BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Boston Private Financial Holdings, Inc. (the “Company” or “BPFH”), is a bank holding company (the “Holding Company”) with two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust. The Private Banking segment is comprised of the banking operations of Boston Private Bank & Trust Company (the “Bank” or “Boston Private Bank”), a trust company chartered by The Commonwealth of Massachusetts, whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”), and a wholly-owned subsidiary of the Company. Boston Private Bank is a member of the Federal Reserve Bank of Boston. Boston Private Bank primarily operates in three geographic markets: New England, Northern California, and Southern California. The Private Banking segment is principally engaged in providing banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Private Banking segment is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization and small businesses. The Wealth Management and Trust segment is comprised of Boston Private Wealth, LLC (“Boston Private Wealth”), a registered investment adviser (“RIA”) and wholly-owned subsidiary of the Bank, as well as the trust operations of Boston Private Bank. 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. On September 1, 2019, KLS Professional Advisors Group, LLC (“KLS”) merged with and into Boston Private Wealth. The results of KLS were previously reported in a third reportable segment, “Affiliate Partners”, as further discussed below. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California, and Southern California. Prior to the third quarter of 2019, the Company had three reportable segments: Affiliate Partners, Private Banking, and Wealth Management and Trust. For the first two quarters of 2019, the Affiliate Partners segment was comprised of two subsidiaries of the Company: KLS and Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”), each of which are RIAs. Prior to the first quarter of 2019, the Affiliate Partners segment also included Anchor Capital Advisors, LLC (“Anchor”) and Bingham, Osborn & Scarborough, LLC (“BOS”). On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. On December 3, 2018, the Company completed the sale of its ownership interest in BOS. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Divestitures” for additional information. With the integration of KLS into Boston Private Wealth, 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 now included in the results of Boston Private Wealth within the Wealth Management and Trust segment for all periods presented. The results of DGHM are now included within the Holding Company and Eliminations segment for all periods presented. The results of Anchor and BOS are included in the Holding Company and Eliminations segment for the periods owned. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Divestitures” for further details on the transactions. On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB Financial Group ("SVB") pursuant to which SVB will acquire the Company. The transaction has been unanimously approved by both companies' Boards of Directors and is expected to close in mid-2021, subject to the satisfaction of customary closing conditions, including the receipt of customary regulatory approvals and approval by the shareholders of the Company. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 28: Subsequent Event” for further details on the transactions. Basis of Presentation The Company conducts substantially all of its business through its two reportable segments. All significant intercompany accounts and transactions have been eliminated in consolidation, and the portion of income allocated to owners other than the Company is included in Net income attributable to noncontrolling interests in the Consolidated Statements of Operations. Redeemable noncontrolling interests, if any, in the Consolidated Balance Sheets reflect the maximum redemption value of agreements with other owners. The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) (“GAAP”). Reclassifications of amounts in prior years’ consolidated financial statements are made whenever necessary to conform to the current year’s presentation. Use of Estimates In preparing the consolidated financial statements, management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to change, in the near term, relate to the determination of the Allowance for loan losses. Significant Group Concentrations of Credit Risk Most of the Company’s activities are with clients within the New England, Northern California, Southern California, New York, and Southeastern Florida regions of the country. The Company does not believe it has any significant concentrations in any one industry, geographic location, or with any one client. Part II. Item 8. “Financial Statements and Supplementary Data - Note 4: Investment Securities” highlights the types of securities in which the Company invests, and Part II. Item 8. “Financial Statements and Supplementary Data - Note 5: Loan Portfolio and Credit Quality” describes the concentration of the Private Banking loan data based on the location of the lender. Statements of Cash Flows For purposes of reporting cash flows, the Company considers cash and due from banks which have original maturities with 90 days or less to be cash equivalents. Cash and Due from Banks The Bank is required to maintain average reserve balances in an account with the Federal Reserve based upon a percentage of certain deposits. As of December 31, 2020 and 2019, the daily amounts required to be held in the aggregate for the Bank were zero and $3.4 million, respectively. Due to the COVID-19 pandemic, the Federal Reserve reduced reserve requirements to zero percent effective March 26, 2020, which eliminated reserve requirements for all depository institutions. Investment Securities Investment securities available-for-sale are reported at fair value, with unrealized gains and losses credited or charged, net of the estimated tax effect, to Accumulated other comprehensive income/(loss). Investment securities held-to-maturity are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Equity securities are primarily money market mutual fund securities and are reported at fair value. Premiums and discounts on the investment securities are amortized or accreted into Net interest income by the level-yield method. Gains and losses on the sale of the Investment securities available-for-sale are recognized at the trade date on a specific identification basis. Dividend and interest income is recognized when earned and is recorded on the accrual basis. The Company conducts a quarterly review and evaluation of its investment securities to determine if the decline in fair value of a security below its amortized cost is deemed to be an impairment. The Investment securities held-to-maturity portfolio is assessed under the zero loss expectation exception criteria. The Investment securities available-for-sale portfolio are reviewed for impairment under Accounting Standards Codification (“ASC”) 326-30-35, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The Company considers whether or not the following criteria have been met: (1) if the investment fair value of a security falls below amortized cost; (2) if it is determined the Company has an intention to sell the security; and (3) if it is more likely than not that the security will be required to be sold prior to recovery. If the Company determines that these criteria have been met, the loss is then recorded and reflected in earnings as a charge against Gain on sale of investments. If there is no intent or requirement to sell, the impairment is evaluated to determine if it is credit-related or a temporary loss. The amount of the impairment related to credit is set up as an allowance, and the remaining impairment is recorded and reflected in earnings through Accumulated other comprehensive income/(loss). Investment Securities Policy Prior to the Adoption of ASU 2016-13 For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Company conducted a quarterly review and evaluation of its investment securities to determine if the decline in fair value of a security below its amortized cost is deemed to be other-than-temporary. Other-than-temporary impairment losses are recognized on securities when: (i) the holder has an intention to sell the security; (ii) it is more likely than not that the security will be required to be sold prior to recovery; or (iii) the holder does not expect to recover the entire amortized cost basis of the security. Other-than-temporary losses are reflected in earnings as a charge against gain on sale of investments, net, to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in accumulated other comprehensive income/(loss). Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology. Loans Held for Sale Loans originated and held for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Fair value is based on commitments on hand from investors or prevailing market prices. Unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans transferred to the held for sale category from the loan portfolio are transferred at the lower of cost or fair value, usually as determined at the individual loan level. If fair value is less than cost, then a charge for the difference will be made to the Allowance for loan losses if the decline in value is due to credit issues. Gains or losses on the sale of loans are recognized at the time of sale on a specific identification basis. Interest income is recognized on an accrual basis when earned. Loans Loans are carried at the principal amount outstanding, net of participations, deferred loan origination fees and costs, charge-offs, and interest payments applied to principal on nonaccrual loans. Loan origination fees, net of related direct incremental loan origination costs, are deferred and recognized into income over the contractual lives of the related loans as an adjustment to the loan yield, using the level-yield method. If a loan is paid off prior to maturity, the unamortized portion of net fees/cost is recognized into interest income. If a loan is sold, the unamortized portion of net fees/cost is recognized at the time of sale as a component of the gain or loss on sale of loans. When the Company analyzes its loan portfolio to determine the adequacy of its Allowance for loan losses, it categorizes the loans by portfolio segment and class of financing receivable based on the similarities in risk characteristics for the loans. The Company has determined that its portfolio segments and classes of financing receivables are one and the same, with the exception of the Commercial and industrial portfolio segment, which consists of Other Commercial and industrial loans and Commercial tax-exempt loans. The level at which the Company develops and documents its Allowance for loan loss methodology is consistent with the grouping of financing receivables based upon initial measurement attributes, risk characteristics, and the Company’s method for monitoring and assessing credit risks. These portfolio segments and classes of financing receivables are: •Commercial and industrial (portfolio segment) ◦Other Commercial and industrial loans (class of financing receivable)- Commercial and industrial loans include working capital and revolving lines of credit, term loans for equipment and fixed assets, and Small Business Administration (“SBA”) loans. ◦Commercial tax-exempt loans (class of financing receivable)- Commercial tax-exempt loans include loans to not-for-profit private schools, colleges, public charter schools and other not-for-profit organizations. •Paycheck Protection Program (segment and class)- Paycheck Protection Program loans are loans made under the Paycheck Protection Program as stipulated through the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). •Commercial real estate (segment and class)- Commercial real estate loans are generally acquisition financing for Commercial properties such as office buildings, retail properties, apartment buildings, and industrial/warehouse space. In addition, tax-exempt Commercial real estate loans are provided for affordable housing development and rehabilitation. These loans are often supplemented with federal, state, and/or local subsidies. •Construction and land (segment and class)- Construction and land loans include loans for financing of new developments as well as financing for improvements to existing buildings. In addition, tax-exempt construction and land loans are provided for the construction phase of the Commercial tax-exempt and Commercial real estate tax-exempt loans described above. •Residential mortgage (segment and class)- Residential mortgage loans consist of loans secured by single-family and one- to four-unit properties in excess of the amount eligible for purchase by the Federal National Mortgage Association, which was $510 thousand at December 31, 2020 for the “General” limit and $766 thousand for single-family properties for the “High-Cost” limit, depending on which specific geographic region of the Bank’s primary market areas the loan was originated. While the Bank has no minimum size for mortgage loans, it concentrates its origination activities in the “Jumbo” segment of the market. •Home equity (segment and class)- Home equity loans consist of balances outstanding on second mortgages and home equity lines of credit extended to individual clients. The amount of Home equity loans typically depends on client demand. •Consumer and other (segment and class)- Consumer and other loans consist of balances outstanding on consumer loans including personal lines of credit, and loans arising from overdraft protection extended to individual and business clients. Personal lines of credit are typically for high net worth clients whose assets may not be liquid due to investments or closely held stock. The amount of Consumer and other loans typically depends on client demand. The past due status of a loan is determined in accordance with its contractual repayment terms. Loans are reported past due when one scheduled payment is due and unpaid for 30 days or more. The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest is in doubt. When management determines that it is probable that the Bank will not collect all principal and interest on a loan in accordance with the original loan terms, the loan is designated as impaired. Impaired loans are usually Commercial loans or Construction and land loans, for which it is probable that the Company will not collect all amounts due according to the contractual terms of the loan agreement, and all loans restructured in a troubled debt restructuring (“TDR”). Accrual of interest income is discontinued and all interest previously accrued but not collected is reversed against current period interest income when a loan is initially classified as nonaccrual. Generally, interest received on nonaccrual loans is applied against principal or, on a limited basis, reported as interest income on a cash basis, when according to management’s judgment, the collectability of principal is reasonably assured. The Bank’s general policy for returning a loan to accrual status requires the loan to be brought current, for the client to show a history of making timely payments (generally six consecutive months), and when the financial position of the borrower and other relevant factors indicate there is no longer doubt as to the collectability of the loan. The Bank’s loan commitments are generally short-term in nature with terms that are primarily variable. Given the limited interest rate exposure posed by the commitments, the Bank estimates the fair value adjustment of these commitments to be immaterial. Credit Quality Indicators The Bank uses a risk rating system to monitor the credit quality of its loan portfolio. Loan classifications are assessments made by the Bank of the status of the loans based on the facts and circumstances known to the Bank, including management’s judgment, at the time of assessment. Some or all of these classifications may change in the future if there are unexpected changes in the financial condition of the borrower, including but not limited to, changes resulting from continuing deterioration in employment levels, general business and economic conditions on a national basis or in the local markets in which the Bank operates adversely affecting, among other things, real estate values. Such conditions, as well as other factors which adversely affect borrowers’ ability to service or repay loans, typically result in changes in loan default and charge-off rates, and increased provisions for loan losses, which would adversely affect the Company’s financial performance and financial condition. These circumstances are not entirely foreseeable and, as a result, it may not be possible to accurately reflect them in the Company’s analysis of credit risk. Generally, only Commercial loans, including Commercial real estate, Other Commercial and industrial loans, Commercial tax-exempt loans, and Construction and land loans, are given a numerical grade. A summary of the rating system used by the Bank follows: Pass- All loans graded as pass are considered acceptable credit quality by the Bank and are grouped for disclosure purposes. For Residential, Home equity, and Consumer loans, the Bank classifies loans as pass unless there is known information such as delinquency or client requests for modifications, which due to financial difficulty would then generally result in a risk rating such as special mention or more severe depending on the factors. Special mention- Loans rated in this category are defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the Bank’s credit position. These loans are currently protected but have the potential to deteriorate to a substandard rating. For Commercial loans, the borrower’s financial performance may be inconsistent or below forecast, creating the possibility of liquidity problems and shrinking debt service coverage. In loans having this rating, the primary source of repayment is still good, but there is increasing reliance on collateral or guarantor support. Collectability of the loan is not yet in jeopardy. In particular, loans in this category are considered more variable than other categories since they will typically migrate through categories more quickly. Substandard- Loans rated in this category are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. A substandard credit has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans may be either still accruing or nonaccruing depending upon the severity of the risk and other factors such as the value of the collateral, if any, and past due status. Doubtful - Loans rated in this category indicate that collection or liquidation in full on the basis of currently existing facts, conditions, and values is highly questionable and improbable. Loans in this category are usually on nonaccrual and classified as impaired. These above credit quality indicators are assigned upon origination with Commercial loans reassessed on an annual basis while noncommercial loans are reassessed when the loan becomes past due greater than 90 days or when ad-hoc information becomes available to the loan officer. Further, the Commercial loan portfolio is subject for selection of an independent review on an annual basis. In addition, those loans not considered to be "Pass" rated are subject to a Loan Committee review on a quarterly basis. Lastly, on an ad-hoc basis as new information becomes available to the loan officer on the credit quality of the borrower, the credit quality indicators are reassessed. Restructured Loans When the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a troubled borrower that it would not otherwise consider, the loan is classified as a restructured loan pursuant to ASC 470, Debt. The concession either stems from an agreement between the creditor and the Bank or is imposed by law or a court. The concessions may include: •Deferral of principal and/or interest payments •Lower interest rate as compared to a new loan with comparable risk and terms •Extension of the maturity date •Reduction in the principal balance owed All loans whose terms have been modified in a TDR, including Commercial, Residential, and Consumer, are evaluated for impairment under ASC 326, Financial Instruments ─ Credit Losses ("ASC 326"). Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of at least six months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring or significant events that coincide with the restructuring are considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of the restructuring or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. A loan may be removed from a restructured classification after the next fiscal year-end, if the restructured terms include a market interest rate and the borrower has demonstrated performance with the restructured terms. Allowance for Loan Losses The Allowance for loan losses is an estimate of the inherent risk of loss in the loan portfolio as of the dates indicated on the Consolidated Balance Sheets. Management estimates the level of the Allowance for loan losses based on all relevant information available. The Company’s Allowance for loan losses is accounted for in accordance with guidance issued by various regulatory agencies, including: the Federal Financial Institutions Examination Council Policy Statement on the Allowance for Loan and Lease Losses (October 2019); Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 119 (November 2019); ASC 326, Financial Instruments ─ Credit Losses. For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Allowance for loan losses was determined under the incurred loss model. Upon the adoption of ASU 2016-13 on January 1, 2020, management's processes for the Allowance for loan losses has changed. The updates in this standard replace the incurred loss impairment methodology, previously accounted for in accordance with Receivables (“ASC 310”) and SEC Staff Accounting Bulletin No. 102 (July 2001), with the updated methodology described below that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Allowance for loan losses consists of two primary components: general reserves on pass, non-impaired special mention, and substandard loans as well as specific reserves on impaired loans. The calculation of the Allowance for loan losses involves a high degree of management judgment and estimates designed to reflect the inherent risk of loss in the loan portfolio at the measurement date The Allowance for loan losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Under the Current Expected Credit Losses ("CECL") methodology, which the Company adopted on January 1, 2020, the Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address risks not incorporated in the quantitative model output. The quantitative model utilizes economic factors and our selected peer groups' historical default and loss experience evaluated over the historical observation period to estimate expected credit losses. The expected credit losses are the product of multiplying the Company’s estimates of probability of default, net loss given default, and individual loan level exposure at default on an undiscounted basis. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of estimated prepayment and curtailment rates, both of which are derived from the Company's recent historical experience on the remaining portfolio segment balance over the life of the portfolio. Reasonable and supportable economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical long-run average of the macroeconomic variables, such as Gross Domestic Product, Unemployment, Consumer Confidence Index etc. Management has determined a reasonable and supportable period of two years and a straight line reversion period of twelve months to be appropriate for purposes of estimating expected credit losses. Management also applies a weight to the various forecasts to determine the reasonable and supportable economic forecasts. A portion of the collective Allowance for loan losses is related to the qualitative factors used to adjust historical loss information for asset-specific characteristics and current conditions to the extent they are not captured sufficiently in the quantitative model. The qualitative factors are based on information not reflected in the quantitative models but are likely to impact the measurement of estimated credit losses. The Company's qualitative assessment includes the following factors: • Volume and trend of past-due, non-accrual, and adversely-graded loans • Trends in volume and terms of loans • Concentration risk • Experience and depth of management • Risk surrounding lending policy and underwriting standards • Risk surrounding loan review • Banking industry conditions, other external factors, and inherent model risk Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that will be individually assessed, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable. The Bank makes a determination of the applicable loss rate for these factors based on relevant local market conditions, credit quality, and portfolio mix. Each quarter, management reviews the loss factors to determine if there have been any changes in its loan portfolio, market conditions, or other risk indicators which would result in a change to the current loss factor. A loan is considered impaired in accordance with ASC 326 when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured based on the fair value of the loan, expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, impairment may be determined based upon the observable market price of the loan, or the fair value of the collateral, less estimated costs to sell, if the loan is “collateral dependent.” A loan is collateral dependent if repayment of the loan is expected to be provided solely by the underlying collateral or sale of the underlying collateral. For collateral dependent loans, appraisals are generally used to determine the fair value. When a collateral dependent loan becomes impaired, an updated appraisal of the collateral is obtained, if appropriate. Appraised values are generally discounted for factors such as the Bank’s intention to liquidate the property quickly in a foreclosure sale or the date when the appraisal was performed if the Bank believes that collateral values have declined since the date the appraisal was done. The Bank may use a broker opinion of value in addition to an appraisal to validate the appraised value. In certain instances, the Bank may consider broker opinions of value as well as other qualitative factors while an appraisal is being prepared. If the loan is deemed to be collateral dependent, generally the difference between the book balance (client balance less any prior charge-offs or client interest payments applied to principal) and the fair value of the collateral less costs to sell is taken as a partial charge-off through the Allowance for loan losses in the current period. If the loan is not determined to be collateral dependent, then a specific allocation to the general reserve is established for the difference between the book balance of the loan and the expected future cash flows discounted at the loan’s effective interest rate. Charge-offs for loans not considered to be collateral dependent are made when it is determined a loss has been incurred. Impaired loans are removed from the general loan pools. There may be instances where the loan is considered impaired although based on the fair value of underlying collateral or the discounted expected future cash flows there is no impairment to be recognized. In addition, all loans which are classified as TDRs are considered impaired. While this evaluation process utilizes historical and other objective information, the classification of loans and the establishment of the Allowance for loan losses rely to a great extent on the judgment and experience of management. While management evaluates currently available information in establishing the Allowance for loan losses, future adjustments to the Allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution’s Allowance for loan losses as well as loan grades/classifications. Changes to the required level in the Allowance for loan losses result in either a provision for loan loss expense, if an increase is required, or a credit to the provision, if a decrease is required. Loan losses are charged to the Allowance for loan losses when available information confirms that specific loans, or portions thereof, are uncollectible. Recoveries on loans previously charged-off are credited to the Allowance for loan losses when received in cash or when the Bank takes possession of other assets. Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within Accrued interest receivable on the Consolidated Balance Sheets. Management has elected not to measure an Allowance for credit losses on these amounts as the Company employs a timely write-off policy as generally any loan over 89 days past-due is put on non-accrual status and any associated accrued interest is reversed. Reserve for Unfunded Loan Commitments The Company maintains a reserve for unfunded loan commitments for such items as unused portion of lines of credit and unadvanced construction loans. The reserve is maintained at a level that reflects the risk in these various commitments. Management determines the reserve percentages on a quarterly basis based on a percentage of the quantitative loss rate derived from the CECL model for these portfolios. Once a loan commitment is funded, the reserve for unfunded loan commitment is reversed and a corresponding Allowance for loan loss reserve is established. This unfunded loan commitment reserve is included in Other liabilities in the Consolidated Balance Sheets. Net adjustments to the reserve for unfunded commitments are included in Other expense in the Consolidated Statements of Operations. Allowance For Loan Losses Policy Prior to the Adoption of ASU 2016-13 Prior to the adoption of ASU 2016-13, the Allowance for loan losses consisted of three primary components: general reserves on pass graded loans, allocated reserves on non-impaired special mention and substandard loans, and specific reserves on impaired loans. The calculation of the Allowance for loan losses involved a high degree of management judgment and estimates designed to reflect the inherent risk of loss in the loan portfolio at the measurement date. General reserves were calculated for each loan pool consisting of pass graded loans segregated by portfolio segment by applying estimated net loss percentages based upon the Bank’s actual historical net charge-offs during the historical observation period and loss emergence period. In addition, consideration of qualitative factors was applied to arrive at a total loss factor for each portfolio segment. The rationale for qualitative adjustments was to more accurately reflect the current inherent risk of loss in the respective portfolio segments than would be determined through the sole consideration of the Bank’s actual historical net charge-off rates. The numerical factors assigned to each qualitative factor were based upon observable data, if applicable, as well as management’s analysis and judgment. The qualitative factors considered by the Company include: •Volume and severity of past due, nonaccrual, and adversely graded loans, •Volume and terms of loans, •Concentrations of credit, •Management’s experience, as well as loan underwriting and loan review policy and procedures, •Economic and business conditions impacting the Bank’s loan portfolio, as well as consideration of collateral values, and •External factors, including consideration of loss factor trends, competition, and legal and regulatory requirements. The Bank made a determination of the applicable loss rate for these factors based on relevant local market conditions, credit quality, and portfolio mix. Each quarter, management reviewed the loss factors to determine if there have been any changes in its loan portfolio, market conditions, or other risk indicators which would result in a change to the current loss factor. Allocated reserves on non-impaired special mention and substandard loans reflect management’s assessment of increased risk of losses associated with these types of adversely graded loans. An allocated reserve was assigned to these pools of loans based upon management’s consideration of the credit attributes of individual loans within each pool of loans, including consideration of loan to value ratios, past due status, strength and willingness of the guarantors, and other relevant attributes as well as the qualitative factors considered for the general reserve, as discussed above. These considerations were determined separately for each type of portfolio segment. The allocated reserves were a multiple of the general reserve for each respective portfolio segments, with a greater multiple for loans with increased risk (i.e. special mention loans versus substandard loans). A loan was considered impaired in accordance with ASC 310 when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured based on the fair value of the loan, expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, impairment may be determined based upon the observable market price of the loan, or the fair value of the collateral, less estimated costs to sell, if the loan is “collateral dependent.” A loan was collateral dependent if repayment of the loan is expected to be provided solely by the underlying collateral or sale of the underlying collateral. For collateral dependent loans, appraisals were generally used to determine the fair value. When a collateral dependent loan became impaired, an updated appraisal of the collateral was obtained, if appropriate. Appraised values were generally discounted for factors such as the Bank’s intention to liquidate the property quickly in a foreclosure sale or the date when the appraisal was performed if the Bank believes that collateral values have declined since the date the appraisal was done. The Bank could use a broker opinion of value in addition to an appraisal to validate the appraised value. In certain instances, the Bank could consider broker opinions of value as well as other qualitative factors while an appraisal is being prepared. If the loan was deemed to be collateral dependent, generally the difference between the book balance (client balance less any prior charge-offs or client interest payments applied to principal) and the fair value of the collateral less costs to sell was taken as a partial charge-off through the Allowance for loan losses in the current period. If the loan was not determined to be collateral dependent, then a specific allocation to the general reserve was established for the difference between the book balance of the loan and the expected future cash flows discounted at the loan’s effective interest rate. Charge-offs for loans not considered to be collateral dependent were made when it was determined a loss has been incurred. Impaired loans were removed from the general loan pools. There may be instances where the loan was considered impaired although based on the fair value of underlying collateral or the discounted expected future cash flows there is no impairment to be recognized. In addition, all loans which were classified as TDRs were considered impaired. In addition to the three primary components of the Allowance for loan losses discussed above (general reserves, allocated reserves on non-impaired special mention and substandard loans, and the specific reserves on impaired loans), the Bank could also maintain an insignificant amount of additional Allowance for loan losses (the unallocated Allowance for loan losses). The unallocated reserve reflected the fact that the Allowance for loan losses was an estimate and contained a certain amount of imprecision risk. It represented risks identified by Management that were not already captured in the qualitative factors discussed above. The unallocated Allowance for loan losses was not considered significant by the Company and remained at zero unless additional risk was identified. While this evaluation process utilized historical and other objective information, the classification of loans and the establishment of the Allowance for loan losses relied to a great extent on the judgment and experience of management. While management evaluated