Boston Private Financial (BPFH) 10-Q 2001 Q3 Quarterly report

As filed with the Securities and Exchange Commission on November 14, 2001

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2001

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______.

Commission File Number:   0-17089

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

 (Exact name of registrant as specified in its charter)

Commonwealth of Massachusetts	04-2976299
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Ten Post Office Square
Boston, Massachusetts	02109
(Address of principal executive offices)	(Zip Code)

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

                Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 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   ý    No   o

APPLICABLE ONLY TO CORPORATE ISSUERS

           Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of  October 31, 2001:

Common Stock - Par Value $1.00	16,591,511 shares
(class)	(outstanding)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC

FORM 10-Q

TABLE OF CONTENTS

	Cover Page
	Index
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Changes in Stockholders’ Equity
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
Item 2	Management's Discussion and Analysis of Financial Condition  and Results of Operations
	Risk Factors and Factors Affecting Forward-Looking Statements
Item 3	Quantitative and Qualitative Disclosures about Market Risk
	PART II - OTHER INFORMATION
Item 1	Legal Proceedings
Item 2	Changes in Securities and Use of Proceeds
Item 3	Defaults upon Senior Securities
Item 4	Submission of Matters to a Vote of Security Holders
Item 5	Other Information
Item 6	Exhibits and Reports on Form 8-K
	Signature Page

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	(Unaudited)
	September 30, December 31,
	2001			2000
	(In thousands, except share data)
Assets:
Cash and due from banks	$	27,072		$	47,625
Federal funds sold	25,000			10,000
Investment securities available for sale (amortized cost of $203,360 and $173,265, respectively)	208,753			174,885
Mortgage-backed securities available for sale (amortized cost of $2,527 and $3,274, respectively)	2,558			3,267
Loans receivable:
Commercial	300,438			271,784
Residential mortgage	463,834			345,643
Home equity	35,710			27,128
Other	568			518
Total loans	800,550			645,073
Less: allowance for loan losses	(9,309		)	(7,342		)
Net loans	791,241			637,731
Stock in the Federal Home Loan Bank of Boston	6,034			4,830
Premises and equipment, net	8,226			6,841
Excess of cost over net assets acquired, net	17,339			18,371
Fees receivable	6,822			6,816
Accrued interest receivable	6,879			6,305
Other assets	16,991			6,515
Total assets	$	1,116,915		$	923,186
Liabilities:
Deposits	$	797,111		$	665,047
FHLB borrowings	120,686			90,172
Securities sold under agreements to repurchase	55,231			49,706
Accrued interest payable	2,833			1,998
Other liabilities	26,844			16,646
Total liabilities	1,002,705			823,569
Stockholders’ equity:
Common stock, $1.00 par value per share; authorized:  30,000,000 shares issued: 16,441,855 shares at September 30, 2001 and 16,210,636 shares at December 31, 2000	16,442			16,211
Additional paid-in capital	59,992			57,456
Retained earnings	34,305			25,064
Stock subscriptions receivable	--			(146		)
Accumulated other comprehensive income	3,471			1,032
Total stockholders’ equity	114,210			99,617
Total liabilities and stockholders’ equity	$	1,116,915		$	923,186

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2001			2000		2001			2000
	(In thousands, except share and per share data)
Interest and dividend income:
Loans	$	14,133		$	11,337	$	40,556		$	30,224
Taxable investment securities	1,543			899		4,347			2,284
Non-taxable investment securities	1,002			505		3,250			1,315
Mortgage–backed securities	39			61		135			196
FHLB stock dividends	76			96		262			264
Federal funds sold and other	610			660		2,544			1,826
Total interest and dividend income	17,403			13,558		51,094			36,109
Interest expense:
Deposits	5,444			5,592		17,506			14,160
FHLB borrowings	1,724			1,123		4,805			3,403
Securities sold under agreements to repurchase	442			346		1,240			933
Federal funds purchased and other	4			9		4			8
Interest on other short term borrowings	--			60		1			70
Total interest expense	7,614			7,130		23,556			18,574
Net interest income	9,789			6,428		27,538			17,535
Provision for loan losses	750			500		1,900			1,300
Net interest income after provision for loan losses	9,039			5,928		25,638			16,235
Fees and other income:
Investment management and trust	8,838			8,012		27,021			21,753
Financial planning fees	1,120			947		3,195			2,585
Equity in earnings (losses) of partnerships	(49		)	38		(161		)	(203		)
Deposit account service charges	122			77		332			207
Gain on sale of loans	362			26		697			36
Gain on sale of investment securities	530			27		1,691			27
Cash administration fees	314			--		886			--
Other	342			154		683			419
Total fees and other income	11,579			9,281		34,344			24,824
Operating expense:
Salaries and employee benefits	10,486			7,657		29,548			21,066
Occupancy and equipment	1,512			1,225		4,532			3,482
Professional services	598			671		2,228			1,484
Marketing and business development	627			477		2,280			1,565
Contract services and processing	349			374		1,298			1,092
Merger expenses	--			--		139			--
Amortization of intangibles	345			204		1,034			437
Other	1,063			815		2,869			2,097
Total operating expense	14,980			11,423		43,928			31,223
Income before income taxes	5,638			3,786		16,054			9,836
Income tax expense	1,596			1,183		4,713			3,004
Net income	$	4,042		$	2,603	$	11,341		$	6,832
Per share data:
Basic earnings per share	$	0.25		$	0.21	$	0.69		$	0.55
Diluted earnings per share	$	0.23		$	0.20	$	0.66		$	0.53
Average common shares outstanding	16,419,765			12,601,624		16,354,511			12,418,254
Average diluted shares outstanding	17,275,134			13,211,612		17,178,176			12,907,097

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDARIES

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Stock Subscriptions			Accumulated Comprehensive Income (Loss)			Total
	(In thousands, except share data)
Balance at December 31, 1999	$	12,246	$	12,744	$	16,815		$	(320)		$	(1,239)		$	40,246
Net income	--		--		6,832			--			--			6,832
Comprehensive income, net:
Change in unrealized gain (loss) on securities available for sale	--		--		--			--			455			455
Total comprehensive income														7,287
Dividends paid to shareholders					(1,052		)							(1,052		)
Proceeds from issuance of 3,935,294 shares of common stock	3,777		43,978		--			--			--			47,755
Stock options exercised	158		442		--			--			--			600
Stock subscription payments	--		--		--			170			--			170
S corporation dividends paid					(363		)							(363		)
Balance at September 30, 2000	$	16,181	$	57,164	$	22,232		$	(150	)	$	(784	)	$	94,643
Balance at December 31, 2000	$	16,211	$	57,456	$	25,064		$	(146	)	$	1,032		$	99,617
Net income	--		--		11,341			--			--			11,341
Comprehensive income, net:
Change in unrealized gain (loss) on securities available for sale	--		--		--			--			2,439			2,439
Total comprehensive income														13,780
Dividends paid to shareholders	--		--		(1,695		)	--			--			(1,695		)
Proceeds from issuance of 61,038 shares of common stock	61		1,159		--			--			--			1,220
Stock options exercised	170		1,377		--			--			--			1,547
Stock subscription payments	--		--		--			146			--			146
S corporation dividends paid	--		--		(405		)	--			--			(405		)
Balance at September 30, 2001	$	16,442	$	59,992	$	34,305		$	--		$	3,471		$	114,210

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

		Nine Months Ended September 30,
		2001			2000
		(In thousands)
Cash flows from operating activities:
Net income		$	11,341		$	6,832
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		(586		)	1,918
Gain on sale of loans		(697		)	(37		)
Gain on sale of investment securities		(1,691		)	(27		)
Provision for loan losses		1,900			1,300
Distributed (undistributed) earnings of partnership investments		171			2,259
Loans originated for sale		(72,725		)	(1,904		)
Proceeds from sale of loans		73,422			1,941
(Increase) decrease in:
Fees receivable		(6		)	(385		)
Accrued interest receivable		(574		)	(1,157		)
Other assets	��	(12,020		)	(561		)
Increase (decrease) in:
Accrued interest payable		835			250
Other liabilities		10,198			1,532
Net cash provided (used) by operating activities		9,568			11,961
Cash flows from investing activities:
Net decrease (increase) in federal funds sold		(15,000		)	(62,000		)
Investment securities available for sale:
Purchases		(133,915		)	(68,507		)
Sales		--			--
Maturities		107,978			31,120
Mortgage-backed securities available for sale:
Sales		--			--
Principal payments		740			2,015
Net decrease (increase) in loans		(155,111		)	(137,294		)
Purchase of FHLB stock		(1,204		)	--
Recoveries on loans previously charged off		67			116
Capital expenditures		(2,592		)	(2,454		)
Cash and cash equivalents for acquisition		--			(9,254		)
Net cash provided (used) by investing activities		(199,037		)	(244,245		)
Cash flows from financing activities:
Net increase (decrease) in deposits		132,064			228,280
Net increase (decrease) in repurchase agreements		5,525			12,059
Net increase (decrease) in federal funds purchased		--			--
FHLB advance proceeds		41,000			3,000
FHLB advancerepayments		(10,486		)	(18,350		)
Proceeds from stock subscriptions receivable		146			170
Dividends paid to stockholders		(1,695		)	(1,052		)
S-corporation dividends paid		(405		)	(363		)
Proceeds from issuance of common stock		2,767			45,384
Net cash provided (used) by financing activities		168,916			269,128
Net increase (decrease) in cash and due from banks		(20,553		)	36,844
Cash and due from banks at beginning of year		47,625			11,661
Cash and due from banks at end of period		$	27,072		$	48,505
Supplementary disclosures of cash flow information:
Cash paid during the period for interest		$	22,721		$	18,333
Cash paid during the period for income taxes		5,964			3,674

