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Boston Private Financial Holdings Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 5, 2011 10:48AM
Boston Private Financial Holdings Inc. (BPFH) filed Quarterly Report for the period ended 2011-06-30. Boston Private Financial Holdings Inc. has a market cap of $505.9 million; its shares were traded at around $6.57 with and P/S ratio of 1.7. The dividend yield of Boston Private Financial Holdings Inc. stocks is 0.6%.
Highlight of Business Operations:
The Company's Investment Management segment reported net income attributable to the Company of $1.1 million in the second quarter of 2011, compared to net income attributable to the Company of $1.0 million in the same period of 2010. The $0.1 million, or 7%, increase was primarily due to a $0.9 million, or 10%, increase in investment management and trust fees for the second quarter of 2011 compared to the same period in 2010, partially offset by a $0.3 million, or 6%, increase in salaries and employee benefits expense. The increase in investment management and trust fees was related to a $1.4 billion, or 21%, increase in AUM from June 30, 2010, of which $1.6 billion related to investment performance, partially offset by $0.2 billion in net outflows.
The Company's Wealth Advisory segment reported net income attributable to the Company of $1.2 million in the second quarter of 2011, compared to net income attributable to the Company of $0.9 million in the same period of 2010. The $0.2 million, or 25%, increase was primarily due to a $1.0 million, or 10%, increase in wealth advisory fees, offset by increases in compensation expense and premise and equipment. AUM increased $1.0 billion, or 14%, from June 30, 2010, of which $0.8 billion related to investment performance and $0.2 billion related to net inflows.
Investment maturities, principal payments, and sales of the Company's available for sale securities provided $0.4 billion of cash proceeds during the first six months of 2011, which was all used to purchase 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 and six months ended June 30, 2011 of $0.2 million and $0.6 million, respectively, 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 $10.9 million of unrealized gains and $0.8 million of unrealized losses at June 30, 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 $193.1 million, or 19%, to $834.8 million at June 30, 2011 from $1.0 billion at December 31, 2010. Repurchase agreements decreased $136.2 million, or 53%, to $122.4 million at June 30, 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 $52.0 million, or 9%, to $523.7 million at June 30, 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 and to manage interest rate risk, but can also be used as an additional source of liquidity for the Bank.
Loans. Total portfolio loans decreased $70.9 million, or 2%, to $4.4 billion or 73% of total assets at June 30, 2011 from $4.5 billion, or 73% of total assets at December 31, 2010. Increases in residential loans of $93.7 million, or 6%, and other consumer loans of $28.3 million, or 20%, were offset by decreases in commercial real estate loans of $129.5 million, or 8%, commercial and industrial loans of $38.4 million, or 6%, construction and land loans of $20.1 million, or 13%, and in home equity loans of $4.9 million, or 3%. In general, the Company continues to have lower loan growth in 2011 than in recent years as economic conditions have reduced the demand for commercial real estate loans and the Bank has generally reduced originating construction and land loans. The Company has been focusing more on residential loan growth as a source of high quality earning assets.
Net recoveries of $0.7 million were recorded in the second quarter of 2011, compared to $9.2 million in net charge-offs 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. Of the $10.8 million in net charge-offs recorded in the first six months of 2011, $10.0 million were in commercial real estate loans, $0.7 million were in commercial and industrial loans, and the balance of $0.1 million was in other loan categories.
Stocks Discussed: BPFH,