currently available information in establishing the Allowance for loan losses, future adjustments to the Allowance for loan losses could be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution’s Allowance for loan losses as well as loan grades/classifications. Such agencies could require the financial institution to recognize additions to the Allowance for loan losses or increases to adversely graded loans based on their judgments about information available to them at the time of their examination. Reserve for Unfunded Loan Commitments Policy Prior to the Adoption of ASU 2016-13 The Company maintained a reserve for unfunded loan commitments for such items as unused portion of lines of credit and unadvanced construction loans. The reserve was maintained at a level that reflects the risk in these various commitments. Management determined the reserve percentages on a quarterly basis based on a percentage of the current historical loss rates for these portfolios. Once a loan commitment was funded, the reserve for unfunded loan commitment was reversed and a corresponding Allowance for loan loss reserve is established. This unfunded loan commitment reserve was included in other liabilities in the Consolidated Balance Sheets. Net adjustments to the reserve for unfunded commitments were included in other operating expense in the Consolidated Statements of Operations. Other Real Estate Owned ("OREO") OREO, if any, is comprised of property acquired through foreclosure proceedings or acceptance of a deed-in-lieu of foreclosure in partial or total satisfaction of certain loans. Properties are recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value, as established by a current appraisal, comparable sales, and other estimates of value obtained principally from independent sources, less estimated costs to sell. Any decline in fair value compared to the carrying value of a property at the time of acquisition is charged against the Allowance for loan losses. Any subsequent valuation adjustments to reflect declines in current fair value, as well as gains or losses on disposition are reported in gain/(loss) on OREO, net in the Consolidated Statements of Operations. Expenses incurred for holding or maintaining OREO properties such as real estate taxes, utilities, and insurance are charged as incurred to Other expense in the Consolidated Statements of Operations. Rental income earned, although generally minimal, is offset against Other expense. Premises and Equipment Premises and equipment consists of leasehold improvements, furniture, fixtures, office equipment, computer equipment, software, and buildings. Premises and equipment are carried at cost, less accumulated depreciation. Also included in premises and equipment is technology initiatives in process. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. The estimated useful life for leasehold improvements is 10 years or the remaining term of the lease, if shorter. The estimated useful life for buildings is 40 years. The estimated useful life for furniture and fixtures is six years, five years for office equipment, and three years for computer equipment and software. The costs of improvements that extend the life of an asset are capitalized, while the cost of repairs and maintenance are expensed as incurred. Valuation of Goodwill/Intangible Assets and Analysis for Impairment The Company allocates the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Other intangible assets identified in acquisitions generally consist of advisory contracts. The value attributed to advisory contracts is based on the time period over which they are expected to generate economic benefits. The advisory contracts are generally amortized over 8-15 years, depending on the contract. The excess of the purchase price for acquisitions over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill. Goodwill is not amortized but is tested for impairment at the reporting unit level, defined as the affiliate level, at least annually in the fourth quarter or more frequently when events or circumstances occur that indicate that it is more likely than not that an impairment has occurred, based on the guidance in ASC 350, Intangibles -Goodwill and Other (“ASC 350”), as updated by ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). Goodwill impairment exists when a reporting unit’s carrying value of goodwill exceeds its implied fair value. Long-lived intangible assets are subject to the impairment provisions of ASC 360-10, Property, Plant, and Equipment (“ASC 360”). Long-lived intangible assets are tested for recoverability by comparing the net carrying value of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset (asset group) when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value, determined based upon the discounted value of the expected cash flows generated by the asset. An entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill (“Step 0”). In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, an entity assesses relevant events and circumstances, such as the following: •Macroeconomic conditions, such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets. •Industry and market considerations, such as a deterioration in the environment in which an entity operates, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for an entity’s products or services, or a regulatory or political development. •Overall financial performance, such as negative or declining asset flows or cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. •Other relevant entity-specific events, such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation. •Events affecting a reporting unit, such as a change in the composition or carrying amount of its net assets; a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit; the testing for recoverability of a significant asset group within a reporting unit; or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit. If, after assessing the totality of events or circumstances such as those described in the preceding paragraph, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test, as described below, is unnecessary. Goodwill is tested for impairment by estimating the fair value of a reporting unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions, and selecting an appropriate control premium. Both the income and market approaches to determine fair value of the reporting units are typically incorporated. The income approach is primarily based on discounted cash flows derived from assumptions of income statement activity. For the market approach, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and revenue multiples of comparable companies are selected and applied to the financial services reporting unit’s applicable metrics. Generally, a valuation consultant will be engaged to assist with the valuation. Quantitative impairment testing requires a comparison of each reporting unit’s fair value to carrying value to identify potential impairment. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized. In adopting ASU 2017-04, the Company measures that loss as an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Additionally, the Company considers the income tax effect from any tax deductible goodwill on the carrying amount of the reporting unit, if applicable, when measuring the goodwill impairment loss. The fair value of the reporting unit is determined using generally accepted approaches to valuation commonly referred to as the income approach, market approach, and cost approach. Within each category, a variety of methodologies exist to assist in the estimation of fair value. The Wealth Management and Trust segment is the only reportable segment that has goodwill. The fair value of the reporting unit is compared to market capitalization as an assessment of the appropriateness of the fair value measurement. A control premium analysis is performed to determine whether the implied control premium was within range of overall control premiums observed in the market place. If the carrying amount of the reporting unit’s goodwill is greater than the fair value of the reporting unit’s goodwill, an impairment loss must be recognized for the excess (i.e., recorded goodwill must be written down to the implied fair value of the reporting unit’s goodwill). After a goodwill impairment loss for a reporting unit is measured and recognized, the adjusted carrying amount of the reporting unit’s goodwill becomes the new accounting basis for that goodwill. Income Tax Estimates The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). The deferred tax assets and/or liabilities are determined by multiplying the differences between the financial reporting and tax reporting basis for assets and liabilities by the enacted tax rates expected to be in effect when such differences are recovered or settled. The effect on deferred taxes for a change in tax rates is recognized in Income tax expense/(benefit) attributable to continuing operations in the period that includes the enactment date. Valuation allowances on deferred tax assets are estimated based on our assessment of the realizability of such amounts. Significant management judgment is required in determining the provision for income taxes and, in particular, any valuation allowance recorded against our deferred tax assets. In accordance with ASC 740, deferred tax assets are to be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of the tax benefit depends upon the existence of sufficient taxable income of the appropriate character within the carry-forward periods. Management considered the following items in evaluating the need for a valuation allowance: ▪The Company had cumulative pre-tax income, as adjusted for permanent book-to-tax differences, during the preceding three year period. ▪Deferred tax assets are expected to reverse in periods when there will be taxable income. ▪The Company projects sufficient future taxable income to be generated by operations during the available carry-forward period. ▪Certain tax planning strategies are available, such as reducing investments in tax-exempt securities. ▪The Company has not had any operating loss or tax credit carryovers expiring unused in recent years. The Company believes that it is more likely than not that the net deferred tax asset as of December 31, 2020, will be realized based primarily upon the ability to generate future taxable income. The Company does not have any capital losses in excess of capital gains as of December 31, 2020. Derivative Instruments and Hedging Activities The Company records derivatives on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are designated as fair value hedges. Derivatives used to hedge exposure to variability in expected future cash flows, or other types of forecasted transactions, are designated as cash flow hedges. Per ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, for derivatives designated as cash flow hedges, the changes in the fair value of the derivative are initially reported in Accumulated other comprehensive income/(loss) (a component of Shareholders’ equity), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings. For derivatives designated as fair value hedges, changes in the fair value of the derivative are recognized in earnings together with the changes in the fair value of the related hedged item. On January 1, 2018, the Company early adopted ASU No. 2017-12, Targeted Improvements to Accounting. Wealth Management and Trust Fees and Investment Management Fees The Company generates fee income from providing wealth management and investment management services and from providing trust services to its clients. Investment management fees are generally based upon the value of assets under management ("AUM") and are billed monthly, quarterly, or annually. Asset-based advisory fees are recognized as services are rendered and are based upon a percentage of the fair value of client assets managed. Certain wealth management fees are not asset-based and are negotiated individually with clients. Any fees collected in advance are deferred and recognized as income over the period earned. Performance-based advisory fees are generally assessed as a percentage of the investment performance realized on a client’s account, generally over an annual period, and are not recognized until any contingencies in the contract that could require the performance fee to be reduced have been eliminated. AUM at the Company’s consolidated subsidiaries are not included in the consolidated financial statements since they are held in a fiduciary or agency capacity and are not assets of the Company. Stock-Based Incentive Plans The fair value of restricted stock and restricted units, both time based and performance based, is generally equal to the closing price of the Company’s stock on the date of issuance. The fair value of time based, performance based, or market based stock options is calculated using a pricing model such as Black-Scholes. At December 31, 2020, the Company has three stock-based incentive compensation plans. These plans encourage and enable the officers, employees, and non-employee directors of the Company to acquire an interest in the Company. The Company accounts for share-based awards in accordance with ASC 718, Compensation – Stock Compensation. Costs resulting from the issuance of such share-based payment awards are required to be recognized in the financial statements based on the grant date fair value of the award. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period. The vesting period for time based and performance based stock, units, and options is generally cliff vesting with terms from one to five years or graded. Market based option vesting is based on the specific terms of the vesting criteria and the expectation of when the performance criteria could be attained as of the time of issuance. Earnings Per Share (“EPS”) Basic EPS is computed by dividing Net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as time-based or performance-based restricted stock units, stock options, and warrants, among others) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing Net income attributable to common shareholders by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method. Additionally, when dilutive, interest expense (net of tax) related to the convertible trust preferred securities is added back to Net income attributable to common shareholders. The calculation of diluted EPS excludes the potential dilution of common shares and the inclusion of any related expenses if the effect is anti-dilutive. For the calculation of the Company’s EPS, see Part II. Item 8. “Financial Statements and Supplementary Data - Note 16: Earnings Per Share.” Recently Adopted Accounting Pronouncements The Company has recently adopted the following ASUs issued by the FASB. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 expands the disclosure requirements for revenue agreements with customers; ASU 2014-09 has been subsequently amended by additional ASUs, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, collectively, “ASU 2014-09 et al.” Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. ASU 2014-09 et al. does not apply to revenue associated with financial instruments such as loans and securities. ASU 2014-09 et al. was adopted using the modified retrospective transition method as of January 1, 2018, however no cumulative effect adjustment was required. The guidance was applied to all revenue contracts in place at the date of adoption. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 26: Revenue Recognition” for further details. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update and the related amendments to Topic 842 require lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”), ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”); and ASU No. 2019-01, Leases (Topic 842), Codification Improvements (“ASU 2019-01”), all of which clarify the guidance in ASU 2016-02 and add an additional transition method for leases. The standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the Consolidated Balance Sheets for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Consolidated Statements of Operations. The new standard was effective on January 1, 2019, with early adoption permitted. The Company adopted these provisions on January 1, 2019. The most significant effects relate to the recognition of new ROU assets and lease liabilities on the Consolidated Balance Sheets for real estate operating leases and providing significant new disclosures about leasing activities. Additionally, the Company elected the package of practical expedients, as prescribed by ASU 2016-02. On adoption, the Company recognized $124.1 million of Lease liabilities and $108.5 million of ROU assets. In June 2016, the FASB issued ASU 2016-13. In 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”); ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”); ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 942)—Effective Dates (“ASU 2019-10”); and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2019-11”). This update and related amendments to Topic 326 are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology with a CECL model methodology that reflects expected credit losses and requires consideration of a reasonable and supportable economic forecast to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 utilizing a modified retrospective approach. On adoption of ASU 2016-13, the Company recognized a decrease in the Allowance for loan losses of $20.4 million and an increase in the reserve for unfunded loan commitments of $1.4 million. The net, after-tax impact of the decrease in the Allowance for loan losses and the increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million as shown in the Consolidated Statements of Changes in Shareholders’ Equity. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 4: Investment Securities”, “Note 5: Loan Portfolio and Credit Quality”, and “Note 6: Allowance for Loan Losses” for further details. Accounting Pronouncements Not Yet Adopted There were no ASUs materially impacting the Company, which have been issued by the FASB, but were not yet adopted as of December 31, 2020.