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1)   Basis of Presentation

        The consolidated financial statements of Boston Private Financial Holdings, Inc. (the “Company”) include the accounts of the Company and its wholly-owned subsidiaries, Boston Private Bank & Trust Company (the “Bank”), Boston Private Investment Management, Inc. (“BPIM”), RINET Company, Inc, (“RINET”), Sand Hill Advisors, Inc, (“Sand Hill”) and Boston Private Value Investors (“BPVI”).  The Bank’s consolidated financial statements include the accounts of its wholly-owned subsidiaries, BPB Securities Corporation, Boston Private Asset Management Corporation, and Boston Private Preferred Capital Corporation.  BPIM’s consolidated financial statements include the accounts of its wholly owned subsidiary, Westfield Capital Management Company (“Westfield”). All significant intercompany accounts and transactions have been eliminated in consolidation.

        In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from these estimates.  Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses.  In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties.

        The unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, 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 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 December 31, 2000 Annual Report to Shareholders.  Certain prior year information has been reclassified to conform to current year presentation.

(2)   Earnings Per Share

        Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.  The earnings per share calculation is based upon the weighted average number of common shares and common share equivalents outstanding during the period.  Stock options, when dilutive, are included as common stock equivalents using the treasury stock method.

        The following tables are a reconciliation of the numerators and denominators of basic and diluted earnings per share computations:

	Three Months Ended					Three Months Ended
	September 30,					September 30,
	2001					2000
				Per					Per
				Share					Share
	Income		Shares	Amount		Income		Shares	Amount
	(In  thousands, except per share amounts)
Basic EPS
Net Income	$	4,042	16,420	$	0.25	$	2,603	12,602	$	0.21
Effect of Dilutive Securities
Stock Options	--		855			--		610
Diluted EPS
Net Income	$	4,042	17,275	$	0.23	$	2,603	13,212	$	0.20

	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2001						2000
					Per						Per
					Share						Share
	Income			Shares	Amount		Income		Shares		Amount
	(In  thousands, except per share amounts)
Basic EPS
Net Income	$	11,341	16,355		$	0.69	$	6,832	12,418	$		0.55
Effect of Dilutive Securities
Stock Options	--		823				--		489
Diluted EPS
Net Income	$	11,341	17,178		$	0.66	$	6,832	12,907	$		0.53

(3)   Business Segments

Management Reporting

        The Company has five reportable segments, the Bank, Westfield, RINET, Sand Hill and BPVI.  The financial performance of the Company is managed and evaluated by business segment.  The segments are managed separately because each business is an individual company with different clients, employees, systems, risks, and marketing strategies.

Description of Business Segments

        The Bank pursues a “private banking” business strategy and is principally engaged in providing banking, investment and fiduciary products to high net worth individuals, their families and businesses in the greater Boston area and New England. The Bank offers its clients a broad range of basic deposit services, including checking and savings accounts with automated teller machine (“ATM”) access, and cash management services through sweep accounts and repurchase agreements.  The Bank also offers commercial, residential mortgage, home equity and consumer loans.  In addition, it provides investment advisory and asset management services, securities custody and safekeeping services, and trust and estate administration.  The Bank's investment management emphasis is on large-cap equity and actively managed fixed income portfolios.

        Westfield serves the investment management needs of high net worth individuals and institutions with endowments or retirement plans in the greater Boston area, New England, and other areas of the U.S. Westfield specializes in growth equity portfolios, and also acts as the investment manager for seven limited partnerships.  Its investment services include a particular focus on identifying and managing small and mid-cap equity positions as well as balanced growth accounts.

        RINET provides fee-only financial planning, tax planning and asset allocation services to high net worth individuals and their families in the greater Boston area, New England, and other areas of the U.S.  Its capabilities include tax planning and preparation, asset allocation, estate planning, charitable planning, planning for employment benefits, including 401(k) plans, alternative investment analysis and mutual fund investing.  It also provides an independent mutual fund rating service.

Sand Hill provides investment management services to high net worth individuals primarily in Silicon Valley and Northern California.  Sand Hill specializes in balanced portfolios with an equity discipline, and also uses its expertise to plan and execute diversification programs for concentrated stock positions.

        BPVI serves the investment management needs of high net worth individuals primarily in New England and the Northeast.  The firm is a large-cap value style investor headquartered in Concord, NH, with an office at 10 Post Office Square in Boston, MA.

Measurement of Segment Profit and Assets

        The accounting policies of the segments are the same as those described in the summary of significant accounting policies.  Revenues, expenses, and assets are recorded by each segment, and management reviews separate financial statements.  In addition to direct expenses, each business segment is allocated a share of holding company expenses based on the segment's percentage of consolidated net income.  Sand Hill was acquired in a business combination accounted for as a purchase; accordingly information pertaining to Sand Hill is excluded from the segment disclosures prior to August 31, 2000.

Reconciliation of Reportable Segment Items

        The following tables are a reconciliation of the revenues, net income, assets, and other significant items of reportable segments as of and for the quarters ended September 30, 2001 and 2000.

	For the three months ended September 30, 2001
	Bank				Westfield			RINET			SHA					BPVI			Other	Intersegm						Total
	(In thousands)
Income Statement Data:
Revenues from External Customers:
Net Interest Income	$	9,770	$	25		$	-		$	13			$	6			$	2		$			(27	)	$			9,789
Non-Interest Income	4,039		4,238			1,125			1,184				992				1			-					11,579
Total Revenues	13,809		4,263			1,125			1,197				998				3			(27				)	21,368
Provision for Loan Losses	750		-			-			-				-				-			-					750
Non-Interest Expense	8,791		3,146			982			1,413				645				3			-					14,980
Income Taxes	1,008		467			58			(89			)	152				-			-					1,596
Segment Profit	$	3,260	$	650		$	85		$	(127		)	$		201		-			$	(27			)	$		4,042
Balance Sheet Data:
Total Segment Assets	$	1,087,803	$			$	2,061		$				$		1,983		$			$		(25,393		)	$

	For the three months ended September 30, 2000
	Bank		Westfield			RINET			SHA			BPVI			Other			Intersegm				Total
	(In thousands)
Income Statement Data:
Revenues from External Customers:
Net Interest Income	$	6,490		$	23		$	-		$	-		$	-		$	(62	)	$	(23	)		$	6,428
Non-Interest Income	2,701			4,202			938			431			1,008			1			-				9,281
Total Revenues	9,191			4,225			938			431			1,008			(61		)	(23		)		15,709
Provision for Loan Losses	500			-			-			-			-			-			-				500
Non-Interest Expense	6,567			2,885			772			368			892			(61		)	-				11,423
Income Taxes	525			550			68			26			14			-			-				1,183
Segment Profit	$	1,599		$	790		$	98		$	37		$	102		-			$	(23	)		$	2,603
Balance Sheet Data:
Total Segment Assets	$			$	9,268		$	1,762		$			$	2,476		$			$	(32,679	)		$	853,997

        The following tables are a reconciliation of the revenues, net income, assets, and other significant items of reportable segments as of and for the year to date periods ended September 30, 2001 and 2000.

