-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VXzMBnFD6HIL+NK4vyixwRP8fiMOdTs2N53IRVE1zgEjtHgQk1+ioT+5tI56gu7x Nc6UzGudyRp9P0/9UP8qKw== 0000950135-98-004720.txt : 19980814 0000950135-98-004720.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950135-98-004720 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON PRIVATE BANCORP INC CENTRAL INDEX KEY: 0000821127 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 042976299 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17089 FILM NUMBER: 98685988 BUSINESS ADDRESS: STREET 1: 10 POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6175561900 MAIL ADDRESS: STREET 1: 10 POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. 1 As filed with the Securities and Exchange Commission on August 13, 1998 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-Q |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the quarterly period ended JUNE 30, 1998 OR |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _______ to _______. Commission File Number: 0-17089 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. (Exact name of registrant as specified in its charter) COMMONWEALTH OF MASSACHUSETTS 04-2976299 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) TEN POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02109 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 912-1900 NOT APPLICABLE (Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No - - APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date (July 31, 1998): Common Stock - Par Value $1.00 10,741,219 shares ------------------------------ ----------------- (class) (outstanding) ================================================================================ 2 BOSTON PRIVATE FINANCIAL HOLDINGS, INC FORM 10-Q TABLE OF CONTENTS PAGE Cover Page 1 Index 2 PART I - FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 - 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 17 Item 3 Qualitative and Quantitative Disclosures about Market Risk 18 PART II - OTHER INFORMATION Item 1 Legal Proceedings 18 Item 2 Changes in Securities and Use of Proceeds 18 Item 3 Defaults upon Senior Securities 18 Item 4 Submission of Matters to a Vote of Security Holders 18 - 19 Item 5 Other Information 19 Item 6 Exhibits and Reports on Form 8-K 19 Signature Page 20 3 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1998 1997 --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS: Cash and due from banks $ 8,892 $ 12,361 Federal funds sold 12,400 1,200 Investment securities available for sale (amortized cost of $43,008 and $36,740, respectively) 43,019 36,776 Investment securities held to maturity (market value of $8,135 and $9,678, respectively) 8,106 9,654 Mortgage-backed securities held to maturity (market value of $14,251 and $18,141, respectively) 14,179 18,123 Loans receivable: Commercial 143,266 134,685 Residential mortgage 155,018 124,865 Home equity 15,585 16,969 Other 293 306 --------- --------- Total loans 314,162 276,825 Less allowance for loan losses (3,931) (3,645) --------- --------- Net loans 310,231 273,180 Stock in the Federal Home Loan Bank of Boston 4,027 3,511 Other real estate owned 85 85 Premises and equipment, net 3,435 2,857 Excess of cost over net assets acquired, net 3,585 3,746 Management fees receivable 3,486 2,750 Accrued interest receivable 2,690 2,169 Other assets 3,689 2,530 --------- --------- Total assets $ 417,824 $ 368,942 ========= ========= LIABILITIES: Deposits $ 304,759 $ 258,301 Securities sold under agreements to repurchase 5,105 5,366 Federal funds purchased 2,500 13,255 FHLB borrowings 70,300 60,226 Other short-term borrowings -- 837 Accrued interest payable 585 609 Other liabilities 5,466 4,413 --------- --------- Total liabilities 388,715 343,007 --------- --------- STOCKHOLDERS' EQUITY: Common stock, $1.00 par value per share; authorized: 30,000,000 shares in 1998 and 18,000,000 in 1997 issued: 10,737,969 shares in 1998 and 10,641,100 shares in 1997 10,738 10,641 Additional paid-in capital 12,615 12,140 Retained earnings 6,251 3,800 Stock subscriptions receivable (502) (669) Accumulated other comprehensive income (loss) 7 23 --------- --------- Total stockholders' equity 29,109 25,935 --------- --------- Total liabilities and stockholders' equity $ 417,824 $ 368,942 ========= =========
See accompanying notes to consolidated financial statements. 3 4 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ------------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Interest and dividend income: Commercial loans $ 3,208 $ 2,198 $ 6,284 $ 4,417 Residential mortgage loans 2,483 1,964 4,830 3,762 Home equity and other loans 321 280 653 531 Investment securities 664 428 1,234 837 Mortgage-backed securities 230 350 496 720 FHLB stock dividends 65 54 128 106 Federal funds sold 143 58 230 104 Deposits in banks 36 41 76 78 ----------- ----------- ----------- ----------- Total interest and dividend income 7,150 5,373 13,931 10,555 ----------- ----------- ----------- ----------- Interest expense: Savings and NOW 110 86 211 174 Money market 1,384 804 2,523 1,613 Certificates of deposit 1,070 901 2,135 1,757 Federal funds purchased 9 46 48 94 Securities sold under agreements to repurchase 63 103 115 192 FHLB borrowings 1,058 715 2,159 1,400 Other short-term borrowings 5 6 19 14 ----------- ----------- ----------- ----------- Total interest expense 3,699 2,661 7,210 5,244 ----------- ----------- ----------- ----------- Net interest income 3,451 2,712 6,721 5,311 Provision for loan losses 331 91 615 129 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 3,120 2,621 6,106 5,182 ----------- ----------- ----------- ----------- Fees and other income: Trust and investment management 3,989 3,212 7,728 6,137 Deposit account service charges 58 53 109 93 Gain (loss) on sale of loans 60 12 99 28 Gain (loss) on sale of investment securities 1 -- 56 -- Other 121 60 382 130 ----------- ----------- ----------- ----------- Total fees and other income 4,229 3,337 8,374 6,388 ----------- ----------- ----------- ----------- Operating expense: Salaries and employee benefits 3,793 3,143 7,619 6,230 Occupancy 356 231 685 447 Equipment 179 158 336 289 Professional Services 452 306 821 805 Marketing 87 138 181 209 Business Development 159 151 286 263 Amortization of intangibles 80 80 161 161 Merger Expenses -- 19 -- 110 Other 346 383 696 633 ----------- ----------- ----------- ----------- Total operating expense 5,452 4,609 10,785 9,147 ----------- ----------- ----------- ----------- Income before income taxes 1,897 1,349 3,695 2,423 Income tax expense 635 254 1,244 