Boston Private Financial (BPFH) 8-K Boston Private Financial Holdings, Inc. Reports Second Quarter 2019 Results

Boston Private Financial Holdings, Inc. Reports Second Quarter 2019 Results

Second Quarter 2019 Highlights include:

• GAAP Net income was $19.4 million, or $0.22 per diluted share

• Return on average common equity was 9.8%

• Return on average tangible common equity was 11.1%

• Average total loans were $7.0 billion, a 4% increase year-over-year

• Average total deposits were $6.6 billion, a 5% increase year-over-year

• Total assets under management/advisory (“AUM”) were $16.2 billion, a decrease of 4% year-over-year

• Total net flows were negative $269 million, of which $127 million were attributable to the Wealth Management & Trust segment and $142 million were attributable to Affiliate Partners

Boston, MA - July 24, 2019 - Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “BPFH”) today reported second quarter 2019 GAAP Net income attributable to the Company of $19.4 million, compared to $19.4 million for the first quarter of 2019 and $6.4 million for the second quarter of 2018. Second quarter 2019 GAAP Diluted earnings per share were $0.22, compared to $0.25 in the first quarter of 2019 and $0.03 in the second quarter of 2018.

Summary Financial Results - Reported
							% Change
($ in millions, except for per share data)	2Q19		1Q19		2Q18		LQ		Y/Y
Net income	$19.4		$19.4		$6.4		—	%	nm
Diluted earnings per share	$0.22		$0.25		$0.03		(12	)%	nm
Non-GAAP Financial Measures:
Pre-tax, pre-provision income	$26.2		$23.0		$25.3		14	%	4	%
Return on average common equity (“ROACE”)	9.8	%	10.3	%	3.0	%
Return on average tangible common equity (“ROATCE”)	11.1	%	11.6	%	3.9	%
nm = not meaningful

The Company's reported financial results increased year-over-year primarily as a result of a $12.7 million income tax expense related to the divestiture of Anchor Capital Advisors LLC in the second quarter of 2018.

In addition to presenting the Company’s results in conformity with GAAP, the Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. For additional information on non-GAAP financial measures, see page 7. A full reconciliation of GAAP to non-GAAP results can be found in the footnotes beginning on page 17.

1

Summary Financial Results - Operating Basis (non-GAAP)
							% Change
($ in millions, except for per share data)	2Q19		1Q191		2Q182		LQ		Y/Y
Net income	$19.4		$20.7		$19.5		(7	)%	(1	)%
Diluted earnings per share	$0.22		$0.27		$0.21		(17	)%	4	%
Pre-tax, pre-provision income	$26.2		$24.7		$25.7		6	%	2	%
Return on average common equity	9.8	%	11.0	%	10.1	%
Return on average tangible common equity	11.1	%	12.4	%	12.2	%
1 1Q19 results adjusted to exclude the net after-tax impact of $1.6 million restructuring expense 2 2Q18 results adjusted to exclude $12.7 million income tax expense related to the divestiture of Anchor and net after-tax impact of $0.4 million information services expense related to efficiency initiatives

"During the first half of 2019, we have been focused on beginning the process of implementing our strategic vision for growth," said Anthony DeChellis, CEO of Boston Private. "Our second quarter results reflect improvement in pre-tax, pre-provision profitability measures as we exercise expense discipline and realize the benefits from efficiency initiatives. Looking ahead, we will continue to improve our efficiency as we transition our company to achieve the growth objectives we discussed during our Investor Day."

Divested Affiliates

The Company completed the sale of Anchor Capital Advisors LLC ("Anchor") and Bingham, Osborn & Scarborough LLC ("BOS") (together, "the Divested Affiliates") during 2018. Financial results from the Divested Affiliates remain consolidated in the Company's financial results through the closing dates of the divestitures. The Anchor divestiture closing date was April 13, 2018, and the BOS divestiture closing date was December 3, 2018.

For presentation purposes, the Divested Affiliates' AUM are excluded from AUM amounts, but are included in the calculation of Core fees and income. The discussion below includes non-GAAP measures that exclude the contributions from these affiliates in order to enhance comparability of trends in the core business.

Net Interest Income and Margin
										% Change
($ in millions)	2Q19			1Q19			2Q18			LQ		Y/Y
Net interest income		$57.5			$58.3			$57.5		(2	)%	—	%
Less: Interest recovered on previous nonaccrual loans	—			0.3			—			nm		nm
Core net interest income (non-GAAP)		$57.5			$58.1			$57.5		(1	)%	—	%
Net interest margin	2.78		%	2.90		%	2.85		%
Core net interest margin (non-GAAP)	2.78		%	2.89		%	2.85		%

Net interest income for the second quarter of 2019 was $57.5 million, a decrease of 2% linked quarter while remaining flat year-over-year. Core net interest income, which excludes interest recovered on previous nonaccrual loans, decreased 1% linked quarter and while remaining flat year-over-year. The linked quarter decrease was primarily driven by higher funding costs and higher borrowing volumes, partially offset by higher average interest-earning asset volumes.

The Company’s Core net interest margin, which excludes interest recovered on previous nonaccrual loans, decreased 11 basis points on a linked quarter basis to 2.78%, primarily driven by higher funding costs and higher borrowing volumes, while interest earning asset yields remained stable.

2

Noninterest Income
				% Change
($ in millions)	2Q19	1Q19	2Q18	LQ		Y/Y
Investment management fees	$2.5	$2.7	$4.2	(7	)%	(42	)%
Wealth advisory fees	8.1	8.2	13.7	—	%	(41	)%
Wealth management and trust fees	10.8	10.9	11.2	(1	)%	(4	)%
Private banking fees 3	2.9	2.6	2.8	14	%	4	%
Total core fees and income	$24.3	$24.3	$31.9	—	%	(24	)%
Total other income	0.1	1.0	0.2	(91	)%	(56	)%
Total noninterest income	$24.4	$25.2	$32.1	(3	)%	(24	)%
Memo: Excluding Divested Affiliates
Investment management fees (non-GAAP) 4	2.5	2.7	3.1	(7	)%	(20	)%
Wealth advisory fees (non-GAAP) 5	8.1	8.2	8.0	—	%	2	%
Wealth management and trust fees	10.8	10.9	11.2	(1	)%	(4	)%
Private banking fees3	2.9	2.6	2.8	14	%	4	%
Total core fees and income (non-GAAP) 4 5	$24.3	$24.3	$25.0	—	%	(3	)%
Total other income (non-GAAP)	0.1	1.0	0.2	(91	)%	(48	)%
Total noninterest income (non-GAAP) 4 5	$24.4	$25.2	$25.2	(3	)%	(3	)%
3 Private banking fees includes Other banking fee income and Gain/ (loss) on sale of loans, net 4 Excludes Anchor revenue of $1.2 million in 2Q18 5 Excludes BOS revenue of $5.8 million in 2Q18

Total core fees and income for the second quarter of 2019 was $24.3 million, flat linked quarter and a decline of 24% year-over-year. The year-over-year decline was primarily driven by the divestitures of Anchor and BOS.