The Private Banking segment is comprised of the banking operations of Boston Private Bank & Trust Company (the “Bank” or “Boston Private Bank”), a trust company chartered by The Commonwealth of Massachusetts, whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”), and a wholly-owned subsidiary of the Company. Boston Private Bank is a member of the Federal Reserve Bank of Boston. Boston Private Bank primarily operates in three geographic markets: New England, Northern California, and Southern California. The Private Banking segment is principally engaged in providing banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Private Banking segment is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization and small businesses.

The Wealth Management and Trust segment is comprised of Boston Private Wealth, LLC (“Boston Private Wealth”), a registered investment adviser (“RIA”) and wholly-owned subsidiary of the Bank, as well as the trust operations of Boston Private Bank. 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. On September 1, 2019, KLS Professional Advisors Group, LLC (“KLS”) merged with and into Boston Private Wealth. The results of KLS were previously reported in a third reportable segment, “Affiliate Partners”, as further discussed below. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California, and Southern California.

Prior to the third quarter of 2019, the Company had three reportable segments: Affiliate Partners, Private Banking, and Wealth Management and Trust. For the first two quarters of 2019, the Affiliate Partners segment was comprised of two subsidiaries of the Company: KLS and Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”), each of which are RIAs. Prior to the first quarter of 2019, the Affiliate Partners segment also included Anchor Capital Advisors, LLC (“Anchor”) and Bingham, Osborn & Scarborough, LLC (“BOS”). On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. On December 3, 2018, the Company completed the sale of its ownership interest in BOS. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Divestitures” for additional information.

