Despite a hefty charge related to one of its affiliates and the completion of an acquisition, Boston Private Financial Holdings Inc. reported Thursday an 11% increase in second-quarter cash earnings, to 47 cents per share.
The company took a charge related to goodwill impairment at a unit, the New York value manager Dalton Greiner, Hartman, Maher & Co. LLC, whose assets under management have declined 35% since 2004, to $2 billion. Earnings calculated under generally accepted accounting principles fell 60.6%, to 13 cents per share, because of the charge of $10.1 million, or 25 cents per diluted share.
Dalton Greiner was managing $2.6 billion of assets, mostly in small-cap portfolios, when Boston Private bought it in 2004. The asset total reached $3.5 billion by the end of 2005, but the unit lost $1.3 billion of assets in last year’s third quarter, when small-cap managers underperformed the Standard & Poor’s 500 stock index by 95%.
Boston Private had said June 22 that it would take the charge.
Walter Pressey, Boston Private’s president and interim CFO, said he believes that Dalton Greiner has turned the corner. “Results have improved in the first half of this year,” he said during the company’s earnings call on Thursday. “They are fully staffed, are launching new products, and developing new mandates.”
“The high profitability of this business is worth the volatility,” he added.
Excluding the charge, core operating earnings would have been 38 cents per share, up 15.2% from a year earlier. Revenue grew 15.6%, to $96.6 million, and assets under management rose 19.2%, to $36 billion. Despite a difficult lending environment, loans increased 16.1%, to $635 million, and deposits grew 6.6%, to $241 million.
Timothy L. Vaill, Boston Private’s chairman and chief executive officer, said during the conference call that it has been a tough environment for banks but that the company is pleased with its loan quality. “We don’t feel that we are exposed to bad loans,” he said. “Does that mean we’ll never have bad loans? Of course not. But we feel we have a strong underwriter.”
Boston Private continues to expand regionally, he said. In July, it closed its $70.8 million deal for Charter Financial Corp., a Bellevue, Wash., private banking company. It serves professionals and family-owned businesses in the Puget Sound region.
For 13 years Boston Private has established regional hubs by acquiring a wealth manager and a bank, then opening offices in the region. In addition to Seattle, it has used this strategy in San Francisco, Los Angeles, New York, Boston, and Coral Gables, Fla.
Mr. Vaill said he cannot predict the timing of another deal. The mergers and acquisitions that continue in the banking business will increase Boston Private’s opportunities to expand. “The competition is getting bigger and stronger, but we continue to compete despite the industry changes,” he said.