Excluding Divested Affiliates, Total core fees and income decreased 3% year-over-year, primarily driven by lower Investment management fees and Wealth management and trust fees.

Assets Under Management / Advisory
				% Change
($ in millions)	2Q19	1Q19	2Q18	LQ		Y/Y
Wealth Management and Trust	$7,595	$7,593	$7,789	—	%	(2	)%
Affiliate Partners 6	8,604	8,529	9,072	1	%	(5	)%
Total assets under management / advisory 7	$16,199	$16,122	$16,861	—	%	(4	)%
Total net flows 7	$(269)	$(963)	$(97)
6 Segmentincludes Dalton, Greiner, Hartman, Maher & Co., LLC ("DGHM") and KLS Professional Advisors Group, LLC ("KLS") 7 Excludes Divested Affiliates

Total assets under management / advisory were $16.2 billion at the end of the second quarter of 2019, flat linked quarter and a decrease of 4% year-over-year. The linked quarter comparison was impacted by positive market action offset by negative net flows, while the year-over-year decrease was primarily driven by negative net flows in excess of positive market action.

Net flows during the second quarter of 2019 in the Wealth Management and Trust segment were negative $127 million, while net flows in the Affiliate Partners segment were negative $142 million.

3

Operating Expense
				% Change
($ in millions)	2Q19	1Q19	2Q18	LQ		Y/Y
Salaries and employee benefits	$32.7	$35.7	$39.4	(8	)%	(17	)%
Occupancy and equipment	7.9	8.3	8.2	(6	)%	(5	)%
Professional services	3.3	3.6	2.9	(7	)%	15	%
Marketing and business development	1.9	1.1	2.1	78	%	(7	)%
Information systems	5.1	5.9	6.8	(12	)%	(24	)%
Amortization of intangibles	0.7	0.7	0.7	—	%	(10	)%
FDIC insurance	0.6	0.7	0.7	(11	)%	(17	)%
Restructuring	—	1.6	—	nm		nm
Other	3.5	3.0	3.6	15	%	(3	)%
Total operating expense	$55.7	$60.6	$64.4	(8	)%	(14	)%
Memo: Excluding Notable Items8 and Divested Affiliates
Information systems 9	—	—	0.4	nm		nm
Restructuring	—	1.6	—	nm		nm
Divested Affiliates operating expense	—	—	4.7	nm		nm
Total operating expense (non-GAAP)	$55.7	$59.0	$59.2	(6	)%	(6	)%
8 "Notable Items" include adjustments made to GAAP results in prior periods 9 $0.4 million of Information services expense was reclassified to Restructuring expense in conjunction with the Company's formal restructuring plan announced in 4Q18

Total operating expense decreased 8% linked quarter, primarily driven by lower salaries and employee benefits expense, restructuring expense, information systems expense, and occupancy and equipment expense, partially offset by higher marketing and business development expense. Salaries and employee benefits expense declined linked quarter primarily as a result of seasonal payroll tax expense incurred during the first quarter of 2019. Restructuring expense incurred during the first quarter of 2019 was related to executive departures. Information systems expense declined linked quarter primarily as a result of savings attributable to information technology infrastructure consolidation. The year-over-year decline in Total operating expense of 14% was primarily driven by expenses associated with Divested Affiliates that are included in the second quarter of 2018 results.

Excluding Notable Items and Divested Affiliates, Total operating expense for the second quarter of 2019 was $55.7 million, down 6% linked quarter and 6% year-over-year. The year-over-year decline was primarily attributable to efficiency initiatives primarily impacting compensation and technology.

Income Tax Expense

The Company's effective tax rate for the second quarter of 2019 was 21.6%.

4

Loans and Deposits - QTD Averages
							% Change
($ in millions)	2Q19		1Q19		2Q18		LQ		Y/Y
Commercial and industrial	$1,092		$1,070		$974		2	%	12	%
Commercial real estate	2,507		2,398		2,478		5	%	1	%
Construction and land	203		211		167		(4	)%	22	%
Residential	3,009		2,973		2,775		1	%	8	%
Home equity	91		91		94		1	%	(3	)%
Other consumer	125		134		180		(7	)%	(31	)%
Total loans	$7,026		$6,877		$6,668		2	%	5	%
Non-interest bearing deposits	1,927		1,975		1,908		(2	)%	1	%
Interest bearing deposits	4,664		4,792		4,441		(3	)%	5	%
Total deposits	$6,590		$6,767		$6,349		(3	)%	4	%
Non-interest bearing deposits as a % of Total deposits	29	%	29	%	30	%

Average total loans in the second quarter of 2019 increased 5% year-over-year, primarily driven by increases in Residential loans and Commercial and industrial loans.

Average total deposits increased 4% year-over-year, primarily driven by growth in money market accounts, certificates of deposits, and demand deposit accounts, partially offset by declines in savings and NOW accounts. Deposits declined 3% linked quarter

The cost of total deposits was 0.88%, an increase of 4 basis points linked quarter and 35 basis points year-over-year.

Provision and Asset Quality
($ in millions)	2Q19		1Q19		4Q18		3Q18		2Q18
Provision/ (credit) for loan loss	$1.4		$(1.4)		$0.1		$(0.9)		$0.5
Total criticized loans	141.7		141.3		146.6		134.7		114.4
Total nonaccrual loans	17.2		12.0		14.1		12.1		15.7
Total loans 30-89 days past due and accruing	2.4		17.7		22.3		11.6		5.0
Total net loans (charged-off)/ recovered	(0.1)		(0.1)		1.7		1.0		0.1
Ratios:
Allowance for loan losses as a % of Total loans	1.06	%	1.07	%	1.09	%	1.09	%	1.09	%
Nonaccrual loans as a % of Total loans	0.24	%	0.17	%	0.20	%	0.18	%	0.23	%

The Company recorded a provision expense of $1.4 million for the second quarter of 2019, compared to a provision credit of $1.4 million for the first quarter of 2019 and an expense of $0.5 million in the second quarter of 2018. The provision expense in the second quarter of 2019 was primarily driven by loan growth.

Total criticized loans as of June 30, 2019 was $141.7 million, flat linked quarter and an increase of 24% year-over-year. Total nonaccrual loans as of June 30, 2019 was $17.2 million, or 24 basis points of total loans, compared to $12.0 million, or 17 basis points of total loans as of March 31, 2019, and $15.7 million, or 23 basis points of total loans as of June 30, 2018.

