Exhibit 99.1
FOR IMMEDIATE RELEASE
CONTACT:
David J. Kaye
Chief Financial Officer
(617) 912-3949
Erica E. Smith
Investor Relations
(617) 912-3766
www.bostonprivate.com
BOSTON PRIVATE FINANCIAL HOLDINGS ANNOUNCES PRELIMINARY
RESULTS FOR FIRST QUARTER 2008
Boston, MA, April 23, 2008 – Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) today reported its first quarter 2008 cash earnings of $0.37 per diluted share, a decrease from $0.44 in the first quarter of 2007. The range of estimated GAAP earnings (loss) for the first quarter of 2008, driven by an estimated non-cash impairment charge as more fully described below, is between ($.25) per diluted share and ($.38) per diluted share. The range of estimated net loss for the quarter will be between $9.2 million and $14.2 million.
The Company believes that the significant increase in non-accrual loans at First Private in the first quarter of 2008 and continued economic declines in Southern California constitute a triggering event under GAAP accounting and will, therefore, require goodwill impairment testing at that affiliate. Accordingly, Boston Private’s management has retained a third party valuation firm to assist in making a final determination of impairment. Although this testing is not yet complete, management has estimated that the Company will incur a non-cash goodwill impairment charge in the range of $20 million to $25 million. A reconciliation table is included in the financial tables at the end of this release.
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Included in the results for the first quarter of 2008 is a provision for loan losses of $19.6 million, which reflects an increase of $18.5 million over the first quarter of 2007. Almost 70% of this increase in the provision is due to First Private Bank & Trust, the Company’s banking affiliate in Southern California. Also, as announced earlier in the quarter, Boston Private reported a pre-tax gain on the repurchase of a portion of its Convertible Notes of approximately $11.3 million which offsets in part the increase in the provision.
In the first quarter Boston Private realized an increase in its tangible equity to tangible assets ratio of 34 basis points from 3.21% to 3.55%. This ten percent increase in the ratio will not be affected by the expected non-cash goodwill impairment charge The impairment charge will reduce capital and goodwill by the same amount but will have no impact upon tangible capital.
“During the quarter, our private banking affiliates experienced the impact of the credit challenges faced by the whole banking industry due to declines in market values, particularly in the economically challenged Southern California and Southern Florida markets. At First Private, the increase in provision is related almost entirely to the bank’s construction and land development loan portfolio and was primarily due to the rapidly declining values of real estate securing loans in the Inland Empire. Gibraltar Private Bank has had limited losses in land development and construction loans. However, we added to the reserves to reflect the overall deterioration in the Southern Florida economy and an increase in the amount of criticized loans,” stated Timothy L. Vaill, Chairman and Chief Executive Officer.
Mr. Vaill continued, “Notwithstanding the increase in the provision, we had strong private banking segment revenue growth of 17% across our banking affiliates. In fact, our unique business model continues to prove resilient. The long-term strategy that we have put in place over the past few years – thoughtful diversification of our operations across both business lines and geographies – is helping to mitigate the adverse effect of market conditions on certain aspects of our business. Core operations across our three segments remain strong. In particular, our fee-based segments – Wealth Advisory and Investment Management – experienced solid year over year growth.”
“As previously reported, we have taken strong action at all of our banks to further assess our credit exposure and to enhance credit administration, including engaging a third party to conduct a review of the loan portfolio at all of our banking institutions, starting with First Private and continuing most recently at Gibraltar Private Bank,” stated James D. Dawson, Chief Executive Officer of the Private Banking Group. “While market conditions in both of these regions continue to be challenging, the risk profile of
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the Southern Florida loan portfolio is, among other things, more diversified than in Southern California. Approximately 52% of the Southern Florida portfolio is comprised of residential first mortgages or home equity loans. Gibraltar Private Bank is not in the business of lending for tract housing or speculative condominium projects. As a result, we continue to believe that providing highly personal wealth management services to successful individuals, their families and businesses is a winning business strategy that has proven successful and will continue to generate returns over the long term.”
Financial Highlights
| • | Estimated net loss for the quarter will be between $9.2 million and $14.2 million, driven by the estimated non-cash impairment charge. |
| • | Total Revenues for the first quarter were up 28% to $117.3 million, compared to revenue of $92.0 million a year ago. On a linked quarter basis, revenues were up $7.8 million, or 7%. |
| • | Net Interest Incomewas $49.7 million in the first quarter of 2008, compared to $43.4 million in the first quarter 2007 and $50.1 million recorded in the fourth quarter of 2007. |
| • | The net interest margin was 3.32%, a decrease of 19 basis points from a year ago and a decrease of 7 basis points from the fourth quarter of 2007. |
| • | The decline in net interest margin in the first quarter resulted from lower loan yields caused by the Federal Reserve rate cuts and interest income reversals due to the increase in non-accrual loans. Additional non-accrual loans lowered NIM by 7 basis points. These factors were partially offset by a decline in the cost of deposits and borrowings. |
| • | Wealth Advisory Fees increased $5.1 million or 71% year over year to $12.4 million, as the segment benefited from continued organic growth of new client relationships, and fee increases. Davidson Trust Company, acquired on February 1, 2008, and Bingham, Osborn & Scarborough LLC (which was included in the Company’s consolidated results after they became a majority-owned affiliate partner in August 2007), contributed $4.4 million of fees in the first quarter of 2008. Wealth advisory fees increased 11% on a linked quarter basis. |
| • | Investment Management & Trust Feesfor the first quarter totaled $40.4 million, an increase of 7% over the same quarter in 2007. On a linked quarter basis, |
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investment management revenues declined $4.6 million, or 10%, due to market declines and annual performance fees recorded in the fourth quarter of 2007.
