Boston Private Financial Holdings Reports Fourth Quarter 2009 Results

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) ("the Company”) today reported fourth quarter 2009 GAAP net income from continuing operations of $11.9 million, compared to GAAP net income from continuing operations of $390 thousand in the third quarter of 2009. Including the net income from discontinued operations of $31.5 million, which is primarily the gain recognized from the sale of Westfield Capital Management, the Company reported fourth quarter 2009 GAAP net income of $42.2 million. After accounting for non-cash equity adjustments and preferred dividends, BPFH reported fourth quarter 2009 GAAP earnings per share of $0.42 compared to a ($0.61) loss per share in the third quarter of 2009.

For the full year of 2009, the Company reported GAAP net income of $5.2 million. After accounting for non-cash equity adjustments and preferred dividends, BPFH reported a 2009 GAAP loss per share of ($0.52), compared to a GAAP net loss of $388.8 million, or ($8.87) per share, for 2008.

Included in the Company’s current quarter earnings was the gain, net of tax, from the repurchase of a portion of the Company’s outstanding trust preferred securities of approximately $11 million, or $0.16 per share.

"The proactive steps we’ve taken in 2009 to increase capital, reduce credit and operating risk, and create financial flexibility in what remains a difficult economic environment have significantly strengthened our business and set the stage for steady improvement in 2010,” said Chairman and CEO Timothy L. Vaill. "Compared to our third quarter, we realized a satisfying increase in our core deposits, net interest income, wealth advisory fees and investment management fees, while reducing salaries and holding operating expenses essentially flat. Our tangible common equity increased by 9% since the third quarter. In addition, we recently repaid approximately one third of our TARP CPP funds. In keeping with our prudent approach, we plan to repay the balance, subject to regulatory approval, as the economy improves and we feel the timing is appropriate.”

On January 13^th, BPFH announced that it had repaid $50 million of the Company’s outstanding $154 million in Series C Preferred Stock issued to the Treasury pursuant to the Capital Purchase Program. This redemption will result in annual savings of $2.5 million, or $0.04 per share, due to the elimination of the associated preferred dividends. A one-time, non-cash, after-tax reduction in earnings per share of $0.04 will be incurred in the first quarter of 2010 due to the acceleration of the Preferred Stock discount accretion.

Key Financials (Note: All comparisons relate only to continuing operations).

• Revenue for the fourth quarter was $83.4 million, an increase of $17.2 million, or 26%, from $66.2 million in the third quarter. On a year to date basis, Revenue was up 2% to $285.9 million.
• Net Interest Income for the fourth quarter was $41.1 million, an increase of $1.3 million, or 3.0%, from $39.7 million on a linked quarter basis. On a year to date basis, Net Interest Income was up 6% to $159.5 million.
• Total fee income was up 3%, or $666 thousand, to $25.8 million in the fourth quarter 2009. On a year to date basis, total fee income was down 10%, or $10.8 million.
• Operating Expenses for the fourth quarter were $56.0 million, flat from $55.9 million on a linked quarter basis. On a year to date basis, Operating Expenses were up 5% to $221.3 million.
• Tangible Common Equity/Tangible Assets ("TCE/TA”) as of the end of the fourth quarter was 6.66%, up 35 basis points from 6.31% as of the end of the third quarter, and up 128 basis points from 5.38% as of the end of 2008.
• Total Balance Sheet Assets as of the end of the fourth quarter were $6.0 billion, up $179.7 million, or 3%, from $5.9 billion as of the end of the third quarter and were down 17% from $7.3 billion as of the end of 2008.
• Provision for Loan Losses for the fourth quarter was $13.8 million, up $4.7 million, or 52%, from $9.1 million on a linked quarter basis. On a year to date basis, Provision for Loan Losses was down 77% from $196.6 million.
• Allowance for Loan Losses as a percentage of Total Loans as of the end of the fourth quarter was 1.59%, down 10 basis points, from 1.69% as of the end of the third quarter and up 4 basis points from 1.55% as of the end of 2008.