5

Capital
($ in millions, except for per share data)	2Q19		1Q19		4Q18		3Q18		2Q18
Tangible common equity/ Tangible assets 10	8.4	%	8.3	%	8.1	%	7.8	%	7.5	%
Tangible book value per share 10	$8.71		$8.47		$8.18		$7.67		$7.62
Regulatory Capital Ratios:11
Tier 1 common equity	11.2	%	11.4	%	11.4	%	11.1	%	10.9	%
Total risk-based capital	13.9	%	14.2	%	14.3	%	14.1	%	13.8	%
Tier 1 risk-based capital	12.7	%	13.0	%	13.0	%	12.8	%	12.6	%
Tier 1 leverage capital	9.6	%	9.7	%	9.5	%	9.2	%	9.2	%
Common Equity Repurchase Program:
Total shares of common stock repurchased	—		—		1,505,521		137,144		—
Average price paid per share of common stock	—		—		$12.02		$13.89		—
Aggregate repurchases of common equity ($ in millions)	—		—		$18.1		$1.9		—
10 See footnote 6 for a GAAP to non-GAAP reconciliation. 11 Current quarter information is presented based on estimated data.

Tangible book value per share as of June 30, 2019 increased 3% linked quarter and 14% year-over-year to $8.71. The linked quarter increase in Tangible book value per share was primarily driven by increased retained earnings and higher Accumulated other comprehensive income related to unrealized securities gains, while the year-over-year increase was primarily driven by the divestiture of BOS, higher Accumulated other comprehensive income and increased retained earnings, partially offset by common share repurchases.

EPS Calculation

For calculation of income for EPS, second quarter 2019 Net income attributable to the common shareholders was negatively impacted by $0.8 million, or $0.01 per share, related to the changes in value of Redeemable noncontrolling interests (“RNCI”).

6

Dividend Payments

Concurrent with the release of second quarter 2019 earnings, the Board of Directors of the Company declared a cash dividend payable to common shareholders of $0.12 per share. The record date for this dividend is August 9, 2019, and the payment date is August 23, 2019.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. 

These non-GAAP financial measures include: tangible book value per share; the TCE/TA ratio; return on average common equity; return on average tangible common equity; pre-tax, pre-provision income; total operating expense excluding intangibles, and restructuring, if any; the efficiency ratio; the efficiency ratio excluding amortization of intangibles, and restructuring, if any; net interest income and net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as core net interest income, and core net interest margin, respectively; net income attributable to the Company excluding notable items; net income attributable to the common shareholders, treasury stock method, excluding notable items; diluted earnings per share excluding notable items; operating basis total revenue; operating basis total operating expenses.

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

Conference Call

Management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, July 25, 2019, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003

Elite Entry Number: 5871776

Replay Information:

Available from July 25, 2019 at 12:00 p.m Eastern Time until August 1, 2019

Dial In #: (877) 344-7529

Conference Number: 10132971

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

7

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization that owns Wealth Management, Trust, and Commercial and Private Banking affiliates with offices in Boston, New York, Los Angeles, San Francisco, San Jose, and Florida. The Company has total assets of greater than $8 billion, and manages over $16 billion of client assets.

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

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

Forward-Looking Statements

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

Note to Editors:

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

###

CONTACT:

Adam Bromley

(617) 912-4386

abromley@bostonprivate.com

8

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	June 30, 2019		March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
	(In thousands, except share and per share data)
Assets:
Cash and cash equivalents	$	65,756	$	96,211		$	127,259		$	92,634		$	364,539
Investment securities available-for-sale	966,731		981,951			994,065			1,056,261			1,069,025
Investment securities held-to-maturity	54,482		67,548			70,438			75,468			78,955
Equity securities at fair value	19,092		7,491			14,228			7,079			7,942
Stock in Federal Home Loan Bank and Federal Reserve Bank	64,453		47,053			49,263			48,727			70,127
Loans held for sale	3,640		280			2,812			3,344			4,622
Total loans	7,080,260		6,926,968			6,893,158			6,720,420			6,767,123
Less: Allowance for loan losses	75,067		73,814			75,312			73,500			73,464
Net loans	7,005,193		6,853,154			6,817,846			6,646,920			6,693,659
Other real estate owned (“OREO”)	—		—			401			108			108
Premises and equipment, net	40,244		42,938			45,412			47,399			46,421
Goodwill (1)	57,607		57,607			57,607			75,598			75,598
Intangible assets, net	10,884		11,555			12,227			13,834			14,584
Fees receivable	3,611		3,982			5,101			10,445			10,405
Accrued interest receivable	26,411		25,935			24,366			24,641			23,732
Deferred income taxes, net	17,183		22,844			26,638			27,833			26,316
Right-of-use assets	110,880		104,644			—			—			—
Other assets	266,706		248,950			246,962			245,549			230,170
Total assets	$	8,712,873	$	8,572,143		$	8,494,625		$	8,375,840		$	8,716,203
Liabilities:
Deposits	$	6,437,963	$	6,779,845		$	6,781,170		$	6,768,723		$	6,620,179
Securities sold under agreements to repurchase	62,372		58,329			36,928			39,453			58,824
Federal funds purchased	135,000		—			250,000			120,000			—
Federal Home Loan Bank borrowings	920,068		615,070			420,144			441,836			1,056,938
Junior subordinated debentures	106,363		106,363			106,363			106,363			106,363
Lease liabilities	126,740		120,162			—			—			—
Other liabilities	124,370		112,893			143,540			149,770			129,175
Total liabilities	7,912,876		7,792,662			7,738,145			7,626,145			7,971,479
Redeemable noncontrolling interests (“RNCI”)	1,786		662			2,526			11,686			10,747
Shareholders’ equity:
Common stock, $1.00 par value; authorized: 170,000,000 shares	83,774		83,774			83,656			84,603			84,479
Additional paid-in capital	603,869		604,288			600,196			614,157			613,918
Retained earnings	106,443		97,155			87,821			64,618			56,912
Accumulated other comprehensive income/ (loss)	4,125		(6,398		)	(17,719		)	(27,578		)	(23,328		)
Total Company’s shareholders’ equity	798,211		778,819			753,954			735,800			731,981
Noncontrolling interests	—		—			—			2,209			1,996
Total shareholders’ equity	798,211		778,819			753,954			738,009			733,977
Total liabilities, RNCI and shareholders’ equity	$	8,712,873	$	8,572,143		$	8,494,625		$	8,375,840		$	8,716,203