| • | Operating Leveragefor the first quarter of 2008 compared to the first quarter of 2007 was positive 12.2%. Excluding the gain from the buy back of the Convertible Notes, the operating leverage would have been -0.2% for the same period. |
| • | Total Assets Under Management/Advisoryincreased 6% or $2.1 billion to $36.0 billion from consolidated and unconsolidated affiliates on a year-over-year basis. Total assets under management / advisory decreased $1.7 billion, or 5% on a linked quarter basis, primarily due to market value declines. The acquisition of Davidson Trust Company added approximately $0.9 billion of assets under management during the quarter. |
“We continue to devote intense focus to a disciplined expense management approach, and were pleased that first quarter expenses were flat quarter over quarter ,” stated David J. Kaye, Chief Financial Officer. “On the credit front, turbulent economic factors drove a decline in certain collateral values and necessitated increased provisions at First Private and Gibraltar. Over 90% of the increase in the provision is limited to two of our five banking affiliates. At First Private, the deterioration was limited almost exclusively to the construction and land loan portfolio in the Inland Empire. Notwithstanding these challenges, we were pleased to see that our total revenues for the first quarter were up 28% to $117.3 million, compared to revenue of $92.0 million a year ago. Overall this underscores our strategy and shows strong organic growth across segments for the quarter.”
“Our fee based businesses, both investment management and wealth advisory, continued to outperform the benchmarks,” said Jay Cromarty, Chief Executive Officer of the Investment Management and Wealth Advisory Groups. “While we experienced net outflows this quarter, the strong performance at our affiliated firms has kept pipelines robust. These two segments of our business constitute approximately 40% of total revenues and have seen 15% year over year growth for the combined segments. This growth comes during a period of intense volatility in the markets over the past 12 months.”
“In this environment, we have kept the organization tightly focused on continuing to provide high touch, high quality services to our clients. The high net worth marketplace continues to be a very attractive business and we believe we are well positioned to capitalize on the tremendous opportunities it presents, allowing us to
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create value and deliver returns to our shareholders over the long term,” concluded Vaill.
Loan Quality
| • | The Company recorded $1.7 million in net charge offs during the quarter, which represented approximately 3 basis points of total loans. |
| • | Non-performing assets as a percentage of total assets increased to 125 basis points, or $32.7 million, to $86.5 million from the prior quarter. Of this increase, 75% or $24.5 million was at First Private. |
| • | The allowance for credit losses as a percentage of total loans was 1.77%, up 31 basis points from the prior quarter and 64 basis points from the first quarter 2007, primarily due to the additional provisions noted above. |
| • | The criticized loans increased to $302.2 million in the first quarter of 2008 from $165.7 million in the fourth quarter of 2007. The increase in criticized loans at First Private accounted for 85% of the growth. |
Dividend Payment
Concurrent with the release of the first quarter 2008 earnings, the Board of Directors of Boston Private Financial Holdings declared a cash dividend to shareholders of $0.10 per share. The record date for this dividend is May 1, 2008 and the payment date is May 15, 2008.
Cash Earnings/Operating Earnings
Boston Private calculates its non-GAAP cash earnings by adjusting net income to exclude net amortization of intangibles, goodwill and intangibles impairment, and the impact of certain non-cash share based compensation plans, and includes related tax benefits that result from purchase accounting. In addition to GAAP earnings, the Company believes its non-GAAP cash earnings report the additional value to shareholders generated by purchase accounting adjustments and the non-cash share based compensation plans. (A detailed reconciliation table is attached.)
For purposes of this release, Boston Private calculated its operating earnings by including the projected effect of the estimated non-cash impairment charge related to the goodwill at First Private Bank. A reconciliation of estimated earnings including the
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impact of the estimated impairment charge is included in the financial tables that follow.
Conference Call
Management will host a conference call to review the Company’s financial performance and business developments on April 23, 2008 at 8:30 a.m. Eastern time. Interested parties may join the call by dialing 866-770-7125 passcode: 9810159. The call will be simultaneously web cast and may be accessed on the Internet by linking through www.bostonprivate.com . A continuous telephone replay will be available beginning at 11:30 a.m. Eastern time. The replay telephone number is 888-286-8010 passcode: 73539806.