	For the nine months ended September 30, 2001
	Bank			Westfield			RINET			SHA			BPVI		Other		Intersegm					Total
	(In thousands)
Income Statement Data:
Revenues from External Customers:
Net Interest Income	$	27,468	$		61	$		(10	)	$	52		$	18	$	16		$	(67	)	$		27,538
Non-Interest Income	11,361		13,184			3,210				3,597			2,988		4			-			34,344
Total Revenues	38,829		13,245			3,200				3,649			3,006		20			(67		)	61,882
Provision for Loan Losses	1,900		-			-				-			-		-			-			1,900
Non-Interest Expense	25,641		9,584			2,743				3,790			2,150		20			-			43,928
Income Taxes	2,653		1,529			187				(58		)	402		-			-			4,713
Segment Profit	$	8,635	$		2,132	$		270		$	(83	)	$	454	-			$	(67	)	$		11,341
Balance Sheet Data:
Total Segment Assets	$	1,087,803	$		9,748	$		2,061		$			$	1,983	$			$	(25,393	)	$

	For the nine months ended September 30, 2000
	Bank		Westfield		RINET		SHA		BPVI		Other			Intersegm			Total
	(In thousands)
Income Statement Data:
Revenues from External Customers:
Net Interest Income	$	17,597	$	62	$	1	$	-	$	-	$	(62	)	$	(63	)	$	17,535
Non-Interest Income	7,642		11,007		2,585		431		3,156		3			-			24,824
Total Revenues	25,239		11,069		2,586		431		3,156		(59		)	(63		)	42,359
Provision for Loan Losses	1,300		-		-		-		-		-			-			1,300
Non-Interest Expense	18,304		7,761		2,108		368		2,741		(59		)	-			31,223
Income Taxes	1,373		1,358		195		26		52		-			-			3,004
Segment Profit	$	4,262	$	1,950	$	283	$	37	$	363	-			$	(63	)	$	6,832
Balance Sheet Data:
Total Segment Assets	$		$	9,268	$	1,762	$		$	2,476	$			$	(32,679	)	$

(4) Recent Accounting Developments

During July, 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that all business combinations consummated after June 30, 2001 be accounted for under a single accounting method -- the purchase method.  Use of the pooling-of-interests method for transactions initiated after June 30, 2001 will no longer be permitted.  Statement 142 requires that goodwill no longer be amortized to earnings. This includes existing goodwill, i.e., goodwill already recorded in the financial statements, as well as goodwill arising from business combinations consummated subsequent to the effective date of the statement. The amortization of goodwill ceases upon adoption of the Statement, which for calendar year-end companies, will be January 1, 2002.  At September 30, 2001 the company had $17.4 million of goodwill on the balance sheet that is being amortized at $1.4 million per year.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the Quarter Ended September 30, 2001

The discussions set forth below and elsewhere herein contain certain statements that may be considered 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. All statements, other than statements of historical facts, including statements regarding our strategy, effectiveness of investment programs, expectations as to growth in assets, deposits and results of operations, success of acquisitions, future operations, market position, financial position, and prospects, plans and objectives of management are forward-looking statements.   The Company’s actual results could differ materially from those projected in the forward-looking statements as the result of, among other factors, changes in interest rates, changes in the securities or financial markets, a deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers’ ability to service and repay our loans, changes in loan defaults and charge-off rates, reduction in deposit levels necessitating increased borrowing to fund loans and investments, the risk that difficulties will arise in connection with the integration of the operations of acquired businesses with the operations of our banking or investment management businesses, the passing of adverse government regulation, changes in assumptions used in making such forward looking statements, as well as those factors set forth below under the heading “Risk Factors and Factors Affecting Forward-Looking Statements.”  These forward-looking statements are made as of the date of this report and the company does not intent or undertake to update any such forward-looking statement.

General

        Boston Private Financial Holdings, Inc. is incorporated under the laws of the Commonwealth of Massachusetts and is registered with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). On July 1, 1988, the Company became the parent holding company of Boston Private Bank & Trust Company, a trust company chartered by the Commonwealth of Massachusetts and insured by the Federal Deposit Insurance Corporation (the “FDIC”).

        During 1997, the Company merged with Westfield, a Massachusetts corporation engaged in providing a range of investment management services to individual and institutional clients.  During October 1999, the Company merged with RINET, a Massachusetts corporation engaged in providing financial planning and asset allocation services to high net worth individuals and families, in exchange for 765,697 newly issued shares of the Company’s common stock.  On February 28, 2001 the Company merged with Boston Private Value Investors, formerly E. R. Taylor Investments, Inc., a New Hampshire corporation engaged in providing value-style investment advisory services to the wealth management market, in exchange for 629,731 newly issued shares of the Company’s common stock.  On October 1, 2001, RINET acquired by merger Kanon Bloch Carre, a Boston-based independent mutual fund rating service and investment advisor, in exchange for 100,288 newly issued shares of the company’s common stock.  These mergers were accounted for as “pooling of interests”.  Accordingly, the results of operations of the Company reflect the financial position and results of operations including Westfield, RINET, and BPVI on a consolidated basis for all periods presented.

        On August 31, 2000, the Company acquired Sand Hill Advisors, Inc., an 18-year old investment advisory firm servicing the wealth management market, primarily in Northern California.  The estimated purchase price at closing was $16.5 million, with 70% paid at the closing, and the remainder paid in four annual payments contingent upon performance using a combination of approximately 73% cash and 27% common stock for each payment. At closing, the Company issued 258,395 shares of its common stock in connection with the transaction. This acquisition was accounted for as a “purchase of assets”.  Accordingly, the results of operations of the Company reflect the Company’s financial position and the results of operations including Sand Hill on a consolidated basis since the date of the acquisition.

        The Company conducts substantially all of its business through its wholly owned operating subsidiaries, the Bank, Westfield, RINET, Sand Hill and BPVI.  A description of each subsidiary is provided in Note 3 to the Consolidated Financial Statements.

Financial Condition

Total Assets.   Total assets increased $193.7 million, or 21.0%, to $1.1 billion at September 30, 2001 from $923.2 million at December 31, 2000.  This increase was primarily driven by deposit growth, which was used to fund new loans and purchase investment securities.

Investments.   Total investments (consisting of cash, federal funds sold, investment securities, mortgage-backed securities, and stock in the FHLB of Boston) were $269.4 million, or 24.1% of total assets, at September 30, 2001, compared to $240.6 million, or 26.1% of total assets, at December 31, 2000. Cash and fed funds sold declined $5.6 million while the investment portfolio increased by $33.2 million.  Management periodically evaluates investment alternatives to properly manage the overall balance sheet.  The timing of sales and reinvestments is based on various factors, including management’s evaluation of interest rate trends and total bank liquidity.

        The following table is a summary of investment and mortgage-backed securities available for sale as of September 30, 2001 and December 31, 2000:

	Amortize		Unrealized					Market Value
	Cost		Gains		Losses
	(in thousands)
At September 30, 2001
U.S. Government and agencies	$	78,739	$	2,501	$	--		$	81,240
Corporate bonds	37,899		700		(2		)	38,597
Municipal bonds	86,722		2,194		--			88,916
Mortgage-backed securities	2,527		31		--			2,558
Total investments	$	205,887	$	5,426	$	(2	)	$	211,311
At December 31, 2000
U.S. Government and agencies	$	74,753	$	819	$	(379	)	$	75,193
Corporate bonds	12,029		214		--			12,243
Municipal bonds	86,483		1,086		(120		)	87,449
Mortgage-backed securities	3,274		2		(9		)	3,267
Total investments	$	176,539	$	2,121	$	(508	)	$	178,152

Loans.   Total loans increased $155.5 million, or 24.1%, during the first nine months of 2001 to $800.6 million, or 71.7% of total assets, at September 30, 2001, from $645.1 million, or 69.9% of total assets, at December 31, 2000.  Both the commercial and residential mortgage loan portfolios continued to experience growth due to the Company’s strong client relationships and the demand for financing.  Commercial loans increased $28.7 million, or 10.5%, and residential mortgage loans increased $118.2 million, or 34.2%, during the first nine months of 2001.

Risk Elements.   Total non-performing assets, which consist of non-accrual loans and other real estate owned, decreased by $701,000 during the first nine months of 2001 to $1.2 million, or 0.11% of total assets, at September 30, 2001, from $1.3 million, or 0.14% of total assets, at December 31, 2000. The Company continues to evaluate the underlying collateral and value of each of its non-performing assets and pursues the collection of all amounts due.

        At September 30, 2001, loans with an aggregate balance of $548,000, or 0.07% of total loans, were 30 to 89 days past due, a decrease of $2.6 million as compared to $3.1 million, or 0.48% of total loans, as of December 31, 2000.  Most of these loans are adequately secured and management’s success in keeping these borrowers current varies from month to month.

        The Company discontinues the accrual of interest on a loan when the collectibility of principal or interest is in doubt.  In certain instances, loans that have become 90 days past due may remain on accrual status if management believes that full principal and interest due on the loan is collectible.

Allowance for Loan Losses.   The allowance for loan losses is established through a charge to operations.  When management believes that the collectibility of a loan’s principal balance is unlikely, the principal amount is charged against the allowance.  Recoveries on loans, which have been previously charged off are, credited to the allowance as received.

        The allowance for loan losses is determined using a systematic analysis and procedural discipline based on historical experience, product types, and industry benchmarks.  A system of periodic loan reviews is performed to individually assess the inherent risk and assign risk ratings to each loan.  The allowance is calculated based on management’s judgment of the effect of current and forecasted economic conditions on the borrowers’ abilities to repay, an evaluation of the allowance for loan losses in relation to the size of the overall loan portfolio, and consideration of the relationship of the allowance for loan losses to non-performing loans, net charge-off trends, and other factors.  While this evaluation process utilizes historical and other objective information, the classification of loans and the establishment of the allowance for loan losses relies to a great extent on the judgment and experience of management.

