
Accruing classified loans: (1)	Accruing classified loans: (1)					Accruing classified loans: (1)
New England	New England	$	50,483	$	20,428	New England	$	106,375	$	89,582
Northern California	Northern California	24,843		24,946		Northern California	13,147		340
Southern California	Southern California	12,622		12,548		Southern California	16,608		16,961
Total accruing classified loans	Total accruing classified loans	$	87,948	$	57,922	Total accruing classified loans	$	136,130	$	106,883

___________________

(1) Accruing Classified may include both Substandard and Doubtful classifications.

The following table presents a summary of credit quality by loan type. The loan type assigned to the credit quality data is based on the purpose of the loan.


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Nonaccrual loans:	Nonaccrual loans:					Nonaccrual loans:
Commercial and industrial	Commercial and industrial	$	1,371	$	582	Commercial and industrial	$	4,766	$	4,394
Paycheck Protection Program						Paycheck Protection Program	—		—
Commercial tax-exempt	Commercial tax-exempt	—		—		Commercial tax-exempt	—		—
Commercial real estate	Commercial real estate	5,392		—		Commercial real estate	5,859		5,261
Construction and land	Construction and land	—		—		Construction and land	—		—
Residential	Residential	16,074		13,993		Residential	14,475		13,780
Home equity	Home equity	1,476		1,525		Home equity	651		415
Consumer and other	Consumer and other	1		3		Consumer and other	13		1
Total nonaccrual loans	Total nonaccrual loans	$	24,314	$	16,103	Total nonaccrual loans	$	25,764	$	23,851
Loans 30-89 days past due and accruing:	Loans 30-89 days past due and accruing:					Loans 30-89 days past due and accruing:
Commercial and industrial	Commercial and industrial	$	1,493	$	828	Commercial and industrial	$	2,914	$	2,359
Paycheck Protection Program						Paycheck Protection Program	—		—
Commercial tax-exempt	Commercial tax-exempt	—		—		Commercial tax-exempt	—		—
Commercial real estate		—		1,420
Construction and land		—		—
Residential		12,967		20,171
Home equity		319		369
Consumer and other		73		3,157
Total loans 30-89 days past due		$	14,852	$	25,945
Accruing classified loans: (1)
Commercial and industrial		$	50,408	$	24,987
Commercial tax-exempt		8,544		4,052
Commercial real estate		23,692		23,558
Construction and land		—		—
Residential		4,241		4,253
Home equity		1,063		1,072
Consumer and other		—		—
Total accruing classified loans		$	87,948	$	57,922


Commercial real estate	—		627
Construction and land	—		—
Residential	4,044		15,498
Home equity	104		1,363
Consumer and other	187		15
Total loans 30-89 days past due	$	7,249	$	19,862
Accruing classified loans: (1)
Commercial and industrial	$	27,403	$	22,955
Paycheck Protection Program	—		—
Commercial tax-exempt	—		4,503
Commercial real estate	105,727		76,169
Construction and land	—		—
Residential	3,000		3,000
Home equity	—		256
Consumer and other	—		—
Total accruing classified loans	$	136,130	$	106,883

___________________

(1) Accruing Classified may include both Substandard and Doubtful classifications.

Liquidity

Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity risk is the risk of potential loss if the Company were unable to meet its funding requirements at a reasonable cost. The Company manages its liquidity based on demand, commitments, specific events and uncertainties to meet current and future financial obligations of a short-term nature. The Company’s objective in managing liquidity is to respond to the needs of depositors and borrowers as well as earnings enhancement opportunities in a changing marketplace.