With the integration of KLS into Boston Private Wealth, 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 now included in the results of Boston Private Wealth within the Wealth Management and Trust segment for all periods presented. The results of DGHM are now included within the Holding Company and Eliminations segment for all periods presented. The results of Anchor and BOS are included in the Holding Company and Eliminations segment for the periods owned. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Divestitures” for further details on the transactions.

On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB Financial Group ("SVB") pursuant to which SVB will acquire the Company. The transaction has been unanimously approved by both companies' Boards of Directors and is expected to close in mid-2021, subject to the satisfaction of customary closing conditions, including the receipt of customary regulatory approvals and approval by the shareholders of the Company. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 28: Subsequent Event” for further details on the transactions.

The Company conducts substantially all of its business through its two reportable segments. All significant intercompany accounts and transactions have been eliminated in consolidation, and the portion of income allocated to owners other than the Company is included in Net income attributable to noncontrolling interests in the Consolidated Statements of Operations. Redeemable noncontrolling interests, if any, in the Consolidated Balance Sheets reflect the maximum redemption value of agreements with other owners.

Most of the Company’s activities are with clients within the New England, Northern California, Southern California, New York, and Southeastern Florida regions of the country. The Company does not believe it has any significant concentrations in any one industry, geographic location, or with any one client. Part II. Item 8. “Financial Statements and Supplementary Data - Note 4: Investment Securities” highlights the types of securities in which the Company invests, and Part II. Item 8. “Financial Statements and Supplementary Data - Note 5: Loan Portfolio and Credit Quality” describes the concentration of the Private Banking loan data based on the location of the lender.

The Bank is required to maintain average reserve balances in an account with the Federal Reserve based upon a percentage of certain deposits. As of December 31, 2020 and 2019, the daily amounts required to be held in the aggregate for the Bank were zero and $3.4 million, respectively. Due to the COVID-19 pandemic, the Federal Reserve reduced reserve requirements to zero percent effective March 26, 2020, which eliminated reserve requirements for all depository institutions.

Investment securities available-for-sale are reported at fair value, with unrealized gains and losses credited or charged, net of the estimated tax effect, to Accumulated other comprehensive income/(loss). Investment securities held-to-maturity are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Equity securities are primarily money market mutual fund securities and are reported at fair value.

