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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .
Commission File Number: 001-35070
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange which registered
Common StockBPFHNASDAQ Stock Market LLC
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 preceding 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 o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes x     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No x
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 30, 2021:
Common Stock, Par Value $1.00 Per Share82,464,321
(class)(outstanding)


BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1
Item 2
Impact of the COVID-19 Pandemic
Item 3
Item 4
PART II—OTHER INFORMATION
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6
Certifications

i


PART I. FINANCIAL INFORMATION, ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
 March 31, 2021December 31, 2020
 
(In thousands, except share 
and per share data)
Assets:
Cash and cash equivalents$1,389,943 $1,055,588 
Investment securities available-for-sale (amortized cost of $1,319,395 and $1,198,513 at March 31, 2021 and December 31, 2020, respectively)
1,339,408 1,243,693 
Investment securities held-to-maturity (fair value of $32,631 and $35,942 at March 31, 2021 and December 31, 2020, respectively)
31,943 35,223 
Equity securities at fair value39,708 41,452 
Stock in Federal Home Loan Bank and Federal Reserve Bank28,651 28,663 
Loans held for sale8,434 17,421 
Total loans7,216,325 7,104,309 
Less: Allowance for loan losses74,010 81,238 
Net loans7,142,315 7,023,071 
Premises and equipment, net41,637 44,087 
Goodwill57,607 57,607 
Intangible assets, net8,389 9,056 
Fees receivable2,237 2,800 
Accrued interest receivable26,029 26,191 
Deferred income taxes, net11,353 6,774 
Right-of-use assets93,224 97,859 
Other assets317,614 359,248 
Total assets$10,538,492 $10,048,733 
Liabilities:
Deposits$9,147,618 $8,595,366 
Securities sold under agreements to repurchase46,262 53,472 
Federal Home Loan Bank borrowings115,019 114,659 
Junior subordinated debentures106,363 106,363 
Lease liabilities107,143 112,339 
Other liabilities157,664 198,526 
Total liabilities9,680,069 9,180,725 
Shareholders’ Equity:
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 82,455,432 shares at March 31, 2021 and 82,334,257 shares at December 31, 2020
82,455 82,334 
Additional paid-in capital600,089 597,558 
Retained earnings162,137 156,431 
Accumulated other comprehensive income13,742 31,685 
Total shareholders’ equity858,423 868,008 
Total liabilities and shareholders’ equity$10,538,492 $10,048,733 
See accompanying notes to Unaudited Consolidated Financial Statements.
1

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 Three months ended March 31,
 20212020
 (In thousands, except share and per share data)
Interest and dividend income:
Loans$58,036 $66,358 
Taxable investment securities782 868 
Non-taxable investment securities2,045 1,998 
Mortgage-backed securities3,437 2,787 
Short-term investments and other593 1,071 
Total interest and dividend income64,893 73,082 
Interest expense:
Deposits4,691 12,796 
Federal Home Loan Bank borrowings236 2,034 
Junior subordinated debentures481 917 
Repurchase agreements and other short-term borrowings8 78 
Total interest expense5,416 15,825 
Net interest income59,477 57,257 
Provision/(credit) for loan losses(7,004)16,962 
Net interest income after provision/(credit) for loan losses66,481 40,295 
Fees and other income:
Wealth management and trust fees19,136 18,371 
Investment management fees489 1,925 
Other banking fee income2,411 2,490 
Gain on sale of loans, net747 100 
Other3,387 (1,365)
Total fees and other income26,170 21,521 
Operating expense:
Salaries and employee benefits40,904 35,096 
Occupancy and equipment8,205 7,646 
Information systems9,719 6,725 
Professional services3,302 3,601 
Merger costs10,665 — 
Marketing and business development624 1,890 
Amortization of intangibles667 715 
FDIC insurance967 — 
Other870 5,235 
Total operating expense75,923 60,908 
Income before income taxes16,728 908 
Income tax expense6,076 102 
Net income before attribution to noncontrolling interests10,652 806 
(Continued)
2

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 Three months ended March 31,
 20212020
Less: Net income attributable to noncontrolling interests— 6 
Net income attributable to the Company$10,652 $800 
Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders— 414 
Net income attributable to common shareholders$10,652 $1,214 
Basic earnings per share attributable to common shareholders:
Total attributable to common shareholders:$0.13 $0.01 
Weighted average basic common shares outstanding82,429,162 83,005,064 
Diluted earnings per share attributable to common shareholders:
Total attributable to common shareholders:$0.13 $0.01 
Weighted average diluted common shares outstanding83,934,107 83,318,041 
 See accompanying notes to Unaudited Consolidated Financial Statements.
3

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 Three months ended March 31,
 20212020
(In thousands)
Net income attributable to the Company$10,652 $800 
Other comprehensive income/(loss), net of tax:
Net unrealized gain/(loss) on Investment securities available-for-sale(17,993)14,489 
Unrealized gain/(loss) on cash flow hedges6 — 
Reclassification adjustment for net realized (gain)/loss included in net income44 — 
Net unrealized gain/(loss) on cash flow hedges50 — 
Other comprehensive income/(loss), net of tax(17,943)14,489 
Total comprehensive income/(loss) attributable to the Company, net of tax$(7,291)$15,289 
 See accompanying notes to Unaudited Consolidated Financial Statements.

4

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
 
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)		Total
 (In thousands, except share and per share data)
Balance at December 31, 2019$83,266 $600,708 $127,469 $7,575 $819,018 
Impact due to change in accounting principle (1)— — 13,492 — 13,492 
Net income attributable to the Company— — 800 — 800 
Other comprehensive income/(loss), net of tax— — — 14,489 14,489 
Dividends paid to common shareholders: $0.12 per share
— — (10,000)— (10,000)
Repurchase of 1,565,060 shares of common stock
(1,565)(11,242)— — (12,807)
Net proceeds from issuance of:
88,328 shares of common stock
88 832 — — 920 
5,539 shares of incentive stock grants, net of 964 shares withheld for employee taxes
5 57 — — 62 
Amortization of stock compensation and employee stock purchase plan— 1,348 — — 1,348 
Stock options exercised7 48 — — 55 
Other equity adjustments(1)1,416 — — 1,415 
Balance at March 31, 2020$81,800 $593,167 $131,761 $22,064 $828,792 
Balance at December 31, 2020$82,334 $597,558 $156,431 $31,685 $868,008 
Net income attributable to the Company— — 10,652 — 10,652 
Other comprehensive income/(loss), net of tax— — — (17,943)(17,943)
Dividends paid to common shareholders: $0.06 per share
— — (4,946)— (4,946)
Net proceeds from issuance of:
99,008 shares of common stock
99 596 — — 695 
2,782 shares of incentive stock grants, net of 964 shares withheld for employee taxes
2 24 — — 26 
Amortization of stock compensation— 1,520 — — 1,520 
Stock options exercised20 241 — — 261 
Other equity adjustments— 150 — — 150 
Balance at March 31, 2021$82,455 $600,089 $162,137 $13,742 $858,423 
_____________________
(1) Impact due to the adoption of ASU 2016-13, Financial Instruments (Topic 326) (“ASU 2016-13”). See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements.”
See accompanying notes to Unaudited Consolidated Financial Statements.
5

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 Three months ended March 31,
20212020
 (In thousands)
Cash flows from operating activities:
Net income attributable to the Company$10,652 $800 
Adjustments to arrive at net income:
Net income attributable to noncontrolling interests— 6 
Net income before attribution to noncontrolling interests10,652 806 
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization4,692 6,345 
Net income attributable to noncontrolling interests— (6)
Stock compensation, net of cancellations1,559 1,421 
Provision/(credit) for loan losses(7,004)16,962 
Loans originated for sale(38,308)(15,324)
Proceeds from sale of Loans held for sale48,060 15,127 
Deferred Income tax expense/(benefit)2,575 (5,731)
Decrease in Right-of-use assets4,635 3,179 
Decrease in operating Lease liabilities(5,196)(3,640)
Increase in Merger cost liabilities8,665 — 
Net (increase) in other operating activities(8,612)(27,617)
Net cash provided by/(used in) operating activities21,718 (8,478)
Cash flows from investing activities:
Investment securities available-for-sale:
Purchases(160,756)(8,874)
Maturities, calls, redemptions, and principal payments37,278 12,472 
Investment securities held-to-maturity:
Principal payments3,182 2,730 
Equity securities at fair value:
Purchases(8,256)(19,713)
Sales10,000 15,443 
(Investments)/distributions in trusts, net(429)569 
Contingent considerations from divestitures1,258 1,277 
(Purchase)/redemption of Federal Home Loan Bank and Federal Reserve Bank stock12 (6,195)
Net increase in portfolio loans(110,006)(67,890)
Proceeds from recoveries of loans previously charged-off73 180 
Capital expenditures(1,268)(1,975)
Net cash provided (used in) investing activities(228,912)(71,976)
(Continued)
6

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 Three months ended March 31,
20212020
(In thousands)
Cash flows from financing activities:
Net increase/(decrease) in deposits552,252 (405,904)
Net (decrease) in securities sold under agreements to repurchase(7,210)(8,079)
Net increase in federal funds purchased— 145,000 
Net increase in short-term Federal Home Loan Bank borrowings— 115,000 
Advances of long-term Federal Home Loan Bank borrowings100,424 175,000 
Repayments of long-term Federal Home Loan Bank borrowings(100,064)(149,575)
Dividends paid to common shareholders(4,946)(10,000)
Repurchase of common stock— (12,807)
Proceeds from stock option exercises261 55 
Proceeds from issuance of common stock695 920 
Tax withholding for share based compensation awards(13)(11)
Distributions paid to noncontrolling interests— (6)
Other equity adjustments150 96 
Net cash provided by/(used in) financing activities541,549 (150,311)
Net increase/(decrease) in cash and cash equivalents334,355 (230,765)
Cash and cash equivalents at beginning of year1,055,588 292,479 
Cash and cash equivalents at end of period$1,389,943 $61,714 
Supplemental disclosure of cash flow items:
Cash paid for interest$5,399 $15,628 
Cash paid for income taxes, (net of refunds received)$1,600 $872 
Change in unrealized gain/(loss) on Investment securities available-for-sale, net of tax$(17,993)$14,489 
Change in unrealized gain/(loss) on cash flow hedges, net of tax$50 $— 
Non-cash transactions:
Loans charged-off$(297)$(528)
See accompanying notes to Unaudited Consolidated Financial Statements.