518 =========== =========== =========== =========== Net income $ 1,262 $ 1,095 $ 2,451 $ 1,905 =========== =========== =========== =========== Per share data: Basic earnings per share $ 0.12 $ 0.10 $ 0.23 0.18 =========== =========== =========== =========== Diluted earnings per share $ 0.11 $ 0.10 $ 0.22 0.17 =========== =========== =========== =========== Average common shares outstanding 10,714,611 10,554,905 10,692,912 10,551,827 =========== =========== =========== =========== Average diluted shares outstanding 11,186,923 10,909,786 11,135,675 10,889,855 =========== =========== =========== =========== Proforma information: Net income $ 1,262 $ 1,095 $ 2,451 1,905 Proforma adjustment for income taxes of entity previously filing as an S-Corporation -- 187 -- 256 ----------- ----------- ----------- ----------- Proforma net income after adjustment for income taxes $ 1,262 $ 908 $ 2,451 $ 1,649 =========== =========== =========== =========== Proforma basic earnings per share $ 0.12 $ 0.09 $ 0.23 $ 0.16 =========== =========== =========== =========== Proforma diluted earnings per share $ 0.11 $ 0.08 $ 0.22 $ 0.15 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 4 5 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ACCUMULATED ADDITIONAL OTHER COMMON PAID-IN RETAINED STOCK COMPREHENSIVE STOCK CAPITAL EARNINGS SUBSCRIPTIONS INCOME (LOSS) TOTAL ------------ ------------- -------------- ------------- ---------------- ----------- (IN THOUSANDS, EXCEPT SHARE DATA) Balance at December 31, 1996 $ 10,321 $ 11,991 $ 4,400 $ (847) $ (64) $ 25,801 Net income -- -- 1,904 -- -- 1,904 Other comprehensive income, net: Change in unrealized gain (loss) on securities available for sale -- -- -- -- (1) (1) -------- Total other comprehensive income 1,903 Stock options exercised 3 12 -- -- -- 15 Proceeds from issuance of 231,000 shares of common stock 231 (82) -- -- -- 149 Stock subscription payments -- -- -- 171 -- 171 S-Corporation dividends paid -- -- (2,088) -- -- (2,088) -------- -------- -------- -------- -------- -------- Balance at June 30, 1997 10,555 11,921 4,216 (676) (65) 25,951 Balance at December 31, 1997 10,641 12,140 3,800 (669) 23 25,935 Net income -- -- 2,451 -- -- 2,451 Other comprehensive income, net: Change in unrealized gain (loss) on securities available for sale -- -- -- -- (16) (16) -------- Total other comprehensive income 2,435 Stock options exercised 97 475 -- -- -- 572 Stock subscription payments -- -- -- 167 -- 167 ======== ======== ======== ======== ======== ======== Balance at June 30, 1998 $ 10,738 $ 12,615 $ 6,251 $ (502) $ 7 $ 29,109 ======== ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 5 6 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, -------------------------- 1998 1997 -------- -------- (IN THOUSANDS) Cash flows from operating activities: Net income $ 2,451 $ 1,905 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 803 425 Gain on sale of loans (99) (28) Gain on sale of other real estate owned (4) -- Gain on sale of investment securities (56) -- Provision for loan losses 615 129 Distributed (undistributed) earnings of partnership investments (231) 1,113 Loans originated for sale (8,811) (3,264) Proceeds from sale of loans 8,910 3,292 (Increase) decrease in: Accrued interest receivable (521) (124) Investment management fees receivable (736) Other assets (1,262) (1,402) Increase (decrease) in: Accrued interest payable (24) 50 Other liabilities 1,053 818 -------- -------- Net cash provided (used) by operating activities 2,088 2,914 -------- -------- Cash flows from investing activities: Net decrease (increase) in fed funds sold (11,200) (7,550) Investment securities available for sale: Purchases (40,712) (5,835) Sales 30,917 130 Maturities 3,480 1,205 Investment securities held to maturity: Purchases (874) (4,000) Maturities 2,400 4,000 Mortgage-backed securities held to maturity: Principal payments 3,921 3,662 Net decrease (increase) in loans (37,971) (8,840) Purchase of FHLB stock (516) -- Recoveries on loans previously charged off 47 47 Proceeds from sales of other real estate owned 38 -- Capital expenditures (505) (1,286) -------- -------- Net cash provided (used) by investing activities (50,975) (18,467) -------- -------- Cash flows from financing activities: Net increase (decrease) in deposits 46,458 26,702 Net increase (decrease) in repurchase agreements (261) 2,419 Net increase (decrease) in federal funds purchased (10,755) -- FHLB advances: Proceeds 26,480 57,913 Repayments (16,406) (68,007) Net increase (decrease) in other short-term borrowings (837) (528) S-corporation dividends paid -- (2,089) Proceeds from stock subscriptions receivable 167 170 Proceeds from issuance of common stock 572 165 -------- -------- Net cash provided (used) by financing activities 45,418 16,745 -------- -------- Net increase (decrease) in cash and due from banks (3,469) 1,192 Cash and due from banks at beginning of year 12,361 8,709 -------- -------- Cash and due from banks at end of period $ 8,892 $ 9,901 ======== ======== Supplementary disclosures of cash flow information: Cash paid during the period for interest $ 7,244 $ 5,180 Cash paid during the period for income taxes 2,068 875 Supplementary disclosures of non-cash activities: Transfer of loans to other real estate owned 42 --
See accompanying notes to consolidated financial statements 6 7 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The consolidated financial statements of Boston Private Financial Holdings, Inc. (the "Company") include the accounts of the Company and its wholly-owned subsidiaries, Boston Private Bank & Trust Company (the "Bank"), and Boston Private Investment Management, Inc. ("BPIM"). The Bank's consolidated financial statements include the accounts of its wholly-owned subsidiaries, BPB Securities Corporation and Boston Private Asset Management Corporation, and BPIM's consolidated financial statements include the accounts of its wholly-owned subsidiary, Westfield Capital Management Company, Inc. ("Westfield"). All significant intercompany accounts and transactions have been eliminated in consolidation. In preparing the financial statements, management is required to make 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 relate to the determination of the allowance for loan losses. In connection with the determination of the allowance for loan losses, management obtains independent appraisals for significant properties. The unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles and include all necessary adjustments of a normal recurring nature, which in the opinion of management, are required for a fair presentation of the results and financial condition of the Company. The interim results of consolidated operations are not necessarily indicative of the results for the entire year. The information in this report should be read in conjunction with the consolidated financial statements and accompanying notes included in the December 31, 1997 Annual Report to Shareholders. (2) EARNINGS PER SHARE Effective December 31, 1997, the Company adopted SFAS 128, "Earnings Per Share." This Statement establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly held common stock or potential common stock. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The earnings per share calculation is based upon the weighted average number of common shares and common share equivalents outstanding during the period. Stock options, when dilutive, are included as common stock equivalents using the treasury stock method. The following tables are a reconciliation of the numerators and denominators of basic and diluted earnings per share computations:
THREE MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, --------------------------- -------------------------- 1998 1997 --------------------------- -------------------------- Per Per Share Share Income Shares Amount Income Shares Amount -------- ------- ------- ------ -------- ------ (In thousands, except per share amounts) BASIC EPS Net Income $1,262 10,715 $0.12 $1,095 10,555 $0.10 ===== ===== EFFECT OF DILUTIVE SECURITIES Stock Options -- 472 -- 355 -------- ------- ------ -------- DILUTED EPS ============================ ============================ Net Income $1,262 11,187 $0.11 $1,095 10,910 $0.10 ============================ ============================
7 8 BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- --------------------------- 1998 1997 ---------------------------- -------------------------- Per Per Share Share Income Shares Amount Income Shares Amount ---------------------------- -------------------------- (In thousands, except per share amounts) BASIC EPS Net Income $2,451 10,693 $0.23 $1,905 10,552 $0.18 ===== ====== EFFECT OF DILUTIVE SECURITIES Stock Options -- 443 -- 338 --------------------- --------------- DILUTED EPS ============================ ========================== Net Income $2,451 11,136 $0.22 $1,905 10,890 $0.17 ============================ ==========================
(3) RECLASSIFICATIONS Certain fiscal 1997 information has been reclassified to conform with the 1998 presentation. (4) RECENT ACCOUNTING DEVELOPMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standard ("SFAS") 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair market value. Under this statement, an entity that elects to apply hedge accounting is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. This statement should have an immaterial effect on the Company's consolidated financial statements. Also in June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." This Statement establishes standards for the way that public entities report information about operating segments in annual financial statements, and requires that selected information about operating segments be reported in interim financial reports issued to shareholders. Operating segments are components of an entity about which separate financial information is available and is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. This Statement requires that public entities report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. It also requires reconciliation of the amounts disclosed for segments to corresponding amounts in the consolidated financial statements. However, this Statement does not require an entity to report information that is not prepared for internal use if reporting it would be impracticable. The Statement is effective for annual periods beginning after December 15, 1997, and for interim periods beginning after December 15, 1998. This Statement only affects presentation in the financial statements, it will have no impact on the Company's results of operations. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1998 This quarterly report contains certain statements that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in loan defaults and charge-off rates, reduction in deposit levels necessitating increased borrowing to fund loans and investments, changes in interest rates, fluctuations in assets under management and other sources of fee income, and changes in assumptions used in making such forward-looking statements. GENERAL Boston Private Financial Holdings, Inc. (the "Company") is incorporated under the laws of the Commonwealth of Massachusetts and is registered with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"). On July 1, 1988, the Company became the parent holding company of Boston Private Bank & Trust Company (the "Bank"), a trust company chartered by the Commonwealth of Massachusetts and insured by the Federal Deposit Insurance Corporation (the "FDIC"). Effective April 22, 1998, the Company changed its name from Boston Private Bancorp, Inc. to Boston Private Financial Holdings, Inc. On October 31, 1997, the Company acquired Westfield Capital Management Company Inc. ("Westfield"), a Massachusetts corporation engaged in providing a range of investment management services to individual and institutional clients, in exchange for 3,918,367 newly issued shares of the Company's common stock. Concurrent with the acquisition, the Company formed a subsidiary, Boston Private Investment Management, Inc., as a holding company for Westfield. The acquisition was accounted for as a "pooling of interests." Accordingly, the current and prior period results of operations of the Company have been restated to reflect the results of operations on a consolidated basis. The Company conducts substantially all of its business through its wholly-owned operating subsidiaries, the Bank and Westfield. The Company's and the Bank's principal office is located at Ten Post Office Square, Boston, Massachusetts, and Westfield is located at One Financial Center, Boston, Massachusetts. The Bank pursues a "private banking" business strategy and is principally engaged in providing banking, investment, and fiduciary products and services to high net worth individuals, their families and businesses in the greater Boston area and New England and, to a lesser extent, Europe and Latin America. The Bank offers its clients a broad range of basic deposit services, including checking and savings accounts, with automated teller machine ("ATM") access, and cash management services through sweep accounts and repurchase agreements. The Bank also offers commercial, residential mortgage, home equity and personal loans. In addition, it provides investment advisory and asset management services, securities custody and safekeeping services, trust and estate administration and IRA and Keogh accounts. Westfield is an investment management firm serving the investment needs of high net worth individuals and institutions with endowments, pensions and profit-sharing or 401(k) plans. Westfield primarily manages individually invested accounts and also acts as managing general partner for two limited partnerships, one of which invests primarily in technology stocks, and the other of which invests primarily in small capitalization equities. FINANCIAL CONDITION TOTAL ASSETS Total assets increased $48.9 million, or 13.2%, from $368.9 million at December 31, 1997 to $417.8 million at June 30, 1998. This increase was primarily due to increases in total loans. 