Boston Private Announces Results for the Fourth-Quarter and Year-End 2006

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the "Company” or "Boston Private”) today reported fourth quarter 2006 non-GAAP cash earnings of $0.50 per diluted share, an increase of 11.1%, versus $0.45 for the fourth quarter 2005. For the year, non-GAAP cash earnings were $1.82 per diluted share, an increase of 7.1% compared to $1.70 per diluted share for the year ended December 31, 2005. GAAP earnings for the fourth quarter were $0.40 per diluted share, an increase of 11.1% compared to $0.36 per diluted share for the fourth quarter 2005. For the year, GAAP earnings were $1.43 per diluted share, an increase of 3.6% compared to $1.38 per diluted share for the year ended 2005. Timothy L. Vaill, Chairman and Chief Executive Officer, said, "I am gratified that the GAAP earnings for the fourth quarter were $0.40 per share compared to $0.36 per share in the third quarter. During the year, we invested in new wealth management offices in demographically rich markets such as Naples, Florida, New York City, and Hingham, Massachusetts. We acquired Anchor Capital, further diversifying our revenue stream by entering the separately managed accounts business. In addition, we increased our investment in our fast growing affiliate partner Bingham, Osborn & Scarborough. While we continued to face the challenge of an inverted yield curve, our results this quarter were benefited by approximately $0.02 per share resulting from management’s decision to reduce discretionary incentive payments consistent with a lower earnings growth rate compared to recent years. We also recognized a $0.01 per share benefit from a lower tax rate and $0.01 per share from seasonal performance fees related to the investment management business.” Walter M. Pressey, Boston Private’s President, stated, "Our investment management business benefited from a strong market and diversification by business mix, geography, product, investment style, and client type. Despite short-term challenges faced by one investment product, which resulted in significant outflows, our revenues grew by more than 30 percent overall and approximately 10 percent on a same affiliate basis.” The financial statements include the results from Gibraltar Private Bank & Trust Company ("Gibraltar”), which Boston Private acquired on October 1, 2005, and from Anchor Capital Holdings LLC ("Anchor”), which the Company acquired on June 1, 2006. Accordingly, comparisons for certain periods are not reflective of same affiliate financial information. More detailed financial information regarding Gibraltar’s and Anchor’s financial results are outlined later in this press release. Annual Highlights Net Income for 2006 increased 24.9% to $54.4 million, compared to $43.5 million in 2005. Net income was $48.0 million, or an increase of 15.9%, on a same affiliate basis after adjusting for the $6.4 million of net income related to Gibraltar and Anchor, and the related financing. Total Revenues for 2006 increased 31.0% to $344.9 million, compared to $263.3 million in 2005. Revenues were $274.5 million, a 10.0% increase after adjusting for the $70.4 million of revenues related to the Gibraltar and Anchor acquisitions, and related financing. Net Interest Income for 2006 increased 34.8%, to $173.5 million. Net interest income increased $11.3 million, or 9.7%, to $128.0 million in 2006 after adjusting for the $45.5 million in net interest income at Gibraltar and the related trust preferred interest expense. -- Core net interest margin, excluding the impact of trust preferred interest expense related to acquisitions, increased 2 basis points to 4.12% from 4.10% for 2006 versus 2005. -- Net interest margin, including the impact of trust preferred interest expense, was 3.84%, 4 basis points lower than the 2005 level of 3.88%. -- Increased business volume contributed $54.4 million to the increase of net interest income. Excluding Gibraltar, business volume contributed $16.8 million to the increase in net interest income. -- Increased cost of funds, partially offset by increased asset yields, caused a $9.6 million reduction in net interest income. Excluding Gibraltar, the cost of funds caused a $5.6 million reduction in net interest income. Wealth Advisory Fee Income increased 8.8% to $20.8 million in 2006 over the prior year. Investment Management Fee Income for 2006 totaled $137.7 million, an increase of 30.1% over 2005. The increase was due predominantly to the addition of Anchor and strong investment performance at certain affiliates. On a same affiliate basis, investment management fee income was $114.8 million, an increase