The Company conducts a quarterly review and evaluation of its investment securities to determine if the decline in fair value of a security below its amortized cost is deemed to be an impairment. The Investment securities held-to-maturity portfolio is assessed under the zero loss expectation exception criteria. The Investment securities available-for-sale portfolio are reviewed for impairment under Accounting Standards Codification (“ASC”) 326-30-35, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The Company considers whether or not the following criteria have been met: (1) if the investment fair value of a security falls below amortized cost; (2) if it is determined the Company has an intention to sell the security; and (3) if it is more likely than not that the security will be required to be sold prior to recovery. If the Company determines that these criteria have been met, the loss is then recorded and reflected in earnings as a charge against Gain on sale of investments. If there is no intent or requirement to sell, the impairment is evaluated to determine if it is credit-related or a temporary loss. The amount of the impairment related to credit is set up as an allowance, and the remaining impairment is recorded and reflected in earnings through Accumulated other comprehensive income/(loss).

For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Company conducted a quarterly review and evaluation of its investment securities to determine if the decline in fair value of a security below its amortized cost is deemed to be other-than-temporary. Other-than-temporary impairment losses are recognized on securities when: (i) the holder has an intention to sell the security; (ii) it is more likely than not that the security will be required to be sold prior to recovery; or (iii) the holder does not expect to recover the entire amortized cost basis of the security. Other-than-temporary losses are reflected in earnings as a charge against gain on sale of investments, net, to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in accumulated other comprehensive income/(loss). Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology.

Loans originated and held for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Fair value is based on commitments on hand from investors or prevailing market prices. Unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans transferred to the held for sale category from the loan portfolio are transferred at the lower of cost or fair value, usually as determined at the individual loan level. If fair value is less than cost, then a charge for the difference will be made to the Allowance for loan losses if the decline in value is due to credit issues. Gains or losses on the sale of loans are recognized at the time of sale on a specific identification basis. Interest income is recognized on an accrual basis when earned.

Loans are carried at the principal amount outstanding, net of participations, deferred loan origination fees and costs, charge-offs, and interest payments applied to principal on nonaccrual loans. Loan origination fees, net of related direct incremental loan origination costs, are deferred and recognized into income over the contractual lives of the related loans as an adjustment to the loan yield, using the level-yield method. If a loan is paid off prior to maturity, the unamortized portion of net fees/cost is recognized into interest income. If a loan is sold, the unamortized portion of net fees/cost is recognized at the time of sale as a component of the gain or loss on sale of loans.

When the Company analyzes its loan portfolio to determine the adequacy of its Allowance for loan losses, it categorizes the loans by portfolio segment and class of financing receivable based on the similarities in risk characteristics for the loans. The Company has determined that its portfolio segments and classes of financing receivables are one and the same, with the exception of the Commercial and industrial portfolio segment, which consists of Other Commercial and industrial loans and Commercial tax-exempt loans. The level at which the Company develops and documents its Allowance for loan loss methodology is consistent with the grouping of financing receivables based upon initial measurement attributes, risk characteristics, and the Company’s method for monitoring and assessing credit risks. These portfolio segments and classes of financing receivables are:

•Residential mortgage (segment and class)- Residential mortgage loans consist of loans secured by single-family and one- to four-unit properties in excess of the amount eligible for purchase by the Federal National Mortgage Association, which was $510 thousand at December 31, 2020 for the “General” limit and $766 thousand for single-family properties for the “High-Cost” limit, depending on which specific geographic region of the Bank’s primary market areas the loan was originated. While the Bank has no minimum size for mortgage loans, it concentrates its origination activities in the “Jumbo” segment of the market.

•Consumer and other (segment and class)- Consumer and other loans consist of balances outstanding on consumer loans including personal lines of credit, and loans arising from overdraft protection extended to individual and business clients. Personal lines of credit are typically for high net worth clients whose assets may not be liquid due to investments or closely held stock. The amount of Consumer and other loans typically depends on client demand.

The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest is in doubt. When management determines that it is probable that the Bank will not collect all principal and interest on a loan in accordance with the original loan terms, the loan is designated as impaired. Impaired loans are usually Commercial loans or Construction and land loans, for which it is probable that the Company will not collect all amounts due according to the contractual terms of the loan agreement, and all loans restructured in a troubled debt restructuring (“TDR”). Accrual of interest

income is discontinued and all interest previously accrued but not collected is reversed against current period interest income when a loan is initially classified as nonaccrual. Generally, interest received on nonaccrual loans is applied against principal or, on a limited basis, reported as interest income on a cash basis, when according to management’s judgment, the collectability of principal is reasonably assured. The Bank’s general policy for returning a loan to accrual status requires the loan to be brought current, for the client to show a history of making timely payments (generally six consecutive months), and when the financial position of the borrower and other relevant factors indicate there is no longer doubt as to the collectability of the loan.

The Bank uses a risk rating system to monitor the credit quality of its loan portfolio. Loan classifications are assessments made by the Bank of the status of the loans based on the facts and circumstances known to the Bank, including management’s judgment, at the time of assessment. Some or all of these classifications may change in the future if there are unexpected changes in the financial condition of the borrower, including but not limited to, changes resulting from continuing deterioration in employment levels, general business and economic conditions on a national basis or in the local markets in which the Bank operates adversely affecting, among other things, real estate values. Such conditions, as well as other factors which adversely affect borrowers’ ability to service or repay loans, typically result in changes in loan default and charge-off rates, and increased provisions for loan losses, which would adversely affect the Company’s financial performance and financial condition. These circumstances are not entirely foreseeable and, as a result, it may not be possible to accurately reflect them in the Company’s analysis of credit risk. Generally, only Commercial loans, including Commercial real estate, Other Commercial and industrial loans, Commercial tax-exempt loans, and Construction and land loans, are given a numerical grade.

Special mention- Loans rated in this category are defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the Bank’s credit position. These loans are currently protected but have the potential to deteriorate to a substandard rating. For Commercial loans, the borrower’s financial performance may be inconsistent or below forecast, creating the possibility of liquidity problems and shrinking debt service coverage. In loans having this rating, the primary source of repayment is still good, but there is increasing reliance on collateral or guarantor support. Collectability of the loan is not yet in jeopardy. In particular, loans in this category are considered more variable than other categories since they will typically migrate through categories more quickly.

Substandard- Loans rated in this category are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. A substandard credit has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans may be either still accruing or nonaccruing depending upon the severity of the risk and other factors such as the value of the collateral, if any, and past due status.

Generally, a nonaccrual loan that is restructured remains on nonaccrual status for a period of at least six months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring or significant events that coincide with the restructuring are considered when assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of the restructuring or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan.

For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Allowance for loan losses was determined under the incurred loss model. Upon the adoption of ASU 2016-13 on January 1, 2020, management's processes for the Allowance for loan losses has changed. The updates in this standard replace the incurred loss impairment methodology, previously accounted for in accordance with Receivables (“ASC 310”) and SEC Staff Accounting Bulletin No. 102 (July 2001), with the updated methodology described below that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Allowance for loan losses consists of two primary components: general reserves on pass, non-impaired special mention, and substandard loans as well as specific reserves on impaired loans. The calculation of the Allowance for loan losses involves a high degree of management judgment and estimates designed to reflect the inherent risk of loss in the loan portfolio at the measurement date The Allowance for loan losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost.

Under the Current Expected Credit Losses ("CECL") methodology, which the Company adopted on January 1, 2020, the Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address risks not incorporated in the quantitative model output. The quantitative model utilizes economic factors and our selected peer groups' historical default and loss experience evaluated over the historical observation period to estimate expected credit losses. The expected credit losses are the product of multiplying the Company’s estimates of probability of default, net loss given default, and individual loan level exposure at default on an undiscounted basis. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of estimated prepayment and curtailment rates, both of which are derived from the Company's recent historical experience on the remaining portfolio segment balance over the life of the portfolio. Reasonable and supportable economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical long-run average of the macroeconomic variables, such as Gross Domestic Product, Unemployment, Consumer Confidence Index etc. Management has determined a reasonable and supportable period of two years and a straight line reversion period of twelve months to be appropriate for purposes of estimating expected credit losses. Management also applies a weight to the various forecasts to determine the reasonable and supportable economic forecasts. A portion of the collective Allowance for loan losses is related to the qualitative factors used to adjust historical loss information for asset-specific characteristics and current conditions to the extent they are not captured sufficiently in the quantitative model. The qualitative factors are based on information not reflected in the quantitative models but are likely to impact the measurement of estimated credit losses. The Company's qualitative assessment includes the following factors:

Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that will be individually assessed, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable.