Boston Private Wealth Management Group
Boston Private is a financial services company which owns independently-operated affiliates located in key geographic regions of the U.S. Boston Private’s affiliates offer private banking, wealth advisory and investment management services to the high net worth marketplace, selected businesses and institutions. The Company’s strategy is to enter new markets primarily through selected acquisitions, and then expand its wealth management business by way of organic growth. It makes investments in mid-size firms in demographically attractive areas, forming geographic clusters that represent the firm’s core competencies. Boston Private provides continuing assistance to its affiliates with strategic matters, marketing, compliance and operations. For more information about Boston Private, visit the Company’s web site at www.bostonprivate.com
This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s management uses these non-GAAP measures in its analysis of the Company’s performance. These measures typically adjust GAAP performance measures to exclude the effects of charges and expenses related to the consummation of mergers and acquisitions, as well as excluding other significant gains or losses that are unusual in nature. Also included in these non-GAAP measures are net amortization of intangibles, tax benefits related to purchase accounting, stock options and ESPP expense. Because these items and their impact on the Company’s performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily
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comparable to non-GAAP performance measures which may be presented by other companies.
Statements in this press release that are not historical facts are forward-looking statements as defined by United States securities laws. Forward-looking statements involve risks and uncertainties. These statements include, but are not limited to,prospects for long term financial performance, the impact on the Company’s results of market conditions and prevailing and future interest rates, prospects for growth in balance sheet assets and assets under management and advisory, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond Boston Private’s control and could cause actual results to differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, among others, adverse conditions in the capital and debt markets and the impact of such conditions on Boston Private’s investment advisory activities; interest rate compression which may adversely impact net interest income; competitive pressures from other financial institutions which, together with other factors, may affect the Company’s growth and financial performance; the effects of national and local economic conditions; including changes which adversely affect borrowers’ ability to service and repay our loans, changes in loan defaults and charge-off rates, adequacy of loan loss reserves, reduction in deposit levels necessitating increased borrowing to fund loans and investments, asset quality issues; the passing of adverse government regulation, and the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired or further impaired; as well as the other risks and uncertainties detailed in Boston Private’s Annual Report on Form 10-K and other filings submitted to the Securities and Exchange Commission. Boston Private does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
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Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) |  |
| March 31, 2008 | ||||||||
RECONCILIATION OF ESTIMATED EARNINGS (*) | ||||||||
Including Impact of Estimated Impairement Charge: | ||||||||
Net Income before Impairment | $ | 10,756 | $ | 10,756 | ||||
Projected Impairement | (20,000 | ) | (25,000 | ) | ||||
Projected Loss | $ | (9,244 | ) | $ | (14,244 | ) | ||
PROJECTED DILUTED EPS | $ | (0.25 | ) | $ | (0.38 | ) | ||
| (*) | The below financials do not include the above estimated impairment charge related to the goodwill at First Private Bank. The additional provision that occurred at First Private in Q1 ‘08 was considered a triggering event which necessitated goodwill impairment testing under FAS 142. The Company has not finalized the impairment results but estimates the final charge to be between $20 million to $25 million (no tax benefit will be recorded as a result of the charge). |
| March 31, 2008 | March 31, 2007 | |||||||
FINANCIAL DATA: | ||||||||
Total Balance Sheet Assets | $ | 6,909,669 | $ | 5,871,510 | ||||
