Boston Private Financial Holdings Inc. turned in strong third-quarter results by avoiding much of the subprime crisis' fallout thanks to its high-net-worth clientele, its CEO said Thursday.
Timothy L. Vaill, the Boston company's chairman and chief executive officer, said the company expects no material credit losses, though its nonperforming assets as a percentage of total assets grew by 15 basis points from the second quarter, to 0.43%, or $28.2 million. The fact "we are so focused on the high-net-worth market through a dedicated local presence" inspires his confidence, he said on the earnings call.
The loan loss allowance for, as a percentage of total loans, was 1.03%, up three basis points from the prior quarter.
Net chargeoffs continue to be immaterial, he said, and as other banks struggled with losses, Boston Private reported net recoveries for the past eight quarters despite lending in hard-hit areas, such as South Florida and the Inland Empire in Southern California, because it targets households with a net worth of $1 million to $20 million.
"Everyone says, 'We are different. Our clients are different,' but our clients are different," Mr. Vaill said. "Residential mortgages are financial instruments, not necessities, for these individuals."
Loans grew 21.4%, to $889 million, and deposits rose 11.8%, to $456 million, but analysts said Boston Private is successful because it does not rely on loans and deposits for business growth.
David J. Kaye, Boston Private's chief financial officer, who was hired in July from the CFO post at Columbia Management, Bank of America Corp.'s asset management arm, said the increase in net income was driven by solid growth in the private banking, wealth advisory, and investment management businesses, which were up 19.3%, 111.2%, and 28%, respectively. Assets under management increased 21%, to $37.2 billion.
Boston Private said third-quarter earnings per share rose 20%, to 54 cents per share, as revenue grew 19.2%, to $105.5 million. The average analyst earnings expectation was 39 cents per share, according to Thomson Financial Inc.
Boston Private's net income increased 27.6%, to $17.4 million, from a year earlier. Excluding acquisitions, net income was up 21.4%, to $16.6 million.
During the quarter, Boston Private closed two deals, including its July 1 purchase of Charter Financial Corp., a Bellevue, Wash., private banking company. The new-business pipeline looks strongest in the Northwest, Mr. Vaill said.
"Business is strong in the Bellevue and Seattle region," he said. "With companies like Microsoft and Starbucks, it is a terrific economy, and Charter has been a wonderful addition to take advantage of this market."
In August, Boston Private augmented its investment in Bingham, Osborn & Scarborough LLC of San Francisco and Menlo Park, Calif., to a 60% stake.
Boston Private closed an initial 20% investment in Bingham Osborn in February 2004 and bought additional 10% positions in August 2004, 2005, and 2006.
Bingham Osborn, which specializes in strategies for retirement and estate planning, charitable giving, portfolio diversification, insurance programs, and tax management, has $2 billion under management.
With so many mergers and acquisitions of banks, private banks, and asset managers in the San Francisco and San Mateo region, Mr. Vaill said, opportunities will arise through Bingham Osborn to develop market share.
Boston Private has 14 affiliates focused on private banking, investment management, and financial planning in New England, New York, Florida, the Pacific Northwest, Northern California, and Southern California. It establishes regional hubs by acquiring a wealth manager and a bank, then opening offices in the region. It plans to expand into Northern Virginia, Atlanta, Dallas, Chicago, and Denver.
Boston Private is also expanding organically. Last year, it opened offices in Palo Alto, Calif.; New York; Naples, Fla.; and Lexington and Hingham, Mass. Walter M. Pressey, Boston Private's president, said it has opened four offices this year. The six newest private banking offices contributed 16% of its new deposits, year over year.