        While management evaluates currently available information in establishing the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

        The following table is an analysis of the Bank’s allowance for loan losses for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2001			2000			2001			2000
	(Dollars in thousands)						(Dollars in thousands)
Ending gross loans	$	800,550		$	587,371		$	800,550		$	587,371
Allowance for loan losses, beginning of period	$	8,521		$	6,224		$	7,342		$	5,336
Provision for loan losses	750			500			1,900			1,300
Charge- offs	(6		)	-			(17		)	(19		)
Recoveries	44			9			84			116
Allowance for loan losses, end of period	$	9,309		$	6,733		$	9,309		$	6,733
Allowance for loan losses to ending gross loans	1.16		%	1.15		%	1.16		%	1.15		%

Deposits and Borrowings.   The Company experienced an increase in total deposits of $132.1 million, or 19.9%, during the first nine months of 2001, to $797.1 million, or 71.4% of total assets, at September 30, 2001, from $665.0 million, or 72.0% of total assets, at December 31, 2000.  This increase was due to higher average balances in existing client accounts, as well as a significant number of new accounts opened during the first nine months of 2001. The following table shows the composition of the Company’s deposits at September 30, 2001 and December 31, 2000:

	September 30, 2001				December 31, 2000
	Balance		As a% of Total		Balance		As a% of Total
Demand deposits	$	90,268	11.3	%	$	111,846	16.8	%
NOW	97,747		12.3		86,868		13.0
Savings	7,772		1.0		5,997		0.9
Money Market	469,116		58.8		347,641		52.3
Certificates of deposit under $100,000	23,930		3.0		21,754		3.3
Certificates of deposit $100,000 or greater	108,278		13.6		90,941		13.7
Total	$	797,111	100.0	%	$	665,047	100.0	%

        Liquidity.   Liquidity is defined as the ability to meet current and future financial obligations of a short-term nature. The Company further defines liquidity as the ability to respond to the needs of depositors and borrowers as well as to earnings enhancement opportunities in a changing marketplace.  Primary sources of liquidity consist of investment management fees, financial planning fees, deposit inflows, loan repayments, borrowed funds, and cash flows from investment securities.  These sources fund the Company’s lending and investment activities.

        Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets.  At September 30, 2001, cash, federal funds sold and securities available for sale amounted to $263.4 million, or 23.6% of total assets of the Company.  This compares to $235.8 million, or 25.5% of total assets, at December 31, 2000.

         In general, the Bank maintains a liquidity target of 10% to 20% of total assets.  The Bank is a member of the FHLB of Boston and as such has access to both short and long-term borrowings of up to $315.2 million as of September 30, 2001.  In addition, the Bank maintains short-term lines of credit at the Federal Reserve Bank and other correspondent banks totaling $95.6 million, and has established brokered certificate of deposit lines with several institutions aggregating $120.0 million.  Management believes that at September 30, 2001, the Bank had adequate liquidity to meet its commitments for the foreseeable future.

        Westfield’s primary source of liquidity consists of investment management fees that are collected on a quarterly basis.  At September 30, 2001 Westfield had working capital of approximately $3.7 million.  Management believes that at September 30, 2001, Westfield had adequate liquidity to meet its commitments for the foreseeable future.

        RINET’s primary source of liquidity consists of financial planning fees that are collected on a quarterly basis.  At September 30, 2001 RINET had working capital of approximately $442,000. Management believes that at September 30, 2001, RINET had adequate liquidity to meet its commitments for the foreseeable future.

        Sand Hill’s primary source of liquidity consists of investment management fees that are collected on a quarterly basis.  At September 30, 2001 Sand Hill had working capital of approximately $297,000. Management believes that at September 30, 2001, Sand Hill had adequate liquidity to meet its commitments for the foreseeable future.

        BPVI’s primary source of liquidity consists of investment management fees that are collected on a quarterly basis.  At September 30, 2001 BPVI had working capital of approximately $394,000. Management believes that at September 30, 2001, BPVI had adequate liquidity to meet its commitments for the foreseeable future.

        The Company’s primary sources of funds are dividends from its subsidiaries, issuance of its Common Stock and borrowings.  Management believes that the Company has adequate liquidity to meet its commitments for the foreseeable future.

Capital Resources.   Total stockholders’ equity of the Company at September 30, 2001 was $114.2 million, or 10.2% of total assets, compared to $99.6 million, or 10.8% of total assets at December 31, 2000.   The increase was the result of the Company’s net income for the first nine months of 2001 of $11.3 million, combined with common stock issued in connection with stock grants to employees and proceeds from options exercised, less dividends paid to shareholders and the change in accumulated other comprehensive income.

        The Company is subject to various regulatory capital requirements administered by federal agencies.  Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements.  For example, under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.  Similarly, the Company is also subject to capital requirements administered by the Federal Reserve Bank with respect to certain non-banking activities, including adjustments in connection with off-balance sheet items.  The following table presents actual capital amounts and regulatory capital requirements as of September 30, 2001 and December 31, 2000:

									To Be Well
					For Capital AdequacyPurposes				Capitalized Under
	Actual								Prompt Corrective
									Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of September 30,
Total risk-based capital
Company	$	101,666	15.25	%	$	53,347	> 8.0	%	$	66,684	> 10.0	%
Bank	74,347		11.36		52,337		8.0		65,421		10.0
Tier I risk-based
Company	93,318		13.99		26,674		4.0		40,010		6.0
Bank	66,155		10.11		26,168		4.0		39,253		6.0
Tier I leverage capital
Company	93,318		8.44		44,237		4.0		55,296		5.0
Bank	66,155		6.21		43,725		4.0		54,656		5.0
As of December 31, 2000:
Total risk-based capital
Company	$	86,691	16.76	%	$	41,384	> 8.0	%	$	51,729	> 10.0	%
Bank	63,821		12.55		40,668		8.0		50,835		10.0
Tier I risk-based
Company	80,214		15.51		20,692		4.0		31,038		6.0
Bank	57,454		11.30		20,334		4.0		30,501		6.0
Tier I leverage capital
Company	80,214		9.09		35,312		4.0		44,140		5.0
Bank	57,454		6.59		34,879		4.0		43,598		5.0

Results of Operations for the Three Months Ended September 30, 2001

Net Income.   The Company recorded net income of $4.0 million, or $0.23 per diluted share, for the quarter ended September 30, 2001 compared to $2.6 million, or $0.20 per diluted share for the quarter ended September 30, 2000.    This represented a 55.3% increase in net income and a 15.0% increase in earnings per share.  The difference in growth rates between net income and earnings per share results from having issued 3.5 million shares of the Company’s common stock in September 2000 to fund expansion and business growth.

Net Interest Income.   For the quarter ended September 30, 2001, net interest income was $9.8 million, an increase of $3.4 million, or 52.3%, over the same period in 2000.  This increase was primarily attributable to an increase of $228.2 million, or 41.8%, in the average balance of earning assets. The Company’s net interest margin was 3.86% for the third quarter of 2001, an increase of 11 basis points compared to the same period last year.

Interest Income.   During the third quarter of 2001, interest income was $17.4 million, an increase of $3.8 million, or 28.4%, compared to $13.6 million for the same period in 2000.  Interest income on commercial loans increased 6.2% to $5.9 million for the quarter ended September 30, 2001, compared to $5.6 million for the same period in 2000.  Interest income from residential mortgage loans increased 48.3% to $7.7 million for the third quarter of 2001, compared to $5.2 million for the same period in 2000, and interest on home equity and other loans decreased 9.6% to $529,000 for the third quarter of 2001, compared to $585,000, for the same period in 2000. The average balance of commercial loans increased 30.9% and the average rate decreased 18.9%, or 184 basis points to 7.90% for the quarter ended September 30, 2001.   The average balance of residential mortgage loans increased 50.9%, and the average rate decreased 1.8%, or 13 basis points to 6.94% for the same period.  The average balance of home equity and other loans increased 32.6% and the average rate decreased 31.8%, or 311 basis points, to 6.66%.

        Total investment income (consisting of interest and dividend income from cash, federal funds sold, investment securities, mortgage-backed securities, and stock in the FHLB of Boston) increased $1.0 million, or 47.2%, to $3.3 million for the quarter ended September 30, 2001, compared to $2.2 million for the same period in 2000.  This increase was primarily attributable to an increase in the average balance of  $118.3 million, or 75.2%, offset by a decrease in the average yield on investments of 90 basis points, or 16.0%, to 4.74% for the quarter ended September 30, 2001.

