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BPFH > SEC Filings for BPFH > Form 10-Q on 7-May-2014All Recent SEC Filings

Show all filings for BOSTON PRIVATE FINANCIAL HOLDINGS INC

Form 10-Q for BOSTON PRIVATE FINANCIAL HOLDINGS INC


7-May-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of and for the three months ended March 31, 2014 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 that adversely affect borrowers' ability to service and repay our loans; changes in the value of securities in the Company's investment portfolio; 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, dispositions and restructurings; 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 first
quarter of 2014. 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 March 31,
                                             2014                 2013           $ Change        % Change
                                               (In thousands, except per share data)
Total revenues                         $       77,255       $       75,037     $     2,218            3  %
Provision/ (credit) for loan losses            (1,200 )                  -          (1,200 )        n/m
Total operating expense                        54,968               56,586          (1,618 )         (3 )%
Net income from continuing operations          16,349               12,411           3,938           32  %
Net income attributable to
noncontrolling interests                        1,236                  930             306           33  %
Net income attributable to the Company         17,041               13,203           3,838           29  %
Diluted earnings per share:
From continuing operations             $         0.18       $         0.13     $      0.05           38  %
From discontinued operations           $         0.02       $         0.02     $         -            -  %
Total attributable to common
shareholders                           $         0.20       $         0.15     $      0.05           33  %

Net income attributable to the Company was $17.0 million for the three months ended March 31, 2014, compared to $13.2 million in the same period of 2013. The Company recognized diluted earnings per share of $0.20 for the three months ended March 31, 2014, compared to diluted earnings per share of $0.15 for the same period of 2013.
Key items that affected the Company's results in the first quarter of 2014 compared to the same period of 2013 include:

?            The Company recorded a $1.2 million credit to the provision for loan
             losses for the three months ended March 31, 2014, compared to no
             provision or credit to the provision for loan losses recorded in the
             same period of 2013. The credit to the provision for the three
             months ended March 31, 2014 was primarily due to net recoveries and
             lower qualitative factors, partially offset by the increase in
             adversely-classified loans and growth of the loan portfolio.


?            Fees and other income increased 6% to $32.7 million for the three
             months ended March 31, 2014, compared to $30.8 million in the same
             period of 2013. This increase was driven by fee-based revenue
             consisting of a 14% increase in wealth advisory fees, a 14% increase
             in investment management fees, and a 3% increase in private banking
             wealth management and trust fees. Total fee and other income revenue
             line items represent 42% of total revenue for the three months ended
             March 31, 2014, compared to 41% of total revenue in the same period
             of 2013.


?            Operating expenses decreased $1.6 million, or 3%, to $55.0 million
             for the three months ended March 31, 2014, compared to $56.6 million
             in the same period of 2013. Decreases in salaries and employee
             benefits, other expense, and FDIC insurance expense were the primary
             drivers of the overall decrease.

The Company's Private Banking segment reported net income attributable to the Company of $15.0 million in the first quarter of 2014, compared to net income attributable to the Company of $13.8 million in the same period of 2013. The $1.2 million, or 8%, increase was a result of the credit to the provision for loan losses and decreased operating expenses, partially offset by decreased noninterest income, and increased income tax expense for the three months ended March 31, 2014. AUM increased $0.4 billion, or 11%, to $4.6 billion at March 31, 2014 from $4.2 billion at March 31, 2013, due to both investment performance and net inflows.
The Company's Investment Management segment reported net income attributable to the Company of $1.5 million in the first quarter of 2014, compared to net income attributable to the Company of $1.1 million in the same period of 2013. The 30% increase was due to increased investment management fees partially offset by increased operating expenses, primarily


due to increased salaries and employee benefits. Most fee-based revenue is determined based on beginning-of-period AUM data. AUM increased $1.2 billion, or 13%, to $10.5 billion at March 31, 2014 from $9.3 billion at March 31, 2013, due to investment performance, partially offset by net outflows.
The Company's Wealth Advisory segment reported net income attributable to the Company of $1.8 million in the first quarter of 2014, compared to net income attributable to the Company of $1.2 million in the same period of 2013. The $0.6 million, or 51%, increase was due to increased wealth advisory fee revenue, partially offset by increased operating expenses, primarily due to increased salaries and employee benefits, offset by decreased professional services expense and a 2013 legal settlement expense. AUM increased $1.2 billion, or 14%, to $9.6 billion at March 31, 2014 from $8.5 billion at March 31, 2013, 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, 2013. There have been no changes to these policies through the filing of this Quarterly Report on Form 10-Q.

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