Stockholders’ Equity | 688,620 | 651,282 | ||||||
Investment Securities | 728,542 | 511,985 | ||||||
Goodwill | 351,343 | 332,462 | ||||||
Intangible Assets, Net | 108,942 | 121,782 | ||||||
Commercial and Construction Loans | 3,253,109 | 2,608,172 | ||||||
Residential Mortgage Loans | 1,795,814 | 1,581,829 | ||||||
Home Equity and Other Consumer Loans | 333,768 | 268,956 | ||||||
Total Loans | 5,382,691 | 4,458,957 | ||||||
Loans Held for Sale | 7,324 | 8,911 | ||||||
Deposits | 4,370,379 | 4,101,432 | ||||||
Borrowings | 1,742,158 | 1,012,088 | ||||||
Book Value Per Share | $ | 17.88 | $ | 17.72 | ||||
Market Price Per Share | $ | 10.59 | $ | 27.92 | ||||
ASSETS UNDER MANAGEMENT AND ADVISORY: | ||||||||
Private Banking | 4,727,000 | 4,180,000 | ||||||
Investment Managers | 20,766,000 | 20,426,000 | ||||||
Wealth Advisory (1) | 9,805,000 | 8,438,000 | ||||||
Less: Inter-company Relationship | (313,000 | ) | (255,000 | ) | ||||
Consolidated Affiliate Assets Under Management and Advisory | $ | 34,985,000 | $ | 32,789,000 | ||||
Unconsolidated | 1,050,000 | 1,110,000 | ||||||
Total Unconsolidated Assets Under Management and Advisory | $ | 36,035,000 | $ | 33,899,000 | ||||
FINANCIAL RATIOS: | ||||||||
Stockholders’ Equity/Total Assets | 9.97 | % | 11.09 | % | ||||
Tangible Equity/Tanigble Assets | 3.54 | % | 3.64 | % | ||||
Allowance for Credit Losses/Total Loans | 1.77 | % | 1.13 | % | ||||
| Three Months Ended | ||||||||
| March 31, 2008 | March 31, 2007 | |||||||
OPERATING RESULTS: | ||||||||
Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) | $ | 51,538 | $ | 45,019 | ||||
FTE Adjustment | 1,868 | 1,635 | ||||||
Net Interest Income | 49,670 | 43,384 | ||||||
Investment Management and Trust Fees: | ||||||||
Private Banking | 7,815 | 6,673 | ||||||
Investment Managers | 32,576 | 31,049 | ||||||
Total Investment Management Fees | 40,391 | 37,722 | ||||||
Total Wealth Advisory Fees | 12,387 | 7,266 | ||||||
Other Fees | 3,114 | 2,453 | ||||||
Total Fees | 55,892 | 47,441 | ||||||
Earnings in Equity Investments | 86 | 668 | ||||||
Gain on Sale of Loans, Net | 357 | 532 | ||||||
Gain on Retirement of Debt | 11,324 | — | ||||||
Total Fees and Other Income | 67,659 | 48,641 | ||||||
Total Revenue | 117,329 | 92,025 | ||||||
Provision for Loan Losses | 19,648 | 1,176 | ||||||
Salaries and Employee Benefits | 52,843 | 46,601 | ||||||
Occupancy and Equipment | 8,930 | 7,874 | ||||||
Professional Services | 4,977 | 3,206 | ||||||
Marketing and Business Development | 2,885 | 2,596 | ||||||
Contract Services and Processing | 1,858 | 1,435 | ||||||
Amortization of Intangibles | 3,221 | 3,549 | ||||||
Provision for Unfunded Loan Commitments | 92 | 163 | ||||||
Other | 5,429 | 4,119 | ||||||
Total Operating Expense | 80,235 | 69,543 | ||||||
Minority Interest | 1,503 | 914 | ||||||
Income Before Income Taxes | 15,943 | 20,392 | ||||||
Income Tax Expense | 5,187 | 7,258 | ||||||
Net Incomebefore Impairment | $ | 10,756 | $ | 13,134 | ||||
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Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) | |
| Three Months Ended | ||||||||
| March 31, 2008 | March 31, 2007 | |||||||
RECONCILIATION OF EARNINGS BEFORE IMPAIRMENT | ||||||||
TO CASH EARNINGS: | ||||||||
Net Income before Impairment (GAAP Basis) | $ | 10,756 | $ | 13,134 | ||||
Cash Basis Earnings (2) | ||||||||
Book Amortization of Purchased Intangibles, Net of Tax | 1,785 | 1,912 | ||||||
Cash Benefit of Tax Deductions from Purchased Intangibles & Goodwill | 1,127 | 1,098 | ||||||
Stock options and ESPP, Net of Tax | 835 | 1,121 | ||||||
Total Cash Basis Adjustment | $ | 3,747 | $ | 4,131 | ||||
Cash Basis Earnings | $ | 14,503 | $ | 17,265 | ||||
| Three Months Ended | ||||||||
| March 31, 2008 | March 31, 2007 | |||||||
PER SHARE DATA: (In thousands, except per share data) | ||||||||
Calculation of Net Income for EPS before Impairment: | ||||||||
Net Income as reported and for basic EPS before Impairment | $ | 10,756 | $ | 13,134 | ||||
Interest on convertible trust preferred securities, net of tax | 740 | 750 | ||||||
Net Income for diluted EPS before Impairment | $ | 11,496 | $ | 13,884 | ||||
Calculation of Average Shares Outstanding: | ||||||||
Weighted average basic shares | 37,457 | 36,277 | ||||||
Dilutive effect of: | ||||||||
Stock Options, Stock Grants, and Other | 895 | 1,674 | ||||||
Convertible trust preferred securities | 3,187 | 3,184 | ||||||
Dilutive potential common shares | 4,082 | 4,858 | ||||||