9 10 INVESTMENTS Total investments (consisting of cash, federal funds sold, investment securities, mortgage-backed securities, and stock in the FHLB of Boston) totaled $90.6 million, or 21.7% of total assets, at June 30, 1998, compared to $81.6 million, or 22.1% of total assets, at December 31, 1997. Funds from the sale of $30.9 million of municipal securities, the maturity of $3.5 million of U.S. government and agency obligations, and $3.9 million of principal repayments on mortgage-backed securities were reinvested in municipal securities and U.S. government and agency obligations. Management evaluates investment alternatives in order to properly manage the overall balance sheet. The timing of sales and reinvestments is based on various factors, including management's evaluation of interest rate trends and loan demand. The following table is a summary of investment and mortgage-backed securities as of June 30, 1998 and December 31, 1997:
AVAILABLE FOR SALE HELD TO MATURITY -------------------------------------------------- ---------------------------------------- Amortized Unrealized Market Amortized Unrealized Market ------------------- ----------------- Cost Gains Losses Value Cost Gains Losses Value -------------------------------------------------- ---------------------------------------- (In thousands) AT JUNE 30, 1998 U.S. Government and agencies $20,085 $ 4 $ (16) $20,073 $ -- $ -- $ -- $ -- Municipal bonds 22,923 35 (12) 22,946 8,106 29 -- 8,135 Mortgage-backed securities -- -- -- -- 14,179 116 (44) 14,251 ======= ======= ======= ======= ======= ======= ===== ======= Total investments $43,008 $ 39 $ (28) $43,019 $22,285 $ 145 $ (44) $22,386 ======= ======= ======= ======= ======= ======= ===== ======= AT DECEMBER 31, 1997 U.S. Government and agencies $17,589 $ 12 $ (18) $17,583 $ 4,654 $ 2 $ -- $ 4,656 Municipal bonds 19,151 42 -- 19,193 5,000 22 -- 5,022 Mortgage-backed securities -- -- -- -- 18,123 157 (139) 18,141 ======= ======= ======= ======= ======= ======= ===== ======= Total investments $36,740 $ 54 $ (18) $36,776 $27,777 $ 181 $(139) $27,819 ======= ======= ======= ======= ======= ======= ===== =======
LOANS Total loans increased $37.3 million during the first half of 1998 from $276.8 million, or 75.0% of total assets, at December 31, 1997, to $314.2 million, or 75.2% of total assets, at June 30, 1998. This increase was due to increases in commercial and residential mortgage loans, partially offset by decreases in the home equity and other loan portfolios. Interest rates affect both the level of new loan originations and refinancings or paydowns of existing loans. During the first half of 1998, interest rates were at relatively stable, low levels, and demand for new loans and refinancings was strong. As a result, commercial loans increased $8.6 million, or 6.4%, and residential mortgage loans increased $30.2 million, or 24.1%. The decreases in the home equity and other loan portfolios during the first half of 1998 were mainly due to paydowns on lines of credit. RISK ELEMENTS The following table sets forth information regarding non-performing loans, non-performing assets, and delinquent loans 30-89 days past due as to interest or principal at the dates indicated.
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- (DOLLARS IN THOUSANDS) Loans accounted for on a nonaccrual basis $ 361 $ 722 Loans past due 90 days or more, but still accruing 16 25 ------ ------ Total non-performing loans 377 747 Other real estate owned 85 85 ====== ====== Total non-performing assets $ 462 $ 832 ====== ====== Delinquent loans 30-89 days past due 1,910 1,632 Non-performing loans as a percent of gross loans .12% .27% Non-performing assets as a percent of total assets .11% .23%
10 11 The Company discontinues the accrual of interest on a loan when the collectibility of principal or interest is in doubt. In certain instances, loans that have become 90 days past due may remain on accrual status if the value of the collateral securing the loan is sufficient to cover principal and interest and the loan is in the process of collection. Other real estate owned consists of real estate acquired through foreclosure proceedings and real estate acquired through acceptance of a deed in lieu of foreclosure. In addition, the Company may, under certain circumstances, restructure loans as a concession to a borrower. Total non-performing assets decreased by $370,000, or 44.5% during the first half of 1998 due to several non-accruing loans moving back to performing status, as well as principal payments received on non-performing loans. The Company continues to evaluate the underlying collateral and value of each of its non-performing assets and pursues the collection of all amounts due. At June 30, 1998, loans with an aggregate balance of $1.9 million, or 0.61% of total loans, were 30 to 89 days past due, an increase of $278,000, or 17.0%, from the $1.6 million, or 0.59% of total loans, reported at December 31, 1997. In management's view, most of these loans are adequately secured, but these borrowers do not make timely payments on a regular basis. ALLOWANCE FOR LOAN LOSSES Assessing the adequacy of the allowance for loan losses involves substantial uncertainties and is based upon management's evaluation of the amounts required to meet estimated charge-offs in the loan portfolio after weighing various factors. Among these factors are the risk characteristics of the loan portfolio, the quality of specific loans, the level of nonaccruing loans, current economic conditions, trends in delinquencies and charge-offs, and the value of underlying collateral, all