7
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

1.     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 wholly-owned subsidiary of the Company. Boston Private Bank is a trust company chartered by the Commonwealth of Massachusetts, whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”). Boston Private Bank is a member of the Board of Governors of the Federal Reserve System (the "Federal Reserve") and primarily operates in three geographic markets: New England, Northern California, and Southern California. The Private Banking segment is principally engaged in providing private 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 the 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. The results of Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”), a wholly-owned subsidiary of the Company, are included within the Holding Company and Eliminations for all periods presented. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Divestitures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information.
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 the owners other than the Company is included in “Net income attributable to noncontrolling interests”, if any, in the Consolidated Statements of Operations for the periods owned. Redeemable noncontrolling interests, if any, in the Consolidated Balance Sheets reflect the maximum redemption value of agreements with the owners of DGHM.
The unaudited interim Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) 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 of operations 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 Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”).
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. On May 4, 2021, the shareholders of the Company approved the Merger Agreement. The transaction is expected to close mid-2021, subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals.
The Company’s significant accounting policies are described in Part II. Item 8. “Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC. For interim reporting purposes, the Company follows the same significant accounting policies. There were no new accounting pronouncements from the Financial Accounting Standards Board (the “FASB”) that were adopted effective January 1, 2021 with a material impact to the Company.
8
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
2.    Earnings Per Share
The treasury stock method of calculating earnings per share (“EPS”) is presented below for the three months ended March 31, 2021 and 2020. The following tables present the computations of basic and diluted EPS:
Three months ended March 31,
20212020
(In thousands, except share and per share data)
Basic earnings per share - Numerator:
Net income before attribution to noncontrolling interests$10,652 $806 
Less: Net income attributable to noncontrolling interests— 6 
Net income attributable to the Company10,652 800 
Decrease in noncontrolling interests’ redemption values (1)— 414 
Net income attributable to common shareholders, treasury stock method$10,652 $1,214 
Basic earnings per share - Denominator:
Weighted average basic common shares outstanding82,429,162 83,005,064 
Per share data - Basic earnings per share:
Total attributable to common shareholders$0.13 $0.01 
Three months ended March 31,
20212020
(In thousands, except share and per share data)
Diluted earnings per share - Numerator:
Net income attributable to common shareholders, after assumed dilution$10,652 $1,214 
Diluted earnings per share - Denominator:
Weighted average basic common shares outstanding82,429,162 83,005,064 
Dilutive effect of: Time-based and market-based stock options, performance-based and time-based restricted stock units, and other dilutive securities (2)1,504,945 312,977 
Weighted average diluted common shares outstanding (2)83,934,107 83,318,041 
Per share data - Diluted earnings per share:
Total attributable to common shareholders$0.13 $0.01 
Dividends per share declared and paid on common stock$0.06 $0.12 
_____________________
(1)See Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a description of the redemption values related to the redeemable noncontrolling interests. In accordance with the FASB Accounting Standards Codification Distinguishing Liabilities from Equity (“ASC 480”), an increase in redemption value from period to period reduces income attributable to common shareholders. A decrease in redemption value from period to period increases income attributable to common shareholders, but only to the extent that the cumulative change in redemption value remains a cumulative increase since adoption of this standard in the first quarter of 2009.
(2)The diluted EPS computations for the three months ended March 31, 2021 and 2020 do not assume the conversion, exercise, or contingent issuance of the following shares for the following periods because the result would have been anti-dilutive for the periods indicated. This includes shares excluded from the computation of diluted EPS because the effect would have been anti-dilutive and out-of-the money options, where the exercise prices were greater than the average market price of common shares for the period, because their inclusion would have been anti-dilutive. As a result of the anti-dilution, the potential common shares excluded from the diluted EPS computation are as follows:
Three months ended March 31,
20212020
Anti-dilutive shares excluded from computation of average dilutive EPS(In thousands)
Potential common shares from: options, restricted stock units, or other dilutive securities333 1,254 
Total anti-dilutive shares excluded from computation of average dilutive EPS333 1,254 
9
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
3.    Reportable Segments
Management reporting
The Company has two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust, as well as Boston Private Financial Holdings, Inc. within Holding Company and Eliminations. The financial performance of the Company is managed and evaluated according to these two segments. Each segment is managed by a segment leader (“Segment Leader”) who has full authority and responsibility for the performance and the allocation of resources within their segment. The Company’s Chief Executive Officer (“CEO”) is the Company’s Chief Operating Decision Maker (“CODM”).
The Segment Leader for Private Banking is the CEO of Boston Private Bank, who is also the Company’s CEO. The Bank’s banking operations are reported in the Private Banking segment. The Segment Leader for Wealth Management and Trust is the President of Private Banking, Wealth and Trust. The Segment Leader of Wealth Management and Trust reports to the CEO of the Company. The Segment Leaders have authority with respect to the allocation of capital within their respective segments, management oversight responsibility, performance assessments, and overall authority and accountability within their respective segment. The Company’s CODM communicates with the President of Private Banking, Wealth and Trust regarding profit and loss responsibility, strategic planning, priority setting, and other matters. The Company’s Chief Financial Officer reviews all financial detail with the CODM on a monthly basis.
Description of reportable segments
Private Banking
The Private Banking segment operates primarily in three geographic markets: New England, Northern California, and Southern California. The Bank conducts business under the name of Boston Private Bank & Trust Company in all markets. The Bank is principally engaged in providing private banking services to high net worth individuals, privately-owned businesses and partnerships, and nonprofit organizations. In addition, the Bank is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization, and small businesses.
Wealth Management and Trust
The Wealth Management and Trust segment is comprised of the trust operations of the Bank and the operations of Boston Private Wealth. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office, financial planning, tax planning, and trust services to individuals, families, institutions, and nonprofit institutions. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, Northern California, and Southern California.
Measurement of segment profit and assets
The accounting policies of the segments are the same as those described in Part I. Item 1. "Notes to Unaudited Consolidated Financial Statements - Note 1: Basis of Presentation and Summary of Significant Accounting Policies."
Reconciliation of reportable segment items
The following tables present a reconciliation of the revenues, expenses, assets, and other significant items of the reportable segments as of and for the three months ended March 31, 2021 and 2020.
Three months ended March 31,
20212020
Private Banking (1)(In thousands)
Net interest income$59,948 $58,090 
Fees and other income4,075 1,108 
Total revenue64,023 59,198 
Provision/(credit) for loan losses(7,004)16,962 
Operating expense 44,460 42,588 
Income/(loss) before income taxes26,567 (352)
Income tax expense/(benefit)4,720 (931)
Net income before attribution to noncontrolling interests21,847 579 
Net income attributable to the Company$21,847 $579 
Assets$10,485,377 $8,692,069 
Amortization of intangibles$189 $77 
Depreciation$2,971 $2,626 
Three months ended March 31,
10
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
20212020
Wealth Management and Trust (1)(In thousands)
Net interest income$1 $72 
Fees and other income19,165 18,485 
Total revenue19,166 18,557 
Operating expense 17,455 15,449 
Income before income taxes1,711 3,108 
Income tax expense499 1,074 
Net income before attribution to noncontrolling interests1,212 2,034 
Net income attributable to the Company$1,212 $2,034 
Assets$155,994 $143,998 
Amortization of intangibles$478 $638 
Depreciation$347 $294 
Three months ended March 31,
20212020
Holding Company and Eliminations (1)(2)(In thousands)
Net interest income (3)$(472)$(905)
Fees and other income2,930 1,928 
Total revenue2,458 1,023 
Operating expense14,008 2,871 
Income/(loss) before income taxes(11,550)(1,848)
Income tax expense/(benefit) 857 (41)
Net income/(loss) before attribution to noncontrolling interests(12,407)$(1,807)
Noncontrolling interests— 6 
Net income/(loss) attributable to the Company$(12,407)$(1,813)
Assets (including eliminations)$(102,879)$(89,741)
Depreciation$430 $39 
Three months ended March 31,
20212020
Total Company (1)(In thousands)
Net interest income$59,477 $57,257 
Fees and other income26,170 21,521 
Total revenue85,647 78,778 
Provision/(credit) for loan losses(7,004)16,962 
Operating expense75,923 60,908 
Income before income taxes16,728 908 
Income tax expense6,076 102 
Net income before attribution to noncontrolling interests10,652 806 
Noncontrolling interests— 6 
Net income attributable to the Company$10,652 $800 
Assets$10,538,492 $8,746,326 
Amortization of intangibles$667 $715 
Depreciation$3,748 $2,959 
_____________________
(1)Due to rounding, the sum of individual segment results may not add up to the Total Company results.
(2)The Holding Company and Eliminations segment includes the results of DGHM.
(3)Interest expense on Junior subordinated debentures is included in Holding Company and Eliminations.
11
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
4.    Investments
The following table presents a summary of investment securities at March 31, 2021 and December 31, 2020:
 Amortized
Cost		UnrealizedFair
Value
GainsLosses
(In thousands)
At March 31, 2021
Investment securities available-for-sale at fair value:
U.S. government and agencies$19,964 $650 $— $20,614 
Government-sponsored entities137,866 3,619 — 141,485 
Municipal bonds325,312 17,668 (585)342,395 
Mortgage-backed securities (1)836,253 12,198 (13,537)834,914 
Total$1,319,395 $34,135 $(14,122)$1,339,408 
Investment securities held-to-maturity at amortized cost:
Mortgage-backed securities (1)$31,943 $688 $— $32,631 
Total$31,943 $688 $— $32,631 
Equity securities at fair value:
Money market mutual funds (2)$39,708 $— $— $39,708 
Total$39,708 $— $— $39,708 
At December 31, 2020
Investment securities available-for-sale at fair value:
U.S. government and agencies$19,962 $1,022 $— $20,984 
Government-sponsored entities142,985 4,801 — 147,786 
Municipal bonds324,422 22,177 (11)346,588 
Mortgage-backed securities (1)711,144 17,805 (614)728,335 
Total$1,198,513 $45,805 $(625)$1,243,693 
Investment securities held-to-maturity at amortized cost:
Mortgage-backed securities (1)$35,223 $719 $— $35,942 
Total$35,223 $719 $— $35,942 
Equity securities at fair value:
Money market mutual funds (2)$41,452 $— $— $41,452 
Total$41,452 $— $— $41,452 
_____________________
(1)All Mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
(2)Money market mutual funds maintain a constant net asset value of $1.00 and therefore have no unrealized gain or loss.
The Company adopted ASU 2016-13 as of January 1, 2020. Under ASU 2016-13, the Company is required to assess the investment portfolio for credit impairment. The Company considers the Investment securities held-to-maturity portfolio to meet the "zero loss" expectation requirements. All Investment securities held-to-maturity owned by the Company are AAA- rated mortgage-backed securities that are backed by the guarantees of the U.S. government, U.S. government agencies or government-sponsored entities. The Company has experienced zero losses for these securities. In addition, as of March 31, 2021 and December 31, 2020, no Investment securities held-to-maturity were past due. Therefore, no credit allowance was recorded on the Investment securities held-to-maturity portfolio.
The Company evaluated the Investment securities available-for-sale on a security by security basis by assessing the extent and duration of unrealized loss positions, significant deterioration in the financial performance of the issuer, significant adverse changes in the market, or other factors that could raise significant concerns about the issuer's ability to continue as a going concern. The Company identified no security with impairment as of March 31, 2021 and December 31, 2020. Therefore, no credit allowance was booked on the Investment securities available-for-sale portfolio. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for additional information on ASU 2016-13.
The following table presents the maturities of Investment securities available-for-sale, based on contractual maturity, as of March 31, 2021. Certain securities are callable before their final maturity. Additionally, certain securities (such
12
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
as Mortgage-backed securities) are shown within the table below based on their final (contractual) maturity, but due to prepayments and amortization are expected to have shorter lives.
 
Investment Securities Available-for-sale
Amortized
Cost		Fair
Value
(In thousands)
Within one year$78,206 $79,090 
After one, but within five years258,270 267,989 
After five, but within ten years227,730 237,588 
Greater than ten years755,189 754,741 
Total$1,319,395 $1,339,408 
The following table presents the maturities of Investment securities held-to-maturity, based on contractual maturity, as of March 31, 2021.
 