of 9.8%. Total Operating Expenses for 2006, including minority interests, increased 34.6% to $254.1 million, compared to $188.8 million in 2005. Operating expenses, including minority interest, were $196.6 million, or a 9.8% increase, on a same affiliate basis after adjusting for the $57.5 million related to the acquisitions of Anchor and Gibraltar. Operating Leverage was negative 3.7% for 2006. The negative operating leverage was impacted by a significant increase in the cost of deposit funds and $4.9 million in operating expenses related to investment spending to support business expansion. Total Assets increased 12.6% to $5.8 billion over the December 31, 2005 balance of $5.1 billion. Loans increased 19.0% to $4.3 billion over the December 31, 2005 balance of $3.6 billion. Commercial and construction loans totaled $2.5 billion and represented 57.9% of the combined loan portfolio. Residential loans totaled $1.5 billion and represented 35.9% of the total portfolio. Deposits increased 8.8% to $4.1 billion over the December 31, 2005 balance of $3.7 billion. Total Assets Under Management/Advisory, including the Company’s unconsolidated affiliates, increased 38.2%, or $9.0 billion, over the prior year to $32.7 billion. AUM increased $2.6 billion, or 11.0%, after adjusting for the $6.4 billion in assets under management at December 31, 2006 held by Anchor. Change in Assets Under Management. On a consolidated basis, Boston Private’s banks and asset managers had net outflows of funds of approximately $405 million and an increase of approximately $2.7 billion related to market action for the year. Robert J. Whelan, Boston Private’s Chief Financial Officer, commented, "Our management teams have taken selective actions to improve financial performance, investment performance and deposit balances. I am confident that we are appropriately reinvesting for future organic growth, and promoting a superior customer experience, while optimizing our financial performance.” CEO Vaill concluded, "We are looking forward to the year ahead. We believe we have the strategy, unique business model, and financial strength to capitalize on the tremendous opportunities in the wealth management market. I am as excited as I have ever been about the opportunities we are facing as we build one of the leading wealth management companies in the industry.” Fourth Quarter 2006 Results Boston Private’s revenues increased 14.4% to $90.9 million for the fourth quarter of 2006, over revenues of $79.5 million for the fourth quarter of 2005. This increase was due to the acquisition of Anchor, as well as growth achieved in the Company’s wealth advisory and investment management businesses. The Anchor acquisition contributed $7.4 million in revenue for the fourth quarter. The Company’s net interest income decreased 1.2% to $43.4 million for the fourth quarter of 2006, compared to $43.9 million for the fourth quarter of 2005. The change was due to the impact of net interest margin decline, which caused a decrease of $5.5 million, partially offset by increased volumes of $5.0 million. Excluding the impact of trust preferred interest expense, Boston Private’s core net interest margin decreased 18 basis points to 3.85% in the fourth quarter 2006 compared to 4.03% in the third quarter of 2006. The net interest margin, including the impact of the trust preferred, was 3.58% in the fourth quarter of 2006, compared to 3.76% in the third quarter of 2006. Investment management fee income for the fourth quarter 2006 totaled $37.7 million, up 34.2% over the fourth quarter 2005. The increase from the fourth quarter of 2006 was primarily due to the addition of Anchor, strong investment performance at certain affiliates and improved market action. Anchor contributed $7.4 million in fee income. In Boston Private’s wealth advisory business, fee income increased 10.7% from the fourth quarter of 2005 to $5.5 million for the fourth quarter of 2006. Boston Private’s banks and asset managers had net outflows of assets under management of approximately $222 million and an increase of approximately $1.6 billion related to market action for the fourth quarter. Operating expenses, including minority interest, were $66.1 million for the fourth quarter of 2006, an increase 16.5% over the fourth quarter of 2005. The main drivers of operating expense growth were costs associated with operating expenses of the Anchor acquisition and geographic expansion. Operating expenses, including minority interest for Anchor were $5.8 million in the fourth quarter of 2006. Net income was $15.6 million for the fourth quarter of 2006, an increase 18.6% over the fourth quarter of 2005. Anchor