"We took steps to reduce our credit risk and strengthen our overall financial position, as evidenced by a number of key metrics throughout the fourth quarter,” said David J. Kaye, Chief Financial Officer. "There are numerous tangible examples of our progress, including continued improvement of our TCE/TA ratio, the repurchase of $44.5 million of our outstanding trust preferred securities at a 44% discount to the original issuance price, and declines in both our non-performing and classified assets. In addition, we continued to outperform the industry average for net charge-offs for the year.”

Total Deposits increased 3% as of the end of the fourth quarter to $4.3 billion from the end of the third quarter and were up 14% from the end of 2008. Total Loans decreased 1% as of the end of the fourth quarter to $4.3 billion from the end of the third quarter, but were up 4% from the end of 2008. Since receiving TARP capital, the Company has increased its loans by $215 million and its investments in mortgage-backed securities by approximately $100 million.

Non-Performing Loans as a percentage of Total Loans were 2.10% as of the end of the fourth quarter, down from 2.31% as of the end of the third quarter of 2009. Net Charge-offs for the quarter were $18.4 million, which represented approximately 43 basis points of Total Loans, compared to $7.1 million of Net Charge-offs during the third quarter 2009, or 16 basis points of Total Loans. Past Due Loans (30-89 days) as a percentage of Total Loans increased 23 basis points on a linked quarter basis to 0.49%.

The Wealth Advisory and Investment Management businesses experienced an increase in assets under management (adjusted for affiliate sales) and an increase in fee income during the fourth quarter. Total Assets Under Management/Advisory ("AUM”) increased 2%, or $377 million, to $18.5 billion in the fourth quarter. Total AUM was up 11% on a year-over-year basis. The Company experienced fourth quarter AUM outflows of $133 million, as compared to $107 million of outflows in the prior quarter. AUM outflows for the year were $426 million.

"The actions we took in 2009 to reduce credit risk, strengthen capital and improve our balance sheet have put us in a solid position entering the new year,” Vaill said. "We have sharpened our focus on markets with attractive long-term demographics where our strategy of delivering locally-driven wealth management services is a substantial differentiator. In 2010, we will continue providing support and strength to our affiliates, helping them grow by cultivating personal customer relationships – the connections that truly resonate and endure in the high net worth marketplace.”

Dividend Payments

Concurrent with the release of the fourth quarter 2009 earnings, the Board of Directors of the Company declared a cash dividend to shareholders of $0.01 per share. The record date for this dividend is February 8, 2010 and the payment date is February 22, 2010.

Non-GAAP Financial Measures

The Company calculates its cash earnings by adjusting net income to exclude net amortization of intangibles, impairment, and the impact of certain non-cash share based compensation plans. The Company uses certain non-GAAP financial measures, such as the TCE/TA ratio, 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 is attached.)

Conference Call

Management will hold a conference call at 9:00 a.m. Eastern Time on Thursday, January 28, to discuss the financial results in more detail. To access the call:

Dial In #: 800.638.5495

International Dial In #: 617.614.3946

Passcode: 13500857

Replay Information:

Available from 1/28/2010 to 2/04/2010

Dial In #: 888.286.8010

International Dial In #: 617.801.6888

Passcode: 69617701

Boston Private Financial Holdings, Inc.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) is a national financial services organization comprised of independently operated affiliates located in key regions of the U.S. that offer private banking, wealth advisory and investment management services to the high net worth marketplace, selected businesses and institutions. The Company enters demographically attractive markets through selective acquisitions and then expands by way of organic growth. It employs a distinct business strategy, empowering its affiliates to run independently such that they can best serve their clients at the local level, while at the same time providing strategic oversight and access to resources, both financial and intellectual, to support management, compliance, legal, marketing, and operations.

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

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 an independently operated and wholly-owned subsidiary of BPFH. The information reported in this press release is related to the performance and results of BPFH.

Statements in this press release that are not historical facts are 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, asset management and investment advisory activities; changes in interest rates; competitive pressures from other financial institutions; the effects of a continuing deterioration 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 deposit levels necessitating increased borrowing to fund loans and investments; the passing of adverse government regulation; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; and risks related to the identification and implementation of acquisitions, as well as the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K, as updated by the Company’s Quarterly Reports on Form 10-Q; and other filings submitted to the Securities and Exchange Commission. 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.