Weighted Average Diluted Shares | 41,539 | 41,135 | ||||||
Earnings per Share before Impairment: | ||||||||
Basic | $ | 0.29 | $ | 0.36 | ||||
Diluted | $ | 0.28 | $ | 0.34 | ||||
RECONCILIATION OF EPSBEFORE IMPAIRMENT | ||||||||
TO CASH EPS: | ||||||||
(on a Diluted Basis) | ||||||||
Earnings Per Share before Impairment (GAAP Basis) | $ | 0.28 | $ | 0.34 | ||||
Cash Basis Adjustment | $ | 0.09 | $ | 0.10 | ||||
Cash Basis Earnings Per Diluted Share | $ | 0.37 | $ | 0.44 | ||||
| Three Months Ended | ||||||||
| March 31, 2008 | March 31, 2007 | |||||||
OPERATING RATIOS & STATISTICS: | ||||||||
Return on Average Equity before Impairment | 6.31 | % | 8.17 | % | ||||
Return on Average Assets before Impairment | 0.62 | % | 0.91 | % | ||||
Net Interest Margin | 3.32 | % | 3.51 | % | ||||
Core Net Interest Margin(3) | 3.70 | % | 3.76 | % | ||||
Total Fees and Other Income/Total Revenue | 57.67 | % | 52.86 | % | ||||
Efficiency Ratio | 65.84 | % | 71.77 | % | ||||
Net Loans Charged-off | $ | 1,688 | $ | 8 | ||||
RECONCILIATION OF NIM TO CORE NIM: | ||||||||
Net Interest Margin | 3.32 | % | 3.51 | % | ||||
Effect of Trust Preferred, Net | 0.38 | % | 0.25 | % | ||||
Core Net Interest Margin(3) | 3.70 | % | 3.76 | % | ||||
CASH OPERATING RATIOS: | ||||||||
Return on Average Equity (4) | 8.51 | % | 10.74 | % | ||||
Return on Average Assets (5) | 0.83 | % | 1.19 | % | ||||
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Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) | |
AVERAGE BALANCE SHEET:
| Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||||||||||||||||
| Average Balance | Income/ Expense | Yield/ Rate | Average Balance | Income/ Expense | Yield/ Rate | |||||||||||||||||
AVERAGE ASSETS | ||||||||||||||||||||||
Earnings Assets | ||||||||||||||||||||||
Cash and investments | $ | 884,286 | $ | 10,048 | 4.54 | % | $ | 691,090 | $ | 8,329 | 4.82 | % | ||||||||||
Loans | ||||||||||||||||||||||
Commercial and Construction | 3,142,400 | 55,657 | 7.02 | % | 2,540,403 | 49,128 | 7.74 | % | ||||||||||||||
Residential Mortgage | 1,798,327 | 27,599 | 6.14 | % | 1,588,980 | 22,834 | 5.75 | % | ||||||||||||||
Home Equity and Other Consumer | 317,033 | 5,287 | 6.59 | % | 265,736 | 5,181 | 7.77 | % | ||||||||||||||
Total Earning Assets | 6,142,046 | 98,591 | 6.38 | % | 5,086,209 | 85,472 | 6.72 | % | ||||||||||||||
Allowance for Loan Losses | (73,532 | ) | (43,816 | ) | ||||||||||||||||||
Cash and due From Banks | 78,390 | 56,127 | ||||||||||||||||||||
Other Assets | 804,338 | 703,881 | ||||||||||||||||||||
TOTAL AVERAGE ASSETS | $ | 6,951,242 | $ | 5,802,401 | ||||||||||||||||||
AVERAGE LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||
Interest-Bearing Liabilities: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Savings and NOW | $ | 661,782 | $ | 3,248 | 1.97 | % | $ | 550,726 | $ | 2,930 | 2.16 | % | ||||||||||
Money Market | 1,859,869 | 13,845 | 2.99 | % | 1,874,556 | 15,710 | 3.40 | % | ||||||||||||||
Certificate of Deposits | 1,106,709 | 12,480 | 4.54 | % | 888,152 | 10,272 | 4.69 | % | ||||||||||||||
Total Deposits | 3,628,360 | 29,573 | 3.28 | % | 3,313,434 | 28,912 | 3.54 | % | ||||||||||||||
Junior Subordinated Debentures | 522,596 | 5,834 | 4.47 | % | 234,021 | 3,293 | 5.63 | % | ||||||||||||||
FHLB Borrowings and Other | 1,221,782 | 11,646 | 3.77 | % | 741,425 | 8,248 | 4.45 | % | ||||||||||||||
Total Interest-Bearing Liabilities | 5,372,738 | 47,053 | 3.51 | % | 4,288,880 | 40,453 | 3.81 | % | ||||||||||||||
Non-interest Bearing Demand Deposits | 764,626 | 729,887 | ||||||||||||||||||||
Payables and Other Liabilities | 132,176 | 140,719 | ||||||||||||||||||||
Total Liabilities | 6,269,540 | 5,159,486 | ||||||||||||||||||||
Stockholders’ Equity | 681,702 | 642,915 | ||||||||||||||||||||
TOTAL AVERAGE LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 6,951,242 | $ | 5,802,401 | ||||||||||||||||||
Net Interest Income | $ | 51,538 | $ | 45,019 | ||||||||||||||||||
Net Interest Margin | 3.32 | % | 3.51 | % | ||||||||||||||||||
PRIVATE BANKING LOAN DATA AND CREDIT QUALITY (6):
| March 31, 2008 | March 31, 2007 | ||||||
Commercial and Construction Loans: | |||||||
New England | $ | 1,008,392 | $ | 839,627 | |||
Northern California | 875,306 | 769,670 | |||||
Southern California | 536,141 | 419,342 | |||||
South Florida | 611,440 | 579,533 | |||||
Pacific Northwest | 222,826 | — | |||||
Total Commercial and Construction Loans | $ | 3,254,105 | $ | 2,608,172 | |||
Residential Mortgage Loans: | |||||||
New England | $ | 1,040,972 | $ | 960,555 | |||