of which can change frequently. In connection with the determination of the allowance for loan losses, management may obtain independent appraisals for significant properties. While management evaluates currently available information in establishing the allowance for loan losses, future adjustments to the allowance 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 and carrying amounts of other real estate owned. Such agencies may require the financial institution to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. As the Company continues to be affected by changes in the risk characteristics of the loan portfolio, levels of non-performing loans, trends in delinquencies and charge-offs, and current economic conditions, it will continue to evaluate the adequacy of the allowance for loan losses. Notwithstanding these future evaluations, management believes that the allowance for loan losses as of June 30, 1998 is adequate based upon the information currently available. The following table is an analysis of the Bank's allowance for loan losses for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------------------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Ending gross loans $ 314,162 $ 215,019 $ 314,162 $ 215,019 ========= ========= ========= ========= Allowance for loan losses, beginning of period $ 3,555 $ 2,622 $ 3,645 $ 2,566 Provision for loan losses 331 91 615 129 Charge-offs -- -- (376) (13) Recoveries 45 16 47 47 --------- --------- --------- --------- Allowance for loan losses, end of period $ 3,931 $ 2,729 $ 3,931 $ 2,729 ========= ========= ========= ========= Allowance for loan losses to ending gross loans 1.25% 1.27% 1.25% 1.27% ========= ========= ========= =========
11 12 DEPOSITS AND BORROWINGS The Company experienced an increase in total deposits of $46.5 million, or 18.0%, during the first half of 1998, from $258.3 million, or 70.0% of total assets, at December 31, 1997, to $304.8 million, or 72.9% of total assets, at June 30, 1998. This increase was primarily attributable to growth in money market accounts. The following table shows the composition of the Company's deposits at June 30, 1998 and December 31, 1997:
JUNE 30, DECEMBER 31, 1998 1997 -------- -------- (IN THOUSANDS) Demand deposits $ 36,628 $ 36,848 NOW 27,954 24,938 Savings 4,255 5,787 Money market 159,449 117,984 Certificates of deposit under $100,000 27,502 22,956 Certificates of deposit $100,000 or greater 48,971 49,788 -------- -------- Total $304,759 $258,301 ======== ========
Total borrowings (consisting of securities sold under agreements to repurchase, federal funds purchased, FHLB borrowings, and other short-term borrowings) decreased by $1.8 million, or 2.2%, during the first half of 1998. This decrease was primarily attributable to a decrease in federal funds purchased and paydown of other short-term borrowings, partially offset by an increase in FHLB borrowings. Management will from time to time take advantage of opportunities to fund asset growth with borrowings, but on a long-term basis, the Company intends to replace a portion of its borrowings with core deposits. LIQUIDITY Liquidity is defined as the ability to meet current and future financial obligations of a short-term nature. The Company further defines liquidity as the ability to respond to the needs of depositors and borrowers as well as to earnings enhancement opportunities in a changing marketplace. Primary sources of liquidity consist of deposit inflows, loan repayments, borrowed funds, maturity of investment securities and sales of securities from the available for sale portfolio. These sources fund the Company's lending and investment activities. Management is responsible for establishing and monitoring liquidity targets as well as strategies and tactics to meet these targets. At June 30, 1998, cash, federal funds sold and securities available for sale amounted to $64.8 million, or 15.5% of total assets. This compares to $50.3 million, or 13.6% of total assets at December 31, 1997. The Bank is a member of the FHLB of Boston, and as such has access to both short and long-term borrowings. In addition, the Bank maintains a line of credit at the FHLB of Boston as well as other lines of credit with several correspondent banks. Management believes that the Bank has adequate liquidity to meet its commitments. Westfield's primary source of liquidity consists of investment management fees which are generally collected on a quarterly basis. At June 30, 1998 Westfield had working capital of approximately $1.7 million. Management believes that Westfield has adequate liquidity to meet its commitments. The Company's primary sources of funds are dividends from subsidiaries, issuance of common stock, and borrowings. Management believes that the Company has adequate liquidity to meet its commitments. 12 13 CAPITAL RESOURCES Total stockholders' equity of the Company at June 30, 1998 was $29.1 million, compared to $25.9 million at December 31, 1997. This increase was the result of the Company's net income for the six months ended June 30, 1998 of $2.5 million, combined with issuance of additional stock in connection with the exercise of stock options, less the change in accumulated other comprehensive income. The following table presents actual capital amounts and regulatory capital requirements as of June 30, 1998 and December 31, 1997:
TO BE WELL CAPITALIZED FOR CAPITAL ADEQUACY UNDER PROMPT CORRECTIVE ACTUAL PURPOSES ACTION PROVISIONS ----------------- ---------------------------- ---------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO ------- ------- ------- ----------------- -------- ----------------- AS OF JUNE 30, 1998 Total risk-based capital: Company $28,717 11.25% $20,424 greater than 8.0% $23,530 greater than 10.0% Bank 25,764 10.26 20,085 greater than 8.0 25,107 greater than 10.0 Tier I risk-based capital: Company 25,517 10.00 10,212 greater than 4.0 15,318 greater than 6.0 Bank 22,616 9.01 10,043 greater than 4.0 15,064 greater than 6.0 Tier I leverage capital: Company 25,517 6.47 15,772 greater than 4.0 19,715 greater than 5.0 Bank 22,616 5.79 15,621 greater than 4.0 19,526 greater than 5.0 AS OF DECEMBER 31, 1997 Total risk-based capital: Company $25,000 11.07% $18,073 greater than 8.0% $22,590 greater than 10.0% Bank 23,756 10.68 17,788 greater than 8.0 22,235 greater than 10.0 Tier I risk-based capital: Company 22,166 9.81 9,036 greater than 4.0 13,554 greater than 6.0 Bank 20,966 9.43 8,894 greater than 4.0 13,341 greater than 6.0 Tier I leverage capital: Company 22,166 6.54 13,554 greater than 4.0 16,943 greater than 5.0 Bank 20,966 6.28 13,354 greater than 4.0 16,693 greater than 5.0