9

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	Three Months Ended
	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Interest and dividend income:	(In thousands, except share and per share data)
Loans	$	71,943		$	69,933		$	69,294		$	68,254		$	64,048
Investment securities	5,728			5,983			6,242			6,230			6,302
Short-term investments and other	1,057			908			1,356			1,617			1,205
Total interest and dividend income	78,728			76,824			76,892			76,101			71,555
Interest expense:
Deposits	14,515			14,058			13,470			11,487			8,365
Borrowings	6,753			4,428			3,425			4,973			5,645
Total interest expense	21,268			18,486			16,895			16,460			14,010
Net interest income	57,460			58,338			59,997			59,641			57,545
Provision/ (credit) for loan losses	1,363			(1,426		)	93			(949		)	453
Net interest income after provision/ (credit) for loan losses	56,097			59,764			59,904			60,590			57,092
Noninterest income:
Investment management fees	2,455			2,650			2,831			3,245			4,227
Wealth advisory fees	8,141			8,165			12,111			13,995			13,693
Wealth management and trust fees	10,771			10,893			11,677			11,510			11,169
Other banking fee income	2,867			2,499			2,033			2,775			2,745
Gain on sale of loans, net	58			73			39			67			63
Total core fees and income	24,292			24,280			28,691			31,592			31,897
Gain/ (loss) on sale of investments, net	—			—			(596		)	—			7
Gain/ (loss) on OREO, net	—			91			—			—			—
Gain on sale of affiliate	—			—			18,142			—			—
Other	88			877			(392		)	722			191
Total other income	88			968			17,154			722			198
Total revenue (2)	81,840			83,586			105,842			91,955			89,640
Operating expense:
Salaries and employee benefits	32,706			35,726			36,007			38,944			39,433
Occupancy and equipment	7,852			8,348			7,975			8,164			8,229
Professional services	3,313			3,560			4,229			2,877			2,872
Marketing and business development	1,934			1,085			2,275			1,710			2,070
Information systems	5,137			5,860			6,296			6,233			6,770
Amortization of intangibles	672			672			680			750			749
FDIC insurance	585			660			739			674			708
Restructuring	—			1,646			2,065			5,763			—
Other	3,460			2,996			3,291			3,442			3,553
Total operating expense	55,659			60,553			63,557			68,557			64,384
Income before income taxes	24,818			24,459			42,192			24,347			24,803
Income tax expense	5,369			4,917			8,651			5,461			17,399
Net income from continuing operations	19,449			19,542			33,541			18,886			7,404
Net income/ (loss) from discontinued operations (3)	—			—			306			—			(2		)
Net income before attribution to noncontrolling interests	19,449			19,542			33,847			18,886			7,402
Less: Net income attributable to noncontrolling interests	69			100			545			924			968
Net income attributable to the Company	$	19,380		$	19,442		$	33,302		$	17,962		$	6,434
Adjustments, treasury stock method (4)	(816		)	1,557			2,694			(829		)	(3,524		)
Net income attributable to common shareholders, treasury stock method	$	18,564		$	20,999		$	35,996		$	17,133		$	2,910
Weighted average basic shares outstanding	83,565,780			83,285,095			83,750,785			84,017,284			83,509,115
Weighted average diluted shares outstanding (5)	84,048,972			84,010,450			84,863,779			85,498,568			85,413,575
Diluted total earnings per share	$	0.22		$	0.25		$	0.42		$	0.20		$	0.03

10

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	Six Months Ended
	June 30, 2019			June 30, 2018
Interest and dividend income:	(In thousands, except share and per share data)
Loans	$	141,876		$	124,977
Investment securities	11,711			12,720
Short-term investments and other	1,965			2,214
Total interest and dividend income	155,552			139,911
Interest expense:
Deposits	28,573			14,889
Borrowings	11,181			10,094
Total interest expense	39,754			24,983
Net interest income	115,798			114,928
Provision/ (credit) for loan losses	(63		)	(1,342		)
Net interest income after provision/ (credit) for loan losses	115,861			116,270
Fees and other income:
Investment management fees	5,105			15,652
Wealth advisory fees	16,306			27,205
Wealth management and trust fees	21,664			23,320
Other banking fee income	5,366			5,018
Gain on sale of loans, net	131			137
Total core fees and income	48,572			71,332
Gain/ (loss) on sale of investments, net	—			(17		)
Gain/ (loss) on OREO, net	91			—
Other	965			523
Total other income	1,056			506
Total revenue (2)	165,426			186,766
Operating expense:
Salaries and employee benefits	68,432			86,517
Occupancy and equipment	16,200			15,977
Professional services	6,873			6,049
Marketing and business development	3,019			3,663
Information systems	10,997			12,656
Amortization of intangibles	1,344			1,499
FDIC insurance	1,245			1,452
Restructuring	1,646			—
Other	6,456			7,428
Total operating expense	116,212			135,241
Income before income taxes	49,277			52,867
Income tax expense	10,286			23,425
Net income from continuing operations	38,991			29,442
Net income from discontinued operations (3)	—			1,696
Net income before attribution to noncontrolling interests	38,991			31,138
Less: Net income attributable to noncontrolling interests	169			2,018
Net income attributable to the Company	$	38,822		$	29,120
Adjustments, treasury stock method (4)	741			(3,547		)
Net income attributable to common shareholders, treasury stock method	$	39,563		$	25,573
Weighted average basic shares outstanding	83,426,213			83,304,573
Weighted average diluted shares outstanding (5)	84,036,050			85,221,974
Diluted total earnings per share	$	0.47		$	0.30

11

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

(In thousands, except per share data)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
FINANCIAL DATA:
Book value per common share	$	9.53		$	9.30		$	9.01		$	8.72		$	8.69
Tangible book value per share (6)	$	8.71		$	8.47		$	8.18		$	7.67		$	7.62
Market price per share	$	12.07		$	10.96		$	10.57		$	13.65		$	15.90
ASSETS UNDER MANAGEMENT AND ADVISORY ("AUM"):
Wealth Management and Trust	$	7,595,000		$	7,593,000		$	7,602,000		$	8,335,000		$	7,789,000
Affiliate Partners, excluding BOS	8,604,000			8,529,000			8,319,000			9,388,000			9,072,000
Total AUM, excluding BOS (7)	16,199,000			16,122,000			15,921,000			17,723,000			16,861,000
AUM at BOS	—			—			—			4,714,000			4,525,000
Less: Inter-company relationship	—			—			—			(7,000		)	(7,000		)
Total AUM	$	16,199,000		$	16,122,000		$	15,921,000		$	22,430,000		$	21,379,000
FINANCIAL RATIOS:
Total equity/ Total assets	9.16		%	9.09		%	8.88		%	8.81		%	8.42		%
Tangible common equity/ Tangible assets (6)	8.44		%	8.35		%	8.12		%	7.83		%	7.46		%
Tier 1 common equity/ Risk weighted assets (6)	11.19		%	11.38		%	11.40		%	11.14		%	10.90		%
Allowance for loan losses/ Total loans	1.06		%	1.07		%	1.09		%	1.09		%	1.09		%
Allowance for loan losses/ Nonaccrual loans	438		%	614		%	536		%	608		%	469		%
Return on average assets (annualized)	0.90		%	0.93		%	1.56		%	0.84		%	0.31		%
ROACE (annualized) (non-GAAP) (8)	9.83		%	10.29		%	17.87		%	9.67		%	3.03		%
ROATCE (annualized) (non-GAAP) (8)	11.06		%	11.63		%	20.46		%	11.37		%	3.90		%
Efficiency ratio (annualized) (non-GAAP) (9)	67.19		%	69.67		%	57.14		%	67.04		%	70.29		%
DEPOSIT DETAIL:
Demand deposits (non-interest bearing)	$	1,854,091		$	2,016,838		$	1,951,274		$	2,001,275		$	2,089,373
NOW	563,130			605,852			626,685			568,148			635,841
Savings	68,036			68,102			73,834			72,967			73,675
Money market	3,228,608			3,302,244			3,338,892			3,363,062			3,128,211
Certificates of deposit	724,098			786,809			790,485			763,271			693,079
Total deposits	$	6,437,963		$	6,779,845		$	6,781,170		$	6,768,723		$	6,620,179