Investment Securities Held-to-maturity
Amortized
Cost		Fair
Value
(In thousands)
After five, but within ten years$26,376 $26,970 
Greater than ten years5,567 5,661 
Total$31,943 $32,631 
The following table presents the maturities of Equity securities, based on contractual maturity, as of March 31, 2021.
 Equity Securities
Amortized
Cost		Fair
Value
(In thousands)
Within one year$39,708 $39,708 
Total$39,708 $39,708 
During the three months ended March 31, 2021 and 2020, there were no sales of Investment securities available-for-sale, Investment securities held-to-maturity, or Equity securities.
The following tables present information regarding securities at March 31, 2021 and December 31, 2020 having temporary impairment, due to the fair values having declined below the amortized cost of the individual securities, and the time period that the investments have been temporarily impaired. As of March 31, 2021, there were no Investment securities held-to-maturity having temporary impairment.
Less than 12 months12 months or longerTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		# of
Securities
(In thousands, except number of securities)
March 31, 2021
Investment securities available-for-sale
Municipal bonds$26,139 $(585)$— $— $26,139 $(585)9 
Mortgage-backed securities (1) 436,241 (13,456)4,989 (81)441,230 (13,537)59 
Total$462,380 $(14,041)$4,989 $(81)$467,369 $(14,122)68 
13
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Less than 12 months12 months or longerTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		# of
Securities
(In thousands, except number of securities)
December 31, 2020
Investment securities available-for-sale
Municipal bonds$2,344 $(11)$— $— $2,344 $(11)2 
Mortgage-backed securities (1)126,545 (519)5,411 (95)131,956 (614)41 
Total$128,889 $(530)$5,411 $(95)$134,300 $(625)43 
_____________________
(1)All Mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
As of March 31, 2021, the Mortgage-backed securities in the first table above had Standard and Poor’s credit ratings of at least AAA. As of March 31, 2021, the Municipal securities in the first table above had Standard and Poor's credit ratings of AAA and AA+. As of March 31, 2021, the Company determined that the unrealized losses on investments, since their purchase, is primarily attributed to changes in interest rates and not as a result of the deterioration of credit quality. As of March 31, 2021, the Company had no intent to sell any securities in an unrealized loss position, and it is not more likely than not that the Company would be forced to sell any of these securities prior to the full recovery of all unrealized loss amounts.
Other investments
The Bank invests in low-income housing tax credits, which are included in Other assets, to encourage private capital investment in the construction and rehabilitation of low-income housing. The Bank makes these investments as an indirect subsidy that allows investors, such as the Bank, in a flow-through limited liability entity, such as limited partnerships or limited liability companies that manage or invest in qualified affordable housing projects, to receive the benefits of the tax credits allocated to the entity that owns the qualified affordable housing project. The Bank also holds partnership interests in venture capital funds formed to provide financing to small businesses and to promote community development.
Other investments, which are included in Other assets, can be temporarily impaired when the fair values decline below the amortized costs of the individual investments. There were no other investments with unrealized losses as of March 31, 2021 or December 31, 2020. The Bank’s other investments primarily include low-income housing partnerships which generate tax credits. The Bank also holds partnership interests in small business investment companies formed to provide financing to small businesses and to promote community development. The Bank had $74.0 million and $75.7 million in other investments included in Other assets as of March 31, 2021 and December 31, 2020, respectively.
5.    Fair Value Measurements
Fair value is defined under GAAP as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy established in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value. Financial instruments are considered Level 1 when valuation can be based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.
14
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:
 As of March 31, 2021Fair value measurements at reporting date using:
Quoted prices in
active markets
for identical
assets (Level 1)		Significant 
other
observable
inputs (Level 2)		Significant
unobservable
inputs (Level 3)
(In thousands)
Assets:
Investment securities available-for-sale:
U.S. government and agencies$20,614 $— $20,614 $— 
Government-sponsored entities141,485 — 141,485 — 
Municipal bonds342,395 — 342,395 — 
Mortgage-backed securities834,914 — 834,914 — 
Total
1,339,408 — 1,339,408 — 
Equity securities39,708 39,708 — — 
Derivatives - interest rate customer swaps53,682 — 53,682 — 
Derivatives - risk participation agreement28 — 28 — 
Trading securities held in the “rabbi trust” (1)7,633 7,633 — — 
Liabilities:
Derivatives - interest rate customer swaps$54,529 $— $54,529 $— 
Derivatives - interest rate swaps157 — 157 — 
Derivatives - risk participation agreement211 — 211 — 
Deferred compensation “rabbi trust” (1)7,633 7,633 — — 
  Fair value measurements at reporting date using:
As of December 31, 2020Quoted prices in
active markets
for identical
assets (Level 1)		Significant 
other
observable
inputs (Level 2)		Significant
unobservable
inputs (Level 3)
(In thousands)
Assets:
Investment securities available-for-sale:
U.S. government and agencies$20,984 $— $20,984 $— 
Government-sponsored entities147,786 — 147,786 — 
Municipal bonds346,588 — 346,588 — 
Mortgage-backed securities728,335 — 728,335 — 
Total
1,243,693 — 1,243,693 — 
Equity securities41,452 41,452 — — 
Derivatives - interest rate customer swaps83,255 — 83,255 — 
Derivatives - risk participation agreements49 — 49 — 
Trading securities held in the “rabbi trust” (1)7,204 7,204 — — 
Liabilities:
Derivatives - interest rate customer swaps$84,590 $— $84,590 $— 
Derivatives - interest rate swaps228 — 228 — 
Derivatives - risk participation agreements375 — 375 — 
Deferred compensation “rabbi trust” (1)7,204 7,204 — — 
_____________________
(1) The Company has adopted a special trust for the Deferred Compensation Plan called a “rabbi trust.” The rabbi trust is an arrangement that is used to accumulate assets that may be used to fund the Company’s obligation to pay benefits under the Deferred Compensation Plan. To prevent immediate taxation to the executives who participate in the Deferred Compensation Plan, the amounts placed in the rabbi trust must remain subject to the claims of the Company’s creditors. The investments chosen by the participants in the Deferred Compensation Plan are mirrored by the rabbi trust as a way to minimize the earnings volatility of the Deferred Compensation Plan.
15
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
As of March 31, 2021 and December 31, 2020, Investment securities available-for-sale consisted of U.S. government and agencies securities, Government-sponsored entities securities, Municipal bonds, and Mortgage-backed securities. Investment securities available-for-sale Level 2 securities generally have quoted prices but are traded less frequently than exchange-traded securities and can be priced using market data from similar assets and include Government-sponsored entities securities, Municipal bonds, Mortgage-backed securities, “off-the-run” U.S. Treasury securities, and certain investments in the Small Business Administration's (the "SBA") loans (which are categorized as U.S. government and agencies securities). “Off-the-run” U.S. Treasury securities are Treasury bonds and notes issued before the most recently issued bond or note of a particular maturity. When Treasuries move to the secondary over-the-counter market, they become less frequently traded, therefore, they are considered “off-the-run.” No investments held as of March 31, 2021 or December 31, 2020 were categorized as Level 3.
As of March 31, 2021 and December 31, 2020, Equity securities consisted of Level 1 money market mutual funds that are valued with prices quoted in active markets.
In managing its interest rate and credit risk, the Company may utilize derivative instruments including interest rate customer swaps, interest rate swaps, and risk participation agreements. As a service to its customers, the Company may utilize derivative instruments including customer foreign exchange forward contracts to manage its foreign exchange risk, if any. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities, and therefore, they have been categorized as a Level 2 measurement as of March 31, 2021 and December 31, 2020. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 8: Derivatives and Hedging Activities” for further details.
To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position.
The Company has determined that the majority of inputs used to value its derivatives are within Level 2. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy as of March 31, 2021 and December 31, 2020.
Trading securities held in the "rabbi trust" consist of publicly traded mutual fund investments that are valued at prices quoted in active markets. Therefore, they have been categorized as Level 1 as of March 31, 2021 and December 31, 2020.
The Company accounts for its investments held in the rabbi trust in accordance with ASC 320, Investments - Debt and Equity Securities. The investments held in the rabbi trust are classified as trading securities. The assets of the rabbi trust are carried at their fair value within Other assets on the Consolidated Balance Sheets. Changes in the fair value of the securities are recorded as an increase or decrease in Other income each quarter. The deferred compensation liability reflects the market value of the securities selected by the participants and is included within Other liabilities on the Consolidated Balance Sheets. Changes in the fair value of the liability are recorded as an increase or decrease in Salaries and employee benefits expense each quarter.
There were no transfers for assets or liabilities recorded at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. There were no Level 3 assets valued on a recurring basis at March 31, 2021 or December 31, 2020. There were no changes in the valuation techniques used for measuring the fair value.
The following tables present the Company’s assets measured at fair value on a non-recurring basis during the periods ended March 31, 2021 and March 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall.
 As of March 31, 2021Fair value measurements at reporting date using:Gain (losses) from fair value changes
Quoted prices in
active markets
for identical
assets (Level 1)
Significant other
observable
inputs (Level 2)
Significant
unobservable
inputs (Level 3)
Three months ended March 31, 2021
(In thousands)
Assets:
Impaired loans (1)$5,205 $— $— $5,205 $(435)
_____________________
(1)Collateral-dependent impaired loans held as of March 31, 2021 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2021.
16
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
 As of March 31, 2020Fair value measurements at reporting date using:Gain (losses) from fair value changes
Quoted prices in
active markets
for identical
assets (Level 1)
Significant other
observable
inputs (Level 2)
Significant
unobservable
inputs (Level 3)
Three months ended March 31, 2020
(In thousands)
Assets:
Impaired loans (1)$97 $— $— $97 $21 
_____________________
(1)Collateral-dependent impaired loans held as of March 31, 2020 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2020.
The following tables present additional quantitative information about assets measured at fair value on a non-recurring basis for which the Company has utilized Level 3 inputs to determine fair value:
 As of March 31, 2021
Fair ValueValuation
Technique		Unobservable
Input		Range of
Inputs
Utilized 		Weighted
Average of
Inputs
Utilized
(In thousands)
Impaired Loans$5,205 Appraisals of CollateralDiscount for costs to sell
5% - 10%
5%
Appraisal adjustments—%—%
 As of March 31, 2020
Fair ValueValuation
Technique		Unobservable
Input		Range of
Inputs
Utilized 		Weighted
Average of
Inputs
Utilized
(In thousands)
Impaired Loans$97 Appraisals of CollateralDiscount for costs to sell
10% - 10%
10%
Appraisal adjustments—%—%
Impaired loans include those loans that were adjusted to the fair value of underlying collateral as required under ASC 310, Receivables. The amount does not include impaired loans that are measured based on expected future cash flows discounted at the respective loan’s original effective interest rate, as that amount is not considered a fair value measurement. The Company uses appraisals, which management may adjust to reflect estimated fair value declines, or may apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property or consideration of broker quotes. The appraisers use a market, income, and/or a cost approach in determining the value of the collateral. Therefore, they have been categorized as a Level 3 measurement.
17
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables present the carrying values and fair values of the Company’s financial instruments that are not measured at fair value on a recurring basis:
 As of March 31, 2021
Book ValueFair ValueQuoted prices 
in active
markets for
identical
assets 
(Level 1)		Significant 
other
observable
inputs
(Level 2)		Significant
unobservable
inputs 
(Level 3)
(In thousands)
FINANCIAL ASSETS:
Cash and cash equivalents$1,389,943 $1,389,943 $1,389,943 $— $— 
Investment securities held-to-maturity31,943 32,631 — 32,631 — 
Loans held for sale8,434 8,431 — 8,431 — 
Loans, net7,142,315 7,035,003 — — 7,035,003 
Other financial assets56,917 56,917 — 56,917 — 
FINANCIAL LIABILITIES:
Deposits9,147,618 9,148,568 — 9,148,568 — 
Securities sold under agreements to repurchase46,262 46,262 — 46,262 — 
Federal Home Loan Bank borrowings115,019 115,410 — 115,410 — 
Junior subordinated debentures106,363 69,863 — — 69,863 
Other financial liabilities1,751 1,751 — 1,751 — 
 As of December 31, 2020
Book ValueFair ValueQuoted prices 
in active
markets for
identical
assets 
(Level 1)		Significant 
other
observable
inputs (Level 2)		Significant
unobservable
inputs 
(Level 3)
(In thousands)
FINANCIAL ASSETS:
Cash and cash equivalents$1,055,588 $1,055,588 $1,055,588 $— $— 
Investment securities held-to-maturity35,223 35,942 — 35,942 — 
Loans held for sale17,421 17,782 — 17,782 — 
Loans, net7,023,071 6,980,202 — — 6,980,202 
Other financial assets57,654 57,654 — 57,654 — 
FINANCIAL LIABILITIES:
Deposits8,595,366 8,596,193 — 8,596,193 — 
Securities sold under agreements to repurchase53,472 53,472 — 53,472 — 
Federal Home Loan Bank borrowings114,659 115,284 — 115,284 — 
Junior subordinated debentures106,363 69,863 — — 69,863 
Other financial liabilities1,734 1,734 — 1,734 — 
The estimated fair values have been determined by using available quoted market information or other appropriate valuation methodologies. The aggregate fair value amounts presented above do not represent the underlying value of the financial assets and liabilities of the Company taken as a whole as they do not reflect any premium or discount the Company might recognize if the assets were sold or the liabilities sold, settled, or redeemed. An excess of fair value over book value on financial assets represents a premium, or gain, the Company might recognize if the assets were sold, while an excess of book value over fair value on financial liabilities represents a premium, or gain, the Company might recognize if the liabilities were sold, settled, or redeemed prior to maturity. Conversely, losses would be recognized if assets were sold where the book value exceeded the fair value or liabilities were sold where the fair value exceeded the book value.
The fair value estimates provided are made at a specific point in time, based on relevant market information and the characteristics of the financial instrument. The estimates do not provide for any premiums or discounts that could result from concentrations of ownership of a financial instrument. Because no active market exists for some of the Company’s financial instruments, certain fair value estimates are based on subjective judgments regarding current economic conditions, risk characteristics of the financial instruments, future expected loss experience, prepayment assumptions, and other factors. The resulting estimates involve uncertainties and are considered best estimates. Changes made to any of the underlying assumptions could significantly affect the estimates.
18
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Cash and cash equivalents
The carrying value reported in the Consolidated Balance Sheets for Cash and cash equivalents approximates fair value due to the short-term nature of their maturities, and these assets are classified as Level 1 measurements.
Investment securities held-to-maturity
Investment securities held-to-maturity consist of Mortgage-backed securities as of March 31, 2021 and December 31, 2020. The Mortgage-backed securities are fixed income instruments that are not quoted on an exchange but may be traded in active markets. The fair value of these securities is based on quoted market prices obtained from external pricing services. The principal market for our securities portfolio is the secondary institutional market, with an exit price that is predominantly reflective of bid level pricing in that market. Accordingly, Investment securities held-to-maturity Mortgage-backed securities are classified as Level 2 measurement.
There were no transfers of the Company's financial instruments that are not measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020.
Loans held for sale
Loans held for sale are recorded at the lower of cost or fair value in the aggregate. Fair value estimates are based on actual commitments to sell the loans to investors at an agreed upon price or current market prices if rates have changed since the time the loan closed. Accordingly, loans held for sale are included in the Level 2 fair value category.
Loans, net
Fair value estimates are based on loans with similar financial characteristics. The Company estimates the fair value of loans using the exit price notion under ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which includes identifying an exit price using current market information for origination rates and making certain adjustments to incorporate credit risk, transaction costs and other adjustments utilizing publicly available rates and indexes. Loans, net are included in the Level 3 fair value category based upon the inputs and valuation techniques used.
Other financial assets
Other financial assets consist of accrued interest and fees receivable, and stock in the Federal Home Loan Bank of Boston (“FHLB”) and the Federal Reserve Bank of Boston (“FRB”), for which the carrying amount approximates fair value, and these assets are classified as Level 2 measurements.
Deposits
The fair values reported for transaction accounts (demand, NOW, savings, and money market) equal their respective book values reported on the Consolidated Balance Sheets, and these liabilities are classified as Level 2 measurements. The fair values disclosed are, by definition, equal to the amount payable on demand at the reporting date. The fair values for certificates of deposit are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on certificates of deposit with similar remaining maturities, and these liabilities are classified as Level 2 measurements.
Securities sold under agreements to repurchase
The fair values of Securities sold under agreements to repurchase are estimated based on contractual cash flows discounted at the Bank’s incremental borrowing rate for FHLB borrowings with similar maturities, and these liabilities have been classified as Level 2 measurements.
Federal funds purchased, if any
The carrying amounts of Federal funds purchased, if any, approximate fair value due to their short-term nature, and therefore, these funds have been classified as Level 2 measurements.
Federal Home Loan Bank borrowings
The fair values reported for FHLB borrowings are estimated based on the discounted value of contractual cash flows. The discount rate used is based on the Bank’s estimated current incremental borrowing rate for FHLB borrowings with similar maturities, and therefore, these borrowings have been classified as Level 2 measurements.
Junior subordinated debentures
The fair values of the Junior subordinated debentures issued by Boston Private Capital Trust I and Boston Private Capital Trust II are estimated using Level 3 inputs such as the interest rates on these securities, current rates for similar debt, and regulatory changes that would result in an unfavorable change in the regulatory capital treatment of this type of debt.
19
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Other financial liabilities
Other financial liabilities consist of accrued interest payable for which the carrying amount approximates fair value and is classified as Level 2 measurements.
Financial instruments with off-balance sheet risk, if any
The Bank’s commitments to originate loans and for unused lines and outstanding letters of credit are primarily at market interest rates, and therefore, the carrying amount approximates fair value.
6.    Loan Portfolio and Credit Quality
The Bank’s lending activities are conducted principally in the regions of New England, Northern California, and Southern California. The Bank originates single and multi-family residential loans, commercial real estate loans, commercial and industrial loans, commercial tax-exempt loans, construction and land loans, and home equity and other consumer loans. Most loans are secured by borrowers’ personal or business assets. The ability of the Bank’s single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic conditions within the Bank’s lending areas. Commercial, construction, and land borrowers’ ability to repay is generally dependent upon the health of the economy and real estate values, including the performance of the construction sector. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio is susceptible to changing conditions in the New England, Northern California, and Southern California economies and real estate markets.
The following table presents a summary of the loan portfolio based on the portfolio segment as of the dates indicated:
 March 31, 2021December 31, 2020
 (In thousands)
Commercial and industrial$668,217 $558,343 
Paycheck Protection Program351,170 312,356 
Commercial tax-exempt488,507 442,159 
Commercial real estate2,697,677 2,757,375 
Construction and land181,482 159,204 
Residential2,632,554 2,677,464 
Home equity71,752 77,364 
Consumer and other124,966 120,044 
Total$7,216,325 $7,104,309 
The following table presents nonaccrual loans receivable by class of receivable as of the dates indicated:
March 31, 2021December 31, 2020
(In thousands)
Commercial and industrial$4,766 $4,394 
Commercial real estate5,859 5,261 
Residential14,475 13,780 
Home equity651 415 
Consumer and other13 1 
Total$25,764 $23,851 
The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest is in doubt. In certain instances, although infrequent, loans that have become 90 days or more 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. There were no loans 90 days or more past due, but still accruing, as of both March 31, 2021 and December 31, 2020. The Bank’s policy for returning a loan to accrual status requires the loan to be brought current and for the client to show a history of making timely payments (generally six consecutive months). For troubled debt restructured loans (“TDRs”), a return to accrual status generally requires timely payments for a period of six months in accordance with the restructured loan terms, along with meeting other criteria.
20
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables show the payment status of loans receivable by class of receivable as of the dates indicated:
March 31, 2021
Accruing Past DueNonaccrual Loans
30-59 Days Past Due 60-89 Days Past DueTotal Accruing Past DueCurrent30-89 Days Past Due90 Days or
Greater
Past Due		Total Non-Accrual LoansCurrent Accruing LoansTotal
Loans
Receivable
(In thousands)
Commercial and industrial$2,914 $— $2,914 $1,832 $1,914 $1,020 $4,766 $660,537 $668,217 
Paycheck Protection Program— — — — — — — 351,170 351,170 
Commercial tax-exempt— — — — — — — 488,507 488,507 
Commercial real estate— — — 601 — 5,258 5,859 2,691,818 2,697,677 
Construction and land— — — — — — — 181,482 181,482 
Residential4,044 — 4,044 8,838 1,655 3,982 14,475 2,614,035 2,632,554 
Home equity104 — 104 611 — 40 651 70,997 71,752 
Consumer and other173 14 187 13 — — 13 124,766 124,966 
Total$7,235 $14 $7,249 $11,895 $3,569 $10,300 $25,764 $7,183,312 $7,216,325 
December 31, 2020
Accruing Past DueNonaccrual Loans
30-59 Days Past Due60-89 Days Past DueTotal Accruing Past DueCurrent30-89 Days Past Due90 Days or Greater Past DueTotal Non-Accrual LoansCurrent Accruing LoansTotal Loans Receivable
(In thousands)
Commercial and industrial$1,837 $522 $2,359 $3,934 $87 $373 $4,394 $551,590 $558,343 
Paycheck Protection Program— — — — — — — 312,356 312,356 
Commercial tax-exempt— — — — — — — 442,159 442,159 
Commercial real estate136 491 627 — — 5,261 5,261 2,751,487 2,757,375 
Construction and land— — — — — — — 159,204 159,204 
Residential10,960 4,538 15,498 8,183 1,521 4,076 13,780 2,648,186 2,677,464 
Home equity1,107 256 1,363 228 — 187 415 75,586 77,364 
Consumer and other15 — 15 — 1 — 1 120,028 120,044 
Total$14,055 $5,807 $19,862 $12,345 $1,609 $9,897 $23,851 $7,060,596 $7,104,309 
Nonaccrual and delinquent loans are affected by many factors, such as economic and business conditions, interest rates, unemployment levels, and real estate collateral values, among others. In periods of prolonged economic decline, borrowers may become more severely affected over time as liquidity levels decline and the borrower’s ability to continue to make payments deteriorates.
With respect to real estate collateral values, the declines from the peak, as well as the value of the real estate at the time of origination versus the current value, can impact the level of problem loans. For instance, if the loan to value ratio at the time of renewal has increased due to the decline in the real estate value since origination, the loan may no longer meet the Bank’s underwriting standards and may be considered for classification as a problem loan dependent upon a review of risk factors. There could be an increase in these situations as the economic conditions brought on by the COVID-19 pandemic could lead to a decline in collateral values.
Generally, when a collateral dependent loan becomes impaired, an updated appraisal of the collateral, if appropriate, is obtained. If the impaired loan has not been upgraded to a performing status within a reasonable amount of time, the Bank will continue to obtain updated appraisals as deemed necessary, especially during periods of declining property values.
The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loans with modified terms under the CARES Act are not considered past due if they are complying with the modified terms.
21
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
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 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 is included here from Part II. Item 8. “Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, follows:
Pass - All loans graded as pass are considered acceptable credit quality by the Bank and are grouped for purposes of calculating the allowance for loan losses. 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.
22
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables present the loan portfolio’s credit risk profile by internally assigned grade and class of receivable as of the dates indicated:
March 31, 2021
By Loan Grade or Nonaccrual Status
PassSpecial
Mention 		Accruing
Classified (1)		Nonaccrual
Loans		Total
(In thousands)
Commercial and industrial$623,253 $12,795 $27,403 $4,766 $668,217 
Paycheck Protection Program351,170 — — — 351,170 
Commercial tax-exempt485,720 2,787 — — 488,507 
Commercial real estate2,452,482 133,609 105,727 5,859 2,697,677 
Construction and land178,501 2,981 — — 181,482 
Residential2,615,079 — 3,000 14,475 2,632,554 
Home equity71,101 — — 651 71,752 
Consumer and other124,653 300 — 13 124,966 
Total$6,901,959 $152,472 $136,130 $25,764 $7,216,325 
December 31, 2020
By Loan Grade or Nonaccrual Status
PassSpecial
Mention 		Accruing
Classified (1)		Nonaccrual
Loans		Total
(In thousands)
Commercial and industrial$519,680 $11,314 $22,955 $4,394 $558,343 
Paycheck Protection Program312,356 — — — 312,356 
Commercial tax-exempt434,850 2,806 4,503 — 442,159 
Commercial real estate2,505,424 170,521 76,169 5,261 2,757,375 
Construction and land156,908 2,296 — — 159,204 
Residential2,660,684 — 3,000 13,780 2,677,464 
Home equity76,693 — 256 415 77,364 
Consumer and other119,743 300 — 1 120,044 
Total$6,786,338 $187,237 $106,883 $23,851 $7,104,309 
______________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.

