Boston Private Financial Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Results; Announces

Boston Private Financial Holdings, Inc. Reports Fourth Quarter and Full Year 2012 Results; Announces Dividend Increase and Share Repurchase Program

Fourth Quarter and Full Year Highlights:

  • Earnings increase 36% year-over-year: Full year 2012GAAP Net Income increased to $53.3 million from $39.1 million in 2011. Full year diluted 2012 EPS increased to $0.61 from $0.46 in 2011.
  • Steady Net Interest Income: Net Interest Income increased 2% to $183.3 million for the full year of 2012. Full year NIM of 3.22% decreased 3 basis points year-over-year.
  • Core Fees and Income increase for the fourth straight quarter: Fourth quarterCore Fees and Income increased 13% year-over-year and 5% on a linked quarter basis.AUM increased 2% to $20.4 billion in the quarter, and 13% year-over-year. Fourth quarter AUM net inflows were $298 million, up from $223 million linked quarter, and up from AUM net outflows of ($142) million in the fourth quarter of 2011.
  • Provision decreases: Provision for Loan Losses was a credit of ($5.0) million in the quarter, compared to a provision credit of ($4.0) million in the third quarter of 2012.
  • Capital builds: Tangible Common Equity/Tangible Assets ratio increased by 30 basis points to 7.7% on a year-over-year basis, and was flat on a linked quarter basis.
  • Dividend increase and share repurchase program announced: The Board of Directors approved a cash dividend of $0.05 per share, up from $0.01 per share last quarter, and a share repurchase program of up to 5% of the Company's outstanding shares as of January 16, 2013.

BOSTON--(BUSINESS WIRE)-- Boston Private Financial Holdings, Inc. (NAS: BPFH) (the "Company" or "BPFH") today reported fourth quarter 2012 GAAP Net Income Attributable to the Company of $13.1 million, compared to $16.5 million in the third quarter of 2012. BPFH reported fourth quarter diluted earnings per share of $0.15 compared to $0.19 in the third quarter of 2012.


For the full year of 2012, BPFH reported GAAP Net Income Attributable to the Company of $53.3 million, compared to $39.1 million for the full year of 2011. BPFH reported diluted earnings per share of $0.61 compared to $0.46 for the full year of 2011.

"The year-over-year increases we saw in loan, deposit, and AUM balances confirm that the power of our Private Banking and Wealth Management model is taking hold," said Clayton G. Deutsch, CEO and President. "We continue to be pleased with the ongoing improvement in our quality metrics as evidenced by the 24% decline in criticized loans on a year-over-year basis, and the continued strengthening of our capital base. In 2013, we remain committed to growing our fee-based revenues, defending our Net Interest Margin and achieving our 11% ROE target."

Net Interest Income, Core Fees Increase Year-Over-Year

Net Interest Income in the fourth quarter was $45.5 million, down 2% from $46.4 million in the third quarter of 2012. For the full year of 2012, Net Interest Income was $183.3 million, up 2% from $179.0 million in 2011. Core Fees and Income (Investment Management and Trust Fees, Private Bank Investment Management and Trust Fees, Wealth Advisory Fees, Other Banking Fee Income and Gain on Sale of Loans) for the fourth quarter increased 5% to $29.1 million from $27.6 million in the third quarter of 2012. The increase was driven by fee increases in all three business segments and by a $0.9 million gain on sale of residential mortgage loans that the Company sold during the fourth quarter. For the full year of 2012, Core Fees and Income increased 2% to $109.4 million.

Net Interest Margin was 3.19% in the fourth quarter, up 8 basis points from 3.11% in the third quarter. On a year-over-year basis, Net Interest Margin increased 2 basis points from 3.17%. For the full year of 2012, Net Interest Margin decreased 3 basis points to 3.22%.

Total Assets Under Management/Advisory ("AUM") increased to $20.4 billion, up 2% from $20.1 billion in the third quarter of 2012. AUM increased 13% from $18.1 billion in the fourth quarter of 2011. The Company experienced fourth quarter 2012 AUM net inflows of $298 million, as compared to AUM net inflows of $223 million in the third quarter of 2012. AUM net outflows for the fourth quarter of 2011 were ($142) million. AUM net inflows for the full year of 2012 were $621 million, as compared to AUM net outflows of ($492) million in 2011.