Interest Expense.During the third quarter of 2001, interest expense was $7.6 million, an increase of $485,000, or 6.8%, compared to $7.1 million for the same period in 2000.  This increase in the Company’s interest expense was the result of an increase in the average balance of interest-bearing liabilities of $277.7 million, or 46.1%, increase between the two periods.  The average cost of interest-bearing liabilities decreased 127 basis points, or 26.9%, to 3.46% for the quarter ended September 30, 2001.

Provision for Loan Losses.  The provision for loan losses was $750,000 for the quarter ended September 30, 2001, compared to $500,000 for the same period in 2000. Management evaluates several factors including new loan originations, estimated charge-offs, and risk characteristics of the loan portfolio when determining the provision for loan losses.  These factors include the level and mix of loan growth, the level of non-accrual and delinquent loans, and the level of charge-offs and recoveries.  Also see discussion under “Financial Condition – Allowance for Loan Losses.” Net recoveries were $38,000 during the third quarter of 2001, compared to $9,000 for the same period in 2000.

Fees and Other Income.  Fees and other income increased $2.3 million, or 24.8%, to $11.6 million for the three-month period ending September 30, 2001, compared to $9.3 million for the same period in 2000. The majority of fee income was attributable to advisory fees earned on assets under management.  These fees increased $826,000, or 10.3% to $8.8 million for the third quarter of 2001, compared to $8.0 million for the same period in 2000.  Of this increase in fee income, $743,000 million, or 90.0% was due to the purchase acquisition of Sand Hill on August 31, 2000.

        Financial planning fees increased $173,000, or 18.3%, to $1.1 million for the third quarter of 2001, compared to $947,000 for the same period in 2000.Equity in losses of partnerships was $49,000 for the three months ended September 30, 2001 due to a decrease in the market value of Westfield’s general partnership interest in its hedge funds.

        Deposit account service fees increased $45,000, or 58.4%, to $122,000 for the third quarter of 2001 as a result of a larger number of deposit accounts and an increased level of transaction-based fees.  Gain on sale of investment securities was $530,000 for the third quarter of 2001.  Gain on sale of loans increased $336,000 to $362,000 for the third quarter of 2001 as a result of increased market demand for fixed rate loans, which are generally sold on the secondary market.  Cash administration fees, which consists primarily of cash management fees and liquid asset management fees, were $314,000 for the third quarter ended September 30, 2001.  Other fee income, which consists primarily of loan fees and banking fees, increased $188,000 to $342,000 for the third quarter of 2001.

Operating Expense.  Total operating expense for the third quarter of 2001 increased $3.6 million, or 31.1%, to $15.0 million compared to $11.4 million for the same period in 2000.  Of this increase, $1.4 million, or 39.7%, was due to the operating expenses of Sand Hill, and the remainder was attributable to the Company’s continued growth and expansion. The Company has experienced a 30.8% increase in total balance sheet assets and a 35.6% increase in the number of employees from September 30, 2000 to September 30, 2001. In addition, the Company opened a new banking office in Cambridge, Massachusetts on October 15, 2001.

        Salaries and benefits, the largest component of operating expense, increased $2.8 million, or 36.9%, to $10.5 million for the quarter ended September 30, 2001, from $7.7 million for the same period in 2000.  Of this increase, $415,000, or 14.8%, was due to the acquisition of Sand Hill.  The remaining increase was due to a 35.6% increase in the number of employees, a higher level of employee incentive-based compensation, normal salary increases, and the related taxes and benefits thereon.

        Occupancy and equipment expense increased $287,000, or 23.4%, to $1.5 million for the third quarter of 2001, from $1.2 million for the same period last year. Of this increase, $22,000, or 19.2% was due to the acquisition of Sand Hill. The remaining increase was primarily attributable to the increased occupancy expenses related to expansion at Ten Post Office Square, Boston, Massachusetts, and the new banking office in Cambridge, Massachusetts, as well as the Company’s continued investments in technology.

        Professional services include legal fees, consulting fees, and other professional services such as audit and tax preparation.  These expenses, excluding professional service costs associated with merger activity, decreased $73,000, or 10.9%.

        Marketing and business development increased $150,000, or 31.4%, to $627,000 for the third quarter of 2001 as a result of increased business development activity due to growth in sales staff.

        Contract services and processing includes outsourced systems, data processing and custody expense.  These expenses decreased $25,000, or 6.7%, as a result of a 10% decrease in the Bank’s assets under management.

        Amortization of intangibles increased $141,000 to $345,000 for the third quarter of 2001, from $204,000 for the same period last year due primarily to the purchase acquisition of Sand Hill on August 31, 2000.

        Other expenses include insurance, supplies, telephone, mailing expense, publications and subscriptions, employee training and other miscellaneous business expenses.  These expenses have increased $248,000, or 30.4% to $1.1 million, primarily as a result of increased business volume and an increase in the number of employees.

Income Tax Expense.  The Company recorded income tax expense of $1.6 million for the third quarter of 2001 as compared to $1.2 million for the same period last year.  The effective tax rate was 28.3% for the third quarter of 2001, compared to 31.2% for the same period in 2000.   The decrease in the Company’s effective tax rate is a result of a lower percentage of fully taxable income.

Results of Operations for the Nine Months Ended September 30, 2001

Net Income.   The Company recorded net income of $11.3 million, or $0.66 per diluted share, for the nine months ended September 30, 2001 compared to $6.8 million, or $0.53 per diluted share for the nine months ended September 30, 2000.    This represented a 66.0% increase in net income and a 24.5% increase in earnings per share.  The difference in growth rates between net income and earnings per share results from having issued 3.5 million shares of the Company’s common stock in September 2000 to fund expansion and business growth.

Net Interest Income.   For the nine months ended September 30, 2001, net interest income was $27.5 million, an increase of $10.0 million, or 57.0%, over the same period in 2000.  This increase was primarily attributable to an increase of $345.9 million, or 54.2%, in the average balance of earning assets. The Company’s net interest margin was 3.91% for the third quarter of 2001, an increase of 15 basis points compared to the same period last year.

Interest Income.   During the first nine months of 2001, interest income was $51.1 million, an increase of $15.0 million, or 41.5%, compared to $36.1 million for the same period in 2000.  Interest income on commercial loans increased 20.7% to $18.0 million for the nine months ended September 30, 2001, compared to $14.9 million for the same period in 2000.  Interest income from residential mortgage loans increased 53.0% to $20.9 million for the first nine months of 2001, compared to $13.7 million for the same period in 2000, and interest on home equity and other loans increased 0.1% to $1.6 million for the first nine months of 2001, compared to $1.6 million for the same period in 2000. These increases were primarily due to an increase in loan volume, offset by decreases in the average yield.  The average balance of commercial loans increased 35.8% and the average rate decreased 11.2%, or 106 basis points to 8.44% for the nine months ended September 30, 2001.  The average balance of residential mortgage loans increased 50.4%, and the average rate increased 1.7%, or 12 basis points to 7.05% for the same period.  The average balance of home equity and other loans increased 20.2% and the average rate decreased 16.9% or 156 basis points to 7.65%.

        Total investment income (consisting of interest and dividend income from cash, federal funds sold, investment securities, mortgage-backed securities, and stock in the FHLB of Boston) increased $4.7 million, or 79.1%, to $10.5 million for the nine months ended September 30, 2001, compared to $5.9 million for the same period in 2000.  This increase was primarily attributable to an increase in the average balance of $133.6 million, or 94.3%, offset by a decrease in the average yield on investments of 43 basis points, or 7.8% to 5.11% for the nine months ended September 30, 2001.

Interest Expense.During the first nine months of 2001, interest expense was $23.6 million, an increase of $5.0 million, or 26.8%, compared to $18.6 million for the same period in 2000.  This increase in the Company’s interest expense was the result of an increase in the average balance of interest-bearing liabilities of $273.4 million, or 49.9% increase between the two periods.  The average cost of interest-bearing liabilities decreased 15.4%, or 70 basis points to 3.82% for the nine months ended September 30, 2001.

Provision for Loan Losses.  The provision for loan losses was $1.9 million for the nine months ended September 30, 2001, compared to $1.3 million for the same period in 2000. Management evaluates several factors including new loan originations, estimated charge-offs, and risk characteristics of the loan portfolio when determining the provision for loan losses.  These factors include the level and mix of loan growth, the level of non-accrual and delinquent loans, and the level of charge-offs and recoveries.  Also see discussion under “Financial Condition – Allowance for Loan Losses.” Net recoveries were $67,000 during the first nine months of 2001, compared to $97,000 for the same period in 2000.

Fees and Other Income.  Fees and other income increased $9.5 million, or 38.3%, to $34.3 million for the nine-month period ending September 30, 2001, compared to $24.8 million for the same period in 2000. The majority of fee income was attributable to advisory fees earned on assets under management.  These fees increased $5.3 million, or 24.2% to $27.0 million for the first nine months of 2001, compared to $21.8 million for the same period in 2000.  Of this increase in fee income, $3.1 million, or 59.7% was due to the purchase acquisition of Sand Hill on August 31, 2000.