23
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables present the loan portfolio’s credit risk profile by loan origination year and class of receivable as of the dates indicated:
March 31, 2021
Loan Origination Year By Loan Grade or Nonaccrual Status
20212020201920182017PriorRevolvingRevolving Converted to Term (2)Total
(In thousands)
Commercial and industrial
Pass$22,837 $92,124 $71,592 $57,958 $12,334 $56,994 $301,010 $8,404 $623,253 
Special Mention— 321 4,919 952 — 2,588 3,764 251 12,795 
Accruing Classified (1)4,600 1,992 195 6,241 659 63 7,709 5,944 27,403 
Nonaccrual— — 375 346 16 903 884 2,242 4,766 
Total$27,437 $94,437 $77,081 $65,497 $13,009 $60,548 $313,367 $16,841 $668,217 
Paycheck Protection Program
Pass$113,041 $238,129 $— $— $— $— $— $— $351,170 
Total$113,041 $238,129 $— $— $— $— $— $— $351,170 
Commercial tax-exempt
Pass$— $89,135 $38,215 $40,285 $24,410 $290,684 $— $2,991 $485,720 
Special Mention— — — — — 2,787 — — 2,787 
Total$— $89,135 $38,215 $40,285 $24,410 $293,471 $— $2,991 $488,507 
Commercial real estate
Pass$65,639 $264,428 $444,717 $248,987 $301,316 $1,022,447 $90,477 $14,471 $2,452,482 
Special Mention— 18,253 15,913 2,317 17,744 79,382 — — 133,609 
Accruing Classified (1)— 5,586 49,581 23,964 12,787 13,809 — — 105,727 
Nonaccrual— — 5,212 — 598 — 49 — 5,859 
Total$65,639 $288,267 $515,423 $275,268 $332,445 $1,115,638 $90,526 $14,471 $2,697,677 
Construction and land
Pass$6,774 $57,925 $73,762 $21,550 $16,262 $2,228 $— $— $178,501 
Special Mention— — — 2,981 — — — — 2,981 
Total$6,774 $57,925 $73,762 $24,531 $16,262 $2,228 $— $— $181,482 
Residential
Pass$138,273 $599,553 $436,633 $338,505 $348,499 $753,601 $— $15 $2,615,079 
Accruing Classified (1)— — — — — 3,000 — — 3,000 
Nonaccrual— — 603 473 2,373 11,026 — — 14,475 
Total$138,273 $599,553 $437,236 $338,978 $350,872 $767,627 $— $15 $2,632,554 
Home equity
Pass$— $— $— $— $— $1,367 $59,919 $9,815 $71,101 
Nonaccrual— — — — — 256 139 256 651 
Total$— $— $— $— $— $1,623 $60,058 $10,071 $71,752 
Consumer and other
Pass$964 $653 $147 $19 $— $593 $122,277 $— $124,653 
Special Mention— — — — — — 300 — 300 
Nonaccrual— — — — — — 13 — 13 
Total$964 $653 $147 $19 $— $593 $122,590 $— $124,966 
Total
Pass$347,528 $1,341,947 $1,065,066 $707,304 $702,821 $2,127,914 $573,683 $35,696 $6,901,959 
Special Mention— 18,574 20,832 6,250 17,744 84,757 4,064 251 152,472 
Accruing Classified (1)4,600 7,578 49,776 30,205 13,446 16,872 7,709 5,944 136,130 
Nonaccrual— — 6,190 819 2,987 12,185 1,085 2,498 25,764 
Total$352,128 $1,368,099 $1,141,864 $744,578 $736,998 $2,241,728 $586,541 $44,389 $7,216,325 
______________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
(2) Amounts for revolving loans converted to term loans represent only those loans that have been converted to term loans after December 31, 2016. Due to data limitations, information prior to December 31, 2016 is unavailable.
24
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
December 31, 2020
Loan Origination Year By Loan Grade or Nonaccrual Status
20202019201820172016PriorRevolvingRevolving Converted to Term (2)Total
(In thousands)
Commercial and industrial
Pass$96,230 $80,949 $65,506 $13,378 $17,972 $43,592 $191,252 $10,801 $519,680 
Special Mention358 2,413 1,008 674 — 2,688 3,911 262 11,314 
Accruing Classified (1)1,184 223 6,247 — — 110 8,683 6,508 22,955 
Nonaccrual— 141 350 — 813 14 1,012 2,064 4,394 
Total$97,772 $83,726 $73,111 $14,052 $18,785 $46,404 $204,858 $19,635 $558,343 
Paycheck Protection Program
Pass$312,356 $— $— $— $— $— $— $— $312,356 
Total$312,356 $— $— $— $— $— $— $— $312,356 
Commercial tax-exempt
Pass$53,225 $20,586 $40,451 $24,624 $102,133 $190,798 $— $3,033 $434,850 
Special Mention— — — — — 2,806 — — 2,806 
Accruing Classified (1)— — — — — 4,503 — — 4,503 
Total$53,225 $20,586 $40,451 $24,624 $102,133 $198,107 $— $3,033 $442,159 
Commercial real estate
Pass$311,605 $462,144 $247,228 $308,437 $375,713 $657,563 $126,544 $16,190 $2,505,424 
Special Mention21,661 13,851 12,382 29,461 37,123 56,043 — — 170,521 
Accruing Classified (1)3,161 49,637 14,000 — — 9,371 — — 76,169 
Nonaccrual— 5,212 — — — — 49 — 5,261 
Total$336,427 $530,844 $273,610 $337,898 $412,836 $722,977 $126,593 $16,190 $2,757,375 
Construction and land
Pass$43,042 $63,914 $31,434 $16,288 $2,230 $— $— $— $156,908 
Special Mention— — 2,296 — — — — — 2,296 
Total$43,042 $63,914 $33,730 $16,288 $2,230 $— $— $— $159,204 
Residential
Pass$603,414 $471,237 $366,390 $388,845 $352,330 $478,468 $— $— $2,660,684 
Accruing Classified (1)— — — — — 3,000 — — 3,000 
Nonaccrual— 604 272 2,373 62 10,469 — — 13,780 
Total$603,414 $471,841 $366,662 $391,218 $352,392 $491,937 $— $— $2,677,464 
Home equity
Pass$— $— $252 $— $686 $553 $64,985 $10,217 $76,693 
Accruing Classified (1)— — — — — — — 256 256 
Nonaccrual— — — — — 276 139 — 415 
Total$— $— $252 $— $686 $829 $65,124 $10,473 $77,364 
Consumer and other
Pass$728 $158 $25 $— $81 $574 $118,177 $— $119,743 
Special Mention— — — — — — 300 — 300 
Nonaccrual— — — — — — 1 — 1 
Total$728 $158 $25 $— $81 $574 $118,478 $— $120,044 
Total
Pass$1,420,600 $1,098,988 $751,286 $751,572 $851,145 $1,371,548 $500,958 $40,241 $6,786,338 
Special Mention22,019 16,264 15,686 30,135 37,123 61,537 4,211 262 187,237 
Accruing Classified (1)4,345 49,860 20,247 — — 16,984 8,683 6,764 106,883 
Nonaccrual— 5,957 622 2,373 875 10,759 1,201 2,064 23,851 
Total$1,446,964 $1,171,069 $787,841 $784,080 $889,143 $1,460,828 $515,053 $49,331 $7,104,309 
______________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
(2) Amounts for revolving loans converted to term loans represent only those loans that have been converted to term loans after December 31, 2016. Due to data limitations, information prior to December 31, 2016 is unavailable.

