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BPFH > SEC Filings for BPFH > Form 10-Q on 7-Aug-2013All Recent SEC Filings

Show all filings for BOSTON PRIVATE FINANCIAL HOLDINGS INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for BOSTON PRIVATE FINANCIAL HOLDINGS INC


7-Aug-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of and for the three and six months ended June 30, 2013 Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions. These statements include, among others, statements regarding our strategy, effectiveness of our investment programs, evaluations of future interest rate trends and liquidity, expectations as to growth in assets, deposits and results of operations, receipt of regulatory approval for pending acquisitions, success of acquisitions, future operations, market position, financial position, and prospects, plans and objectives of management. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control.
Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among others, factors referenced herein under the section captioned "Risk 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 the value of the securities and other assets; changes in loan default and charge-off rates; the adequacy of loan loss reserves; reductions in deposit levels necessitating increased borrowing to fund loans and investments; changes in government regulation; the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired; the risk that the Company's deferred tax assets may not be realized; risks related to the identification and implementation of acquisitions; and changes in assumptions used in making such forward-looking statements, as well as the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K and updated in 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.


Executive Summary
The Company offers a wide range of wealth management services to high net worth
individuals, families, businesses and select institutions through its three
reportable segments: Private Banking, Investment Management, and Wealth
Advisory. This Executive Summary provides an overview of the most significant
aspects of our operating segments and the Company's operations in the second
quarter of 2013. Details of the matters addressed in this summary are provided
elsewhere in this document and, in particular, in the sections immediately
following.
                                            Three months ended June 30,
                                             2013                 2012           $ Change       % Change
                                              (In thousands, except per share data)
Total revenues                         $       84,755       $       74,605     $   10,150           14  %
Provision/ (credit) for loan losses            (2,000 )              1,700         (3,700 )         nm
Total operating expenses                       56,688               55,335          1,353            2  %
Net income from continuing operations          19,516               12,330          7,186           58  %
Net income attributable to
noncontrolling interests                          969                  759            210           28  %
Net income attributable to the Company         21,328               14,161          7,167           51  %
Diluted earnings per share:
From continuing operations             $         0.08       $         0.14     $    (0.06 )        (43 )%
From discontinued operations           $         0.03       $         0.03     $        -            -  %
Attributable to common shareholders    $         0.11       $         0.17     $    (0.06 )        (35 )%


________________
nm =  not meaningful

Net income attributable to the Company was $21.3 million for the three months ended June 30, 2013, compared to $14.2 million in the same period of 2012. The Company recognized diluted earnings per share of $0.11 for the three months ended June 30, 2013, compared to diluted earnings per share of $0.17 for the same period of 2012.
Key items that affected the Company's results in the second quarter of 2013 compared to the same period of 2012 include:
?            The Company issued Series D preferred stock for net proceeds of
             $47.8 million, and at the same time repurchased all of its Series B
             preferred stock for $69.8 million. The repurchase of the Series B
             preferred stock resulted in a deemed dividend, which reduced net
             income available to common shareholders by $11.7 million and diluted
             EPS by $0.14 per share.


?            The Bank completed the sale of its Pacific Northwest offices,
             recording a $10.6 million pretax gain on sale.


?            The Company recorded a $2.0 million credit to the provision for loan
             losses for the three months ended June 30, 2013, compared to a
             provision for loan losses of $1.7 million in the same period of
             2012. The credit to the provision for the three months ended June
             30, 2013 was driven by recoveries of previously charged-off loan
             amounts, a reduction in adversely-classified loans and continued
             improvement in credit quality.


?            The low interest rate environment continues to affect net interest
             income. Net interest margin ("NIM") decreased 21 basis points to
             3.14% for the three months ended June 30, 2013 compared to the same
             period in 2012. Net interest income for the three months ended June
             30, 2013 was $43.9 million, a decrease of $2.7 million, or 6%,
             compared to the same period in 2012. This decrease was due to lower
             average yields on loans and investments and increased volume of
             deposits, partially offset by an increase in volume of the loan
             portfolio, lower average rates paid on the Company's deposits and
             borrowings, and a decrease in volume of borrowings.

The Company's Private Banking segment reported net income attributable to the Company of $19.2 million in the second quarter of 2013, compared to net income attributable to the Company of $13.0 million in the same period of 2012. The $6.2 million, or 48%, increase was a result of the gain on sale of the Pacific Northwest offices, the credit to the provision for loan losses in the second quarter of 2013, and increased fee-based noninterest income, offset by decreased net interest income, increased noninterest expense, and increased income tax expense for the three months ended June 30, 2013. AUM increased


$0.4 billion, or 12%, to $4.1 billion at June 30, 2013 from $3.7 billion at June 30, 2012, due to both net inflows and investment performance.
The Company's Investment Management segment reported net income attributable to the Company of $1.2 million in the second quarter of 2013, compared to net income attributable to the Company of $0.8 million in the same period of 2012. The $0.4 million, or 57%, increase was due to increases in investment management and trust fees, partially offset by increased operating expense. Most fee-based revenue is determined based on beginning-of-period AUM data, and, as a result, the increase in investment management and trust fees was related to changes in AUM from March 31, 2012 through March 31, 2013. AUM increased $1.2 billion, or 15%, to $9.1 billion at June 30, 2013 from $8.0 billion at June 30, 2012, due to investment performance, partially offset by net outflows.
The Company's Wealth Advisory segment reported net income attributable to the Company of $1.7 million in the second quarter of 2013, compared to net income attributable to the Company of $1.1 million in the same period of 2012. The $0.6 million, or 52%, increase was due to increases in wealth advisory fee revenue, partially offset by increased operating expenses, including a legal settlement expense, increased salaries and employee benefits expense and increased professional services expense, and income tax expense. AUM increased $1.0 billion, or 14%, to $8.5 billion at June 30, 2013 from $7.5 billion at June 30, 2012, due to positive net flows and investment performance.

Critical Accounting Policies
Critical accounting policies reflect significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. The Company believes that its most critical accounting policies upon which its financial condition depends, and which involve the most complex or subjective decisions or assessments are the allowance for loan and lease losses, the valuation of goodwill and intangible assets and analysis for impairment, and tax estimates. These policies are discussed in Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. There have been no changes to these policies through the filing of this Quarterly Report on Form 10-Q.

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