A loan is considered impaired in accordance with ASC 326 when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured based on the fair value of the loan, expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, impairment may be determined based upon the observable market price of the loan, or the fair value of the collateral, less estimated costs to sell, if the loan is “collateral dependent.” A loan is collateral dependent if repayment of the loan is expected to be provided solely by the underlying collateral or sale of the underlying collateral. For collateral dependent loans, appraisals are generally used to determine the fair value. When a collateral dependent loan becomes impaired, an updated appraisal of the collateral is obtained, if appropriate. Appraised values are generally discounted for factors such as the Bank’s intention to liquidate the property quickly in a foreclosure sale or the date when the appraisal was performed if the Bank believes that collateral values have declined since the date the appraisal was done. The Bank may use a broker opinion of value in addition to an appraisal to validate the appraised value. In certain instances, the Bank may consider broker opinions of value as well as other qualitative factors while an appraisal is being prepared.

If the loan is deemed to be collateral dependent, generally the difference between the book balance (client balance less any prior charge-offs or client interest payments applied to principal) and the fair value of the collateral less costs to sell is taken as a partial charge-off through the Allowance for loan losses in the current period. If the loan is not determined to be collateral dependent, then a specific allocation to the general reserve is established for the difference between the book balance of the loan and the expected future cash flows discounted at the loan’s effective interest rate. Charge-offs for loans not considered to be collateral dependent are made when it is determined a loss has been incurred. Impaired loans are removed from the general loan pools. There may be instances where the loan is considered impaired although based on the fair value of underlying collateral or the discounted expected future cash flows there is no impairment to be recognized. In addition, all loans which are classified as TDRs are considered impaired.

While this evaluation process utilizes historical and other objective information, the classification of loans and the establishment of the Allowance for loan losses rely to a great extent on the judgment and experience of management. While management evaluates currently available information in establishing the Allowance for loan losses, future adjustments to the Allowance for loan losses may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution’s Allowance for loan losses as well as loan grades/classifications.

Changes to the required level in the Allowance for loan losses result in either a provision for loan loss expense, if an increase is required, or a credit to the provision, if a decrease is required. Loan losses are charged to the Allowance for loan losses when available information confirms that specific loans, or portions thereof, are uncollectible. Recoveries on loans previously charged-off are credited to the Allowance for loan losses when received in cash or when the Bank takes possession of other assets.

The Company maintains a reserve for unfunded loan commitments for such items as unused portion of lines of credit and unadvanced construction loans. The reserve is maintained at a level that reflects the risk in these various commitments. Management determines the reserve percentages on a quarterly basis based on a percentage of the quantitative loss rate derived from the CECL model for these portfolios. Once a loan commitment is funded, the reserve for unfunded loan commitment is reversed and a corresponding Allowance for loan loss reserve is established. This unfunded loan commitment reserve is included in Other liabilities in the Consolidated Balance Sheets. Net adjustments to the reserve for unfunded commitments are included in Other expense in the Consolidated Statements of Operations.

Prior to the adoption of ASU 2016-13, the Allowance for loan losses consisted of three primary components: general reserves on pass graded loans, allocated reserves on non-impaired special mention and substandard loans, and specific reserves on impaired loans. The calculation of the Allowance for loan losses involved a high degree of management judgment and estimates designed to reflect the inherent risk of loss in the loan portfolio at the measurement date.

General reserves were calculated for each loan pool consisting of pass graded loans segregated by portfolio segment by applying estimated net loss percentages based upon the Bank’s actual historical net charge-offs during the historical observation period and loss emergence period. In addition, consideration of qualitative factors was applied to arrive at a total loss factor for each portfolio segment. The rationale for qualitative adjustments was to more accurately reflect the current inherent risk of loss in the respective portfolio segments than would be determined through the sole consideration of the Bank’s actual historical net charge-off rates. The numerical factors assigned to each qualitative factor were based upon observable data, if applicable, as well as management’s analysis and judgment. The qualitative factors considered by the Company include:

Allocated reserves on non-impaired special mention and substandard loans reflect management’s assessment of increased risk of losses associated with these types of adversely graded loans. An allocated reserve was assigned to these pools of loans based upon management’s consideration of the credit attributes of individual loans within each pool of loans, including consideration of loan to value ratios, past due status, strength and willingness of the guarantors, and other relevant attributes as well as the qualitative factors considered for the general reserve, as discussed above. These considerations were determined separately for each type of portfolio segment. The allocated reserves were a multiple of the general reserve for each respective portfolio segments, with a greater multiple for loans with increased risk (i.e. special mention loans versus substandard loans).

A loan was considered impaired in accordance with ASC 310 when, based upon current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impairment is measured based on the fair value of the loan, expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, impairment may be determined based upon the observable market price of the loan, or the fair value of the collateral, less estimated costs to sell, if the loan is “collateral dependent.” A loan was collateral dependent if repayment of the loan is expected to be provided solely by the underlying collateral or sale of the underlying collateral. For collateral dependent loans, appraisals were generally used to determine the fair value. When a collateral dependent loan became impaired, an updated appraisal of the collateral was obtained, if appropriate. Appraised values were generally discounted for factors such as the Bank’s intention to liquidate the property quickly in a foreclosure sale or the date when the appraisal was performed if the Bank believes that collateral values have declined since the date the appraisal was done. The Bank could use a broker opinion of value in addition to an appraisal to validate the appraised value. In certain instances, the Bank could consider broker opinions of value as well as other qualitative factors while an appraisal is being prepared.

was taken as a partial charge-off through the Allowance for loan losses in the current period. If the loan was not determined to be collateral dependent, then a specific allocation to the general reserve was established for the difference between the book balance of the loan and the expected future cash flows discounted at the loan’s effective interest rate. Charge-offs for loans not considered to be collateral dependent were made when it was determined a loss has been incurred. Impaired loans were removed from the general loan pools. There may be instances where the loan was considered impaired although based on the fair value of underlying collateral or the discounted expected future cash flows there is no impairment to be recognized. In addition, all loans which were classified as TDRs were considered impaired.

In addition to the three primary components of the Allowance for loan losses discussed above (general reserves, allocated reserves on non-impaired special mention and substandard loans, and the specific reserves on impaired loans), the Bank could also maintain an insignificant amount of additional Allowance for loan losses (the unallocated Allowance for loan losses). The unallocated reserve reflected the fact that the Allowance for loan losses was an estimate and contained a certain amount of imprecision risk. It represented risks identified by Management that were not already captured in the qualitative factors discussed above. The unallocated Allowance for loan losses was not considered significant by the Company and remained at zero unless additional risk was identified.

While this evaluation process utilized historical and other objective information, the classification of loans and the establishment of the Allowance for loan losses relied to a great extent on the judgment and experience of management. While management evaluated currently available information in establishing the Allowance for loan losses, future adjustments to the Allowance for loan losses could be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution’s Allowance for loan losses as well as loan grades/classifications. Such agencies could require the financial institution to recognize additions to the Allowance for loan losses or increases to adversely graded loans based on their judgments about information available to them at the time of their examination.

The Company maintained a reserve for unfunded loan commitments for such items as unused portion of lines of credit and unadvanced construction loans. The reserve was maintained at a level that reflects the risk in these various commitments. Management determined the reserve percentages on a quarterly basis based on a percentage of the current historical loss rates for these portfolios. Once a loan commitment was funded, the reserve for unfunded loan commitment was reversed and a corresponding Allowance for loan loss reserve is established. This unfunded loan commitment reserve was included in other liabilities in the Consolidated Balance Sheets. Net adjustments to the reserve for unfunded commitments were included in other operating expense in the Consolidated Statements of Operations.

OREO, if any, is comprised of property acquired through foreclosure proceedings or acceptance of a deed-in-lieu of foreclosure in partial or total satisfaction of certain loans. Properties are recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value, as established by a current appraisal, comparable sales, and other estimates of value obtained principally from independent sources, less estimated costs to sell. Any decline in fair value compared to the carrying value of a property at the time of acquisition is charged against the Allowance for loan losses. Any subsequent valuation adjustments to reflect declines in current fair value, as well as gains or losses on disposition are reported in gain/(loss) on OREO, net in the Consolidated Statements of Operations. Expenses incurred for holding or maintaining OREO properties such as real estate taxes, utilities, and insurance are charged as incurred to Other expense in the Consolidated Statements of Operations. Rental income earned, although generally minimal, is offset against Other expense.