The following table presents certain liquidity measurements as of the dates indicated:


		March 31, 2020			December 31, 2019			$ Change		% Change			March 31, 2021			December 31, 2020			$ Change		% Change
		(In thousands)																			(In thousands, except percentages)
Cash and cash equivalents	Cash and cash equivalents	$	61,714		$	292,479		$	(230,765)	(79)	%	Cash and cash equivalents	$	1,389,943		$	1,055,588		$	334,355	32	%
Investment securities available-for-sale	Investment securities available-for-sale	993,166			978,284			14,882		2	%	Investment securities available-for-sale	1,339,408			1,243,693			95,715		8	%
Equity securities at fair value	Equity securities at fair value	23,080			18,810			4,270		23	%	Equity securities at fair value	39,708			41,452			(1,744)		(4)	%
Less: Securities pledged against current borrowings and derivatives	Less: Securities pledged against current borrowings and derivatives	(119,528)			(88,444)			(31,084)		35	%	Less: Securities pledged against current borrowings and derivatives	(79,268)			(110,607)			31,339		28	%
Cash and investments	Cash and investments	$	958,432		$	1,201,129		$	(242,697)	(20)	%	Cash and investments	$	2,689,791		$	2,230,126		$	459,665	21	%
As a percent of assets	As a percent of assets	11		%	14		%					As a percent of assets	26		%	22		%

Access to additional FHLB borrowings	Access to additional FHLB borrowings	1,100,533			1,432,603			(332,070)		(23)	%	Access to additional FHLB borrowings	1,541,845			1,443,641			98,204		7	%
Total liquidity	Total liquidity	$	2,058,965		$	2,633,732		$	(574,767)	(22)	%	Total liquidity	$	4,231,636		$	3,673,767		$	557,869	15	%
As a percent of assets	As a percent of assets	24		%	30		%					As a percent of assets	40		%	37		%
As a percent of deposits	As a percent of deposits	30		%	36		%					As a percent of deposits	46		%	43		%

At March 31, ~~2020,~~2021, the Company’s Cash and cash equivalents amounted to ~~$61.7 million.~~$1.4 billion. The Holding Company’s Cash and cash equivalents amounted to ~~$41.8~~$78.3 million at March 31, ~~2020.~~2021. Management believes that the ~~Holding~~ Company ~~and its affiliates, including the Bank, have~~has adequate liquidity to meet ~~their~~its commitments for the foreseeable future.

Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets. At March 31, ~~2020,~~2021, consolidated Cash and cash equivalents, Investment securities available-for-sale and Equity securities at fair value less ~~securities~~Securities pledged against current borrowings and derivatives amounted to ~~$1.0~~$2.7 billion, or ~~11%~~26% of total assets, compared to ~~$1.2~~$2.2 billion, or ~~14%~~22% of total assets, at December 31, ~~2019. Future loan growth may depend upon~~2020. The Bank also has the ~~Company’s~~ ability to ~~grow its core deposit levels. The Bank anticipates funding the PPP loan originations with~~access additional borrowing ~~facilities~~ under the ~~PPPLF.~~PPPLF by pledging funded PPP loans, if needed. In addition, the Company has access to available borrowings through the FHLB totaling ~~$1.1~~$1.5 billion at March 31, ~~2020~~2021 and $1.4 billion at December 31, ~~2019.~~2020. Combined, this liquidity totals ~~$2.1~~$4.2 billion, or ~~24%~~40% of assets and ~~30%~~46% of deposits, as of March 31, ~~2020,~~2021, compared to ~~$2.6~~$3.7 billion, or ~~30%~~37% of assets and ~~36%~~43% of deposits, at December 31, ~~2019.~~2020.

The Bank has various internal policies and guidelines regarding liquidity, both on- and off-balance sheet, loans to deposits ratio, and limits on the use of wholesale funds. These policies and/or guidelines require certain minimum or maximum balances or ratios be maintained at all times. In light of the provisions in the Bank’s internal liquidity policies and guidelines, the Bank will carefully manage the amount and timing of future loan growth along with its relevant liquidity policies and balance sheet guidelines. As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. If, as a result of general economic conditions, market interest rates, competitive pressures, or otherwise, the balance of deposits at the Bank approaches or ~~exceeds~~falls below internal policies and/or guidelines, the Bank may be limited in its ability to grow its loan portfolio, may rely more heavily on higher cost borrowings as a source of funds, or consider loan sales in the future.