       Financial planning fees increased $610,000, or 23.6%, to $3.2 million for the first nine months of 2001, compared to $2.6 million for the same period in 2000.Equity in losses of partnerships was $161,000 for the nine months ended  September 30, 2001 due to a decrease in the market value of Westfield’s general partnership interest in its hedge funds.

        Deposit account service fees increased $125,000, or 60.4%, to $332,000 for the first nine months of 2001 as a result of a larger number of deposit accounts and an increased level of transaction-based fees.  Gain on sale of investment securities was $1.7 million for the first nine months of 2001.  Gain on sale of loans increased $661,000 to $697,000 for the first nine months of 2001 as a result of increased market demand for fixed rate loans which are generally sold on the secondary market. Cash administration fees, which consists primarily of cash management fees and liquid asset management fees, were $886,000 for the nine months ended September 30, 2001.  Other fee income, which consists primarily of loan fees and banking fees, increased $264,000 to $683,000 for the first nine months of 2001.

Operating Expense.  Total operating expense for the first nine months of 2001 increased $12.7 million, or 40.7% to $43.9 million compared to $31.2 million for the same period in 2000.  Of this increase, $3.8 million, or 29.8% was due to the operating expenses of Sand Hill, and the remainder was attributable to the Company’s continued growth and expansion. The Company has experienced a 30.8% increase in total balance sheet assets, and a 35.6% increase in the number of employees from September 30, 2000 to September 30, 2001. In addition, the Company opened new banking offices on  May 1, 2000 and on October 15, 2001.

        Salaries and benefits, the largest component of operating expense, increased $8.5 million, or 40.3%, to $29.5 million for the nine months ended September 30, 2001, from $21.1 million for the same period in 2000.  Of this increase, $2.2 million or 25.6% was due to the acquisition of Sand Hill.  The remaining increase was due to a 35.6% increase in the number of employees, a higher level of employee incentive-based compensation, normal salary increases, and the related taxes and benefits thereon.

        Occupancy and equipment expense increased $1.1 million, or 30.2%, to $4.5 million for the first nine months of 2001, from $3.5 million for the same period last year. Of this increase, $77,000, or 7.3% was due to the acquisition of Sand Hill. The remaining increase was primarily attributable to the increased occupancy expenses related to expansion at Ten Post Office Square, Boston, Massachusetts, and the new banking offices in the Back Bay area of Boston and in Cambridge, Massachusetts, as well as the Company’s continued investments in technology.

        Professional services include legal fees, consulting fees, and other professional services such as audit and tax preparation.  These expenses increased $744,000, or 50.1% due to legal and consulting expenses incurred for strategic projects during the first nine months of 2001, as well as higher audit fees as a result of the Company’s continued growth.

        Marketing and business development increased $715,000, or 45.7%, to $2.3 million for the first nine months of 2001 as a result of increased business development activity due to growth in sales staff.

        Contract services and processing expenses increased $206,000, or 18.9%, as a result of increased service and volume-related charges for processing banking transactions and maintaining custody of client assets under management.

        Merger expenses of $139,000 for the first nine months of 2001 were a result of the pooling acquisition of BPVI on February 28, 2001.

        Amortization of intangibles increased $597,000 to $1.0 million for the first nine months of 2001, from $437,000 for the same period last year due primarily to the purchase acquisition of Sand Hill on August 31, 2000.

        Other expenses include insurance, supplies, telephone, mailing expense, publications and subscriptions, employee training and other miscellaneous business expenses.  These expenses have increased $772,000, or 36.8%, to $2.9 million primarily as a result of increased business volume and an increase in the number of employees.

Income Tax Expense.  The Company recorded income tax expense of $4.7 million for the first nine months of 2001 as compared to $3.0 million for the same period last year.  The effective tax rate was 29.4% for the first nine months of 2001, compared to 30.5% for the same period in 2000.   The decrease in the Company’s effective tax rate is a result of a lower percentage of fully taxable income.

Risk Factors and Factors Affecting Forward-Looking Statements

This Quarterly Report, including the information incorporated herein by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  The Company’s actual results could differ materially from those projected in the forward-looking statements set forth in this Report including the information incorporated herein by reference.  Factors which may cause such a material difference include those set forth below.  Investors in the Company’s common stock should carefully consider the discussion of risk factors below, in addition to the other information contained in this Quarterly Report.  These forward-looking statements are made as of the date of this report and the company does not undertake to update any such forward-looking statement.

We May Not Be Able to Attract and Retain Banking Customers at Current Levels

Competition in the local banking industry coupled with our relatively small size may limit the ability of the Bank to attract and retain banking customers.  The Bank faces competition from the following:

•      other banking institutions (including larger Boston and suburban commercial banking organizations);

•       savings banks;

•       credit unions;

•       other financial institutions; and

•       non–bank financial service companies serving eastern Massachusetts and adjoining areas.

In particular, the Bank’s competitors include several major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.  Areas of competition include interest rates for loans and deposits, efforts to obtain deposits and range and quality of services provided.

Because the Bank maintains a smaller staff and has fewer financial and other resources than larger institutions with which it competes, it may be limited in its ability to attract customers.  In addition, some of the Bank’s current commercial banking customers may seek alternative banking sources as they develop needs for credit facilities larger than the Bank can accommodate.

        If the Bank is unable to attract and retain banking customers, it may be unable to continue its loan growth and its results of operations and financial condition may otherwise be negatively impacted.  In as much as the Bank is our sole banking subsidiary, its financial performance is very significant to our overall results of operations and financial condition.

We May Not Be Able to Attract and Retain Investment Management Clients at Current Levels

Due to the intense local competition and our relatively short history and limited record of performance in the investment management business, the Bank and our investment management subsidiaries, Westfield, Sand Hill, RINET and BPVI, may not be able to attract and retain investment management clients at current levels.

In the investment management industry, we compete primarily with the following:

•       commercial banks and trust companies;

•       mutual fund companies;

•       investment advisory firms;

•       stock brokerage firms;

•       law firms; and

•       other financial services companies.

Competition is especially keen in our geographic market area, because there are numerous well-established and successful investment management firms in Boston, New England and in Northern California.  Many of our competitors have greater resources than we have.

Our ability to successfully attract and retain investment management clients is dependent upon the ability of each to compete with its competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.  If we are not successful, our results from operations and financial position may be negatively impacted.

In addition, our ability to retain investment management clients may be impaired by the fact that our investment management contracts are typically short-term in nature.  Approximately 46% of our revenues are derived from investment management contracts which are typically terminable upon less than 30 days’ notice.  Most of our clients may withdraw funds from accounts under management generally in their sole discretion.

Moreover, Westfield receives performance–based fees resulting from its status as general partner or investment manager of seven limited partnership investment funds.  The amount of these fees is impacted directly by the investment performance of Westfield.  As a result, the future revenues from such fees may fluctuate and may be affected by conditions in the capital markets and other general economic conditions.  Westfield, Sand Hill, and BPVI are our major investment management subsidiaries, and their financial performance is a significant factor in our overall results of operations and financial condition.

Our stock price may decline if we are unable to complete our proposed merger with Borel Bank & Trust Company or if the terms of the merger need to be modified to close the transaction.

Our proposed merger with Borel is subject to the receipt of several approvals and consents, including approvals from both our stockholders and the stockholders of Borel as well as several regulatory approvals.  In addition, Borel has the right to terminate the transaction if the average price of our common stock declines below $14.238 over a defined measurement period prior to the closing of the transaction and the Philadelphia/KBW Bank Index outperforms our common stock price by fifteen percent (15%) over approximately the same period.  If Borel elects to terminate the transaction on this basis, we do have the right to increase the number of shares of our common stock to be issued to the current Borel stockholders to complete the transaction.  Our stock price may experience a substantial decline if we are unable to close this transaction for any reason or have to increase the number of shares of our common stock to be issued to close this transaction.

Unanticipated costs relating to the merger with Borel could reduce our future earnings per share.

We believe that we have reasonably estimated the likely costs of our proposed merger with Borel.  However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of our operations and financial condition after the merger.  If unexpected costs are incurred, the merger could have a significant dilutive effect on our earnings per share.  In other words, if the merger is completed and these unanticipated costs are incurred, we believe that the earnings per share of our common stock could be less than they would have been if the merger had not been completed.

A large damage award in a lawsuit pending against Borel could have a significant adverse impact on our business and financial condition.

