Boston Private Reports First Quarter 2021 Results

Rhea-AI Summary

Boston Private Financial Holdings reported a net income of $10.7 million for Q1 2021, down from $25.0 million in Q4 2020 and up from $0.8 million YoY. Diluted earnings per share fell to $0.13 from $0.30 in Q4 2020. The decline was influenced by transaction costs related to its pending merger with SVB Financial Group, totaling $10.7 million. However, the company experienced strong deposit growth and reported a total of $17.2 billion in assets under management, a 1% increase linked quarter. Noninterest expenses rose to $75.9 million indicating a 31% quarterly increase.

Positive

• Strong deposit growth reported.
• Total assets under management reached $17.2 billion, a 1% quarterly increase.

Negative

• Net income decreased by 57% from Q4 2020.
• Diluted earnings per share fell by 57% from Q4 2020.
• Transaction costs of $10.7 million associated with the merger.
• Total noninterest expenses increased by 31% quarter-over-quarter.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) (the “Company” or “Boston Private”) today reported first quarter 2021 Net income attributable to the Company of $10.7 million, compared to $25.0 million for the fourth quarter of 2020 and $0.8 million for the first quarter of 2020. First quarter 2021 Diluted earnings per share were $0.13, compared to $0.30 in the fourth quarter of 2021 and $0.01 in the first quarter of 2020.

"I am proud of the dedication and commitment shown by the Boston Private employees who continue to deliver exceptional client service and execute on our strategic objectives, while also preparing for our pending merger with SVB Financial Group," said Anthony DeChellis, CEO of Boston Private. "This quarter's financial results include transaction costs related to the pending merger with SVB Financial Group, a release from our allowance for loan losses, and continued strong deposit growth."

Announced Merger

As previously announced, the Company entered into a definitive merger agreement with SVB Financial Group ("SVB") pursuant to which SVB will acquire Boston Private. The transaction was unanimously approved by both companies' Boards of Directors and is expected to close in mid-2021, subject to the satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by the shareholders of Boston Private.

Summary Financial Results
											% Change
($ in millions, except for per share data)		1Q21			4Q20			1Q20			LQ			Y/Y
Net income - GAAP		$10.7			$25.0			$0.8			(57)	%		nm
Diluted earnings per share - GAAP		$0.13			$0.30			$0.01			(57)	%		nm
Non-GAAP Financial Measures:
Pre-tax, pre-provision income		$9.7			$28.1			$17.9			(65)	%		(46)	%
Return on average common equity ("ROACE")		4.9	%		11.5	%		0.4	%
Return on average tangible common equity ("ROATCE")		5.6	%		12.7	%		0.7	%
nm = not meaningful

The Company's financial results in the first quarter of 2021 were impacted by:

• Transaction costs of $10.7 million related to the proposed merger with SVB, or ($0.09) per diluted share on a tax-effected basis
• Gain of $2.4 million related to the revaluation of a receivable from the divestiture of former affiliate, Bingham, Osborn & Scarborough, LLC ("BOS"), or $0.02 per diluted share on a tax-effected basis
• Total provision credit of $9.0 million, including a provision credit for loan losses of $7.0 million and a credit for unfunded loan commitments of $2.0 million, or $0.08 per diluted share on a tax-effected basis

Net Interest Income and Margin
											% Change
($ in millions)		1Q21			4Q20			1Q20			LQ			Y/Y
Net interest income		$59.5			$59.4			$57.3			—	%		4	%
Net interest margin		2.45	%		2.52	%		2.76	%

Net interest income for the first quarter of 2021 was $59.5 million, flat linked quarter and a 4% increase year-over-year. The year-over-year increase was primarily driven by $3.6 million of Paycheck Protection Program ("PPP") loan-related income recognized in the first quarter of 2021. The Small Business Administration ("SBA") forgave $75 million of PPP loans in the first quarter of 2021, which drove the accelerated recognition of PPP income.

Net interest margin decreased 7 basis points on a linked quarter basis to 2.45%. The decline was primarily driven by excess cash and investments balances and lower asset yields, partially offset by lower funding costs.

Noninterest Income
											% Change
($ in millions)		1Q21			4Q20			1Q20			LQ			Y/Y
Wealth management and trust fees		$19.1			$19.0			$18.4			1	%		4	%
Investment management fees		0.5			1.2			1.9			(58)	%		(75)	%
Private banking fees 1		3.2			5.0			2.6			nm			22	%
Total core fees and income		$22.8			$25.2			$22.9			(10)	%		—	%
Total other income		3.4			1.4			(1.4)			nm			nm
Total noninterest income		$26.2			$26.7			$21.5			(2)	%		22	%
nm = not meaningful
1 Private banking fees includes Other banking fee income and Gain/(loss) on sale of loans, net

Total core fees and income for the first quarter of 2021 were $22.8 million, a 10% decrease linked quarter. The linked quarter decrease was primarily driven by lower swap fee income within Private banking fees and lower Investment management fees in the first quarter of 2021.

Total other income includes a gain of $2.4 million for the first quarter of 2021 related to the revaluation of the BOS receivable.

Assets Under Management/Advisory
											% Change
($ in millions)		1Q21			4Q20			1Q20			LQ			Y/Y
Wealth Management and Trust		$17,002			$16,574			$13,497			3	%		26	%
Other 2		196			526			1,016			(63)	%		(81)	%
Total assets under management/advisory		$17,198			$17,100			$14,513			1	%		19	%
Net flows
Wealth Management and Trust		$(20)			$(128)			$176
Other 2		(388)			(268)			(26)
Total net flows		$(408)			$(396)			$150
2 Includes results from DGHM

Total AUM was $17.2 billion as of March 31, 2021, a 1% increase linked quarter. The linked quarter increase was primarily driven by the impact of higher equity market values, partially offset by net outflows.

Total net flows were negative $408 million during the first quarter of 2021, driven by net flows of negative $388 million at DGHM and negative $20 million in the Wealth Management and Trust segment. New business into the Wealth Management & Trust segment was $231 million for the first quarter of 2021, compared to $297 million for the fourth quarter of 2020.

Noninterest Expense
								% Change
($ in millions)		1Q21		4Q20		1Q20		LQ			Y/Y
Salaries and employee benefits		$40.9		$36.0		$35.1		14	%		17	%
Occupancy and equipment		8.2		7.7		7.6		6	%		7	%
Information systems		9.7		8.6		6.7		13	%		45	%
Professional services		3.3		2.7		3.6		20	%		(8)	%
Merger costs		10.7		—		—		nm			nm
Marketing and business development		0.6		1.2		1.9		(46)	%		(67)	%
Amortization of intangibles		0.7		0.6		0.7		18	%		(7)	%
FDIC insurance		1.0		0.9		—		10	%		n/a
Other		0.9		0.2		5.2		nm			(83)	%
Total noninterest expense		$75.9		$58.0		$60.9		31	%		25	%
Memo: Excluding Off-Balance Sheet Provision

FAQ

What were Boston Private's net income and diluted earnings per share for Q1 2021?

Boston Private reported a net income of $10.7 million and diluted earnings per share of $0.13 for Q1 2021.

What transaction costs did Boston Private incur in relation to the merger with SVB?

Boston Private incurred transaction costs of $10.7 million related to the pending merger with SVB Financial Group.

How did Boston Private's assets under management change in Q1 2021?

Boston Private's assets under management were $17.2 billion in Q1 2021, showing a 1% increase from the previous quarter.

What significant financial impacts did Boston Private experience in Q1 2021?

Boston Private faced a 57% decrease in net income compared to Q4 2020 and a 31% increase in total noninterest expenses.