Holding Company ~~Liquidity~~liquidity. The Company and noncontrolling interest holders of the Company’s majority-owned affiliate, DGHM, have contingent put options, call options, and mandatory repurchase obligations that would require the Company to purchase (and the noncontrolling interest owners of ~~the majority-owned affiliate~~DGHM to sell) the remaining noncontrolling interest in DGHM at contractually predetermined values as determined by the operating agreement of DGHM. At March 31, ~~2020,~~2021, the estimated maximum redemption value for DGHM related to outstanding put options was zero based on the contractually predetermined calculation in the DGHM operating agreement. These put and call options are discussed in detail in Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Although not a primary source of funds, the Holding Company has generated liquidity from the sale of affiliates in the past. Additional funds were generated at the time of the sale of Anchor Capital Advisors LLC (“Anchor”) which occurred in April 2018 and the sale of ~~Bingham, Osborn & Scarborough, LLC (“BOS”)~~BOS which occurred in December 2018. As part of the

sale agreements for both Anchor and BOS, the Company expects to receive future contingent payments for the remaining nine months of ~~2020~~2021 of approximately ~~$1.7~~$1.8 million and ~~$1.6~~$2.0 million, ~~at March 31, 2020,~~ respectively.

Dividends from the Bank are limited by various regulatory requirements relating to capital adequacy and retained earnings. See Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholders Matters, and Issuers Purchases of Equity Securities” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further details.

The Bank pays dividends to the Holding Company, subject to the approval of the Bank’s Board of Directors, depending on its profitability and asset growth. Dividends from the Bank to the Holding Company are limited to the sum of the Bank’s Net ~~Income~~income during the current calendar year and the retained net income of the prior two calendar years unless approved by regulators. If regulatory agencies were to require banks to increase their capital ratios, or impose other restrictions, it may limit the ability of the Bank to pay dividends to the Holding Company and/or limit the amount that the Bank could grow.

Although the Bank’s capital currently exceeds regulatory requirements for capital, the Holding Company could downstream additional capital to increase the rate that the Bank could grow. Depending upon the amount of capital downstreamed by the Holding Company, the approval of the Holding Company’s Board of Directors may be required prior to the payment, if any.

The Company is required to pay interest quarterly on its junior subordinated debentures. The estimated cash outlay for the remaining nine months of ~~2020~~2021 for the interest payments is approximately ~~$2.1~~$1.5 million based on the debt outstanding at March 31, ~~2020.~~2021. LIBOR is expected to be phased out as an index by the end of 2021, and $103.1 million of the Company's junior subordinated debentures are tied to LIBOR. The Company will need to negotiate an alternative benchmark rate to be used at the time.

The Company presently pays cash dividends on its common stock on a quarterly basis dependent upon a number of factors such as profitability, Holding Company liquidity, and the Company’s capital levels. However, the ultimate declaration of dividends by the Board of Directors of the Company will depend on consideration of, among other things, recent financial trends and internal forecasts, regulatory limitations, alternative uses of capital deployment, general economic conditions, and regulatory changes to capital requirements. Additionally, the Company is required to inform and consult with the Federal Reserve in advance of declaring a dividend that exceeds earnings for the period for which the dividend is being paid.

The Company's $0.12 per share dividend announced on April 29, 2020 for the first quarter of 2020 exceeded the Company's earnings for the quarter. As required, the Company received a non-objection letter from the Federal Reserve Bank of Boston to pay the proposed dividend. Given the current economic conditionsMerger Agreement with SVB further limits and ~~future forecasts,~~restricts the Company’s ~~Board of Directors will evaluate the amount of future~~ability to declare and pay dividends ~~to be declared~~ on ~~a quarter by quarter basis. The Board of Directors could reduce or eliminate quarterly cash dividends based on the current or forecasted conditions if deemed prudent.~~its common stock.

In the third quarter of 2019, the Company's Board of Directors approved, and the Company received regulatory non-objection for, a share repurchase program of up to $20.0 million of the Company's outstanding common shares. As of March 31, 2020, the Company completed its share repurchase program. See Part II. Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for further details.