13 14 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 GENERAL. The Company recorded net income of $1.3 million, or $.11 per fully-diluted share, for the three months ended June 30, 1998, compared to $1.1 million, or $.10 per fully-diluted share, for the same period in 1997. The current quarter results include an increase in net interest income and fee income, partially reduced by increases in the provision for loan losses, operating expenses, and the Company's effective tax rate. The Company's annualized return on average assets was 1.27% for the second quarter of 1998, compared to 1.48% for the same period in 1997, and the annualized return on stockholders' equity increased from 17.16% for the second quarter of 1997 to 17.73% for the quarter ended June 30, 1998. NET INTEREST INCOME. For the quarter ended June 30, 1998, net interest income was $3.5 million, an increase of $739,000, or 27.2%, over the same period in 1997. This increase was primarily attributable to an increase of $8.4 million, or 20.7%, in the average balance of net earning assets. INTEREST INCOME. During the second quarter of 1998, interest income was $7.2 million, an increase of $1.8 million, or 33.1%, over the same period in 1997. Interest income on commercial loans increased 46.0% to $3.2 million for the three months ended June 30, 1998, compared to $2.2 million for the same period in 1997. Interest income from residential mortgage loans increased 26.4% to $2.5 million compared to $2.0 million, and home equity and other loans increased 14.6% to $321,000 compared to $280,000, for the same periods, respectively. These increases were primarily due to an increase in loan volume. The average balance of commercial loans increased 52.2% while the average rate decreased 40 basis points from 9.78% for the quarter ended June 30, 1997, to 9.38% for same period in 1998. The average balance of residential mortgage loans increased 31.8%, while the average rate decreased 30 basis points to 7.09% for the same period, and the average balance of home equity and other loans increased 14.1%, while the average rate remained relatively flat at 8.35%. Total investment income increased $207,000, or 22.2%, to $1.1 million during the quarter ended June 30, 1998, compared to $931,000 during the same period in 1997. This increase was primarily attributable to an increase in the average balance of investments of $16.4 million, or 23.5%. INTEREST EXPENSE. Interest paid on deposits and borrowings increased $1.0 million, or 39.0%, to $3.7 million for the three months ended June 30, 1998, from $2.7 million for the same period during 1997. This increase in the Company's interest expense reflects an increase in the average balance of interest-bearing liabilities of $90.7 million, or 37.9% between the two periods, and an increase in the average cost of interest-bearing liabilities from 4.45% for the second quarter of 1997 to 4.49% for the second quarter of 1998. PROVISION FOR LOAN LOSSES. The provision for loan losses was $331,000 for the quarter ended June 30, 1998, compared to $91,000 for the same period in 1997. Management evaluates several factors including new loan originations, estimated charge-offs, and risk characteristics of the loan portfolio when determining the provision for loan losses. These factors include the level and mix of loan growth, the level of non-accrual and delinquent loans, and the level of charge-offs and recoveries. Also see discussion under Financial Condition - -"Allowance for Loan Losses." Net recoveries were $44,000 during the second quarter of 1998 compared to $16,000 for the same period in 1997. The reserve coverage as a percentage of total loans was 1.25% as of June 30, 1998. FEES AND OTHER INCOME. Fees and other income increased $892,000, or 26.7% to $4.2 million for the three month period ended June 30, 1998, compared to $3.3 million for the same period in 1997. The majority of fee income is attributable to advisory fees earned on assets under management. These fees increased $777,000, or 24.2%, to $4.0 million for the second quarter of 1998 compared to $3.2 million for the same period in 1997. This increase is primarily due to a 19.6% increase in assets under management from $2.1 billion on June 30, 1997 to $2.5 billion on June 30, 1998. Deposit account service fees have increased $5,000, or 9.4%, to $58,000 as a result of an increase in deposit account activity. Gain on sale of loans has increased $48,000 to $60,000 due to a higher volume of fixed rate loans which were sold in the secondary market. During the second quarter of 1998, the Company realized $1,000 of gains from the sale of investment securities. There were no sales of investment securities during the second quarter of 1997. 14 15 OPERATING EXPENSE. Total operating expense for the second quarter of 1998 increased $843,000, or 18.3%, to $5.5 million compared to $4.6 million for the same period in 1997. This increase in total operating expense was primarily attributable to the Company's continued growth and expansion. The Company has experienced a 33.3% increase in total assets, and a 15.5% increase in the number of full time employees from June 30, 1997 to June 30, 1998. In addition, the Company opened a new banking office in Wellesley, Massachusetts in April 1998 which contributed to the increase in operating expenses. Salaries and benefits, the largest component of operating expense, increased $650,000, or 20.7%, to $3.8 million for the quarter ended June 30, 1998, from $3.1 million for the same period in 1997. This increase was due to a 15.5% increase in the number of employees, normal salary increases, and the related taxes thereon. Occupancy and equipment expense increased $146,000, or 37.5%, to $535,000 for the second quarter of 1998 from $389,000 for the same period last year. This increase was primarily attributable to ongoing technology investments and expense related to the new banking office in Wellesley, Massachusetts. Professional services include outsourced data processing and custody expense, legal fees, consulting fees, and other professional services such as audit and tax preparation. These expenses increased $146,000, or 47.7%, as a result of higher volume related charges for data processing and custody services, partially offset by lower legal and consulting expenses. Marketing expenses decreased $51,000, or 37.0%, to $87,000 for the second quarter of 1998 as a result of timing differences related to ongoing advertising designed to increase the visibility of the