Premises and equipment consists of leasehold improvements, furniture, fixtures, office equipment, computer equipment, software, and buildings. Premises and equipment are carried at cost, less accumulated depreciation. Also included in premises and equipment is technology initiatives in process. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. The estimated useful life for leasehold improvements is 10 years or the remaining term of the lease, if shorter. The estimated useful life for buildings is 40 years. The estimated useful life for furniture and fixtures is six years, five years for office equipment, and three years for computer equipment and software. The costs of improvements that extend the life of an asset are capitalized, while the cost of repairs and maintenance are expensed as incurred.

The Company allocates the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Other intangible assets identified in acquisitions generally consist of advisory contracts. The value attributed to advisory contracts is based on the time period over which they are expected to generate economic benefits. The advisory contracts are generally amortized over 8-15 years, depending on the contract.

The excess of the purchase price for acquisitions over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill. Goodwill is not amortized but is tested for impairment at the reporting unit level, defined as the affiliate level, at least annually in the fourth quarter or more frequently when events or circumstances occur that indicate that it is more likely than not that an impairment has occurred, based on the guidance in ASC 350, Intangibles -Goodwill and Other (“ASC 350”), as updated by ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). Goodwill impairment exists when a reporting unit’s carrying value of goodwill exceeds its implied fair value. Long-lived intangible assets are subject to the impairment provisions of ASC 360-10, Property, Plant, and Equipment (“ASC 360”). Long-lived intangible assets are tested for recoverability by comparing the net carrying value of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset (asset group) when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value, determined based upon the discounted value of the expected cash flows generated by the asset.

Goodwill is tested for impairment by estimating the fair value of a reporting unit. Significant judgment is applied when goodwill is assessed for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions, and selecting an appropriate control premium. Both the income and market approaches to determine fair value of the reporting units are typically incorporated. The income approach is primarily based on discounted cash flows derived from assumptions of income statement activity. For the market approach, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and revenue multiples of comparable companies are selected and applied to the financial services reporting unit’s applicable metrics. Generally, a valuation consultant will be engaged to assist with the valuation.

Quantitative impairment testing requires a comparison of each reporting unit’s fair value to carrying value to identify potential impairment. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized. In adopting ASU 2017-04, the Company measures that loss as an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Additionally, the Company considers the income tax effect from any tax deductible goodwill on the carrying amount of the reporting unit, if applicable, when measuring the goodwill impairment loss.

If the carrying amount of the reporting unit’s goodwill is greater than the fair value of the reporting unit’s goodwill, an impairment loss must be recognized for the excess (i.e., recorded goodwill must be written down to the implied fair value of the reporting unit’s goodwill). After a goodwill impairment loss for a reporting unit is measured and recognized, the adjusted carrying amount of the reporting unit’s goodwill becomes the new accounting basis for that goodwill.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). The deferred tax assets and/or liabilities are determined by multiplying the differences between the financial reporting and tax reporting basis for assets and liabilities by the enacted tax rates expected to be in effect when such differences are recovered or settled. The effect on deferred taxes for a change in tax rates is recognized in Income tax expense/(benefit) attributable to continuing operations in the period that includes the enactment date. Valuation allowances on deferred tax assets are estimated based on our assessment of the realizability of such amounts. Significant management judgment is required in determining the provision for income taxes and, in particular, any valuation allowance recorded against our deferred tax assets.

The Company records derivatives on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are designated as fair value hedges. Derivatives used to hedge exposure to variability in expected future cash flows, or other types of forecasted transactions, are designated as cash flow hedges.

Per ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, for derivatives designated as cash flow hedges, the changes in the fair value of the derivative are initially reported in Accumulated other comprehensive income/(loss) (a component of Shareholders’ equity), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings. For derivatives designated as fair value hedges, changes in the fair value of the derivative are recognized in earnings together with the changes in the fair value of the related hedged item. On January 1, 2018, the Company early adopted ASU No. 2017-12, Targeted Improvements to Accounting.

The Company generates fee income from providing wealth management and investment management services and from providing trust services to its clients. Investment management fees are generally based upon the value of assets under management ("AUM") and are billed monthly, quarterly, or annually. Asset-based advisory fees are recognized as services are rendered and are based upon a percentage of the fair value of client assets managed. Certain wealth management fees are not asset-based and are negotiated individually with clients. Any fees collected in advance are deferred and recognized as income over the period earned. Performance-based advisory fees are generally assessed as a percentage of the investment performance realized on a client’s account, generally over an annual period, and are not recognized until any contingencies in the contract that could require the performance fee to be reduced have been eliminated. AUM at the Company’s consolidated subsidiaries are not included in the consolidated financial statements since they are held in a fiduciary or agency capacity and are not assets of the Company.

The fair value of restricted stock and restricted units, both time based and performance based, is generally equal to the closing price of the Company’s stock on the date of issuance. The fair value of time based, performance based, or market based stock options is calculated using a pricing model such as Black-Scholes. At December 31, 2020, the Company has three stock-based incentive compensation plans. These plans encourage and enable the officers, employees, and non-employee directors of the Company to acquire an interest in the Company. The Company accounts for share-based awards in accordance with ASC 718, Compensation – Stock Compensation. Costs resulting from the issuance of such share-based payment awards are required to be recognized in the financial statements based on the grant date fair value of the award. Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period. The vesting period for time based and performance based stock, units, and options is generally cliff vesting with terms from one to five years or graded. Market based option vesting is based on the specific terms of the vesting criteria and the expectation of when the performance criteria could be attained as of the time of issuance.

Basic EPS is computed by dividing Net income attributable to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as time-based or performance-based restricted stock units, stock options, and warrants, among others) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing Net income attributable to common shareholders by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method. Additionally, when dilutive, interest expense (net of tax) related to the convertible trust preferred securities is added back to Net income attributable to common shareholders. The calculation of diluted EPS excludes the potential dilution of common shares and the inclusion of any related expenses if the effect is anti-dilutive.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 expands the disclosure requirements for revenue agreements with customers; ASU 2014-09 has been subsequently amended by additional ASUs, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, collectively, “ASU 2014-09 et al.” Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. ASU 2014-09 et al. does not apply to revenue associated with financial instruments such as loans and securities. ASU 2014-09 et al. was adopted using the modified retrospective transition method as of January 1, 2018, however no cumulative effect adjustment was required. The guidance was applied to all revenue contracts in place at the date of adoption. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 26: Revenue Recognition” for further details.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update and the related amendments to Topic 842 require lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”), ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”); and ASU No. 2019-01, Leases (Topic 842), Codification Improvements (“ASU 2019-01”), all of which clarify the guidance in ASU 2016-02 and add an additional transition method for leases. The standard establishes a right-of-use model (“ROU”) that requires a lessee

to recognize a ROU asset and lease liability on the Consolidated Balance Sheets for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the Consolidated Statements of Operations. The new standard was effective on January 1, 2019, with early adoption permitted. The Company adopted these provisions on January 1, 2019. The most significant effects relate to the recognition of new ROU assets and lease liabilities on the Consolidated Balance Sheets for real estate operating leases and providing significant new disclosures about leasing activities. Additionally, the Company elected the package of practical expedients, as prescribed by ASU 2016-02. On adoption, the Company recognized $124.1 million of Lease liabilities and $108.5 million of ROU assets.

In June 2016, the FASB issued ASU 2016-13. In 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”); ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”); ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 942)—Effective Dates (“ASU 2019-10”); and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2019-11”). This update and related amendments to Topic 326 are intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology with a CECL model methodology that reflects expected credit losses and requires consideration of a reasonable and supportable economic forecast to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 utilizing a modified retrospective approach. On adoption of ASU 2016-13, the Company recognized a decrease in the Allowance for loan losses of $20.4 million and an increase in the reserve for unfunded loan commitments of $1.4 million. The net, after-tax impact of the decrease in the Allowance for loan losses and the increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million as shown in the Consolidated Statements of Changes in Shareholders’ Equity. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 4: Investment Securities”, “Note 5: Loan Portfolio and Credit Quality”, and “Note 6: Allowance for Loan Losses” for further details.