25
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following tables present, by class of receivable, the balance of impaired loans with and without a related allowance, the associated allowance for those impaired loans with a related allowance, and the total unpaid principal on impaired loans:
As of and for the three months ended March 31, 2021
Recorded Investment (1)Unpaid Principal BalanceRelated AllowanceYTD Average Recorded InvestmentYTD Interest Income Recognized while Impaired
(In thousands)
With no related allowance recorded:
Commercial and industrial$3,806 $3,880 n/a$3,594 $— 
Paycheck Protection Program— — n/a— — 
Commercial tax-exempt— — n/a— — 
Commercial real estate— — n/a1,303 — 
Construction and land— — n/a— — 
Residential14,710 14,974 n/a14,564 90 
Home equity (2)355 355 n/a362 8 
Consumer and other— — n/a— — 
Subtotal$18,871 $19,209 n/a$19,823 $98 
With an allowance recorded:
Commercial and industrial $610 $629 $541 $789 $— 
Paycheck Protection Program— — — — — 
Commercial tax-exempt— — — — — 
Commercial real estate5,261 5,434 125 3,958 — 
Construction and land— — — — — 
Residential341 341 51 384 2 
Home equity256 256 17 256 — 
Consumer and other— — — — — 
Subtotal$6,468 $6,660 $734 $5,387 $2 
Total:
Commercial and industrial$4,416 $4,509 $541 $4,383 $— 
Paycheck Protection Program— — — — — 
Commercial tax-exempt— — — — — 
Commercial real estate5,261 5,434 125 5,261 — 
Construction and land— — — — — 
Residential15,051 15,315 51 14,948 92 
Home equity (2)611 611 17 618 8 
Consumer and other— — — — — 
Total$25,339 $25,869 $734 $25,210 $100 
_____________________
(1)Recorded investment represents the client loan balance net of historical charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.
(2)Negative quarterly income is due to reversal of income recognized in prior quarter.
26
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
As of and for the three months ended March 31, 2020
Recorded Investment (1)Unpaid Principal BalanceRelated AllowanceYTD Average Recorded InvestmentYTD Interest Income Recognized while Impaired
(In thousands)
With no related allowance recorded:
Commercial and industrial$555 $632 n/a$667 $6 
Commercial tax-exempt— — n/a— — 
Commercial real estate6,119 6,151 n/a2,403 9 
Construction and land— — n/a— — 
Residential16,352 16,612 n/a15,587 117 
Home equity1,548 2,109 n/a1,550 3 
Consumer and other— — n/a— — 
Subtotal$24,574 $25,504 n/a$20,207 $135 
With an allowance recorded:
Commercial and industrial$273 $280 $175 $281 $— 
Commercial tax-exempt— — — — — 
Commercial real estate— — — — — 
Construction and land— — — — — 
Residential532 532 64 535 4 
Home equity270 270 20 271 2 
Consumer and other— — — — — 
Subtotal$1,075 $1,082 $259 $1,087 $6 
Total:
Commercial and industrial$828 $912 $175 $948 $6 
Commercial tax-exempt— — — — — 
Commercial real estate6,119 6,151 — 2,403 9 
Construction and land— — — — — 
Residential16,884 17,144 64 16,122 121 
Home equity1,818 2,379 20 1,821 5 
Consumer and other— — — — — 
Total$25,649 $26,586 $259 $21,294 $141 
_____________________
(1)Recorded investment represents the client loan balance net of historical charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.