12

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	Average Balance						Interest Income/Expense						Average Yield/Rate
(In thousands)	Three Months Ended						Three Months Ended						Three Months Ended
AVERAGE BALANCE SHEET:	06/30/19		03/31/19		06/30/18		06/30/19		03/31/19		06/30/18		06/30/19		03/31/19		06/30/18
AVERAGE ASSETS
Interest-earning assets:
Cash and investments (10):
Taxable investment securities	$	227,029	$	244,230	$	326,482	$	1,121	$	1,185	$	1,501	1.98	%	1.94	%	1.84	%
Non-taxable investment securities	304,309		306,868		297,852		1,901		1,901		1,752		2.50	%	2.48	%	2.35	%
Mortgage-backed securities	508,033		521,788		570,845		2,706		2,897		3,049		2.13	%	2.22	%	2.14	%
Short-term investments and other	130,363		79,603		157,878		1,057		908		1,205		3.23	%	4.58	%	3.03	%
Total cash and investments	1,169,734		1,152,489		1,353,057		6,785		6,891		7,507		2.32	%	2.39	%	2.22	%
Loans (10) (11):
Commercial and industrial	1,091,903		1,070,161		974,443		11,170		10,979		9,201		4.05	%	4.10	%	3.74	%
Commercial real estate	2,506,637		2,398,413		2,477,634		29,953		28,151		27,387		4.73	%	4.69	%	4.37	%
Construction and land	202,609		211,351		166,736		2,559		2,641		2,011		5.00	%	5.00	%	4.77	%
Residential	3,008,753		2,972,945		2,775,239		25,735		25,545		22,590		3.42	%	3.44	%	3.26	%
Home equity	91,384		90,646		94,445		1,146		1,121		1,041		5.03	%	5.02	%	4.42	%
Other consumer	124,778		133,937		179,684		1,380		1,496		1,818		4.43	%	4.53	%	4.06	%
Total loans	7,026,064		6,877,453		6,668,181		71,943		69,933		64,048		4.07	%	4.07	%	3.82	%
Total earning assets	8,195,798		8,029,942		8,021,238		78,728		76,824		71,555		3.82	%	3.83	%	3.55	%
LESS: Allowance for loan losses	73,856		75,537		72,998
Cash and due from banks (non-interest bearing)	45,705		46,172		45,337
Other assets	511,859		493,148		396,744
TOTAL AVERAGE ASSETS	$	8,679,506	$	8,493,725	$	8,390,321
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits (12):
Savings and NOW	$	684,507	$	674,872	$	719,159	$	276	$	296	$	304	0.16	%	0.18	%	0.17	%
Money market	3,226,569		3,341,397		3,033,306		10,476		10,072		5,543		1.30	%	1.22	%	0.73	%
Certificates of deposit	752,500		775,817		688,567		3,763		3,690		2,518		2.01	%	1.93	%	1.47	%
Total interest-bearing deposits (12)	4,663,576		4,792,086		4,441,032		14,515		14,058		8,365		1.25	%	1.19	%	0.76	%
Junior subordinated debentures	106,363		106,363		106,363		1,080		1,121		1,008		4.02	%	4.22	%	3.75	%
FHLB borrowings and other	952,645		615,985		1,022,636		5,673		3,307		4,637		2.36	%	2.15	%	1.79	%
Total interest-bearing liabilities (12)	5,722,584		5,514,434		5,570,031		21,268		18,486		14,010		1.48	%	1.36	%	1.00	%
Non-interest bearing demand deposits (12)	1,926,591		1,974,526		1,908,037
Other liabilities	238,544		236,426		122,175
Total average liabilities	7,887,719		7,725,386		7,600,243
Redeemable noncontrolling interests	943		2,056		14,129
Average shareholders’ equity	790,844		766,283		775,949
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	8,679,506	$	8,493,725	$	8,390,321
Net interest income							$	57,460	$	58,338	$	57,545
Interest rate spread													2.34	%	2.47	%	2.55	%
Bank only net interest margin													2.84	%	2.96	%	2.90	%
Net interest margin													2.78	%	2.90	%	2.85	%
Average total deposits (12)	6,590,167		6,766,612		6,349,069								0.88	%	0.84	%	0.53	%
Average total deposits and borrowings (12)	7,649,175		7,488,960		7,478,068								1.11	%	1.00	%	0.75	%

13

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	Average Balance				Interest Income/Expense				Average Yield/Rate
(In thousands)	Six Months Ended				Six Months Ended				Six Months Ended
AVERAGE BALANCE SHEET:	06/30/19		06/30/18		06/30/19		06/30/18		06/30/19		06/30/18
AVERAGE ASSETS
Interest-earning assets:
Cash and investments:
Taxable investment securities	$	235,218	$	330,220	$	2,306	$	3,011	1.92	%	1.83	%
Non-taxable investment securities (10)	305,581		297,407		3,802		3,482		2.49	%	2.34	%
Mortgage-backed securities	514,872		579,604		5,603		6,227		2.18	%	2.15	%
Short-term investments and other	105,610		158,853		1,965		2,214		3.61	%	2.78	%
Total cash and investments	1,161,281		1,366,084		13,676		14,934		2.34	%	2.19	%
Loans (11):
Commercial and industrial (10)	1,081,092		953,940		22,150		17,661		4.08	%	3.68	%
Commercial real estate (10)	2,452,824		2,459,525		58,104		53,538		4.71	%	4.33	%
Construction and land (10)	206,956		168,052		5,200		3,948		5.00	%	4.67	%
Residential	2,990,948		2,738,980		51,280		44,356		3.43	%	3.24	%
Home equity	91,017		95,810		2,267		2,083		5.02	%	4.39	%
Other consumer	129,332		182,623		2,875		3,391		4.48	%	3.74	%
Total loans	6,952,169		6,598,930		141,876		124,977		4.07	%	3.78	%
Total earning assets	8,113,450		7,965,014		155,552		139,911		3.82	%	3.50	%
LESS: Allowance for loan losses	74,692		73,911
Cash and due from banks (non-interest bearing)	46,010		48,725
Other assets	502,068		408,810
TOTAL AVERAGE ASSETS	$	8,586,836	$	8,348,638
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits (12):
Savings and NOW	$	679,716	$	718,051	$	572	$	519	0.17	%	0.15	%
Money market	3,283,891		3,086,710		20,549		9,857		1.26	%	0.64	%
Certificates of deposit	764,094		672,736		7,452		4,513		1.97	%	1.35	%
Total interest-bearing deposits (12)	4,727,701		4,477,497		28,573		14,889		1.22	%	0.67	%
Junior subordinated debentures	106,363		106,363		2,201		1,854		4.17	%	3.52	%
FHLB borrowings and other	785,245		950,763		8,980		8,240		2.27	%	1.72	%
Total interest-bearing liabilities (12)	5,619,309		5,534,623		39,754		24,983		1.42	%	0.91	%
Non-interest bearing demand deposits (12)	1,950,088		1,890,184
Payables and other liabilities	236,894		126,601
Total average liabilities	7,806,291		7,551,408
Redeemable noncontrolling interests	1,619		17,644
Average shareholders’ equity	778,926		779,586
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY	$	8,586,836	$	8,348,638
Net interest income					$	115,798	$	114,928
Interest rate spread									2.40	%	2.59	%
Bank only net interest margin									2.89	%	2.92	%
Net interest margin									2.84	%	2.87	%
Average total deposits (12)	6,677,789		6,367,681						0.86	%	0.47	%
Average total deposits and borrowings (12)	7,569,397		7,424,807						1.06	%	0.68	%

