Reportable Segments

3 Months Ended

Mar. 31, 2020

Management Reporting

The Company has two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust, as well as the Parent Company (Boston Private Financial Holdings, Inc., the “Holding Company”) within Holding Company and Eliminations. The financial performance of the Company is managed and evaluated according to these two segments. Each segment is managed by a segment leader (“Segment Leader”) who has full authority and responsibility for the performance and the allocation of resources within their segment. The Company’s Chief Executive Officer (“CEO”) is the Company’s Chief Operating Decision Maker (“CODM”).

The Segment Leader for Private Banking is the CEO of Boston Private Bank, who is also the Company’s CEO. The Bank’s banking operations are reported in the Private Banking segment. The Segment Leader for Wealth Management and Trust is the President of Private Banking, Wealth and Trust. The Segment Leader of Wealth Management and Trust reports to the CEO of the Company. The Segment Leaders have authority with respect to the allocation of capital within their respective segments, management oversight responsibility, performance assessments, and overall authority and accountability within their respective segment. The Company’s CODM communicates with the President of Private Banking, Wealth and Trust regarding profit and loss responsibility, strategic planning, priority setting and other matters. The Company’s Chief Financial Officer reviews all financial detail with the CODM on a monthly basis.

Description of Reportable Segments

Private Banking

The Private Banking segment operates primarily in three geographic markets: New England, Northern California and Southern California. The Bank conducts business under the name of Boston Private Bank & Trust Company in all markets. The Bank is chartered by the Commonwealth of Massachusetts and is insured by the FDIC. The Bank is principally engaged in providing private banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Bank is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization and small businesses.

Wealth Management and Trust

The Wealth Management and Trust segment is comprised of the trust operations of the Bank and the operations of Boston Private Wealth. On September 1, 2019, KLS merged into Boston Private Wealth. As a result, the results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment for all periods presented. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office, financial planning, tax planning, and trust services to individuals, families, institutions, and nonprofit institutions. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California and Southern California.

Changes to Segment Reporting

With the integration of KLS into Boston Private Wealth in the third quarter of 2019, the Company reorganized the segment reporting structure to align with how the Company's financial performance and strategy is reviewed and managed. The results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment, and the results of DGHM are included in Holding Company and Eliminations for all periods presented.

Measurement of Segment Profit and Assets

The accounting policies of the segments are the same as those described in Part I. Item 1. "Notes to Unaudited Consolidated Financial Statements - Note 1: Basis of Presentation and Summary of Significant Accounting Policies."

Reconciliation of Reportable Segment Items

The following tables present a reconciliation of the revenues, profits, assets, and other significant items of reportable segments as of and for the three months ended March 31, 2020 and 2019.


	Three months ended March 31,
	2020		2019
Private Banking (1)	(In thousands)
Net interest income	$	58,090	$	59,337
Fees and other income	1,108		3,258
Total revenue	59,198		62,595
Provision/(credit) for loan losses	16,962		(1,426)
Operating expense (2)	42,588		41,317
Income/(loss) before income taxes	(352)		22,704
Income tax expense/(benefit)	(931)		4,430
Net income before attribution to noncontrolling interests	579		18,274


Net income attributable to the Company	$	579	$	18,274

Assets	$	8,692,069	$	8,481,160
Amortization of intangibles	$	77	$	—
Depreciation	$	2,626	$	2,670


	Three months ended March 31,
	2020		2019
Wealth Management and Trust (1)	(In thousands)
Net interest income	$	72	$	106
Fees and other income	18,485		19,126
Total revenue	18,557		19,232

Operating expense (2)	15,449		15,567
Income before income taxes	3,108		3,665
Income tax expense	1,074		1,194
Net income before attribution to noncontrolling interests	2,034		2,471


Net income attributable to the Company	$	2,034	$	2,471



Assets	$	143,998	$	147,771
Amortization of intangibles	$	638	$	672
Depreciation	$	294	$	367


	Three months ended March 31,
	2020		2019
Holding Company and Eliminations (1)	(In thousands)
Net interest income (3)	$	(905)	$	(1,105)
Fees and other income	1,928		2,864
Total revenue	1,023		1,759

Operating expense	2,871		3,669
Income/(loss) before income taxes	(1,848)		(1,910)
Income tax expense/(benefit)	(41)		(707)
Net income/(loss) before attribution to noncontrolling interests	(1,807)		$	(1,203)
Noncontrolling interests	6		100

Net income/(loss) attributable to the Company	$	(1,813)	$	(1,303)




Assets (including eliminations)	$	(89,741)	$	(56,788)

Depreciation	$	39	$	47


	Three months ended March 31,
	2020		2019
Total Company (1)	(In thousands)
Net interest income	$	57,257	$	58,338
Fees and other income	21,521		25,248
Total revenue	78,778		83,586
Provision/(credit) for loan losses	16,962		(1,426)
Operating expense	60,908		60,553
Income before income taxes	908		24,459
Income tax expense	102		4,917
Net income before attribution to noncontrolling interests	806		19,542
Noncontrolling interests	6		100

Net income attributable to the Company	$	800	$	19,442

Assets	$	8,746,326	$	8,572,143
Amortization of intangibles	$	715	$	672
Depreciation	$	2,959	$	3,084

_____________________

(1)Due to rounding, the sum of individual segment results may not add up to the Total Company results.

(2)Operating expense related to the Private Banking and Wealth Management and Trust segments includes restructuring expense for the three months ended March 31, 2019 of $1.3 million and $0.4 million, respectively.

(3)Interest expense on junior subordinated debentures is included in Holding Company and Eliminations.