Company and its products and services. The Company also experienced a $8,000, or 5.3% increase in business development expense as a result of an increase in the number of employees and new business activity. There were $19,000 of merger expenses incurred in the second quarter of 1997 related to the acquisition of Westfield. There were no such expenses during the second quarter of 1998. Other expenses include supplies, telephone, postage, publications and subscriptions, and other miscellaneous business expenses. These expenses have decreased $37,000, or 9.7% to $346,000, primarily as a result of timing differences. INCOME TAX EXPENSE. The Company recorded income tax expense of $635,000 for the second quarter of 1998 as compared to $254,000 for the same period last year. The effective tax rate was 33.5% and 18.8% for the two periods, respectively. The increase in the Company's effective tax rate is primarily due to the fact that Westfield was a tax-exempt S-Corporation during 1997. If Westfield had been a fully taxable entity, the Company would have incurred approximately $187,000 of additional income tax expense for the second quarter of 1997, which equates to an effective tax rate of approximately 33.0%. 15 16 RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 GENERAL. The Company recorded net income of $2.5 million, or $.22 per fully-diluted share, for the six months ended June 30, 1998, compared to $1.9 million, or $.17 per fully-diluted share, for the same period in 1997. The current period results include an increase in net interest income and fee income, partially reduced by increases in the provision for loan losses, operating expenses, and the Company's effective tax rate. The Company's annualized return on average assets was 1.27% for the first half of 1998, compared to 1.30% for the first half of 1997, and the annualized return on stockholders' equity increased from 14.93% to 17.70% for the same periods, respectively. NET INTEREST INCOME. For the six months ended June 30, 1998, net interest income was $6.7 million, an increase of $1.4 million, or 26.5%, over the same period in 1997. This increase was primarily attributable to an increase of $7.5 million, or 18.9%, in the average balance of net earning assets. INTEREST INCOME. During the first half of 1998, interest income was $13.9 million, an increase of $3.4 million, or 32.0%, over the same period in 1997. Interest income on commercial loans increased 42.3% to $6.3 million for the six months ended June 30, 1998, compared to $4.4 million for the same period in 1997. Interest income from residential mortgage loans increased 28.4% to $4.8 million compared to $3.8 million, and home equity and other loans increased 23.0% to $653,000 compared to $531,000, for the same periods, respectively. These increases were primarily due to higher average loan balances. The average balance of commercial loans increased 45.8% while the average rate decreased 23 basis points from 9.58% for the six months ended June 30, 1997, to 9.35% for the same period in 1998. The average balance of residential mortgage loans increased 31.9%, while the average rate decreased 20 basis points to 7.15% for the same period, and the average balance of home equity and other loans increased 21.0%, while the average rate increased 14 basis points to 8.30%. Total investment income increased $319,000, or 17.3%, to $2.2 million during the six months ended June 30, 1998, compared to $1.8 million during the same period in 1997. This increase was primarily attributable to an increase in the average balance of investments of $13.0 million, or 18.8%. INTEREST EXPENSE. Interest paid on deposits and borrowings increased $2.0 million, or 37.5%, to $7.2 million for the six months ended June 30, 1998, from $5.2 million for the same period during 1997. This increase in the Company's interest expense reflects an increase in the average balance of interest-bearing liabilities of $83.1 million, or 35.0% between the two periods, and an increase in the average cost of interest-bearing liabilities from 4.42% for the first half of 1997 to 4.50% for the first half of 1998. PROVISION FOR LOAN LOSSES. The provision for loan losses was $615,000 for the six months ended June 30, 1998, compared to $129,000 for the same period in 1997. When determining the provision for loan losses, management evaluates several factors including new loan originations, estimated charge-offs, and risk characteristics of the loan portfolio. These factors include the level and mix of loan growth, the level of non-accrual and delinquent loans, and the level of charge-offs and recoveries. Also see discussion under Financial Condition - -"Allowance for Loan Losses." Total loans increased $37.3 million, or 13.5% during the first half of 1998, while the level of non-performing loans decreased 49.5%. Net charge-offs were $329,000 during the first half of 1998, compared to $34,000 of net recoveries for the same period in 1997. The majority of the first half 1998 charge-offs resulted from a loan which was written off due to concern about the borrower's ability to repay. The Bank plans to pursue collection of the outstanding balance. The reserve coverage as a percentage of total loans was 1.25% as of June 30, 1998. FEES AND OTHER INCOME. Fees and other income increased $2.0 million, or 31.1% to $8.4 million for the six month period ended June 30, 1998, compared to $6.4 million for the same period in 1997. The majority of fee income is attributable to advisory fees earned on assets under management. These fees increased $1.6 million, or 25.9% to $7.7 million for the first half of 1998 compared to $6.1 million for the same period in 1997. This increase is primarily due to a 19.6% increase in assets under management from $2.1 billion on June 30, 1997 to $2.5 billion on June 30, 1998. During the first half of 1998, the Company accrued $205,000 of performance fees as general partner of the limited partnerships it manages. These fees are not determined until December 31st of each year, therefore, management has estimated fees for the period based upon information available at the end of the period. 