Northern California | 169,810 | 125,912 | |||||
Southern California | 10,826 | 8,894 | |||||
South Florida | 546,828 | 486,468 | |||||
Pacific Northwest | 27,378 | — | |||||
Total Residential Mortgage Loans | $ | 1,795,814 | $ | 1,581,829 | |||
Home Equity and Other Consumer Loans: | |||||||
New England | $ | 57,047 | $ | 43,465 | |||
Northern California | 58,443 | 38,159 | |||||
Southern California | 13,560 | 5,099 | |||||
South Florida | 193,578 | 178,722 | |||||
Pacific Northwest | 3,716 | — | |||||
Home Equity and Other Consumer Loans | $ | 326,344 | $ | 265,445 | |||
Total Private Banking Loans | $ | 5,376,263 | $ | 4,455,446 | |||
Allowance for Credit Losses: | |||||||
New England | $ | 24,375 | $ | 22,584 | |||
Northern California | $ | 12,559 | $ | 10,710 | |||
Southern California | $ | 38,661 | $ | 5,426 | |||
South Florida | $ | 16,330 | $ | 11,584 | |||
Pacific Northwest | $ | 3,175 | — | ||||
Criticized Loans (9): | |||||||
New England | $ | 35,137 | $ | 36,537 | |||
Northern California | $ | 1,525 | $ | 197 | |||
Southern California | $ | 196,167 | $ | 6,587 | |||
South Florida | $ | 48,689 | $ | 3,288 | |||
Pacific Northwest | $ | 20,705 | — | ||||
Non-performing Loans: | |||||||
New England | $ | 7,240 | $ | 1,718 | |||
Northern California | $ | 479 | — | ||||
Southern California | $ | 51,197 | $ | 6,444 | |||
South Florida | $ | 20,447 | $ | 1,402 | |||
Pacific Northwest | $ | 5,704 | — | ||||
Net Loans Charged-off/(Recovered) for the Three Months Ended: | |||||||
New England | $ | 1,005 | $ | (2 | ) | ||
Northern California | $ | 15 | $ | 9 | |||
Southern California | $ | 592 | — | ||||
South Florida | $ | 76 | — | ||||
Pacific Northwest | — | — | |||||
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Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) | |
| March 31, 2008 | December 31, 2007 | |||||||
FINANCIAL DATA: | ||||||||
Total Balance Sheet Assets | $ | 6,909,669 | $ | 6,818,131 | ||||
Stockholders’ Equity | 688,620 | 662,461 | ||||||
Investment Securities | 728,542 | 719,934 | ||||||
Goodwill | 351,343 | 349,889 | ||||||
Intangible Assets, Net | 108,942 | 108,349 | ||||||
Commercial and Construction Loans | 3,253,109 | 3,182,081 | ||||||
Residential Mortgage Loans | 1,795,814 | 1,765,217 | ||||||
Home Equity and Other Consumer Loans | 333,768 | 312,602 | ||||||
Total Loans | 5,382,691 | 5,259,900 | ||||||
Loans Held for Sale | 7,324 | 6,782 | ||||||
Deposits | 4,370,379 | 4,375,101 | ||||||
Borrowings | 1,742,158 | 1,632,944 | ||||||
Book Value Per Share | $ | 17.88 | $ | 17.68 | ||||
Market Price Per Share | $ | 10.59 | $ | 27.08 | ||||
ASSETS UNDER MANAGEMENT AND ADVISORY: | ||||||||
Private Banking | 4,727,000 | 4,738,000 | ||||||
Investment Managers | 20,766,000 | 23,058,000 | ||||||
Wealth Advisory | 9,805,000 | 9,055,000 | ||||||
Less: Inter-company Relationship | (313,000 | ) | (286,000 | ) | ||||
Consolidated Affiliate Assets Under Management and Advisory | $ | 34,985,000 | $ | 36,565,000 | ||||
Unconsolidated | 1,050,000 | 1,188,000 | ||||||
Total Unconsolidated Assets Under Management and Advisory | $ | 36,035,000 | $ | 37,753,000 | ||||
FINANCIAL RATIOS: | ||||||||
Stockholders’ Equity/Total Assets | 9.97 | % | 9.72 | % | ||||
Tangible Equity/Tangible Assets | 3.54 | % | 3.21 | % | ||||
Allowance for Credit Losses/Total Loans | 1.77 | % | 1.46 | % | ||||
4
Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) | |
| Three Months Ended | |||||||
| March 31, 2008 | December 31, 2007 | ||||||
OPERATING RESULTS: | |||||||
Net Interest Income—on a Fully Taxable Equivalent Basis (FTE) | $ | 51,538 | $ | 51,987 | |||
FTE Adjustment | 1,868 | 1,837 | |||||
Net Interest Income | 49,670 | 50,150 | |||||
Investment Management and Trust Fees: | |||||||
Private Banking | 7,815 | 7,660 | |||||
Investment Managers | 32,576 | 37,338 | |||||
Total Investment Management Fees | 40,391 | 44,998 | |||||
Total Wealth Advisory Fees | 12,387 | 11,116 | |||||
Other Fees | 3,114 | 2,876 | |||||
Total Fees | 55,892 | 58,990 | |||||
Earnings (Loss) in Equity Investments | 86 | (71 | ) | ||||
Gain on Sale of Loans, Net | 357 | 440 | |||||
Gain on Retirement of Debt | 11,324 | — | |||||
Total Fees and Other Income | 67,659 | 59,359 | |||||
Total Revenue | 117,329 | 109,509 | |||||
Provision for Loan Losses | 19,648 | 19,252 | |||||
Salaries and Benefits | 52,843 | 51,640 | |||||
Occupancy and Equipment | 8,930 | 9,000 | |||||
Professional Services | 4,977 | 4,341 | |||||
Marketing and Business Development | 2,885 | 3,103 | |||||