Bank ~~Liquidity.~~liquidity. The Bank has established various borrowing arrangements to provide additional sources of liquidity and funding. Management believes that the Bank currently has adequate liquidity available to respond to current demands. The Bank is a member of the FHLB of Boston, and as such, has access to short- and long-term borrowings from that institution. The FHLB can change the advance amounts that banks can utilize based on a bank’s current financial condition as obtained from publicly available data such as FDIC Call Reports. Decreases in the amount of FHLB borrowings available to the Bank would lower its liquidity and possibly limit the Bank’s ability to grow in the short-term. In addition, ~~starting~~due to the elevated level of deposits in 2020 and in the ~~second~~first quarter of ~~2020,~~2021, the Bank ~~anticipates borrowing~~did not utilize any borrowings from the PPPLF, ~~set up by~~as originally anticipated. However, the ~~Federal Reserve~~Bank will continue to monitor its level of deposits and may utilize borrowings from the PPPLF in ~~order to fund loans made through the PPP.~~future quarters, if needed. Management believes that the Bank has adequate liquidity to meet its commitments for the foreseeable future.

In addition to the above liquidity, the Bank has access to the FRB discount window facility, which can provide short-term liquidity as “lender of last resort”. The use of non-core funding sources, including brokered deposits and borrowings, by the Bank may be limited by regulatory agencies. Generally, the regulatory agencies prefer that banks rely on core-funding sources for liquidity.

From time to time, the Bank purchases federal funds from the FHLB and other banking institutions to supplement its liquidity position. At March 31, 2021 and December 31, 2020, the Bank had unused federal fund lines of credit totaling ~~$365.0~~$400.0 million ~~compared to $500.0 million at December 31, 2019,~~ with correspondent institutions to provide it with immediate access to overnight borrowings. Certain liquidity sources, such as federal funds lines, may be withdrawn by the correspondent bank at any time. At March 31, 2020, the Bank had $135.0 million of outstanding borrowings under the federal funds lines with these correspondent institutions along with an additional $10.0 million of outstanding borrowings under federal funds lines with the FHLB. At2021 and December 31, ~~2019,~~2020, the Bank did not have any outstanding borrowings under the federal funds lines with these correspondent institutions nor outstanding borrowings under federal funds lines with the FHLB. ~~Certain liquidity sources, such as federal funds lines, may be withdrawn by the correspondent bank at any time especially in the event of financial deterioration of the institution.~~

The Bank has negotiated brokered deposit agreements with several institutions that have nationwide distribution capabilities. The Bank participates in deposit placement services that can be used to provide customers to expanded deposit insurance coverage. At March 31, 2021 and December 31, 2020, the Bank had ~~$580.5~~$250.0 million of brokered deposits outstanding under these ~~agreements, compared to $422.4 million at December 31, 2019.~~agreements. Funds in the sweep deposit program between the Bank and Boston Private Wealth are not considered brokered deposits.

If the Bank is no longer able to utilize the FHLB for borrowing, collateral currently used for FHLB borrowings could be transferred to other facilities such as the FRB’s discount window. In addition, the Bank could increase its usage of brokered deposits. ~~Other~~These other borrowing arrangements may have higher rates than the FHLB would typically charge.

Capital Resources

Total shareholders’ equity at March 31, ~~2020~~2021 was ~~$828.8~~$858.4 million compared to ~~$819.0~~$868.0 million at December 31, ~~2019, an increase~~2020, a decrease of ~~$9.8~~$9.6 million. The ~~increase~~decrease in ~~shareholders’~~shareholders' equity was primarily the result of the ~~impact of the adoption of ASU 2016-13 and the~~ change in ~~accumulated~~Accumulated other comprehensive income ~~partially offset by~~and dividends paid to common shareholders, ~~and~~partially offset by Net income attributable to the ~~repurchase of common shares.~~Company.

Under the Federal Reserve’s capital rules applicable to the Company and the Bank, the Company and the Bank are each required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum total Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0%, and a minimum Tier 1 leverage ratio of 4.0%. Additionally, Federal Reserve rules require the Company and the Bank to each establish a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total risk-weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases.