14

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

(In thousands)	June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		June 30, 2018
LOAN DATA (13):
Other commercial and industrial loans:
New England	$	524,319	$	492,800	$	503,201	$	460,409	$	481,081
San Francisco Bay Area	41,131		39,829		43,702		41,256		35,220
Southern California	90,736		82,741		76,134		81,549		66,892
Total other commercial and industrial loans	$	656,186	$	615,370	$	623,037	$	583,214	$	583,193
New England	$	343,359	$	342,270	$	344,079	$	330,753	$	332,572
San Francisco Bay Area	95,825		96,024		96,387		96,775		94,959
Southern California	11,123		11,198		11,205		11,279		11,351
Total commercial tax-exempt loans	$	450,307	$	449,492	$	451,671	$	438,807	$	438,882
Total commercial and industrial loans	$	1,106,493	$	1,064,862	$	1,074,708	$	1,022,021	$	1,022,075
Commercial real estate loans:
New England	$	1,071,073	$	1,068,619	$	1,022,061	$	1,043,494	$	1,069,942
San Francisco Bay Area	770,312		720,276		714,449		724,243		739,769
Southern California	689,171		650,153		659,182		631,343		694,810
Total commercial real estate loans	$	2,530,556	$	2,439,048	$	2,395,692	$	2,399,080	$	2,504,521
Construction and land loans:
New England	$	144,986	$	136,097	$	153,929	$	114,411	$	88,068
San Francisco Bay Area	24,725		43,130		41,516		40,755		37,783
Southern California	30,667		31,391		44,861		42,358		46,173
Total construction and land loans	$	200,378	$	210,618	$	240,306	$	197,524	$	172,024
Residential loans:
New England	$	1,708,501	$	1,692,421	$	1,689,318	$	1,650,989	$	1,643,039
San Francisco Bay Area	574,937		570,132		559,578		554,502		533,394
Southern California	742,320		730,579		700,077		657,388		631,773
Total residential loans	$	3,025,758	$	2,993,132	$	2,948,973	$	2,862,879	$	2,808,206
Home equity loans:
New England	$	58,806	$	59,074	$	57,617	$	61,291	$	61,125
San Francisco Bay Area	19,232		18,279		19,722		19,769		17,366
Southern California	11,892		11,267		13,082		12,330		13,310
Total home equity loans	$	89,930	$	88,620	$	90,421	$	93,390	$	91,801
Other consumer loans:
New England	$	106,177	$	110,363	$	120,402	$	121,685	$	145,726
San Francisco Bay Area	12,279		11,956		12,663		14,228		14,659
Southern California	8,689		8,369		9,993		9,613		8,111
Total other consumer loans	$	127,145	$	130,688	$	143,058	$	145,526	$	168,496
Total loans:
New England	$	3,957,221	$	3,901,644	$	3,890,607	$	3,783,032	$	3,821,553
San Francisco Bay Area	1,538,441		1,499,626		1,488,017		1,491,528		1,473,150
Southern California	1,584,598		1,525,698		1,514,534		1,445,860		1,472,420
Total loans	$	7,080,260	$	6,926,968	$	6,893,158	$	6,720,420	$	6,767,123

15

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

(In thousands)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018		June 30, 2018
CREDIT QUALITY (13):
Special mention loans:
New England	$	35,235		$	34,675		$	31,147		$	20,382	$	18,515
San Francisco Bay Area	10,360			23,486			18,585			18,359		19,255
Southern California	25,082			28,626			28,796			28,665		15,678
Total special mention loans	$	70,677		$	86,787		$	78,528		$	67,406	$	53,448
Accruing classified loans (14):
New England	$	13,012		$	15,830		$	10,392		$	10,083	$	11,493
San Francisco Bay Area	25,957			20,801			24,584			24,252		12,766
Southern California	14,914			5,890			19,119			21,045		21,194
Total accruing classified loans	$	53,883		$	42,521		$	54,095		$	55,380	$	45,453
Nonaccruing loans:
New England	$	8,837		$	6,161		$	6,728		$	5,131	$	7,282
San Francisco Bay Area	2,644			2,480			2,488			1,169		1,319
Southern California	5,674			3,378			4,841			5,797		7,050
Total nonaccruing loans	$	17,155		$	12,019		$	14,057		$	12,097	$	15,651
Loans 30-89 days past due and accruing (15):
New England	$	1,747		$	7,232		$	15,961		$	9,193	$	4,653
San Francisco Bay Area	6			2,021			2,246			1,651		—
Southern California	681			8,462			4,092			763		324
Total loans 30-89 days past due and accruing	$	2,434		$	17,715		$	22,299		$	11,607	$	4,977
Loans (charged-off)/ recovered, net:
New England	$	31		$	222		$	(100	)	$	232	$	(73	)
San Francisco Bay Area	20			18			1,804			706		91
Southern California	(161		)	(312		)	15			47		95
Total net loans (charged-off)/ recovered	$	(110	)	$	(72	)	$	1,719		$	985	$	113
Loans (charged-off)/ recovered, net for the year ended:
New England	$	253										$	(358	)
San Francisco Bay Area	38											158
Southern California	(473		)									264
Total Net Loans (Charged-off)/ Recovered	$	(182	)									$	64

16

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

FOOTNOTES:

(1) On April 13, 2018, the Company completed the sale of its ownership interest in Anchor to the management team of Anchor for an upfront cash payment and future payments. Anchor’s results remain consolidated in the Company’s results through the closing date. For presentation purposes, Anchor’s AUM is excluded from prior period AUM amounts, whereas it is included in the calculation of Core fees and income through the closing date. For regulatory purposes, the goodwill and intangible assets of Anchor are included in consolidated calculations through the closing date.

On December 3, 2018, the Company completed the sale of its ownership interest in BOS to the management team of BOS for an upfront cash payment and an eight-year revenue sharing agreement with BOS. For presentation purposes, BOS' AUM is excluded from prior period AUM amounts, whereas it is included in the calculation of Core fees and income through the closing date. For regulatory purposes, the goodwill and intangible assets of BOS are included in consolidated calculations through the closing date.

See footnotes 6 and 8 below.

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

(3) Net income from discontinued operations consists of contingent payments, net of expenses, related to a divested affiliate, Westfield Capital Management Company, LLC. The Company received its final contingent payment in the first quarter of 2018 related to this affiliate and a tax benefit related to deferred taxes in the fourth quarter of 2018 when annual tax returns were filed.