Since 1984, Borel has served as the trustee of a private trust which has been the subject of protracted litigation. During the last seven years there have been three actions filed in the Superior Court for San Mateo County, California by certain beneficiaries of the trust relating to the management and proposed sale of certain real property. These beneficiaries have claimed, among other things, that Borel breached its fiduciary duties as the trustee. Borel has prevailed in the first action and final judgment has been entered in its favor.  Borel has prevailed in the trial court in the second action; however, the appeals court has remanded that case to the trial court for limited further proceedings. The third case has been held in abeyance by the trial court for several years pending disposition of the first two matters. In their complaint in the third case, the plaintiffs claimed $234,200,000 in damages, but the calculation of damages in the complaint is inconsistent with the total amounts claimed.  Moreover, the plaintiffs have never substantiated nor provided any evidence of damages in such amounts.  While the ultimate results of these proceedings cannot be predicted with certainty, at the present time, Borel’s management’s position, based on consultation with its legal counsel, is that there is no basis to conclude that liability with respect to these matters is probable and there is no basis for determining their potential impact, if any, on Borel’s business and financial condition.  Adverse developments in these lawsuits could have a material adverse effect on the combined business and financial condition of Borel and the Company following the completion of the proposed merger.

Defaults in the Repayment of Loans May Negatively Impact Our Business

Defaults in the repayment of loans by the Bank’s customers may negatively impact its business.  A borrower’s default on its obligations under one or more of the Bank’s loans may result in lost principal and interest income and increased operating expenses as a result of the allocation of management time and resources to the collection and work-out of the loan.

In certain situations, where collection efforts are unsuccessful or acceptable workout arrangements cannot be reached, the Bank may have to write-off the loan in whole or in part.  In such situations, the Bank may acquire any real estate or other assets, if any, which secure the loan through foreclosure or other similar available remedies.  In such cases, the amount owed under the defaulted loan often exceeds the value of the assets acquired.

The Bank’s management periodically makes a determination of an allowance for loan losses based on available information, including the quality of its loan portfolio, certain economic conditions, the value of the underlying collateral and the level of its non-accruing loans.  Provisions to this allowance result in an expense for the period.  If, as a result of general economic conditions or an increase in defaulted loans, management determines that additional increases in the allowance for loan losses are necessary, the Bank will incur additional expenses.

In addition, bank regulatory agencies periodically review the Bank’s allowance for loan losses and the values it attributes to real estate acquired through foreclosure or other similar remedies.  Such regulatory agencies may require the Bank to adjust its determination of the value for these items.  These adjustments could negatively impact the Bank’s results of operations or financial position.

A Downturn in the Local Economy or Real Estate Market Could Negatively Impact Our Banking Business

A downturn in the local economy or real estate market could negatively impact our banking business.  Because the Bank serves primarily individuals and smaller businesses located in eastern Massachusetts and adjoining areas, with a particular concentration in the Greater Boston Metropolitan Area, the ability of the Bank’s customers to repay their loans is impacted by the economic conditions in these areas.  In particular, current negative economic trends, including the possibility of a recession, increased unemployment and recently announced layoffs of employees located in New England, as well as increased economic uncertainty created by the September 11, 2001 terrorist attacks on the World Trade Center and the Pentagon, and the United States’ war on terrorism in Afghanistan and elsewhere, will likely negatively impact businesses in those areas.  We are currently uncertain as to the extent of such an impact or whether such an impact would harm the Bank’s business.  The Bank’s commercial loans are generally concentrated in the following customer groups:

•       real estate developers and investors;

•       financial service providers;

•       technology companies;

•       manufacturing and communications companies;

•       professional service providers;

•       general commercial and industrial companies; and

•       individuals.

The Bank’s commercial loans, with limited exceptions, are secured by either real estate (usually, income producing residential and commercial properties), marketable securities or corporate assets (usually, accounts receivable, equipment or inventory).  Substantially all of the Bank’s residential mortgage and home equity loans are secured by residential property in eastern Massachusetts.  As a result, conditions in the real estate market specifically, and the Massachusetts economy generally, can materially impact the ability of the Bank’s borrowers to repay their loans and affect the value of the collateral securing these loans.

We may be unable to successfully integrate Borel’s operations and retain key Borel employees.

The merger involves the integration of two companies, each with a separate emphasis, that have previously operated independently.  The difficulties of combining the companies’ operations include: coordinating geographically separated organizations, combining Borel’s business, which emphasizes commercial banking, with our business, which includes a greater percentage of investment management and trust operations, combining different corporate cultures, and retaining key employees.

                The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses and the loss of key personnel.  The integration of the two companies will require the experience and expertise of certain key employees of Borel that we expect to retain.  There can be no assurances, however, that we will be successful in retaining these employees for the time period necessary to successfully integrate Borel’s operations with ours.  The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on the business and results of operations of the combined company.

If the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits.

We have incurred substantial expenses in connection with the proposed merger with Borel. If the merger is not completed, we expect to incur approximately $980,000 to $2 million in merger related expenses excluding any termination fees, if applicable.  These expenses may have a material adverse impact on the results of our operations and financial condition because we would not have realized the expected benefits of the merger.  There can be no assurance that the merger will be completed.

Even if the merger is completed, because the merger is being accounted for as a pooling of interests, we will record all merger–related expenses on the combined company’s income statement for the quarter and the year in which the merger is completed, resulting in a significant reduction in actual earnings per share for those periods.

The merger with Borel may not be able to be accounted for as a pooling of interests business combination.

                We intend to account for the merger as a pooling of interests business combination and, as a condition to closing, each of Borel and the Company anticipates receiving letters from their respective accountants confirming the availability of “pooling-of-interests” accounting treatment for the merger.  However, such accounting method may not be available and Borel and the Company may waive the receipt of these accountants’ letters as a condition to closing.  Failure to account for the merger as a pooling of interests business combination could have a material adverse effect on our financial results.

Fluctuations in Interest Rates May Negatively Impact Our Banking Business

Fluctuations in interest rates may negatively impact the business of the Bank.  The Bank’s main source of income from operations is net interest income, which is equal to the difference between the interest income received on interest-bearing assets (usually, loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (usually, deposits and borrowings).  The Bank’s net interest income can be affected significantly by changes in market interest rates.  In particular, changes in relative interest rates may reduce the Bank’s net interest income as the difference between interest income and interest expense decreases.  As a result, the Bank has adopted asset and liability management policies to minimize the potential adverse effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of loans, investments and funding sources.  However, even with these policies in place, changes in interest rates may negatively impact the Bank’s results of operations and financial position.

An increase in interest rates could also have a negative impact on the Bank’s results of operations by reducing the ability of borrowers to repay their current loan obligations, which could not only result in increased loan defaults, foreclosures and write-offs, but also necessitate further increases to the Bank’s allowance for loan losses.

Our Cost of Funds for Banking Operations May Increase as a Result of General Economic Conditions, Interest Rates and Competitive Pressures

Our cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures.  The Bank has traditionally obtained funds principally through deposits and through borrowings.  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.  Historically and in comparison to commercial banking averages, the Bank has had a higher percentage of its time deposits in denominations of $100,000 or more.  Within the banking industry, the amounts of such deposits are generally considered more likely to fluctuate than deposits of smaller denominations.  If as a result of general economic conditions, market interest rates, competitive pressures or otherwise, the value of deposits at the Bank decreases relative to its overall banking operations, the Bank may have to rely more heavily on borrowings as a source of funds in the future.

Our Investment Management Business May Be Negatively Impacted by Changes in Economic and Market Conditions

Our investment management business may be negatively impacted by changes in general economic and market conditions because the performance of such business is directly affected by conditions in the financial and securities markets.

The financial markets and the investment management industry in general have experienced record performance and record growth in recent years.  The financial markets and businesses operating in the securities industry, however, are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, all of which are beyond our control.  We cannot assure you that broad market performance will be favorable in the future. In particular, the financial and securities markets have experienced a significant downturn since March 2000.  This decline has impacted our investment management business, in particular, performance fees we earn on mutual funds for which Westfield acts as subadvisor.  In addition, following the September 11, 2001 terrorist attacks on the World Trade Center and the Pentagon, the world financial and securities markets experienced and will likely continue to experience significant volatility as result of, among other things, world economic and political conditions.  Continued decline in the financial markets or a lack of sustained growth may result in a corresponding decline in our performance and may adversely affect the assets which we manage.

In addition, Westfield’s, Sand Hill’s, and BPVI’s management contracts generally provide for fees payable for investment management services based on the market value of assets under management, although a portion of Westfield’s contracts also provide for the payment of fees based on investment performance.  Because most contracts provide for a fee based on market values of securities, fluctuations in securities prices may have a material adverse effect on our results of operations and financial condition.

Our Investment Management Business Is Highly Regulated

Our investment management business is highly regulated, primarily at the federal level.  The failure of any of our subsidiaries that provide investment management services to comply with applicable laws or regulations could result in fines, suspensions of individual employees or other sanctions, including revocation of such subsidiary’s registration as an investment adviser.