A Federal Reserve-supervised institution, such as the Bank, is considered “well capitalized” if it (i) has a total capital to risk-weighted assets ratio of 10.0% or greater; (ii) a Tier 1 capital to risk-weighted assets ratio of 8.0% or greater; (iii) a common equity Tier 1 capital ratio to risk-weighted assets of 6.5% or greater; (iv) a Tier 1 leverage ratio of 5.0% or greater; and (iv) is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. The Bank is currently considered “well capitalized” under all regulatory definitions.

The following table presents the Company’s and the Bank’s regulatory capital and related ratios as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. Also presented are the minimum requirements established by the Federal Reserve as of those dates for the Company and the Bank, respectively, to meet applicable capital requirements for the Bank to be considered “well capitalized” under the prompt corrective action provisions of the Federal Deposit Insurance Act. The Federal Reserve and the Massachusetts Division of Banks may impose higher capital ratios than those listed below based upon the results of regulatory exams.

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		Actual						For capital adequacy purposes (at least)					To be well capitalized under prompt corrective action provisions (at least)							Minimum capital ratio with capital conservation buffer (1)	Actual				For capital adequacy purposes (at least)		To be well capitalized under prompt corrective action provisions (at least)	Minimum capital ratio with capital conservation buffer (1)
		Amount		Ratio		Amount		Ratio		Amount		Ratio	Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio	Ratio
		(In thousands)																							(In thousands, except percentages)
As of March 31, 2020
As of March 31, 2021														As of March 31, 2021
Common equity tier 1 risk-based capital	Common equity tier 1 risk-based capital															Common equity tier 1 risk-based capital
Company	Company	$	742,044	11.20	%	$	298,230	4.5	%	n/a		n/a	7.0%	Company	$	782,105	11.43	%	$	307,991	4.5	%	n/a		n/a	7.0%
Boston Private Bank	Boston Private Bank	784,981		11.88		297,357		4.5		$	429,515	6.5%	7.0	Boston Private Bank	799,284		11.71	%	307,041		4.5	%	$	443,504	6.5%	7.0%
Tier 1 risk-based capital	Tier 1 risk-based capital													Tier 1 risk-based capital
Company	Company	842,066		12.71		397,640		6.0		n/a		n/a	8.5	Company	882,127		12.89	%	410,655		6.0	%	n/a		n/a	8.5%
Boston Private Bank	Boston Private Bank	784,981		11.88		396,475		6.0		528,634		8.0	8.5	Boston Private Bank	799,284		11.71	%	409,388		6.0	%	545,851		8.0%	8.5%
Total risk-based capital	Total risk-based capital													Total risk-based capital
Company	Company	914,572		13.80		530,187		8.0		n/a		n/a	10.5	Company	960,609		14.04	%	547,540		8.0	%	n/a		n/a	10.5%
Boston Private Bank	Boston Private Bank	857,487		12.98		528,634		8.0		660,792		10.0	10.5	Boston Private Bank	877,766		12.86	%	545,851		8.0	%	682,314		10.0%	10.5%
Tier 1 leverage capital	Tier 1 leverage capital													Tier 1 leverage capital
Company	Company	842,066		9.69		347,650		4.0		n/a		n/a	4.0	Company	882,127		8.67	%	407,211		4.0	%	n/a		n/a	4.0%
Boston Private Bank	Boston Private Bank	784,981		9.07		346,277		4.0		432,846		5.0	4.0	Boston Private Bank	799,284		7.88	%	405,487		4.0	%	506,859		5.0%	4.0%