27
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
As of and for the year ended December 31, 2020
Recorded Investment (1)Unpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income Recognized while Impaired
(In thousands)
With no related allowance recorded:
Commercial and industrial$2,262 $2,307 n/a$2,512 $141 
Paycheck Protection Program— — n/a— — 
Commercial tax-exempt— — n/a302 20 
Commercial real estate5,212 5,384 n/a4,818 33 
Construction and land— — n/a— — 
Residential14,523 14,783 n/a15,509 534 
Home equity367 367 n/a922 16 
Consumer and other— — n/a— — 
Subtotal$22,364 $22,841 n/a$24,063 $744 
With an allowance recorded:
Commercial and industrial$2,053 $2,090 $279 $378 $1 
Paycheck Protection Program— — — — — 
Commercial tax-exempt— — — — — 
Commercial real estate50 50 50 23 — 
Construction and land— — — — — 
Residential419 419 54 498 13 
Home equity256 256 17 264 7 
Consumer and other— — — — — 
Subtotal$2,778 $2,815 $400 $1,163 $21 
Total:
Commercial and industrial$4,315 $4,397 $279 $2,890 $142 
Paycheck Protection Program— — — — — 
Commercial tax-exempt— — — 302 20 
Commercial real estate5,262 5,434 50 4,841 33 
Construction and land— — — — — 
Residential14,942 15,202 54 16,007 547 
Home equity623 623 17 1,186 23 
Consumer and other— — — — — 
Total$25,142 $25,656 $400 $25,226 $765 
_____________________
(1)Recorded investment represents the client loan balance net of historical charge-offs and historical nonaccrual interest paid, if applicable, which was applied to principal.
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.
On March 22, 2020, regulators issued an interagency statement encouraging financial institutions to work with borrowers affected by the COVID-19 pandemic. The interagency statement also provided additional information regarding loan modifications. The regulators indicated they will not criticize institutions for working with borrowers in a safe and sound manner and have indicated that related modifications will not automatically result in a TDR. The regulators also provided supervisory views that loans modified under this program would not be considered past due or nonaccrual.
The regulators view prudent loan modification programs offered to financial institution customers affected by the COVID-19 pandemic as positive and proactive actions that can manage adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk. The statement indicated that short-term modifications made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief are not TDRs.
Loans that are designated as impaired require an analysis to determine the amount of impairment, if any. Impairment would be indicated as a result of the carrying value of the loan exceeding either the estimated collateral value, less costs to sell, for collateral dependent loans or the net present value of the projected cash flow, discounted at the loan’s contractual effective interest rate, for loans not considered to be collateral dependent. Generally, shortfalls in the analysis on collateral dependent loans would result in the impairment amount being charged-off to the Allowance for loan losses. Shortfalls on cash flow
28
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
dependent loans may be carried as specific allocations to the general reserve unless a known loss is determined to have occurred, in which case, such known loss is charged-off.
Loans in the held for sale category are carried at the lower of amortized cost or estimated fair value in the aggregate and are excluded from the Allowance for loan losses analysis.
As of March 31, 2021, the Bank has pledged $2.2 billion of loans in a blanket lien agreement with the FHLB. The Bank also has $320.7 million of loans pledged as collateral at the FRB for access to their discount window. As of December 31, 2020, the Bank had pledged $2.2 billion of loans to the FHLB and $332.8 million of loans to the FRB.
The Bank may, under certain circumstances, restructure loans as a concession to borrowers who are experiencing financial difficulty. These loans are outside of the guidelines to not be considered a TDR by recent regulatory guidance. Such loans are classified as TDRs and are included in impaired loans. TDRs typically result from the Bank’s loss mitigation activities which, among other things, could include rate reductions, payment extensions, and/or principal forgiveness. As of March 31, 2021 and December 31, 2020, TDRs totaled $14.0 million and $13.9 million, respectively. As of March 31, 2021, $7.1 million of the $14.0 million in TDRs were on accrual status. As of December 31, 2020, $7.2 million of the $13.9 million in TDRs were on accrual status.
Since all TDR loans are considered impaired loans, they are individually evaluated for impairment. The resulting impairment, if any, would have an impact on the Allowance for loan losses as a specific reserve or charge-off. If, prior to the classification as a TDR, the loan was not impaired, there would have been a general reserve on the particular loan. Prior to the adoption of ASU 2016-13 on January 1, 2020, a general or allocated reserve would have been applied. Many loans initially categorized as TDRs are already on nonaccrual status and are already considered impaired. Therefore, there is generally not a material change to the Allowance for loan losses when a nonaccruing loan is categorized as a TDR.
The following tables present the balance of TDRs that were restructured or defaulted during the periods indicated:
As of and for the three months ended March 31, 2021
Restructured Year to DateTDRs that defaulted in the Year to Date that were restructured
in prior twelve months
# of
Loans		Pre-
modification
recorded
investment		Post-
modification
recorded
investment		# of
Loans		Post-
modification
recorded
investment
(In thousands, except number of loans)
Residential and home equity (1)1 $220 $220 — $— 
Total1 $220 $220 — $— 
_____________________
(1)Represents the following type of concession: extension of maturity
                    