contributed $925 thousand to net income in the fourth quarter of 2006. Dividend Payment Increased Concurrent with the release of the fourth quarter 2006 earnings, the Board of Directors of the Company declared a cash dividend to shareholders of $0.09 per share, reflecting the quarterly earnings performance. The record date for this dividend is February 1, 2007 and the payment date is February 15, 2007. This is an increase from the previous quarterly level by $0.01 per share and reflects the seventh annual increase since the company instituted a dividend in 1999. Cash Earnings Boston Private calculates its cash earnings by adjusting net income to exclude net amortization of intangibles 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 cash earnings reports the additional value to shareholders generated by purchase accounting adjustments and the non-cash share based compensation plans. (A detailed reconciliation table is attached.) Conference Call Management will host a conference call to review the Company’s financial performance and business developments on January 25, 2007 at 9 a.m. Eastern time. Interested parties may join the call by dialing 800-867-0731 and the password required is "Boston”. 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 800-388-9064. Boston Private Wealth Management Group The Boston Private Wealth Management Group is a national enterprise of independently operated financial service firms united by a commitment to provide exceptional wealth management solutions to the high net worth marketplace, selected institutions, key intermediaries and private companies. Member firms are subsidiaries of Boston Private Financial Holdings, Inc., (NASDAQ: BPFH) and are provided access to financial capital and resources such as sales and marketing expertise, leadership development, legal counsel and compliance guidance. Boston Private’s core competencies are private banking, wealth advisory and investment management, represented by its acquired firms that are located in demographically-attractive geographic regions. Collectively, they provide solutions for wealth accumulation, preservation, and distribution, serving the needs of a client’s financial lifecycle. Boston Private’s firms are deeply rooted in excellence and are distinguished by their uncompromising commitment to quality relationships and superior business results. 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 performance measures exclude other significant gains or losses that are unusual in nature. Also, these non-GAAP measures exclude net amortization of intangibles and 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 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 within the meaning of the Private Securities Litigation Reform Act of 1995. 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 improved 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 markets and the impact of such conditions on Boston Private’s investment advisory activities; the risk that the business of Anchor Capital will not be integrated successfully with Boston Private’s or such integration may be more difficult, time-consuming or costly than expected; 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; and the risk that goodwill and intangibles recorded in the Company’s financial statements will become 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 statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Boston Private Financial Holdings, Inc. Selected Financial Data (In Thousands, except share data) (Unaudited)   December 31, December 31, FINANCIAL DATA (1): 2006    2005    Total Balance Sheet Assets $5,763,544  $5,118,568  Stockholders' Equity 635,197  539,348  Tangible Capital: Boston Private Bank & Trust 160,639  137,887  Borel Private Bank & Trust 91,300  76,570  First Private Bank & Trust 48,388  39,514  Gibraltar Private Bank & Trust 78,692  63,762  Investment Securities 577,903  584,860  Goodwill 335,633  286,751  Intangible Assets 125,331  97,656    Commercial and Construction Loans 2,496,234  2,039,443  Residential Mortgage Loans 1,546,965  1,338,607  Home Equity and Other Consumer Loans 268,053    246,190  Total Loans 4,311,252  3,624,240    Loans Held for Sale 5,224  12,883  Allowance for Loan Losses and Off-Balance Sheet Risk 48,973  42,354  Non-performing Loans 9,999  7,900  Repossessed Assets, Net 550  -  Total Non-performing Assets 10,549  7,900  Deposits 4,077,831  3,748,141  Borrowings 914,529  703,379    Book Value Per Share $17.36  $15.50  Market Price Per Share $28.21  $30.42    ASSETS UNDER MANAGEMENT AND ADVISORY:   Westfield Capital Management $10,102,000  $8,325,000  Boston Private Bank & Trust 