As of December 31, 2019
As of December 31, 2020														As of December 31, 2020
Common equity tier 1 risk-based capital	Common equity tier 1 risk-based capital															Common equity tier 1 risk-based capital
Company	Company	$	745,926	11.42	%	$	293,886	4.5	%	n/a		n/a	7.0%	Company	$	773,017	11.53	%	$	301,794	4.5	%	n/a		n/a	7.0%
Boston Private Bank	Boston Private Bank	778,635		11.97		292,717		4.5		$	422,813	6.5%	7.0	Boston Private Bank	788,375		11.79	%	301,003		4.5	%	$	434,782	6.5%	7.0%
Tier 1 risk-based capital	Tier 1 risk-based capital													Tier 1 risk-based capital
Company	Company	846,337		12.96		391,848		6.0		n/a		n/a	8.5	Company	873,039		13.02	%	402,391		6.0	%	n/a		n/a	8.5%
Boston Private Bank	Boston Private Bank	778,635		11.97		390,289		6.0		520,386		8.0	8.5	Boston Private Bank	788,375		11.79	%	401,337		6.0	%	535,116		8.0%	8.5%
Total risk-based capital	Total risk-based capital													Total risk-based capital
Company	Company	919,573		14.08		522,464		8.0		n/a		n/a	10.5	Company	956,919		14.27	%	536,522		8.0	%	n/a		n/a	10.5%
Boston Private Bank	Boston Private Bank	851,733		13.09		520,386		8.0		650,482		10.0	10.5	Boston Private Bank	872,038		13.04	%	535,116		8.0	%	668,896		10.0%	10.5%
Tier 1 leverage capital	Tier 1 leverage capital													Tier 1 leverage capital
Company	Company	846,337		9.77		346,398		4.0		n/a		n/a	4.0	Company	873,039		8.92	%	391,634		4.0	%	n/a		n/a	4.0%
Boston Private Bank	Boston Private Bank	778,635		9.03		344,958		4.0		431,198		5.0	4.0	Boston Private Bank	788,375		8.08	%	390,364		4.0	%	487,955		5.0%	4.0%

____________________

n/a - not applicable

(1) Required capital ratios with the capital conservation buffer added to the minimum risk-based capital ratios.

The Company has sponsored the creation of two statutory trusts for the sole purpose of issuing trust preferred securities and investing the proceeds in junior subordinated debentures of the Company. In accordance with ASC 810-10-55, Consolidation - Overall - Implementation Guidance and Illustrations - Variable Interest Entities, these statutory trusts are not consolidated into the Company’s financial statements; however, the Company reflects the amounts of junior subordinated debentures payable to the preferred stockholders of statutory trusts as debt in its financial statements. As of both March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, all $100.0 million of the net balance of these trust preferred securities qualified as Tier 1 capital.

Recent Accounting Pronouncements

See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for a description of upcoming changes to accounting principles generally accepted in the United States that may materially impact the Company.

6361

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in the Interest Rate Sensitivity and Market Risk as described in Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Sensitivity and Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

As required by Rule 13a-15 under the Exchange Act, the Company has evaluated, with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives.

Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective as of March 31, ~~2020~~2021 in ensuring that material information required to be disclosed by the Company, including its consolidated subsidiaries, was made known to the certifying officers by others within the Company and its consolidated subsidiaries in the reports that it files or submits under the Exchange Act and is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. On a quarterly basis, the Company evaluates ~~the~~its disclosure controls and ~~procedures, and~~procedures; the Company may, from time to time, make changes ~~aimed at enhancing their~~to enhance the effectiveness of its disclosure controls and procedures and to ensure that ~~the Company’s~~its systems evolve with its business.

(b) Change in internal controls over financial reporting.

~~Effective January 1, 2020, the Company adopted the CECL accounting standard ASU 2016-13,~~ ~~Financial Instruments (Topic 326)~~. The Company designed new controls and modified existing controls as part of the adoption. These additional controls over financial reporting included controls over model creation and design, model governance, and assumptions. There ~~were~~have been no ~~other~~ changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, ~~2020~~2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial ~~reporting~~reporting.

6462

PART II. Other Information

Item 1. Legal Proceedings

The Company is involved in various legal proceedings from time to time. In the opinion of management, the final disposition of these proceedings will not have a material adverse effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

~~This section supplements and updates certain of~~Before deciding to invest in us or deciding to maintain or increase your investment, you should carefully consider the ~~information found under~~risks described in Part I,I. Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as filed with the ~~SEC on February 28, 2020 (“Annual Report”), based on information currently known~~SEC. There have been no material changes to ~~us and recent developments~~these risk factors since the ~~date~~filing of the Annual Report filing. The matters discussed below should be read in conjunction with the risks described in Part I. Item 1A. “Risk Factors” of our Annual Report. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the Annual Report. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities, particularly in light of the fast-changing nature of the COVID-19 pandemic, responsive containment measures taken and the related impacts to economic and operating conditions.report.