(4) Adjustments to Net income attributable to the Company to arrive at Net income attributable to the common shareholders, treasury stock method, as presented in these tables, include decrease/ (increase) in Noncontrolling interests redemption value and dividends paid on preferred stock, if any, including deemed dividends on redemption of the 6.95% non-cumulative perpetual preferred stock, Series D (“the Series D preferred stock”), if any. On June 15, 2018, the Company redeemed all $50 million of the outstanding Series D preferred stock. 

(5) When the Company has positive Net income from continuing operations attributable to the common shareholders, the Company adds additional shares to basic Weighted average shares outstanding to arrive at Weighted average diluted shares outstanding for the Diluted earnings per share calculation. These additional shares reflect the assumed exercise, conversion, or contingent issuance of dilutive securities. If the additional shares would result in anti-dilution, they would be excluded from the Diluted earnings per share calculation. The potential dilutive shares relate to unexercised stock options, unvested restricted stock units, and unexercised stock warrants, if any. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 16: Earnings Per Share” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

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

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

The Company calculates TA by adjusting Total assets to exclude Goodwill and intangible assets. The Company calculates TCE by adjusting Total equity to exclude Goodwill and intangible assets, net. 

(In thousands, except share and per share data)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Total balance sheet assets	$	8,712,873		$	8,572,143		$	8,494,625		$	8,375,840		$	8,716,203
LESS: Goodwill and intangible assets, net	(68,491		)	(69,162		)	(69,834		)	(89,432		)	(90,182		)
Tangible assets (non-GAAP)	$	8,644,382		$	8,502,981		$	8,424,791		$	8,286,408		$	8,626,021
Total shareholders’ equity	$	798,211		$	778,819		$	753,954		$	738,009		$	733,977
LESS: Goodwill and intangible assets, net	(68,491		)	(69,162		)	(69,834		)	(89,432		)	(90,182		)
Tangible common equity (non-GAAP)	$	729,720		$	709,657		$	684,120		$	648,577		$	643,795
Total equity/ Total assets	9.16		%	9.09		%	8.88		%	8.81		%	8.42		%
Tangible common equity/ Tangible assets (non-GAAP)	8.44		%	8.35		%	8.12		%	7.83		%	7.46		%
Total risk weighted assets *	$	6,494,049		$	6,304,444		$	6,161,677		$	6,057,002		$	6,104,586
Tier 1 common equity *	$	726,872		$	717,138		$	702,728		$	674,641		$	665,628
Tier 1 common equity/ Risk weighted assets *	11.19		%	11.38		%	11.40		%	11.14		%	10.90		%
End of period shares outstanding	83,774,335			83,773,650			83,655,651			84,602,519			84,478,858
Book value per common share	$	9.53		$	9.30		$	9.01		$	8.72		$	8.69
Tangible book value per share (non-GAAP)	$	8.71		$	8.47		$	8.18		$	7.67		$	7.62

*     Risk weighted assets and Tier 1 common equity for June 30, 2019 are presented based on estimated data.

17

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

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

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

Reconciliations from the Company’s GAAP Return on average equity ratio to the non-GAAP ROACE and the non-GAAP ROATCE ratios are presented below:

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

	Three Months Ended
(In thousands)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Total average shareholders’ equity	$	790,844		$	766,283		$	739,313		$	737,188		$	775,949
LESS: Average Series D preferred stock	—			—			—			—			(39,881		)
Average common equity (non-GAAP)	790,844			766,283			739,313			737,188			736,068
LESS: Average goodwill and intangible assets, net	(68,889		)	(69,498		)	(83,153		)	(89,830		)	(102,533		)
Average tangible common equity (non-GAAP)	$	721,955		$	696,785		$	656,160		$	647,358		$	633,535
Net income attributable to the Company	$	19,380		$	19,442		$	33,302		$	17,962		$	6,434
LESS: Dividends on Series D preferred stock	—			—			—			—			(869		)
Common net income (non-GAAP)	19,380			19,442			33,302			17,962			5,565
ADD: Amortization of intangibles, net of tax	531			531			537			593			592
Tangible common net income (non-GAAP)	$	19,911		$	19,973		$	33,839		$	18,555		$	6,157
Return on average equity - (annualized)	9.83		%	10.29		%	17.87		%	9.67		%	3.33		%
ROACE - (annualized) (non-GAAP)	9.83		%	10.29		%	17.87		%	9.67		%	3.03		%
ROATCE - (annualized) (non-GAAP)	11.06		%	11.63		%	20.46		%	11.37		%	3.90		%

	Six Months Ended
(In thousands)	June 30, 2019			June 30, 2018
Total average shareholders’ equity	$	778,926		$	779,586
LESS: Average Series D preferred stock (non-convertible)	—			(43,795		)
Average common equity (non-GAAP)	778,926			735,791
LESS: Average goodwill and intangible assets, net	(69,211		)	(117,839		)
Average tangible common equity (non-GAAP)	$	709,715		$	617,952
Net income attributable to the Company	$	38,822		$	29,120
LESS: Dividends on Series D preferred stock	—			(1,738		)
Common net income (non-GAAP)	38,822			27,382
ADD: Amortization of intangibles, net of tax	1,062			1,184
Tangible common net income (non-GAAP)	$	39,884		$	28,566
Return on average equity	10.05		%	7.53		%
Return on average common equity (non-GAAP)	10.05		%	7.50		%
Return on average tangible common equity (non-GAAP)	11.33		%	9.32		%

(9) The Company uses certain non-GAAP financial measures, such as Pre-tax, pre-provision income; Total operating expenses excluding amortization of intangibles and restructuring expense, if any; and the Efficiency ratio to provide information for investors to effectively analyze financial trends of ongoing business activities and to enhance comparability with peers across the financial sector.

Reconciliations from the Company’s GAAP Income from continuing operations before income taxes to non-GAAP Pre-tax, pre-provision income; from GAAP Total operating expense to non-GAAP Total operating expense excluding amortization of intangibles and restructuring, if any; and from GAAP Efficiency ratio to non-GAAP Efficiency ratio, excluding amortization of intangibles, impairment of goodwill, and restructuring, if any, are presented below:

18

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

	Three Months Ended
(In thousands)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Income before income taxes (GAAP)	$	24,818		$	24,459		$	42,192		$	24,347		$	24,803
ADD BACK: Provision/ (credit) for loan losses	1,363			(1,426		)	93			(949		)	453
Pre-tax, pre-provision income (non-GAAP)	$	26,181		$	23,033		$	42,285		$	23,398		$	25,256
Total operating expense (GAAP)	$	55,659		$	60,553		$	63,557		$	68,557		$	64,384
Less: Amortization of intangibles	672			672			680			750			749
Less: Restructuring	—			1,646			2,065			5,763			—
Total operating expense (non-GAAP)	$	54,987		$	58,235		$	60,812		$	62,044		$	63,635
Net interest income	$	57,460		$	58,338		$	59,997		$	59,641		$	57,545
Total core fees and income	24,292			24,280			28,691			31,592			31,897
Gain on sale of affiliate	—			—			18,142			—			—
Total other income	88			968			(988		)	722			198
Total revenue (10)	$	81,840		$	83,586		$	105,842		$	91,955		$	89,640
Efficiency ratio (GAAP)	68.01		%	72.44		%	60.05		%	74.55		%	71.83		%
Efficiency ratio, excluding amortization of intangibles and restructuring, if any (non-GAAP) (10)	67.19		%	69.67		%	57.14		%	67.04		%	70.29		%