Total Expenses Increase in Q4 Due to Non-Cash Benefit Charges and Liabilities Restructuring

Total Expenses (including restructuring costs of $1.6 million) in the fourth quarter of 2012 were $62.7 million, up 8% from $58.2 million (including third quarter restructuring costs of $3.6 million) on a linked quarter basis. For the full year of 2012, Total Expenses (including restructuring costs of $5.9 million) were $231.9 million, down 1% from Total Expenses (including restructuring costs of $8.1 million) of $233.9 million for the full year of 2011.

"Total Expenses in the quarter were impacted by unusual items totaling $7.6 million, including non-cash benefit charges of $2.0 million, seasonal marketing costs of $1.1 million, liability restructuring costs of $2.0 million, severance costs of $1.6 million and variable compensation costs of $900 thousand," said David J. Kaye, Chief Financial Officer. "It is important to note that the costs associated with the restructuring of expenses and liabilities will benefit the Company in 2013."

Q4 Provision Credit Due Primarily to Sale of Pacific Northwest Offices

Provision for Loan Losses in the fourth quarter was a credit of ($5.0) million, compared to a provision credit of ($4.0) million in the third quarter of 2012. The ($5.0) million provision credit was primarily driven by the agreement to sell the Pacific Northwest offices, which the Company announced in December. For the full year of 2012, there was a provision credit of ($3.3) million, as compared to a Provision for Loan Losses of $13.2 million in 2011.

Nonaccrual Loans ("Nonaccruals") decreased 17% to $60.7 million on a linked quarter basis. On a year-over-year basis, Nonaccruals were down 11%. As a percentage of Total Loans, Nonaccruals were 1.26% in the fourth quarter of 2012, down 22 basis points from 1.48% in the third quarter of 2012. On a year-over-year basis, Nonaccruals as a percentage of Total Loans declined 20 basis points from 1.46%.

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

(In millions)        

December 31, 2012

        September 30, 2012         December 31, 2011
Total Criticized Loans         $235.0         $275.5         $309.3
Total Loans 30-89 Days Past Due and Accruing (10)         $46.4         $9.5         $27.0
Total Net Loans (Charged-off)/Recovered         ($2.1)         ($3.9)         ($0.1)
Allowance for Loan Losses/Total Loans         1.75%         1.83%         2.07%
                       

Capital Ratios Strengthen in Q4, Dividend Increase and Share Repurchase Program Announced

Most regulatory risk-based capital ratios and tangible common equity ratios increased on a linked quarter basis and year-over-year. The Board of Directors today announced a dividend increase to $0.05 per share, up from $0.01 per share last quarter.

"We believe now is the time to begin returning capital to our shareholders given our outlook and confidence in our continued risk management, capital build and earnings power," said Mr. Deutsch. "Increasing our dividend is a prudent decision which will allow us to reward shareholders while adequately funding our strategy. We will continuously evolve our dividend level while assessing other shareholder friendly transactions. We are committed to managing our capital in a hyper-efficient manner."

In addition, on January 16, 2013, the Board of Directors also approved a share repurchase program of up to 5% of the Company's outstanding shares. Under the program, shares may be repurchased from time to time in the open market for a two-year period.

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

          December 31, 2012         September 30, 2012         December 31, 2011
Total Risk-Based Capital*         14.7%         14.7%         15.2%
Tier I Risk-Based Capital*         13.4%         13.1%         12.7%
Tier I Leverage Capital*         9.9%         9.2%         9.0%
TCE/TA         7.7%         7.7%         7.4%
TCE/Risk Weighted Assets*        

10.5%

        10.4%         10.3%

*December 31, 2012 data is presented based on estimated data.

 

Dividend Payments

Concurrent with the release of the fourth quarter 2012 earnings, the Board of Directors of the Company declared a cash dividend to shareholders of $0.05 per share. The record date for this dividend is February 14, 2013, and the payment date is February 28, 2013.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures, such as the TCE/TA and TCE/Risk Weighted Assets ratios, and Operating Expenses excluding restructuring charges, to provide information for investors to effectively analyze financial trends of ongoing business activities, and to enhance comparability with peers across the financial sector. A detailed reconciliation table of the Company's GAAP to the non-GAAP measures is attached.