The COVID-19 pandemic, and the measures taken to control its spread, will continue to adversely impact our employees, customers, business operations and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted.

The COVID-19 pandemic has, and will likely continue to, severely impact the national economy and the regional and local markets in which we operate, lower equity market valuations, create significant volatility and disruption in capital and debt markets, and increase unemployment levels. Our business operations may be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. We are subject to heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements that we have put in place for our employees. Federal Reserve actions to combat the economic contraction caused by the COVID-19 pandemic, including the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect our net interest income and margins, and our profitability. The continued closures of many businesses and the institution of social distancing, shelter in place and stay home orders in the states and communities we serve, have reduced business activity and financial transactions, and may impact the execution of our strategic plan, such as by delaying strategic hiring. It is unclear whether any COVID-19 pandemic-related businesses losses that we or our customers may suffer will be covered by existing insurance policies. Additionally, these shelter in place and stay home orders may hinder our ability to conduct timely property appraisals, which could delay or impact the accuracy of the recognition of credit losses in our loan portfolios. Changes in customer behavior due to worsening business and economic conditions or legislative or regulatory initiatives may impact the demand for our products and services, which could adversely affect our revenue, including due to an increase in the Bank’s provision for loan loss expense. Because of adverse economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold, goodwill, intangible assets, and right-of-use assets, as well as reductions in other comprehensive income. The increase in market volatility and a corresponding increase in trading frequency means that our Wealth Management and Trust business is subject to an increased risk of trading errors, and the risk that any trading errors are of an increased magnitude. While the COVID-19 pandemic negatively impacted our results of operations for the first quarter of 2020, the extent to which the COVID-19 pandemic will continue to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic, as well as further actions we may take as may be required by government authorities or that we determine is in the best interests of our employees and customers. There is no certainty that such measures will be sufficient to mitigate the risks posed by the pandemic.

Our participation in the SBA’s PPP may expose us to reputational harm, increased litigation risk, as well as the risk that the SBA may not fund some or all of the guarantees associated with PPP loans, which could result in these loans being charged off.

We have approved approximately 1,100 loans aggregating approximately $425.0 million through the PPP. Lenders participating in the PPP have faced increased public scrutiny about their loan application process and procedures, and the nature and type of the borrowers receiving PPP loans. We depend on our reputation as a trusted and responsible financial services company to compete effectively in the communities that we serve, and any negative public or customer response to, or any litigation or claims that might arise out of, our participation in the PPP and any other legislative or regulatory initiatives and programs that may be enacted in response to the COVID-19 pandemic, could adversely impact our business. Other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP,

and we may be subject to the same or similar litigation. In addition, if the SBA determines that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~The following table summarizes repurchases~~There were no unregistered sales of equity securities of the ~~Company’s outstanding common shares~~Company in the first quarter of ~~2020.~~

Issuer Purchases of Equity Securities
Period (a) Total number
of shares
purchased (b) Average
price paid
per share (c) Total number
of shares
purchased as
part of publicly
announced plans (d) Maximum
approximate dollar
value of shares that
may yet be purchased
under the plans
January 1 - 31, 2020 — $ — — $ 12,807,043
February 1 - 29, 2020 221,249 10.38 899,414 10,511,555
March 1 - 31, 2020 1,343,811 7.82 2,243,225 —
Total 1,565,060 $ 8.18 2,243,225 $ —

On August 13, 2019, the Company received a notice of non-objection from the Federal Reserve Bank of Boston for a share repurchase program of up to $20.0 million of the Company’s outstanding common shares and the Company’s Board of Directors approved the program, subject to regulatory non-objection, on August 7, 2019. The program was completed in March 2020.2021.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