2,369,000  2,310,000  Sand Hill Advisors 1,252,000  1,094,000  Boston Private Value Investors 961,000  867,000  RINET Company 1,262,000  1,129,000  Borel Private Bank & Trust 731,000  661,000  Dalton, Greiner, Hartman, Maher & Co. 2,302,000  3,259,000  KLS Professional Advisors Group 3,727,000  3,140,000  Gibraltar Private Bank & Trust 907,000  757,000  Anchor Capital Holdings 6,444,000  -  First Private Bank & Trust (7) 5,000  -  Less: Inter-company Relationship (238,000)   (203,000) Consolidated Affiliate Assets Under Management and Advisory $29,824,000  $21,339,000    Coldstream Capital Management 1,090,000  900,000  Bingham, Osborn, & Scarborough 1,777,000    1,415,000  Total Assets Under Management and Advisory $32,691,000  $23,654,000      FINANCIAL RATIOS:   Stockholders' Equity/Total Assets 11.02% 10.54% Non-performing Loans/Total Loans 0.23% 0.22% Allowance for Loan Losses and Off-Balance Sheet Risk/Total Loans 1.14% 1.17% Tangible Capital/ Tangible Assets 3.29% 3.27% Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, OPERATING RESULTS (1): 2006  2005  2006    2005    Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $44,960  $45,218  $179,276  $133,532  FTE Adjustment 1,575    1,302  5,763    4,793  Net Interest Income 43,385    43,916  173,513    128,739  Investment Management & Trust Fees: Westfield Capital Management 15,567  12,668  57,445  48,878  Boston Private Bank & Trust 3,578  3,354  13,818  12,935  Sand Hill Advisors 1,556  1,522  6,198  6,171  Boston Private Value Investors 1,748  1,612  6,805  6,296  Borel Private Bank & Trust 1,130  956  4,326  3,495  Gibraltar Private Bank & Trust 1,764  1,369  6,479  1,369  Dalton, Greiner, Hartman, Maher & Co. 5,043  6,640  26,182  26,729  First Private Bank & Trust 5  -  5  -  Anchor Capital Holdings 7,356    -  16,474    -  Total Investment Management & Trust Fees 37,747  28,121  137,732  105,873  Wealth Advisory Fees: RINET Company 2,135  2,084  8,181  8,140  KLS Professional Advisors Group 3,336  2,848  12,375  10,782  Other 55    61  204    164  Total Wealth Advisory Fees 5,526    4,993  20,760    19,086  Other Fees 2,312    1,516  7,843    6,278  Total Fees 45,585    34,630  166,335    131,237  Earnings in Equity Investments 1,515  503  3,034  1,556  Gain on Sale of Loans, Net 434  471  1,972  1,774  Gain/(Loss) on Sale of Investments, Net -    (20) -    20    Total Fees and Other Income 47,534    35,584  171,341    134,587  Total Revenue 90,919    79,500  344,854    263,326    Provision for Loan Losses 987    2,070  6,179    5,438    Salaries and Employee Benefits 41,611  35,928  163,438  123,387  Occupancy and Equipment 7,900  6,447  29,149  21,053  Professional Services 3,651  3,080  13,346  10,270  Marketing and Business Development 2,169  2,048  8,705  6,792  Contract Services and Processing 1,321  1,224  5,125  4,070  Amortization of Intangibles 3,874  3,018  13,649  7,634  Other 4,512    3,911  17,037    13,063  Total Operating Expense 65,038    55,656  250,449    186,269  Minority Interest 1,020  1,032  3,699  2,512  Income Before Income Taxes 23,874  20,742  84,527  69,107  Income Tax Expense 8,266    7,583  30,154    25,561  Net Income $15,608    $13,159  $54,373    $43,546  Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, RECONCILIATION OF GAAP EARNINGS 2006  2005  2006  2005  TO CASH EARNINGS (1):   Net Income (GAAP Basis) $15,608  $13,159  $54,373  $43,546    Cash Basis Earnings (2) Book Amortization of Purchased Intangibles, Net of Tax 2,091  1,641  7,514  3,982  Cash Benefit of Tax Deductions from Purchased Intangibles & Goodwill 1,138  1,032  4,206  4,129  Stock options and ESPP, Net of Tax 830  832  3,622  2,772  Total Cash Basis Adjustment 4,059    3,505  15,342    10,883  Cash Basis Earnings $19,667    $16,664  $69,715    $54,429            Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2006  2005  2006  2005  PER SHARE DATA: (In thousands, except per share data)(1)   Calculation of Net Income for EPS:   Net Income as reported and for basic EPS $15,608  $13,159  $54,373  $43,546  Interest on convertible trust preferred securities, net of tax 765  765  3,060  3,059  Net Income for diluted EPS $16,373  $13,924  $57,433  $46,605    Calculation of average shares outstanding: Weighted average basic shares 36,064  34,219  35,453  29,425  Dilutive effect of: Stock Options, Stock Grants and Other 1,560  1,623  1,453  1,071  Forward Agreement -  -  -  147  Convertible trust preferred securities 3,183  3,182  3,183  3,182  Dilutive potential common shares 4,743  4,805  4,636  4,400  Weighted average diluted shares 40,807  39,024  40,089  33,825    Earnings per Share: Basic $0.43  $0.38  $1.53  $1.48  Diluted $0.40  $0.36  $1.43  $1.38    RECONCILIATION OF GAAP EPS TO CASH EPS (1): (on a Diluted Basis)   Earnings Per Share (GAAP Basis) $0.40  $0.36  $1.43  $1.38  Cash Basis Adjustment $0.10  $0.09  $0.39  $0.32  Cash Basis Earnings Per Diluted Share (6) $0.50  $0.45  $1.82  $1.70              Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2006  2005  2006  2005  OPERATING RATIOS & STATISTICS (1):   Return on Average Equity 9.96% 10.00% 9.27% 11.23% Return on Average Assets 1.10% 1.03% 1.02% 1.13% Net Interest Margin 3.58% 4.00% 3.84% 3.88% Core Net Interest Margin(3) 3.85% 4.28% 4.12% 4.10% Total Fees and Other Income/Total Revenue 52.28% 44.76% 49.69% 51.11% Efficiency Ratio 67.55% 65.92% 68.52% 67.47% Loans Charged-off, Net of (Recoveries) ($39) ($40) $399  $46      RECONCILIATION OF NIM TO CORE NIM   Net Interest Margin 3.58% 4.00% 3.84% 3.88% Effect of Trust Preferred, Net 0.27% 0.28% 0.28% 0.22% Core Net Interest Margin(3) 3.85% 4.28% 4.12% 4.10%     CASH OPERATING RATIOS (1):   Return on Average Equity (4) 12.54% 12.67% 11.89% 14.04% Return on Average Assets (5) 1.39% 1.31% 1.31% 1.41% AVERAGE BALANCE SHEET:     Three Months Ended Three Months Ended December 31, 2006 December 31, 2005 Average Income/ Yield/ Average Income/ Yield/ AVERAGE ASSETS: Balance   Expense   Rate Balance   Expense   Rate Earnings Assets Cash and Investments $725,252  $7,665  4.72% $880,755  $7,709  3.88% Loans Commercial and Construction 2,411,415  46,817  7.74% 2,007,407  36,970  7.32% Residential Mortgage 1,535,098  21,819  5.69% 1,341,973  17,458  5.20% Home Equity and Other Consumer 273,830  5,607  7.78% 238,101  4,259  7.00% Total Earning Assets 4,945,595  81,908  7.00% 4,468,236  66,396  5.99% Allowance for Loan Losses (42,634) (36,640) Cash and due From Banks 55,612  71,434  Other Assets 693,800  598,329  TOTAL AVERAGE ASSETS 5,652,373  5,101,359      AVERAGE LIABILITIES AND STOCKHOLDERS' EQUITY:   Interest-Bearing Liabilities: Deposits: Savings and NOW 459,196  2,167  1.87% 428,344  $950  0.88% Money Market 1,878,662  15,439  3.26% 1,816,019  8,560  1.87% Certificate of Deposits 871,428  10,028  4.57% 706,315  5,718  3.21% Total Deposits 3,209,286  27,634  3.42% 2,950,678  15,228  2.05% Junior Subordinated Debentures 234,021  3,318  5.55% 232,979  3,221  5.41% FHLB Borrowings and Other 684,866  7,571  4.35% 451,305  4,031  3.54% Total Interest-Bearing Liabilities 4,128,173  38,523  3.69% 3,634,962  22,480  2.45% Non-interest Bearing Demand Deposits 741,198  782,377  Payables and Other Liabilities 155,862  157,905  Total Liabilities 5,025,233  4,575,244  Stockholders' Equity 627,140  526,115  TOTAL AVERAGE LIABILITIES & STOCKHOLDERS' EQUITY $5,652,373  $5,101,359    Net Interest Income $43,385  $43,916  Net Interest Margin 3.58% 4.00% AVERAGE BALANCE SHEET:     Twelve Months Ended Twelve Months Ended December 31, 2006 December 31, 2005 Average Income/ Yield/ Average Income/ Yield/ AVERAGE ASSETS: Balance Expense Rate Balance   Expense   Rate Earnings Assets Cash and Investments $701,653  $27,237  4.39% $734,314  $22,527  3.52% Loans Commercial and Construction 2,226,396  169,826  7.70% 1,581,658  110,322  7.06% Residential Mortgage 1,466,182  82,255  5.61% 988,799  48,585  4.91% Home Equity and Other Consumer 263,045  20,714  7.75% 128,673  8,556  6.61% Total Earning Assets 4,657,276  300,032  6.93% 3,433,444  189,990  5.67% Allowance for Loan Losses (40,101) (29,744) Cash and due From Banks 60,681  54,300  Other Assets 633,886  410,399  TOTAL AVERAGE ASSETS 5,311,742  3,868,399      AVERAGE LIABILITIES AND STOCKHOLDERS' EQUITY:   Interest-Bearing Liabilities: Deposits: Savings and NOW 453,587  6,754  1.49% 315,967  1,653  0.52% Money Market 1,768,655  49,002  2.77% 1,347,872  22,199  1.65% Certificate of Deposits 767,736  31,506  4.09% 571,843  15,784  2.76% Total Deposits 2,989,978  87,262  2.92% 2,235,682  39,636  1.77% Junior Subordinated Debentures 234,021  13,167  5.63% 145,409  7,484  5.15% FHLB Borrowings and Other 624,954  26,090  4.13% 410,690  14,131  3.32% Total Interest- Bearing Liabilities 3,848,953  126,519  3.28% 2,791,781  61,251  2.19% Non-interest Bearing Demand Deposits 735,224  582,960  Payables and Other Liabilities 141,099  105,899  Total Liabilities 4,725,276  3,480,640  Stockholders' Equity 586,466  387,759  TOTAL AVERAGE LIABILITIES & STOCKHOLDERS' EQUITY $5,311,742  $3,868,399    Net Interest Income $173,513  $128,739  Net Interest Margin 3.84% 3.88% December 31, September 30, 2006    2006  FINANCIAL DATA (1):   Total Balance Sheet Assets $5,763,544  $5,478,170  Stockholders' Equity 635,197  619,240  Tangible Capital: Boston Private Bank & Trust 160,639  154,988  Borel Private Bank & Trust 