Conference Call

Management will hold a conference call at 8 a.m. Eastern Time on Thursday, January 17, to discuss the financial results, business highlights and outlook. To access the call:

Dial In #: (888) 317-6003
International Dial In #: (412) 317-6061
Elite Entry Number: 5890660

Replay Information:
Available from January 17 at 12 noon until January 24
Dial In #: (877) 344-7529
International Dial In #: (412) 317-0088
Conference Number: 10023251

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

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. is a national financial services organization with Wealth Management and Private Banking affiliates in Boston, New York, Los Angeles, San Francisco and Seattle. The Company has a $6 billion Private Banking balance sheet, and manages over $20 billion of client assets.

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

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

Forward-Looking Statements

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

Note to Editors:

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

 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
                 
(In thousands, except share and per share data)   12/31/2012     9/30/2012     12/31/2011  
Assets:
Cash and cash equivalents $ 308,744 $ 83,585 $ 203,354
Investment securities available for sale 699,300 755,125 844,496
Loans held for sale (1) 308,390 135,169 12,069
Total loans 4,814,136 4,967,607 4,651,228
Less: Allowance for loan losses   84,057     91,129     96,114  
Net loans 4,730,079 4,876,478 4,555,114
Other real estate owned ("OREO") 3,616 3,186 5,103
Stock in Federal Home Loan Banks 41,981 42,886 43,714
Premises and equipment, net 27,081 28,390 29,224
Goodwill 110,180 110,180 110,180
Intangible assets, net 24,874 25,306 28,569
Fees receivable 8,836 9,460 8,147
Accrued interest receivable 14,723 16,731 16,875
Deferred income taxes, net 63,840 62,964 66,782
Other assets 123,361 123,324 115,069
Assets of discontinued operations (2)   -     -     10,676  
Total assets $ 6,465,005   $ 6,272,784   $ 6,049,372  
Liabilities:
Deposits $ 4,885,059 $ 4,662,794 $ 4,530,411
Deposits held for sale (1) 194,084 - -
Securities sold under agreements to repurchase 116,319 106,713 130,791
Federal funds purchased - 85,000 -
Federal Home Loan Bank borrowings 408,121 552,946 521,827
Junior subordinated debentures 143,647 158,647 182,053
Other liabilities 95,386 91,407 94,811
Liabilities of discontinued operations (2)   -     -     1,663  
Total liabilities   5,842,616     5,657,507     5,461,556  
Redeemable Noncontrolling Interests 19,287 19,675 21,691
The Company's Shareholders' Equity:
Preferred stock, $1.00 par value; authorized: 2,000,000 shares;
Series B, issued and outstanding (contingently convertible): 401 shares at December 31, 2012, September 30, 2012, and December 31, 2011; liquidation value: $100,000 per share 58,089 58,089 58,089
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 78,743,518 shares at December 31, 2012; 78,929,750 shares at September 30, 2012; and 78,023,317 shares at December 31, 2011 78,744 78,930 78,023
Additional paid-in capital 640,891 644,801 656,436
Accumulated deficit (176,746 ) (189,838 ) (230,017 )
Accumulated other comprehensive income   2,124     3,620     3,594  
Total shareholders' equity   603,102     595,602     566,125  
Total liabilities, redeemable noncontrolling interests and shareholders' equity $ 6,465,005   $ 6,272,784   $ 6,049,372  
 
 
Boston Private Financial Holdings, Inc.
Selected Financial Data
(Unaudited)
 
        Three Months Ended   Twelve Months Ended
(In thousands, except share and per share data)   12/31/2012       9/30/2012       12/31/2011     12/31/2012       12/31/2011
Interest and dividend income:
Loans $ 51,398 $ 52,533 $ 51,857 $ 209,280 $ 212,047
Taxable investment securities 650 890 1,332 3,875 5,561
Non-taxable investment securities 846 782 846 3,228 3,768
Mortgage-backed securities 1,443 1,537 1,775 6,186 7,297
Federal funds sold and other   208     290     226     719     1,069
Total interest and dividend income   54,545    

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