Contract Services and Processing | 1,858 | 1,816 | |||||
Amortization of Intangibles | 3,221 | 3,699 | |||||
Provision for unfunded loan commitments | 92 | 1,813 | |||||
Other | 5,429 | 5,244 | |||||
Total Operating Expense | 80,235 | 80,656 | |||||
Income Before Minority Interest, Income Taxes & Impairment | 17,446 | 9,601 | |||||
Impairment of Goodwill and Intangibles, Net (7) | — | 37,150 | |||||
Income (Loss) Before Minority Interest and Taxes | 17,446 | (27,549 | ) | ||||
Minority Interest | 1,503 | 1,511 | |||||
Income Before Income Taxes | 15,943 | (29,060 | ) | ||||
Income Tax Expense, net of impairment | 5,187 | 2,096 | |||||
Net Income/(Loss) before Current Quarter Impairment | $ | 10,756 | $ | (31,156 | ) | ||
| Three Months Ended | |||||||
| March 31, 2008 | December 31, 2007 | ||||||
RECONCILIATION OF GAAP EARNINGS BEFORE CURRENT QUARTER IMPAIRMENT TO CASH EARNINGS: | |||||||
Net Income/(Loss) before Current Quarter Impairment (GAAP Basis) | $ | 10,756 | $ | (31,156 | ) | ||
Cash Basis Earnings (2) | |||||||
Book Amortization of Purchased Intangibles, Net of Tax | 1,785 | 2,052 | |||||
Cash Benefit of Tax Deductions from Purchased Intangibles & Goodwill | 1,127 | 1,098 | |||||
Impairment of Goodwill and Intangibles, Net | — | 37,150 | |||||
Stock options and ESPP, Net of Tax | 835 | 950 | |||||
Total Cash Basis Adjustment | $ | 3,747 | $ | 41,250 | |||
Cash Basis Earnings | $ | 14,503 | $ | 10,094 | |||
| Three Months Ended | ||||||||
| March 31, 2008 | December 31, 2007 | |||||||
PER SHARE DATA: (In thousands, except per share data) | ||||||||
Calculation of Net Income for EPS before Current Quarter Impairment: | ||||||||
Net Income as reported and for basic EPS before Current Quarter Impairment | $ | 10,756 | $ | (31,156 | ) | |||
Interest on Convertible Trust Preferred Securities, Net of Tax | 740 | — | ||||||
Net Income for diluted EPS before Current Quarter Impairment | $ | 11,496 | $ | (31,156 | ) | |||
Interest on convertible trust preferred securities, net of tax for Cash EPS | — | 750 | ||||||
Calculation of Average Shares Outstanding: | ||||||||
Weighted average basic shares | 37,457 | 37,058 | ||||||
Dilutive effect of: | ||||||||
Stock Options, Stock Grants, and Other (8) | 895 | — | ||||||
Convertible Trust Preferred securities (8) | 3,187 | — | ||||||
Dilutive potential common shares | 4,082 | — | ||||||
Weighted Average Diluted Shares | 41,539 | 37,058 | ||||||
Weighted Average Diluted Shares for Cash EPS | 41,539 | 41,960 | ||||||
Earnings/(Loss) per Share before Current Quarter Impairment: | ||||||||
Basic | $ | 0.29 | $ | (0.84 | ) | |||
Diluted | $ | 0.28 | $ | (0.84 | ) | |||
RECONCILIATION OF EPS BEFORE CURRENT QUARTER IMPAIRMENT TO CASH EPS: | ||||||||
(on a Diluted Basis) | ||||||||
Earnings/(Loss) Per Share before Current Quarter Impairment (GAAP Basis) | $ | 0.28 | $ | (0.84 | ) | |||
Cash Basis Adjustment | $ | 0.09 | $ | 1.10 | ||||
Cash Basis Earnings Per Diluted Share | $ | 0.37 | $ | 0.26 | ||||
OPERATING RATIOS & STATISTICS: | ||||||||
Return on Average Equity before Current Quarter Impairment | 6.31 | % | -18.11 | % | ||||
Return on Average Assets before Current Quarter Impairment | 0.62 | % | -1.83 | % | ||||
Net Interest Margin | 3.32 | % | 3.39 | % | ||||
Core Net Interest Margin (3) | 3.70 | % | 3.63 | % | ||||
Total Fees and Other Income/Total Revenue | 57.67 | % | 54.20 | % | ||||
Efficiency Ratio | 65.84 | % | 68.80 | % | ||||
Net Loans Charged-off | $ | 1,688 | $ | 506 | ||||
5
Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited) | |
| Three Months Ended | ||||||
| March 31, 2008 | December 31, 2007 | |||||
PRIVATE BANKING LOAN DATA AND CREDIT QUALITY (6): | ||||||
Commercial and Construction Loans: | ||||||
New England | $ | 1,008,392 | $ | 985,234 | ||
Northern California | 875,306 | 844,428 | ||||
Southern California | 536,141 | 526,823 | ||||
South Florida | 611,440 | 608,441 | ||||
Pacific Northwest | 222,826 | 218,117 | ||||
Total Commercial and Construction Loans | $ | 3,254,105 | $ | 3,183,043 | ||
Residential Mortgage Loans: | ||||||
New England | $ | 1,040,972 | $ | 1,022,155 | ||
Northern California | 169,810 | 152,417 | ||||
Southern California | 10,826 | 12,763 | ||||
South Florida | 546,828 | 553,356 | ||||
Pacific Northwest | 27,379 | 24,526 | ||||
Total Residential Mortgage Loans | $ | 1,795,815 | $ | 1,765,217 | ||
Home Equity and Other Consumer Loans: | ||||||
New England | $ | 57,047 | $ | 55,802 | ||
Northern California | 58,443 | 50,700 | ||||