91,300  87,426  First Private Bank & Trust 48,388  46,115  Gibraltar Private Bank & Trust 78,692  75,340  Investment Securities 577,903  533,557  Goodwill 335,633  318,417  Intangible Assets 125,331  125,601    Commercial and Construction Loans 2,496,234  2,382,898  Residential Mortgage Loans 1,546,965  1,486,942  Home Equity and Other Consumer Loans 268,053    278,971  Total Loans 4,311,252  4,148,811    Loans Held for Sale 5,224  5,034  Allowance for Loan Losses and Off-Balance Sheet Risk 48,973  47,707  Non-performing Loans 9,999  12,592  Repossessed Assets, Net 550  550  Total Non-performing Assets 10,549  13,142  Deposits 4,077,831  3,854,594  Borrowings 914,529  871,160    Book Value Per Share $17.36  $16.96  Market Price Per Share $28.21  $27.88            ASSETS UNDER MANAGEMENT AND ADVISORY:   Westfield Capital Management $10,102,000  $9,074,000  Boston Private Bank & Trust 2,369,000  2,309,000  Sand Hill Advisors 1,252,000  1,151,000  Boston Private Value Investors 961,000  914,000  RINET Company 1,262,000  1,202,000  Borel Private Bank & Trust 731,000  683,000  Dalton, Greiner, Hartman, Maher & Co. 2,302,000  2,784,000  KLS Professional Advisors Group 3,727,000  3,494,000  Gibraltar Private Bank & Trust 907,000  888,000  Anchor Capital Holdings 6,444,000  5,806,000  First Private Bank & Trust 5,000  -  Less: Inter-company Relationship (238,000)   (211,000) Consolidated Affiliate Assets Under Management and Advisory $29,824,000  $28,094,000    Coldstream Capital Management 1,090,000  1,000,000  Bingham, Osborn, & Scarborough 1,777,000    1,634,000  Total Unconsolidated Assets Under Management and Advisory $32,691,000  $30,728,000    FINANCIAL RATIOS (1):   Stockholders' Equity/Total Assets 11.02% 11.30% Nonperforming Loans/Total Loans 0.23% 0.30% Allowance for Loan Losses and Off-Balance Sheet Risk/Total Loans 1.14% 1.15% Tangible Capital/Tangible Assets 3.29% 3.48%   Three Months Ended December 31, September 30, OPERATING RESULTS (1): 2006    2006    Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $44,960  $44,646  FTE Adjustment 1,575    1,488  Net Interest Income 43,385    43,158  Investment Management & Trust Fees: Westfield Capital Management 15,567  14,238  Boston Private Bank & Trust 3,578  3,352  Sand Hill Advisors 1,556  1,539  Boston Private Value Investors 1,748  1,701  Borel Private Bank & Trust 1,130  1,149  Gibraltar Private Bank & Trust 1,764  1,640  Dalton, Greiner, Hartman, Maher & Co. 5,043  6,559  First Private Bank & Trust 5  -  Anchor Capital 7,356    6,854  Total Investment Management & Trust Fees 37,747  37,032  Wealth Advisory Fees RINET Company 2,135  2,029  KLS Professional Advisors Group 3,336  3,155  Other 55    51  Total Wealth Advisory Fees 5,526    5,235  Other Fees 2,312    2,038  Total Fees 45,585    44,305  Earnings in Equity Investments 1,515  528  Gain on Sale of Loans, Net 434  556  Gain on Sale of Investments, Net -    -    Total Fees and Other Income 47,534    45,389  Total Revenue 90,919    88,547    Provision for Loan Losses 987    2,325    Salaries and Benefits 41,611  42,244  Occupancy and Equipment 7,900  7,695  Professional Services 3,651  3,161  Marketing and Business Development 2,169  1,842  Contract Services and Processing 1,321  1,301  Amortization of Intangibles 3,874  3,736  Other 4,512    3,703  Total Operating Expense 65,038    63,682  Minority Interest 1,020  1,120  Income Before Income Taxes 23,874  21,420  Income Tax Expense 8,266    7,770  Net Income $15,608    $13,650        Three Months Ended December 31, September 30, RECONCILIATION OF GAAP EARNINGS TO CASH EARNINGS (1): 2006    2006      Net Income (GAAP Basis) $15,608  $13,650    Cash Basis Earnings (2) Book Amortization of Purchased Intangibles, Net of Tax 2,091  2,032  Cash Benefit of Tax Deductions from Purchased Intangibles & Goodwill 1,138  1,023  Stock options and ESPP, Net of Tax 830    829  Total Cash Basis Adjustment 4,059    3,884  Cash Basis Earnings $19,667    17,534        Three Months Ended December 31, September 30, 2006    2006  PER SHARE DATA: (In thousands, except per share data) (1)   Calculation of Net Income for EPS:   Net Income as reported and for basic EPS $15,608  $13,650  Interest on convertible trust preferred securities, net of tax 765    765  Net Income for diluted EPS $16,373  $14,415    Calculation of Average Shares Outstanding: Weighted average basic shares 36,064  35,953  Dilutive effect of: Stock Options,Stock Grants, and Other 1,560  1,270  Convertible trust preferred securities 3,183    3,183  Dilutive potential common shares 4,743  4,453  Weighted average diluted shares 40,807  40,406    Earnings per Share: Basic $0.43  $0.38  Diluted $0.40  $0.36    RECONCILIATION OF GAAP EPS TO CASH EPS (1):   (on a Diluted Basis)   Earnings Per Share (GAAP Basis) $0.40  $0.36  Cash Basis Adjustment $0.10    $0.09  Cash Basis Earnings Per Diluted Share $0.50    $0.45    OPERATING RATIOS & STATISTICS:   Return on Average Equity 9.96% 8.95% Return on Average Assets 1.10% 1.02% Net Interest Margin 3.58% 3.76% Core Net Interest Margin (3) 3.85% 4.03% Total Fees and Other Income/Total Revenue 52.28% 51.26% Efficiency Ratio 67.55% 67.39% Loans Charged-off, Net of (Recoveries) ($39) ($101)     RECONCILIATION OF NIM TO CORE NIM Net Interest Margin 3.58% 3.76% Effect of Trust Preferred , Net 0.27% 0.27% Core Net Interest Margin (3) 3.85% 4.03% SAME AFFILIATES (8) Growth Excluding Acquisitions As Reported Acquisitions Same Affiliates December 31, December 31, December 31, December 31, FINANCIAL DATA(1): 2006    2005  2006  2006    Total Balance Sheet Assets $5,763,544  $5,118,568  $93,860  $5,669,684  Stockholders' Equity 635,197  539,348  30,932  604,265  Tangible Capital: Boston Private Bank & Trust 160,639  137,887  -  160,639  Borel Private Bank & Trust 91,300  76,570  -  91,300  First Private Bank & Trust 48,388  39,514  -  48,388  Gibraltar Private Bank & Trust 78,692  63,762  -  78,692  Investment Securities 577,903  584,860  394  577,509  Goodwill 335,633  286,751  38,463  297,170  Intangible Assets 125,331  97,656  35,815  89,516    Commercial and Construction Loans 2,496,234  2,039,443  -  2,496,234  Residential Mortgage Loans 1,546,965  1,338,607  -  1,546,965  Home Equity and Other Consumer Loans 268,053    246,190  -  268,053  Total Loans 4,311,252  3,624,240  -  4,311,252    Loans Held for Sale 5,224  12,883  -  5,224  Allowance for Loan Losses and Off-Balance Sheet Risk 48,973  42,354  -  48,973  Non-performing Loans 9,999  7,900  -  9,999  Repossessed Assets, Net 550  -  -  -  Total Non-performing Assets 10,549  7,900  -  10,549  Deposits 4,077,831  3,748,141  -  4,077,831  Borrowings 914,529  703,379  -  914,529    ASSETS UNDER MANAGEMENT AND ADVISORY:   Westfield Capital Management $10,102,000  $8,325,000  -  $10,102,000  Boston Private Bank & Trust 2,369,000  2,310,000  -  2,369,000  Sand Hill Advisors 1,252,000  1,094,000  -  1,252,000  Boston Private Value Investors 961,000  867,000  -  961,000  RINET Company 1,262,000  1,129,000  -  1,262,000  Borel Private Bank & Trust 731,000  661,000  -  731,000  Dalton, Greiner, Hartman, Maher & Co. 2,302,000  3,259,000  -  2,302,000  KLS Professional Advisors Group 3,727,000  3,140,000  -  3,727,000  Gibraltar Private Bank & Trust 907,000  757,000  -  907,000  Anchor Capital Holdings 6,444,000  -  6,444,000  -  First Private Bank & Trust 5,000  -  -  5,000  Less: Inter-company Relationship (238,000)   (203,000) -  (238,000) Consolidated Affiliate Assets Under Management and Advisory $29,824,000  $21,339,000  $6,444,000  $23,380,000    Coldstream Capital Management 1,090,000  900,000  -  1,090,000  Bingham, Osborn, & Scarborough 1,777,000    1,415,000  -  1,777,000  Total Assets Under Management and Advisory $32,691,000  $23,654,000  $6,444,000  $26,247,000                  Three Months Ended As Reported Acquisitions Same Affiliates December 31, December 31, December 31, December 31,   2006    2005  2006  2006  OPERATING RESULTS(1): Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $44,960  $45,218  $22  $44,938  FTE Adjustment 1,575    1,302  -  1,575  Net Interest Income 43,385    43,916  22  43,363  Investment Management & Trust Fees: Westfield Capital Management 15,567  12,668  -  15,567  Boston Private Bank & Trust 3,578  3,354  -  3,578  Sand Hill Advisors 1,556  1,522  -  1,556  Boston Private Value Investors 1,748  1,612  -  1,748  Borel Private Bank & Trust 1,130  956  -  1,130  Gibraltar Private Bank & Trust 1,764  1,369  -  1,764  Dalton, Greiner, Hartman, Maher & Co. 5,043  6,640  -  5,043  First Private Bank & Trust 5  -  -  5  Anchor Capital Holdings 7,356    -  7,356  -  Total Investment Management & Trust Fees 37,747  28,121  7,356  30,391  Wealth Advisory Fees: RINET Company 2,135  2,084  -  2,135  KLS Professional Advisors Group 3,336  2,848  -  3,336  Other 55    61  -  55  Total Wealth Advisory Fees 5,526    4,993  -  5,526  Other Fees 2,312    1,516  69  2,243  Total Fees 45,585    34,630  7,425  38,160  Earnings in Equity Investments 1,515  503  -  1,515  Gain on Sale of Loans, Net 434  471  -  434  Gain/(Loss) on Sale of Investments, Net -    (20) -  -    Total Fees and Other Income 47,534    35,584  7,425  40,109  Total Revenue 90,919    79,500  7,447  83,472    Provision for Loan Losses 987    2,070  -  987    Salaries and Employee Benefits 41,611  35,928  3,894  37,717  Occupancy