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SEC Filings, Earing Reports, Press Releases
Boston Private Financial Holdings Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 6, 2011 12:19PM
Boston Private Financial Holdings Inc. (BPFH) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
The Company's Investment Management segment reported net income attributable to the Company of $1.2 million in the first quarter of 2011, compared to net income attributable to the Company of $0.7 million in the same period of 2010. The $0.5 million, or 68%, increase was primarily due to a $1.0 million, or 10%, increase in investment management and trust fees for the first quarter of 2011 compared to the same period in 2010, partially offset by a $0.4 million, or 9%, increase in salaries and employee benefits expense. The increase in investment management and trust fees was related to a $1.1 billion, or 15%, increase in AUM from March 31, 2010, of which $1.2 billion related to market appreciation, partially offset by $0.1 billion in net outflows.
Cash and Investments. Total cash and investments (consisting of cash and cash equivalents, investment securities, and stock in the FHLBs) decreased $141.9 million, or 11%, to $1.2 billion, or 20% of total assets at March 31, 2011 from $1.3 billion, or 22% of total assets at December 31, 2010. The decrease was primarily due to the $131.4 million, or 27%, decrease in cash and due from banks, and a $10.1 million, or 1% decrease in investment securities. The decrease in cash and due from banks is primarily due to decreases in securities sold under agreements to repurchase ("repurchase agreements") and decreases in FHLB borrowings. Some commercial bank customers who previously chose repurchase agreements in lieu of deposit products switched to demand deposit accounts as they were 100% insured under the TLGP. The TLGP program ended on December 31, 2010. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight
Investment maturities, principal payments, and sales of the Company's available for sale securities provided $0.2 billion of cash proceeds during the first three months of 2011, and $0.2 billion was deployed on purchases of new investments. The timing of sales and reinvestments is based on various factors, including management's evaluation of interest rate trends, the credit risk of municipal securities, and the Company's liquidity. The sale of investments resulted in recognized net gains for the three months ended March 31, 2011 of $0.4 million due primarily to changes in interest rates, the majority of which were previously recorded in unrealized gains within other comprehensive income. The Company's available for sale investment portfolio carried a total of $8.2 million of unrealized gains and $3.7 million of unrealized losses at March 31, 2011, compared to $9.8 million of unrealized gains and $3.8 million of unrealized losses at December 31, 2010.
Borrowings. Total borrowings (consisting of FHLB borrowings, securities sold under repurchase agreements, and junior subordinated debentures) decreased $212.2 million, or 21%, to $815.7 million at March 31, 2011 from $1.0 billion at December 31, 2010. Repurchase agreements decreased $131.3 million, or 51%, to $127.3 million at March 31, 2011 from $258.6 million at December 31, 2010. The decrease is primarily due to the large balance at December 31, 2010 when, among its other repurchase relationships, the Company had one large repurchase agreement for a short period of time which spanned the year end. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature. FHLB borrowings decreased $80.9 million, or 14%, to $494.8 million at March 31, 2011 from $575.7 million at December 31, 2010. FHLB borrowings are generally used to provide additional funding for loan growth when it is in excess of deposit growth, but can also be used as an additional source of liquidity for the Banks. Since deposit growth has exceeded loan growth, some of the Banks have reduced the amount of FHLB borrowings.
Loans. Total portfolio loans decreased $23.4 million, or 1%, to $4.5 billion or 75% of total assets at March 31, 2011 from $4.5 billion, or 73% of total assets at December 31, 2010. Increases in residential loans of $40.6 million, or 2%, and commercial and industrial loans of $10.3 million, or 2%, were offset by decreases in commercial real estate loans of $48.6 million, or 3%, and in construction and land loans of $24.3 million, or 16%. In general, the Company continues to have lower loan growth in 2011 than in previous years as economic conditions have reduced the demand for commercial real estate loans and our Banks have generally reduced or stopped originating construction and land loans. The Company has been focusing more on residential loan growth as a source of high quality earning assets.
Net charge-offs of $11.5 million were recorded in the first three months of 2011, compared to $2.8 million in the same period of 2010. The Company believes that commercial real estate loans represent the greatest risk of loss due to the size of the portfolio and nature of the commercial real estate market. Economic and business conditions continue to have a significant impact on the loan portfolio. This can be seen in the current economic downturn where, as businesses downsize, vacancy rates increase which can lead to financial difficulties for the borrower. Commercial real estate loans have been impacted by the current economic climate which has resulted in weakened demand for retail and office space, lower lease rates, and reduced collateral values. For the first three months of 2011, 98% of the net charge-offs related to the Northern California market. Of the $11.5 million in net charge-offs recorded in the first three months of 2011, $9.4 million were in commercial real estate loans, $1.3 million were in construction and land loans, and the balance of $0.8 million was in other loan categories.
Stocks Discussed: BPFH,