As of and for the three months ended March 31, 2020
Restructured Year to DateTDRs that defaulted in the Year to Date that were restructured
in prior twelve months
# of
Loans		Pre-
modification
recorded
investment		Post-
modification
recorded
investment		# of
Loans		Post-
modification
recorded
investment
(In thousands, except number of loans)
Commercial and industrial (1)1 $50 $50 — $— 
Residential and home equity (2)1 2,373 2,373 — — 
Total2 $2,423 $2,423 — $— 
_____________________
(1)Represents the following type of concession: extension of maturity and reduction in interest rate.
(2)Represents the following type of concession: payment deferral.
In response to the COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 Residential and home equity loans totaling approximately $220.0 million have been processed under the program. As of March 31, 2021, approximately 47 loans totaling approximately $20.0 million remain in deferral under the program.
29
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Additionally, in response to the COVID-19 pandemic, the Bank initiated a program where it offered qualified Commercial and industrial borrowers principal payment deferrals for six months, with the deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under the program. As of March 31, 2021, approximately four loans totaling approximately $5.7 million remain in deferral under the program.
Loan participations serviced for others and loans serviced for others are not included in the Company’s total loans. The following table presents a summary of the loan participations serviced for others and loans serviced for others based on class of receivable as of the dates indicated:
 March 31, 2021December 31, 2020
 (In thousands)
Commercial and industrial$110,284 $110,589 
Commercial tax-exempt22,845 17,604 
Commercial real estate136,019 130,551 
Construction and land102,422 93,874 
Total loan participations serviced for others $371,570 $352,618 
Residential$146,080 $168,110 
Total loans serviced for others$146,080 $168,110 
Total loans include deferred loan origination (fees)/costs, net, of $(2.1) million and $0.3 million as of March 31, 2021 and December 31, 2020, respectively
7.    Allowance for Loan Losses
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 CECL methodology, which the Company adopted on January 1, 2020, the Company estimates credit losses on a collective basis per segment 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 group’s historical default and loss experience 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 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 historical long-run average of the macroeconomic variables. 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 chosen to determine the reasonable and supportable economic forecasts. The Company's qualitative assessment includes the following factors:
• Volume and trend of past-due, nonaccrual, 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 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.
Loan losses are charged against the Allowance for loan losses when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the Allowance for loan losses when collected.
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
30
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
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.
The Allowance for loan losses, reported as a reduction of outstanding loan balances, totaled $74.0 million and $81.2 million as of March 31, 2021 and December 31, 2020, respectively.
Beginning in the second quarter of 2020, the Company made a change to the loan portfolio segmentation as it relates to the Allowance for loan losses, adding the segment Paycheck Protection Program ("PPP"). For the period ended March 31, 2020, there were no loans in this segment as the SBA initiated the program in the second quarter of 2020 in response to the COVID-19 pandemic.
The following table presents a summary of the changes in the Allowance for loan losses for the periods indicated:
As of and for the three months ended March 31,
20212020
(In thousands)
Allowance for loan losses, beginning of period:
Commercial and industrial$8,985 $10,048 
Paycheck Protection Program159 n/a
Commercial tax-exempt2,550 6,016 
Commercial real estate51,161 40,765 
Construction and land4,041 5,119 
Residential12,864 8,857 
Home equity293 778 
Consumer and other1,185 399 
Total Allowance for loan losses, beginning of period$81,238 $71,982 
Impact of adopting ASU 2016-13:
Commercial and industrialn/a(565)
Paycheck Protection Programn/an/a
Commercial tax-exemptn/a(4,409)
Commercial real estaten/a(14,455)
Construction and landn/a(2,158)
Residentialn/a685 
Home equityn/a(535)
Consumer and othern/a1,052 
Total impact of adopting ASU 2016-13n/a$(20,385)
Allowance for loan losses, beginning of period, net$81,238 $51,597 
Provision/(credit) for loan losses:
Commercial and industrial$2,017 $1,245 
Paycheck Protection Program20 n/a
Commercial tax-exempt35 320 
Commercial real estate(5,404)10,270 
Construction and land(788)2,748 
Residential(2,689)2,237 
Home equity(64)(72)
Consumer and other(131)214 
Total provision/(credit) for loan losses$(7,004)$16,962 
31
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
As of and for the three months ended March 31,
20212020
(In thousands)
Loans charged -off:
Commercial and industrial$(297)$(518)
Paycheck Protection Program— n/a
Commercial tax-exempt— — 
Commercial real estate— — 
Construction and land— — 
Residential— — 
Home equity— — 
Consumer and other— (10)
Total charge-offs$(297)$(528)
Recoveries on loans previously charged-off:
Commercial and industrial$39 $45 
Paycheck Protection Program— n/a
Commercial tax-exempt— — 
Commercial real estate— — 
Construction and land— — 
Residential3 — 
Home equity— 132 
Consumer and other31 3 
Total recoveries$73 $180 
Allowance for loan losses, end of period:
Commercial and industrial$10,744 $10,255 
Paycheck Protection Program179 n/a
Commercial tax-exempt2,585 1,927 
Commercial real estate45,757 36,580 
Construction and land3,253 5,709 
Residential10,178 11,779 
Home equity229 303 
Consumer and other1,085 1,658 
Total Allowance for loan losses, end of period$74,010 $68,211 
The balance of the Allowance for loan losses of $74.0 million as of March 31, 2021 represents a decrease of $7.2 million from December 31, 2020. During the three months ended March 31, 2021, the Company recognized a Provision credit of $7.0 million. The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.
The balance of reserve for unfunded loan commitments of $4.5 million as of March 31, 2021 represents a decrease of $2.0 million from December 31, 2020. The change was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. Changes in the balance of reserve for unfunded loan commitments are recognized as Other expense within Total operating expense.
The Allowance for loan losses is an estimate of the inherent risk of loss in the loan portfolio as of the consolidated balance sheet dates. Management estimates the level of the Allowance for loan losses based on all relevant information available. 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 following tables present the Company’s Allowance for loan losses and loan portfolio as of March 31, 2021 and December 31, 2020 by portfolio segment, disaggregated by method of impairment analysis. The Company had no loans acquired with deteriorated credit quality as of March 31, 2021 or December 31, 2020.
32
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
March 31, 2021
Individually Evaluated
for Impairment		Collectively Evaluated
for Impairment		Total
Recorded investment
(loan balance)		Allowance for loan lossesRecorded investment
(loan balance)		Allowance for loan lossesRecorded investment
(loan balance)		Allowance for loan losses
(In thousands)
Commercial and industrial$4,416 $541 $663,801 $10,203 $668,217 $10,744 
Paycheck Protection Program— — 351,170 179 351,170 179 
Commercial tax-exempt— — 488,507 2,585 488,507 2,585 
Commercial real estate5,261 125 2,692,416 45,632 2,697,677 45,757 
Construction and land— — 181,482 3,253 181,482 3,253 
Residential15,051 51 2,617,503 10,127 2,632,554 10,178 
Home equity611 17 71,141 212 71,752 229 
Consumer and other— — 124,966 1,085 124,966 1,085 
Total$25,339 $734 $7,190,986 $73,276 $7,216,325 $74,010 
December 31, 2020
Individually Evaluated
for Impairment		Collectively Evaluated
for Impairment		Total
Recorded investment
(loan balance)		Allowance for loan lossesRecorded investment
(loan balance)		Allowance for loan lossesRecorded investment
(loan balance)		Allowance for loan losses
(In thousands)
Commercial and industrial$4,315 $279 $554,028 $8,706 $558,343 $8,985 
Paycheck Protection Program— — 312,356 159 312,356 159 
Commercial tax-exempt— — 442,159 2,550 442,159 2,550 
Commercial real estate5,262 50 2,752,113 51,111 2,757,375 51,161 
Construction and land— — 159,204 4,041 159,204 4,041 
Residential14,942 54 2,662,522 12,810 2,677,464 12,864 
Home equity623 17 76,741 276 77,364 293 
Consumer and other— — 120,044 1,185 120,044 1,185 
Total$25,142 $400 $7,079,167 $80,838 $7,104,309 $81,238 
33
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
8.    Derivatives and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and, to a lesser extent, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are generally determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain loans, deposits, and borrowings. As a service to its customers, the Company may utilize derivative instruments including customer foreign exchange forward contracts to manage its foreign exchange risk, if any.
The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020:
 March 31, 2021December 31, 2020
 Asset derivativesLiability derivativesAsset derivativesLiability derivatives
 Balance
sheet
location		Fair 
value (1)		Balance
sheet
location		Fair 
value (1)		Balance
sheet
location		Fair 
value (1)		Balance
sheet
location		Fair 
value (1)
 (In thousands)
Derivatives designated as hedging instruments:
Interest rate swapsOther assets$— Other liabilities$157 Other assets$— Other liabilities$228 
Derivatives not designated as hedging instruments:
Interest rate customer swapsOther assets53,682 Other liabilities54,529 Other assets83,255 Other liabilities84,590 
Risk participation agreementsOther assets28 Other liabilities211 Other assets49 Other liabilities375 
Total$53,710 $54,897 $83,304 $85,193 
_____________________
(1)For additional details, see Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 5: Fair Value Measurements.”
The following table presents the effect of the Company’s derivative financial instruments on Accumulated other comprehensive income for the three months ended March 31, 2021 and 2020:
Derivatives in cash
flow hedging
relationships		Amount of gain or (loss) recognized in OCI on derivatives Location of gain
or (loss) reclassified
from accumulated
OCI into income		Amount of gain or (loss) reclassified from accumulated OCI into income
Three months ended March 31,Three months ended March 31,
2021202020212020
(In thousands)(In thousands)
Interest rate swaps$8 $— Interest income/(expense)$(63)$— 
Total$8 $— $(63)$— 
The following table presents the effect of the Company’s derivative financial instruments in the Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020:
Location of gain or (loss) reclassified from accumulated
OCI into income		Amount of gain or
(loss) recognized in
income on cash flow
hedging relationships
Three months ended March 31,
20212020
(In thousands)
Total amounts of income and (expense) line items presented in the Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recordedInterest income/(expense)$(63)$— 
The effects of cash flow hedging:
Gain or (loss) on cash flow hedging relationships in ASC 815
Interest contracts - amount of gain or (loss) reclassified from Accumulated other comprehensive income into incomeInterest income/(expense)$(63)$— 
34
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The Bank has agreements with its derivative counterparties that contain provisions where, if the Bank defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Bank could also be declared in default on its derivative obligations. The Bank was in compliance with these provisions as of March 31, 2021 and December 31, 2020.
The Bank also has agreements with certain of its derivative counterparties that contain provisions where, if the Bank fails to maintain its status as a well- or adequately-capitalized institution, then the counterparty could terminate the derivative positions and the Bank would be required to settle its obligations under the agreements. The Bank was in compliance with these provisions as of March 31, 2021 and December 31, 2020.
Certain of the Bank’s agreements with its derivative counterparties contain provisions where, if specified, events or conditions occur that materially change the Bank’s creditworthiness in an adverse manner, the Bank may be required to fully collateralize its obligations under the derivative instruments. The Bank was in compliance with these provisions as of March 31, 2021 and December 31, 2020.
As of March 31, 2021 and December 31, 2020, the termination amounts related to collateral determinations of derivatives in a liability position were $51.7 million and $85.6 million, respectively. The Bank has minimum collateral posting thresholds with its derivative counterparties. As of March 31, 2021 and December 31, 2020, the Bank had pledged securities with a market value of $54.3 million and $86.7 million, respectively, against its obligations under these agreements. The collateral posted is typically greater than the current liability position; however, due to timing of liability position changes at period end, the funding of a collateral shortfall may take place shortly following period end.
Cash flow hedges of interest rate risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements.
To accomplish this objective and strategy, the Bank has entered into one interest rate swap during 2020 with an effective date of April 14, 2020. The interest rate swap is designated as a cash flow hedge and involves the receipt of variable rate amounts from a counterparty in exchange for the Bank making fixed payments.
The one interest rate swap entered into during 2020 has a notional amount of $100 million and a term of eighteen months from its effective date. The interest rate swap will effectively fix the Bank's interest payments on $100 million of rolling three-month FHLB advances at a rate of 0.48%.
Per ASU 2017-12, for derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. For active cash flow hedges, a portion of the balance reported in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made or received on the Bank’s interest rate swaps.
Non-designated hedges
Derivatives not designated as hedges are not speculative and result from different services the Bank provides to qualified commercial clients. The Bank offers certain derivative products directly to such clients. The Bank economically hedges derivative transactions executed with commercial clients by entering into mirror-image, offsetting derivatives with third parties. Derivative transactions executed as part of these programs are not designated in ASC 815-qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. Because the derivatives have mirror-image contractual terms, the changes in fair value substantially offset through earnings. The net effect on earnings is primarily driven by changes in the credit valuation adjustment (“CVA”). The CVA represents the dollar amount of fair value adjustment related to nonperformance risk of both the Bank and its counterparties. Fees earned in connection with the execution of derivatives related to this program are recognized in the Consolidated Statements of Operations in Other income. The Bank has interest rate swaps and caps related to this program with an aggregate notional amount of $1.7 billion as of March 31, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, there were no foreign currency exchange contracts related to this program.
In addition, as a participant lender, the Bank has guaranteed performance on the pro-rated portion of swaps executed by other financial institutions. As the participant lender, the Bank is providing a partial guarantee, but is not a direct party to the related swap transactions. The Bank has no obligations under the risk participation agreements unless the borrower defaults on their swap transaction with the lead bank and the swap is in a liability position to the borrower. In that instance, the Bank has agreed to pay the lead bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. As of March 31, 2021 and December 31, 2020, there were seven of these risk participation transactions with an aggregate notional amount of $57.0 million and $57.4 million, respectively.
35
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The Bank has also participated out to other financial institutions a pro-rated portion of swaps executed by the Bank. The other financial institution has no obligations under the risk participation agreements unless the borrowers default on their swap transactions with the Bank and the swaps are in liability positions to the borrower. In those instances, the other financial institution has agreed to pay the Bank a portion of the swap’s termination value at the time of the default. The derivative transactions entered into as part of these agreements are not designated, as per ASC 815, as qualifying hedging relationships and are, therefore, marked-to-market through earnings each period. As of March 31, 2021 and December 31, 2020, there were five of these risk participation transactions with an aggregate notional amount of $30.2 million.
The following table presents the effect of the Bank’s derivative financial instruments not designated as hedging instruments in the Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020.
Amount of gain or (loss), net,
recognized in income on derivatives
Derivatives not designated as
hedging instruments		Location of gain or (loss) recognized in income on derivativesThree months ended March 31,
20212020
 (In thousands)
Interest rate swapsOther income/(expense)$488 $(555)
Risk participation agreementsOther income/(expense)144 (202)
Total$632 $(757)
9.    Income Taxes
The following table presents the components of Income tax expense and effective tax rates for the periods indicated:
Three months ended March 31,
20212020
(In thousands)
Income before income taxes$16,728 $908 
Income tax expense6,076 102 
Net income before attribution to noncontrolling interests$10,652 $806 
Effective tax rate36.3 %11.2 %
The effective tax rate for the three months ended March 31, 2021 of 36.3%, with related tax expense of $6.1 million, was calculated based on a forecasted 2021 annual effective tax rate. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.
The effective tax for the three months ended March 31, 2020 of 11.2%, with related tax expense of $0.1 million, was calculated based on a forecasted 2020 annual effective tax rate. The effective tax rate was less than the statutory rate of 21% due primarily to earnings from tax-exempt investments and income tax credits, partially offset by state and local income taxes and the accounting for investments in affordable housing projects.
The effective tax rate for the three months ended March 31, 2021 is more than the effective tax rate for the same period in 2020 due primarily to the higher level of income in 2021 as compared to 2020 and as a result of approximately $3.0 million tax expense recorded discretely in the first quarter of 2021 due to the expected non-deductible Merger costs.
10.    Noncontrolling Interests
Noncontrolling interests consist of equity owned by management of the Company’s majority-owned affiliate, DGHM. Net income attributable to noncontrolling interests in the Consolidated Statements of Operations, if any, represents the net income allocated to the noncontrolling interest owners of DGHM. Net income allocated to the noncontrolling interest owners was zero and $6 thousand for the three months ended March 31, 2021 and 2020, respectively.
On the Consolidated Balance Sheets, noncontrolling interests are included as the sum of the capital and undistributed profits allocated to the noncontrolling interest owners. Typically, this balance is included in a company’s permanent shareholders’ equity in the Consolidated Balance Sheets. When the noncontrolling interest owners’ rights include certain redemption features, as described in ASC 480, Distinguishing Liabilities from Equity, such redeemable noncontrolling interests are classified as mezzanine equity and are not included in permanent shareholders’ equity. Due to the redemption features of the noncontrolling interests of DGHM, the Company had Redeemable noncontrolling interests held in mezzanine equity in the accompanying Consolidated Balance Sheets of zero as of March 31, 2021 and December 31, 2020. The aggregate amount of
36
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
such Redeemable noncontrolling equity interests are recorded at the estimated maximum redemption values. The Company had no noncontrolling interests included in permanent shareholder’s equity at March 31, 2021 and December 31, 2020.
The DGHM operating agreement provides the Company and/or the noncontrolling interest holders with contingent call and put options and mandatory repurchase obligations used for the orderly transfer of noncontrolling equity interests between the noncontrolling interest holders and the Company at contractually predetermined values. This agreement is discussed in Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The interests in DGHM take the form of limited liability company units. There are various events that could trigger a put, call or mandatory repurchase, such as a change in control, death, disability, retirement, resignation or termination. The terms of these rights and obligations are governed by the operating agreement of DGHM.
The following table presents a roll-forward of the Company’s Redeemable noncontrolling interests for the periods indicated:
Three months ended March 31,
20212020
(In thousands)
Redeemable noncontrolling interests at beginning of period$— $1,383 
Net income attributable to noncontrolling interests— 6 
Distributions— (6)
Purchases/(sales) of ownership interests— (64)
Amortization of equity compensation7 8 
Adjustments to fair value(7)(1,327)
Redeemable noncontrolling interests at end of period$— $— 
11.    Accumulated Other Comprehensive Income
The following table presents a summary of the amounts reclassified from the Company's Accumulated other comprehensive income/(loss) for the three months ended March 31, 2021 and 2020:
Description of component of Accumulated other comprehensive income/(loss)Three months ended March 31,Affected line item in
Statement of Operations
20212020
(In thousands)
Net realized gain/(loss) on cash flow hedges:
Hedges related to deposits:
Pre-tax gain/(loss)$(63)$— Interest income/(expense)
Tax (expense)/benefit19 — Income tax (expense)/benefit
Total reclassifications for the period, net of tax$(44)$— Net income/(loss) attributable to the Company
The following table presents the after-tax changes in the components of the Company’s Accumulated other comprehensive income/(loss) for the three months ended March 31, 2021 and 2020:
Components of Accumulated other comprehensive income/(loss)
Unrealized gain/(loss) on Investment securities available-for-saleUnrealized
gain/(loss)
on cash flow
hedges		Unrealized
gain/(loss)
on other		Accumulated other comprehensive
income/(loss)
(In thousands)
Balance at December 31, 2019$8,435 $— $(860)$7,575 
Other comprehensive income/(loss) before reclassifications14,489 — — 14,489 
Other comprehensive income/(loss), net14,489 — — 14,489 
Balance at March 31, 2020$22,924 $— $(860)$22,064 
Balance at December 31, 2020$32,672 $(162)$(825)$31,685 
Other comprehensive income/(loss) before reclassifications(17,993)6 — (17,987)
Reclassified from other comprehensive income/(loss)— 44 — 44 
Other comprehensive income/(loss), net(17,993)50 — (17,943)
Balance at March 31, 2021$14,679 $(112)$(825)$13,742 
37
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
12.    Restructuring
There were no restructuring charges for the three months ended March 31, 2021 and 2020.
The following table presents a summary of the restructuring activity for the three months ended March 31, 2021 and 2020:
Severance ChargesOther Associated CostsTotal
(In thousands)
Accrued charges at December 31, 2020$— $789 $789 
Costs paid— — — 
Accrued charges at March 31, 2021$— $789 $789 
Accrued charges at December 31, 2019$526 $789 $1,315 
Costs paid(434)— (434)
Accrued charges at March 31, 2020$92 $789 $881 
13.    Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes 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. ASC 606 does not apply to revenue associated with financial instruments such as loans and securities. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest income considered in-scope of ASC 606 is discussed below.
Wealth management and trust fees
Wealth management and trust fees are earned for providing wealth management, retirement plan advisory, family office, financial planning, trust services, and other financial advisory services to clients. The Company’s performance obligation under these contracts is satisfied over time as the services are provided. Fees are recognized monthly based on the average monthly, beginning-of-quarter, or, for a small number of clients, end-of-quarter market value of the AUM and the applicable fee rate, depending on the terms of the contracts. Fees are also recognized monthly based either on a fixed fee amount or are based on the quarter-end (in arrears) market value of the AUM and the applicable fee rate, depending on the terms of the contracts. No performance-based incentives are earned under wealth management contracts. Receivables are recorded on the Consolidated Balance Sheets in the Fees receivable line item. Deferred revenues of $6.3 million and $6.1 million as of March 31, 2021 and December 31, 2020, respectively, are recorded on the Consolidated Balance Sheets within Other liabilities.
Trust fees are earned when the Company is appointed as trustee for clients. As trustee, the Company administers the client’s trust and manages the assets of the trust, including investments and property. The Company’s performance obligation under these agreements is satisfied over time as the administration and management services are provided. Fees are recognized monthly or, in certain circumstances, quarterly based on a percentage of the market value of the account as outlined in the agreement. Payment frequency is defined in the individual contracts, which primarily stipulate monthly in arrears. No performance-based incentives are earned on trust fee contracts. Receivables are recorded on the Consolidated Balance Sheets within Fees receivable.
Investment management fees
Investment management fees are earned for the management of a series of accounts and funds in which clients invest directly, acting as a sub-advisor to larger investment management companies, or private client account management. The Company’s performance obligation is satisfied over time, and the resulting fees are recognized monthly, based upon either the beginning-of-quarter (in advance) or quarter-end (in arrears) market value of the AUM and the applicable fee rate, depending on the terms of the contracts. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company may earn performance-based incentives on certain contracts. Receivables are recorded on the Consolidated Balance Sheets within Fees receivable.
Other banking fee income
The Bank charges a variety of fees to its clients for services provided on the deposit and deposit management-related accounts. Each fee is either transaction-based or assessed monthly. The types of fees include service charges on accounts, overdraft fees, maintenance fees, ATM fee charges, and other miscellaneous charges related to the accounts. These fees are not governed by individual contracts with clients. They are charges to clients based on disclosures presented to clients upon opening these accounts along with updated disclosures when changes are made to the fee structures. The transaction-based fees are
38
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
recognized in revenue when charged to the client based on specific activity on the client’s account. Monthly service/maintenance charges are recognized in the month they are earned and are charged directly to the client’s account.
The Bank also charges fees for treasury activities, such as swap fees and foreign exchange fees, for clients with a banking relationship. These fees are recorded when earned via completion of the transaction for the client. The completion of the transaction is deemed to be the performance obligation of the transaction. The related revenue is recorded through a direct charge to the client’s account. There are no individual agreements or contracts with clients relating to foreign exchange fees as they are governed by client disclosure statements and the Bank’s internal policies and procedures.
The following table presents the fee income considered in-scope of ASC 606 by contracts with customers:
 Three months ended March 31,
 20212020
 (In thousands)
Fees and other income:
Wealth management and trust fees $19,136 $18,371 
Investment management fees489 1,925 
Other income874 752 
Revenue from contracts with customers20,499 21,048 
Other non-interest income not within the scope of ASC 6065,671 473 
Total non-interest income$26,170 $21,521 
14.    Lease Accounting
In accordance with ASC 842, Leases (“ASC 842”), the Company recognizes Lease liabilities and Right-of-use ("ROU") assets on the Consolidated Balance Sheets for all leases with a term longer than 12 months. ROU assets obtained in exchange for lease liabilities are net of tenant improvement allowances and deferred rent. Leases are classified as operating, with respective classification impacting the pattern and method of expense recognition in the Consolidated Statements of Operations.
The Company, as lessee, has 36 real estate leases for office and ATM locations classified as operating leases. The Company determines if an arrangement is a lease or contains a lease at inception. The terms of the real estate leases generally have annual increases in payments based off of a fixed or variable rate, such as the Consumer Price Index rate, that is outlined within the respective contracts. Generally, the initial terms of the leases for our leased properties range from five to fifteen years. Most of the leases also include options to renew for periods of five to ten years at contractually agreed upon rates or at market rates at the time of the extension. On a quarterly basis, the Company evaluates whether the renewal of each lease is reasonably certain. If the lease doesn’t provide the implicit interest rate, the Bank uses its incremental borrowing rate at the commencement date of the lease in determining the present value of lease payments. No other significant judgments or assumptions were made in applying the requirements of ASU 2016-02.
The Company, as lessee, has 27 equipment leases classified as operating leases. The terms of the equipment leases are fixed payments outlined within the respective contracts and generally range from three to five years. The Bank uses its incremental borrowing rate at the commencement date of the lease in determining the present value of lease payments. No other significant judgments or assumptions were made in applying the requirements of ASU 2016-02.
The following table presents information about the Company's leases as of the dates indicated.
Three months ended March 31,
20212020
(In thousands)
Lease cost
Operating lease cost$5,007$4,601 
Short-term lease cost5848 
Variable lease cost3(9)
Less: Sublease income(38)(28)
Total operating lease cost$5,030$4,612 
39
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Three months ended March 31,
20212020
(In thousands, except years and percentages)
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$5,222 $5,100 
ROU assets obtained in exchange for new operating lease liabilities (1)$1,541 $443 
Weighted-average remaining lease term for operating leases7.5 years7.9 years
Weighted-average discount rate for operating leases3.0 %3.2 %
______________________
(1) Operating lease liabilities were impacted by the modification and addition of real estate leases and the addition of equipment leases for the three months ended March 31, 2021.
The Company is obligated for minimum payments under non-cancelable operating leases. In accordance with the terms of these leases, the Company is currently committed to minimum annual payments as follows as of March 31, 2021:
March 31, 2021
(In thousands)
Remainder of 2021$15,814 
202221,334 
202319,846 
202413,884 
202512,541 
Thereafter39,918 
Total future minimum lease payments123,337 
Less: Amounts representing interest(16,194)
Present value of net future minimum lease payments$107,143 
15.    Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) (“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 I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 4: Investments”, “Note 6 - Loan Portfolio and Credit Quality”, and “Note 7 - Allowance for Loan Losses” for further details.
40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of and for the three months ended March 31, 2021
Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may constitute 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, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” and similar expressions. These statements include, among others, statements regarding our strategy; evaluations of interest rate trends and future liquidity; expectations as to changes in assets, deposits and results of operations; the impact of the COVID-19 pandemic; future operations, market position and financial position; and prospects, plans, and objectives of management. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company’s control.
Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; the risk that a condition to closing of the proposed merger may not be satisfied; the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated; the effect of the announcement of the proposed merger on our ability to maintain relationships with our key partners, customers and employees, and on our operating results and business generally; the occurrence of any event, change or other circumstance that could give rise to the right of one or both parties to terminate the Merger Agreement providing for our proposed merger with SVB Financial Group; changes in customer behavior; the possibility that future credits losses are higher than currently expected due to changes in economic assumptions, customer behavior or adverse economic developments; turbulence in the capital and debt markets; changes in interest rates; increases in loan defaults and charge-off rates; decreases in the value of securities and other assets; changes in loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; competitive pressures from other financial institutions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risk relating to the Company’s participation in the Paycheck Protection Program and other pandemic-related legislative and regulatory initiatives and programs; risks that goodwill and intangibles recorded in the Company’s financial statements will become impaired; the risk that the Company’s deferred tax asset may not be realized; risks related to the identification and implementation of acquisitions, dispositions and restructurings; changes in assumptions used in making such forward-looking statements, as well as the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
41