and Equipment 7,900  6,447  190  7,710  Professional Services 3,651  3,080  58  3,593  Marketing and Business Development 2,169  2,048  161  2,008  Contract Services and Processing 1,321  1,224  41  1,280  Amortization of Intangibles 3,874  3,018  859  3,015  Other 4,512    3,911  235  4,277  Total Operating Expense 65,038    55,656  5,438  59,600  Minority Interest 1,020  1,032  405  615  Income Before Income Taxes 23,874  20,742  1,604  22,270  Income Tax Expense 8,266    7,583  679  7,587  Net Income $15,608    $13,159  $925  $14,683      Twelve Months Ended   As Reported Acquisitions Same Affiliates Acquisitions Same Affiliates December 31, December 31, December 31, December 31, December 31, December 31, OPERATING RESULTS (1): 2006    2005  2006  2006  2005    2005    Net Interest Income - on a Fully Taxable Equivalent Basis (FTE) $179,276  $133,532  $45,528  $133,748  $12,056  $121,476  FTE Adjustment 5,763    4,793  -  5,763  -  4,793  Net Interest Income 173,513    128,739  45,528  127,985  12,056  116,683  Investment Management & Trust Fees:   Westfield Capital Management 57,445  48,878  -  57,445  -  48,878  Boston Private Bank & Trust 13,818  12,935  -  13,818  -  12,935  Sand Hill Advisors 6,198  6,171  -  6,198  -  6,171  Boston Private Value Investors 6,805  6,296  -  6,805  -  6,296  Borel Private Bank & Trust 4,326  3,495  -  4,326  -  3,495  Gibraltar Private Bank & Trust 6,479  1,369  6,479  -  1,369  -  Dalton, Greiner, Hartman, Maher & Co. 26,182  26,729  -  26,182  -  26,729  First Private Bank & Trust 5  -  -  5  -  -  Anchor Capital Holdings 16,474    -  16,474  -  -  -  Total Investment Management & Trust Fees 137,732  105,873  22,953  114,779  1,369  104,504  Wealth Advisory Fees: RINET Company 8,181  8,140  -  8,181  -  8,140  KLS Professional Advisors Group 12,375  10,782  -  12,375  -  10,782  Other 204    164  -  204  -  164  Total Wealth Advisory Fees 20,760    19,086  -  20,760  -  19,086  Other Fees 7,843    6,278  1,146  6,697  323  5,955  Total Fees 166,335    131,237  24,099  142,236  1,692  129,545  Earnings in Equity Investments 3,034  1,556  -  3,034  -  1,556  Gain on Sale of Loans, Net 1,972  1,774  732  1,240  120  1,654  Gain on Sale of Investments, Net -    20  -  -  -  20    Total Fees and Other Income 171,341    134,587  24,831  146,510  1,812  132,775  Total Revenue 344,854    263,326  70,359  274,495  13,868  249,458    Provision for Loan Losses 6,179    5,438  1,939  4,240  548  4,890    Salaries and Employee Benefits 163,438  123,387  32,738  130,700  5,399  117,988  Occupancy and Equipment 29,149  21,053  6,067  23,082  1,044  20,009  Professional Services 13,346  10,270  2,848  10,498  351  9,919  Marketing and Business Development 8,705  6,792  2,015  6,690  358  6,434  Contract Services and Processing 5,125  4,070  1,303  3,822  233  3,837  Amortization of Intangibles 13,649  7,634  7,744  5,905  1,479  6,155  Other 17,037    13,063  3,967  13,070  959  12,104  Total Operating Expense 250,449    186,269  56,682  193,767  9,823  176,446  Minority Interest 3,699  2,512  893  2,806  -  2,512  Income Before Income Taxes 84,527  69,107  10,845  73,682  3,497  65,610  Income Tax Expense 30,154    25,561  4,479  25,675  1,387  24,174  Net Income $54,373    $43,546  $6,366  $48,007  $2,110  41,436  (1) The Company adopted FAS 123R on January 1, 2006 and elected the modified retrospective application. Under the modified retrospective application method, all prior quarters have been restated.   (2) The Company calculates its cash earnings by adjusting net income to exclude the amortization of the purchased intangibles (net of tax), includes the tax benefit on the portion of the purchase price which is deductible over a 15 year life, and excludes 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. 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 adoption of FAS123(R) caused an increase in the average diluted shares outstanding in prior years. The additional shares in 2005 caused original Cash Earnings Per Share to decreaese from $1.71 to $1.70 per diluted share.   (7) First Private Bank and Trust opened their Trust Department in the fourth quarter of 2006.   (8) Financial Data and Assets Under Management and Advisory as of December 31, 2005 exclude Anchor Capital Holdings. Same Affilaite Operating Results for the three months ending December 31, 2006 exclude Anchor Capital Holdings. Same Affilaite Operating Results for the twelve months ending December 31, 2006 and 2005 exclude Anchor Capital Holdings, Gibraltar Private Bank & Trust Co., and the interest expense, net of tax, on the related Trust Preferred Debt associated with the Gibraltar acquisition.