Specifically, five of our subsidiaries, including Westfield, Sand Hill, and RINET, BPVI are registered investment advisers under the Investment Advisers Act.  The Investment Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary, record keeping, operational and disclosure obligations.  These subsidiaries, as investment advisers, are also subject to regulation under the federal and state securities laws and the fiduciary laws of certain states.  In addition, Westfield acts as a sub-adviser to a mutual fund which is registered under the 1940 Act and is subject to that act’s provisions and regulations.

We are also subject to the provisions and regulations of ERISA to the extent we act as a “fiduciary” under ERISA with respect to certain of our clients.  ERISA and the applicable provisions of the federal tax laws, impose a number of duties on persons who are fiduciaries under ERISA and prohibit certain transactions involving the assets of each ERISA plan which is a client of ours, as well as certain transactions by the fiduciaries (and certain other related parties) to such plans.

In addition, applicable law provides that all investment contracts with mutual fund clients may be terminated by the clients, without penalty, upon no later than 60 days’ notice.  Investment contracts with institutional and other clients are typically terminable by the client, also without penalty, upon 30 days’ notice.

The Company itself does not manage investments for clients, does not provide any investment management services and, therefore, is not a registered investment adviser.  The Bank is exempt from the regulatory requirements of the Investment Advisors Act, but is subject to extensive regulation by the FDIC and the Commissioner of Banks of The Commonwealth of Massachusetts.

Our Banking Business is Highly Regulated

Bank holding companies and state chartered banks operate in a highly regulated environment and are subject to supervision and examination by federal and state regulatory agencies.  The Company is subject to the BHCA, and to regulation and supervision by the Federal Reserve Board.  The Bank, as a Massachusetts chartered trust company the deposits of which are insured by the FDIC, is subject to regulation and supervision by the Massachusetts Commissioner of Banks and the FDIC.

Federal and state laws and regulations govern numerous matters including changes in the ownership or control of banks and bank holding companies, maintenance of adequate capital and the financial condition of a financial institution, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of reserves against deposits and restrictions on dividend payments.  The FDIC and the Massachusetts Commissioner of Banks possess cease and desist powers to prevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulation, and the Federal Reserve Board possesses similar powers with respect to bank holding companies.  These and other restrictions limit the manner in which The Company and the Bank may conduct business and obtain financing.

Furthermore, our banking business is affected not only by general economic conditions, but also by the monetary policies of the Federal Reserve Board.  Changes in monetary or legislative policies may affect the interest rates the Bank must offer to attract deposits and the interest rates it must charge on its loans, as well as the manner in which it offers deposits and makes loans.  These monetary policies have had, and are expected to continue to have, significant effects on the operating results of depository institutions generally including the Bank.

The combined company may not be able to sustain the rapid growth experienced in the past by us and Borel.

                Both we and Borel have recently experienced a period of rapid growth.  While we have grown through a combination of internal expansion and new acquisitions, Borel has grown primarily through internal expansion.  After the merger, we may not be able to effectively manage newly acquired businesses and newly acquired businesses may not perform as expected.  Our ability to manage our growth to date, as well as our ability to manage any future expansion, will require us to successfully combine the structure of our new acquisitions, particularly Borel’s, with our existing management and operational structure.  There is a risk that we will be unable to maintain our historical rate of growth in the future.  Past growth experienced by us or Borel may not be indicative of the growth of the combined company in the future.

To the Extent that We Acquire Other Companies in the Future, Our Business May Be Negatively Impacted By Risks Inherent with such Acquisitions

We have in the past considered, and will in the future continue to consider, the acquisition of other banking and investment management companies.  We are currently a party to acquire to agreements for two acquisitions, one to acquire Borel Bank & Trust Company and the other to acquire Kanon Bloch Carre.  See “Item 5. Other Information” for a description of these proposed transactions.  To the extent that we acquire Borel, Kanon Bloch Carre or other companies in the future, our business may be negatively impacted by certain risks inherent with such acquisitions.

These risks include the following:

•       the risk that we will incur substantial expenses in pursuing potential acquisitions without completing such acquisitions

•       the risk that the acquired business will not perform in accordance with management’s expectations;

•       the risk that difficulties will arise in connection with the integration of the operations of the acquired business with the operations of our banking or investment management businesses;

•       the risk that management will divert its attention from other aspects of our business;

•       the risk that we may lose key employees of the acquired business

•       the risks associated with entering into geographic and product markets in which we have limited or no direct prior experience; and

•       the risks of the acquired company that may be assumed as a result of the acquisistions.

Substantial Future Sales of our Common Stock in the Public Market May Negatively Affect the Market Value of our Common Stock and Could Impact our Ability to Obtain Additional Equity Financing

On February 4, 2000, the Commission declared a registration statement on Form S-3 effective, pursuant to which 3,094,589 shares of common stock of the Company were registered to enable the holders to publicly sell shares which would otherwise be ineligible for sale in the public market.  The registration of these shares discharged our obligations under the terms of registration rights agreements with the former stockholders of Westfield and RINET.  Similar registration obligations exist with respect to former shareholders of Sand Hill and the former shareholders of E.R. Taylor Investments, the predecessor of BPVI.  The sale of a substantial number of shares of common stock into the public market, or the availability of these shares for future sale, could adversely affect the market price for our common stock and could impair the our ability to obtain additional capital in the future through an offering of equity securities should we desire to do so.

Item 3.  Qualitative and Quantitative Disclosures about Market Risk

        For information related to this item, see the Company’s December 31, 2000 Form 10-K, Item 6 - Interest Rate Sensitivity and Market Risk.  No material changes have occurred since that date.

PART II.  Other Information

Item 1.  Legal Proceedings

        On June 7, 2000, one of the Company's subsidiaries received correspondence on behalf of one of its former clients claiming that the subsidiary is responsible for underperformance of allegedly $5.1 million when compared to the former client's performance targets.  On or about January 11, 2001, our subsidiary received notice of a court document filed in Pennsylvania state court on behalf of the client stating that an action has been commenced against our subsidiary, but containing no allegations.  We intend to defend this matter vigorously.

        We also incorporate by reference all of the discussions concerning legal proceedings included in our Registration Statement on Form S-4 originally filed with the SEC on August 16, 2001.  (SEC File No. 333-67746), as amended through the date hereof.

Item 2.  Changes in Securities and Use of Proceeds

        No changes in security holders’ rights have taken place.

Item 3.  Defaults Upon Senior Securities

        No defaults upon senior securities have taken place.

Item 4.  Submission of Matters to a Vote of the Security Holders

        No submission of matters to a vote of the security holders  have taken place.

Item 5.  Other Information

On June 27, 2001, the Company signed a definitive agreement to acquire Borel Bank & Trust Company, a $375 million private bank located in San Mateo, California, which has been serving the financial needs of individuals, their families and their businesses in Northern California for over 20 years. Borel conducts a commercial banking business which includes accepting demand, savings and time deposits and making commercial, real estate and consumer loans.  Borel also issues cashiers checks and sells money orders and travelers checks and provides 24-hour automated teller services, bank-by-mail, courier and night depository services.  Borel offers various savings plans and provides safe deposit boxes as well as other customary banking services and facilities, except international operations.  Additionally, Borel offers trust services and provides a variety of other fiduciary services including management, advisory and administrative services to individuals.  In June 2000, Borel launched an on-line banking service that allows clients access to their accounts through the use of the Internet.

Boston Private will pay $37.00  per share, subject to adjustments, in Boston Private common stock for 100% of Borel’s common stock for a total of approximately $112,000,000, in a pooling of interests transaction.   Borel’s shares will be converted into Boston Private shares at a conversion ratio based on the average daily closing price of Boston Private common stock for the thirty day period ending three days prior to the closing of the merger.  Under the terms of the agreement, Borel will become a wholly owned subsidiary of the Company.  Borel’s management team is expected to remain in place and continue to manage the bank under the Borel Bank & Trust Company name.

  The consummation of this acquisition is subject to a number of conditions including, among others the approval of the acquisition of Borel by the Company’s and Borel’s stockholders. Currently we have obtained all necessary regulatory approvals.  Approval by the Company’s stockholders will be sought at a stockholders’ meetings on November 19, 2001, and approval by Borel’s stockholders will be sought at a stockholders’ meeting on November 15, 2001.  The anticipated closing date of the transaction is November 30, 2001.

Item 6.  Exhibits and Reports on Form 8–K

(a)           Exhibits.

                No exhibits on Form 8-K have been filed.

(b)           Reports on Form 8-K

                Current report on Form 8-K filed on July 3, 2001.

                Item reported: signing of merger with Borel Bank & Trust Company.

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.
	(Registrant)
November 14, 2001	/s/  Timothy L. Vaill
	Timothy L. Vaill
	Chairman and Chief
	Executive Officer
November 14, 2001	/s/  Walter M. Pressey
	Walter M. Pressey
	President and
	Chief Financial Officer