Exhibit No. Description Incorporated by Reference
Filed or
Furnished
with this
10-Q
Form
SEC Filing
Date
Exhibit
Number
3.1
Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.1
3.2
Form of Non-Qualified Stock Option Agreement for Employees under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.2
3.3
Form of Performance Restricted Stock Unit Award Agreement for Employees under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.3
3.4
Form of Restricted Stock Unit Award Agreement for Employees under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.4
3.5
Form of Non-Qualified Stock Option Agreement for the Chief Executive Officer under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.5
3.6
Form of Performance Restricted Stock Unit Award Agreement for the Chief Executive Officer under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.6
3.7
Form of Restricted Stock Unit Award Agreement for the Chief Executive Officer under the Boston Private Financial Holdings, Inc. 2020 Omnibus Incentive Plan
S-8 4/28/2020 99.7
31.1
Certification of Chief Executive Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934
Filed
31.2
Certification of Chief Financial Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934
Filed
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished
101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document Filed
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed
104 Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101) Filed

Exhibit No.

Description

Incorporated by Reference

Filed or

Furnished

with this

10-Q

Form

SEC Filing

Date

Exhibit

Number

31.1

Certification of Chief Executive Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934

Filed

31.2

Certification of Chief Financial Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934

Filed

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished

101.INS

The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

Filed

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed

104

Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101)

Filed

6863

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

			/s/ ANTHONY DECHELLIS
May ~~8, 2020~~5, 2021			Anthony DeChellis
			Chief Executive Officer, President and Director (Principal Executive Officer)

			/s/ STEVEN M. GAVEN
May ~~8, 2020~~5, 2021			Steven M. Gaven
			Executive Vice President, Chief Financial Officer

6964


	As of March 31, 2019			Fair value measurements at reporting date using:												Gain (losses) from fair value changes
								Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)	Three months ended March 31, 2019
			(In thousands)
Assets:
Impaired loans (1)	$	957		$	—	$	—		$	957		$	372


	As of and for the three months ended March 31, 2019
	Restructured Current Quarter								TDRs that defaulted in the Current Quarter that were restructured in prior twelve months
	# of Loans	Pre- modification recorded investment		Post- modification recorded investment		# of Loans	Post- modification recorded investment
	(In thousands, except number of loans)
Commercial and industrial (1)	1	$	179	$	179	—	$	—
Commercial tax exempt	—	—		—		—	—
Commercial real estate	—	—		—		—	—
Construction and land	—	—		—		—	—
Residential (2)	1	3,000		3,000		—	—
Home equity	—	—		—		—	—
Consumer and other	—	—		—		—	—
Total	2	$	3,179	$	3,179	—	$	—


	Components of Accumulated other comprehensive income/(loss)
	Unrealized gain/(loss) on securities available-for-sale		Unrealized gain/(loss) on cash flow hedges		Unrealized gain/(loss) on other		Accumulated other comprehensive income/(loss)
	(In thousands)
Balance at December 31, 2018	$	(17,556)	$	391	$	(554)	$	(17,719)
Other comprehensive income/(loss) before reclassifications	11,568		(27)		—		11,541
Reclassified from other comprehensive income/(loss)	—		(220)		—		(220)
Other comprehensive income/(loss), net	11,568		(247)		—		11,321

Balance at March 31, 2019	$	(5,988)	$	144	$	(554)	$	(6,398)

Balance at December 31, 2019	$	8,435	$	—	$	(860)	$	7,575
Other comprehensive income/(loss) before reclassifications	14,489		—		—		14,489

Other comprehensive income/(loss), net	14,489		—		—		14,489

Balance at March 31, 2020	$	22,924	$	—	$	(860)	$	22,064


	Issuer Purchases of Equity Securities
Period	(a) Total number of shares purchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans	(d) Maximum approximate dollar value of shares that may yet be purchased under the plans
January 1 - 31, 2020	—	$	—	—	$	12,807,043
February 1 - 29, 2020	221,249	10.38		899,414	10,511,555
March 1 - 31, 2020	1,343,811	7.82		2,243,225	—
Total	1,565,060	$	8.18	2,243,225	$	—