Southern California | 13,560 | 4,204 | ||||
South Florida | 193,578 | 191,820 | ||||
Pacific Northwest | 3,716 | 4,164 | ||||
Home Equity and Other Consumer Loans | $ | 326,344 | $ | 306,690 | ||
Total Private Banking Loans | $ | 5,376,264 | $ | 5,254,950 | ||
Allowance for Credit Losses: | ||||||
New England | $ | 24,375 | $ | 24,131 | ||
Northern California | $ | 12,559 | $ | 12,111 | ||
Southern California | $ | 38,661 | $ | 25,695 | ||
South Florida | $ | 16,330 | $ | 12,406 | ||
Pacific Northwest | $ | 3,175 | $ | 2,704 | ||
Criticized Loans (9): | ||||||
New England | $ | 35,137 | $ | 34,786 | ||
Northern California | $ | 1,525 | $ | 38 | ||
Southern California | $ | 196,167 | $ | 80,499 | ||
South Florida | $ | 48,689 | $ | 34,144 | ||
Pacific Northwest | $ | 20,705 | $ | 16,283 | ||
Non-performing Loans: | ||||||
New England | $ | 7,240 | $ | 7,390 | ||
Northern California | $ | 479 | — | |||
Southern California | $ | 51,197 | $ | 27,911 | ||
South Florida | $ | 20,447 | $ | 18,508 | ||
Pacific Northwest | $ | 5,704 | — | |||
Net Loans Charged-off for the Three Months Ended: | ||||||
New England | $ | 1,005 | $ | 4 | ||
Northern California | $ | 15 | $ | 10 | ||
Southern California | $ | 592 | — | |||
South Florida | $ | 76 | $ | 480 | ||
Pacific Northwest | — | $ | 12 | |||
6
| (1) | The Company went from a minority to majority ownership of Bingham, Osborn, & Scarborough in Q3 2007. |
Prior period financial information is included with Earnings in Equity Investments.
Prior period AUM data is shown for comparative purposes as being included with the consolidated Company.
| (2) | The Company calculates its cash earnings by adjusting net income to exclude the amortization of the purchased intangibles (net of tax), the tax benefit on the portion of the purchase price allocated to goodwill, which is deductible over a 15 year life, impairment, and certain non-cash share based compensation plans (net of tax). The tax savings are deferred under GAAP accounting but are included in cash earnings since the tax savings (lower tax payment) will be retained unless the acquired company is sold. The Company uses certain non-GAAP financial measures, such as Cash Earnings, to provide information for investors to effectively analyze financial trends of ongoing business activities. |
| (3) | The Company defines Core Net Interest Margin as Net Interest Margin excluding the interest expense on the Junior Subordinated Debentures and $30 million of the convertible bond that was used for the purchase of Charter Bank. The Company utilizes Trust Preferred Securities to assist in the funding of acquisitions and believes it is useful to compare Net Interest Margin excluding the impact of this acquisition funding vehicle. |
| (4) | The Company calculates Return on Average Equity on a cash basis as Cash Basis Earnings divided by Average Equity. |
| (5) | The Company calculates Return on Average Assets on a cash basis as Cash Basis Earnings divided by Average Assets. |
| (6) | The concentration of the Private Banking loan data and credit quality is based on the location of the lender. |
| (7) | Since Gibraltar Private Bank and Trust (“Gibraltar”) was acquired pursuant to a tax-free reorganization, all goodwill generated by the acquisition of Gibraltar is not deductible for tax purposes. As a result, there is no tax benefit attributable to the $29.1 million impairment charge related to Gibraltar in the 4th quarter of 2007. |
The acquisition of Dalton, Greiner, Hartman, Maher and Co (“DGHM”) was acquired pursuant to a taxable transaction, all goodwill generated by the acquisition of DGHM is generally deductible for tax purposes. As a result, there is a $5.8 million tax benefit attributable to the $13.9 million impairment charge related to DGHM, which results in an impairment charge, net, of $8.1 million in the 4th quarter of 2007.
| (8) | The convertible trust preferred debt, stock options and restricted shares were anti-dilutive for the 4th quarter of 2007 and therefore excluded from diluted earnings per share. The convertible trust preferred was also anti-dilutive for the fiscal year 2007, whereas the restricted stock and stock options were dilutive. The separate evaluations for quarterly and year-to-date computations may result in a 2007 year-to-date earnings per share that do not equal the sum of the quarterly earnings per share. |
| (9) | Criticized loans include loans classified as either special mention, substandard, doubtful, or loss. |
7