16 17 Deposit account service fees have increased $16,000, or 17.2%, to $109,000 as a result of an increase in of deposit account activity, and a revised fee schedule which went into effect during the third quarter of 1997. Gain on sale of loans has increased $71,000 to $99,000 due to a higher volume of fixed rate loans which were sold in the secondary market. During the first half of 1998, the Company realized $56,000 of gains from the sale of investment securities. There were no sales of investment securities during the first quarter of 1997. OPERATING EXPENSE. Total operating expense for the first half of 1998 increased $1.6 million, or 17.9%, to $10.8 million compared to $9.1 million for the same period in 1997. This increase in total operating expense was primarily attributable to the Company's continued growth and expansion. The Company has experienced a 33.3% increase in total assets, and a 15.5% increase in the number of full time employees from June 30, 1997 to June 30, 1998. In addition, the Company opened a new banking office in Wellesley, Massachusetts in April 1998 which has contributed to the increase in operating expenses. Salaries and benefits, the largest component of operating expense, increased $1.4 million, or 22.3%, to $7.6 million for the six months ended June 30, 1998, from $6.2 million for the same period in 1997. This increase was due to a 15.5% increase in the number of employees, normal salary increases, and the related taxes thereon. Occupancy and equipment expense increased $285,000, or 38.7%, to $1.0 million for the first half of 1998, from $736,000 for the same period last year. This increase was primarily attributable to ongoing technology investments and expense related to the new banking office in Wellesley, Massachusetts. Professional services include outsourced data processing and custody expense, legal fees, consulting fees, and other professional services such as audit and tax preparation. These expenses increased $16,000, or 2.0%, as a result of higher volume related charges for data processing and custody, partially offset by lower legal and consulting expenses. Marketing expenses decreased $28,000, or 13.4%, to $181,000 for the first half of 1998 as a result of timing differences related to ongoing advertising designed to increase the visibility of the Company and its products and services. The Company also experienced a $23,000, or 8.7% increase in business development expense as a result of an increase in the number of employees and new business activity. There were $110,000 of merger expenses incurred in the first half of 1997 related to the acquisition of Westfield. There were no such expenses during the first half of 1998. Other expenses include supplies, telephone, postage, publications and subscriptions, and other miscellaneous business expenses. These expenses have increased $63,000, or 10.0%, to $696,000, primarily as a result of increased business volume and an increase in the number of employees. INCOME TAX EXPENSE. The Company recorded income tax expense of $1.2 million, for the first half of 1998 as compared to $518,000 for the same period last year. The effective tax rate was 33.7% and 21.4% for the two periods, respectively. The increase in the Company's effective tax rate was primarily due to the fact that Westfield was a tax-exempt S-Corporation during 1997. If Westfield had been a fully taxable entity, the Company would have incurred approximately $256,000 of additional income tax expense for the first half of 1997, which equates to an effective tax rate of approximately 31.9%. 17 18 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK For information related to this item, see the Company's December 31, 1997 Form 10-KSB, Item 6 - Interest Rate Sensitivity and Market Risk. No material changes have occurred since that date. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For information related to this item, see the Company's December 31, 1997 Form 10-KSB. No material changes have occurred since that date. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS No changes in security holders' rights have taken place and no equity securities of the Company have been sold during the period covered by this report. ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities have taken place. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS At the Annual Meeting of Stockholders held April 22, 1998, stockholders of the Company approved four proposals. The votes for each proposal were as follows: PROPOSAL I: To elect three Class I Directors to serve until the 2001 Annual Meeting and until their successors are duly elected and qualified: FOR WITHHELD --- -------- Eugene S. Colangelo 7,654,040 10,300 Allen Sinai 7,654,040 10,300 Timothy L. Vaill 7,654,040 10,300 The term of office of each of Arthur J. Baurenfeind, J. Michael Hazard, E. Christopher Palmer, Robert A. Radloff, Herbert S. Alexander, Lynn Thompson Hoffman, and Charles O. Wood, III as a director of the Company continued after the annual meeting. PROPOSAL II: To adopt an amendment and restatement of the Boston Private Bancorp, Inc. Director's Stock Option Plan (the "Plan") to increase the number of shares of Common Stock available under the Plan by such aggregate number of shares of Common Stock as does not exceed one percent (1%) of the total shares of outstanding Common Stock of the Company as of the last business day of the preceding fiscal year, and related matters. FOR AGAINST ABSTAIN WITHHELD --- ------- ------- -------- 7,430,935 175,900 26,135 31,370 PROPOSAL III: To adopt an amendment to the Company's Restated Articles of Organization to change the name of the Company from Boston Private Bancorp, Inc. to Boston Private Financial Holdings, Inc. FOR AGAINST ABSTAIN --- ------- ------- 7,557,859 95,478 11,003 18 19 PROPOSAL IV: To adopt an amendment to the Company's Restated Articles of Organization to increase the authorized shares of Common Stock by 12,000,000 shares from 18,000,000 to 30,000,000 shares of Common Stock. FOR AGAINST ABSTAIN --- ------- ------- 7,464,302 147,175 52,863 ITEM 5. OTHER INFORMATION No information to report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No exhibits to report. No reports on Form 8-K were filed during the three-month period ended June 30, 1998. 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOSTON PRIVATE FINANCIAL HOLDINGS, INC. (Registrant) August 13, 1997 /s/ Timothy L.Vaill ------------------------ Timothy L. Vaill President and Chief Executive Officer August 13, 1997 /s/ Walter M. Pressey ------------------------- Walter M. Pressey Senior Vice President and Chief Financial Officer 20 EX-27 2 FINANCIAL DATA SCHEDULE
9 U.S. DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 8,892 3,958 12,400 0 43,019 22,285 22,386 314,162 (3,931) 417,824 304,759 7,605 6,051 70,300 0 0 10,738 18,371 417,824 11,767 2,164 0 13,931 4,869 7,210 6,721 615 56 10,785 3,695 3,695 0 0 2,451 0.23 0.22 7.69 361 1,910 0 0 3,645 376 47 3,931 3,931 0 0
-----END PRIVACY-ENHANCED MESSAGE-----