	Six Months Ended
(In thousands)	June 30, 2019			June 30, 2018
Income before income taxes (GAAP)	$	49,277		$	52,867
ADD BACK: Provision/ (credit) for loan losses	(63		)	(1,342		)
Pre-tax, pre-provision income (non-GAAP)	$	49,214		$	51,525
Total operating expense (GAAP)	$	116,212		$	135,241
Less: Amortization of intangibles	1,344			1,499
Less: Restructuring	1,646			—
Total operating expense (non-GAAP)	$	113,222		$	133,742
Net interest income	$	115,798		$	114,928
Total core fees and income	48,572			71,332
Total other income	1,056			506
Total revenue (10)	$	165,426		$	186,766
Efficiency ratio (GAAP)	70.25		%	72.41		%
Efficiency ratio, excluding amortization of intangibles and restructuring, if any (non-GAAP) (10)	68.44		%	70.90		%

(10) Currently, the FTE adjustment for interest income on Non-taxable investments and loans is immaterial and therefore has not been applied. For comparison purposes, GAAP amounts are shown for all periods presented.

(11) Average loans includes Loans held for sale and Nonaccrual loans.

(12) Average total deposits is the sum of Average total interest-bearing deposits and Average non-interest bearing demand deposits. Average total deposits and borrowings is the sum of Average total interest-bearing liabilities and Average non-interest bearing demand deposits.

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

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

19

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

(15) In addition to loans 30-89 days past due and accruing, at June 30, 2019, the Company had one loan totaling $0.9 million that was more than 90 days past due but still on accrual status. This loan originated in the New England region. The Company had no loans outstanding more than 90 days past due but still on accrual status in comparative periods.

(16) The Company uses certain non-GAAP financial measures, such as Net interest income excluding interest recovered on previous nonaccrual loans and Net interest margin excluding interest recovered on previous nonaccrual loans, also referred to as Core net interest margin, to provide information for investors to effectively analyze financial trends of ongoing business activities and to enhance comparability with peers across the financial sector.

Reconciliations from the Company’s GAAP Net interest income to non-GAAP Net interest income excluding interest recovered on previous nonaccrual loans and from GAAP Net interest margin to non-GAAP Net interest margin excluding interest recovered on previous nonaccrual loans are presented below:

	Three Months Ended
(In thousands)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Net interest income (GAAP basis)	$	57,460		$	58,338		$	59,997		$	59,641		$	57,545
LESS: Interest recovered on previous nonaccrual loans	—			258			986			986			—
Net interest income, excluding interest recovered while loans on nonaccrual status (non-GAAP) - also referred to as Core net interest income (non-GAAP)	57,460			58,080			59,011			58,655			57,545
Net interest margin, excluding interest recovered while loans on nonaccrual status (non-GAAP) - also referred to as Core net interest margin (non-GAAP)	2.78		%	2.89		%	2.90		%	2.85		%	2.85		%

20

Boston Private Financial Holdings, Inc.

Selected Financial Data (Unaudited)

(17) The Company uses certain non-GAAP financial measures, such as Net income attributable to the Company excluding notable items and Diluted earnings per share excluding notable items to provide information for investors to effectively analyze financial trends of ongoing business activities and to enhance comparability with peers across the financial sector. Reconciliations from the Company’s GAAP Net income attributable to the Company to non-GAAP Net income attributable to the Company excluding notable items and from GAAP Diluted earnings per share to non-GAAP Diluted earnings per share excluding notable items are presented below:

	Three Months Ended
(In thousands, except share and per share data)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Net income attributable to the Company (GAAP)	$	19,380		$	19,442		$	33,302		$	17,962		$	6,434
LESS: Gain on sale of affiliate	—			—			18,142			—			—
ADD BACK: Information services *	—			—			(441		)	—			441
ADD BACK: Restructuring	—			1,646			2,065			5,763			—
ADD BACK: Tax adjustments **	—			—			3,502			—			12,706
Tax effect at statutory rate	—			(346		)	(341		)	(1,210		)	(93		)
Net income attributable to the Company excluding notable items (non-GAAP)	$	19,380		$	20,742		$	19,945		$	22,515		$	19,488
Net income attributable to the common shareholders, treasury stock method (GAAP)	$	18,564		$	20,999		$	35,996		$	17,133		$	2,910
ADD BACK: Deemed dividend due to redemption of Series D preferred stock	—			—			—			—			2,247
LESS: Gain on sale of affiliate	—			—			18,142			—			—
ADD BACK: Information services *	—			—			(441		)	—			441
ADD BACK: Restructuring	—			1,646			2,065			5,763			—
ADD BACK: Tax adjustments **	—			—			3,502			—			12,706
Tax effect at statutory rate	—			(346		)	(341		)	(1,210		)	(93		)
Net income attributable to the common shareholders, treasury stock method, excluding notable items (non-GAAP)	$	18,564		$	22,299		$	22,639		$	21,686		$	18,211
Weighted average diluted shares outstanding	84,048,972			84,010,450			84,863,779			85,498,568			85,413,575
Diluted total earnings per share (GAAP)	$	0.22		$	0.25		$	0.42		$	0.20		$	0.03
Diluted total earnings per share, excluding notable items (non-GAAP)	$	0.22		$	0.27		$	0.27		$	0.25		$	0.21
Average common equity (non-GAAP)	$	790,844		$	766,283		$	739,313		$	737,188		$	736,068
Average tangible common equity (non-GAAP)	$	721,955		$	696,785		$	656,160		$	647,358		$	633,535
Return on average common equity - (annualized), excluding notable items (non-GAAP)	9.83		%	10.98		%	10.70		%	12.12		%	10.15		%
Return on average tangible common equity - (annualized), excluding notable items (non-GAAP)	11.06		%	12.38		%	12.38		%	14.16		%	12.16		%
Pre-tax, pre-provision income (non-GAAP)	$	26,181		$	23,033		$	42,285		$	23,398		$	25,256
LESS: Gain on sale of affiliate	—			—			18,142			—			—
ADD BACK: Information services *	—			—			(441		)	—			441
ADD BACK: Restructuring	—			1,646			2,065			5,763			—
Pre-tax, pre-provision income, excluding notable items (non-GAAP)	$	26,181		$	24,679		$	25,767		$	29,161		$	25,697

* In the fourth quarter of 2018, $0.4 million of Information services expense was reclassified to Restructuring expense in conjunction with the announcement of the Company's formal restructuring plan.

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

21