Executive Summary
The Company offers a wide range of private banking, wealth management, and trust services to high net worth individuals, families, businesses and select institutions through its two reportable segments: (i) Private Banking and (ii) Wealth Management and Trust. This Executive Summary provides an overview of the most significant aspects of the Company's operating segments and operations in the first quarter of 2021. Details of the matters addressed in this summary are provided elsewhere in this document and, in particular, in the sections immediately following.
As of and for the three months ended March 31,
20212020$ Change% Change
(In thousands, except per share data and percentages)
Total revenue$85,647 $78,778 $6,869 9 %
Provision/(credit) for loan losses(7,004)16,962 (23,966)nm
Total operating expense75,923 60,908 15,015 25 %
Net income before attribution to noncontrolling interests10,652 806 9,846 nm
Net income attributable to noncontrolling interests— 6 (6)(100)%
Net income attributable to the Company10,652 800 9,852 nm
Diluted earnings per share attributable to common shareholders$0.13 $0.01 $0.12 nm
ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):
Wealth Management and Trust$17,002,000 $13,497,000 $3,505,000 26 %
Other (1)196,000 1,016,000 (820,000)(81)%
Total AUM$17,198,000 $14,513,000 $2,685,000 19 %
_____________________
nm = not meaningful
(1) Includes results from Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”)
Net income attributable to the Company was $10.7 million and $0.8 million for the three months ended March 31, 2021 and March 31, 2020, respectively. The Company recognized Diluted earnings per share attributable to common shareholders of $0.13 and $0.01 for the three months ended March 31, 2021 and March 31, 2020, respectively. Key items that affected the Company’s results in the first quarter of 2021 compared to the same period of 2020 include:
▪The provision for loan losses was a credit of $7.0 million for the three months ended March 31, 2021, compared to an expense of $17.0 million for the same period of 2020. During the first quarter of 2021, the Company recognized a total provision credit of $9.0 million, which included a Provision credit for loan losses of $7.0 million, and separately, a reserve credit of $2.0 million for unfunded loan commitments, recognized as Other expense within Operating expense.
•The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.
▪Total revenue increased $6.9 million to $85.6 million for the three months ended March 31, 2021, compared to the same period of 2020 as described below.
•Total fees and other income increased $4.6 million, or 22%, to $26.2 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase was primarily driven by higher Other income as a result of a gain related to the revaluation of a receivable from the divestiture of former affiliate Bingham, Osborn & Scarborough, LLC ("BOS"), the impact of mark-to-market on derivatives and deferred compensation securities, and higher gain on sale of secondary loans. Total fees and other income represents 31% of Total revenue for the three months ended March 31, 2021, compared to 27% of Total revenue for the same period of 2020.
•Net interest income increased $2.2 million, or 4%, to $59.5 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase in Net interest income was primarily driven by the addition of income related to the Paycheck Protection Program ("PPP") and lower funding costs, partially offset by lower interest on interest-earning assets. Net interest margin (“NIM”) was 2.45% for the three months ended March 31, 2021, a decrease of 31 basis points compared to the same period in 2020. Although Net interest income increased, the decrease in NIM was primarily driven by excess cash balances held at lower yields.
42

▪Total operating expense increased $15.0 million, or 25%, to $75.9 million for the three months ended March 31, 2021, compared to the same period of 2020. The increase was primarily driven by costs related to the proposed merger with SVB Financial Group ("SVB"), increases in Salaries and employee benefits expense due to increases in variable compensation, and Information systems expense as a result of new IT initiatives being placed in service, partially offset by lower Other expense driven by the off-balance sheet provision credit.
▪For the three months ended March 31, 2021, total loans increased $112.0 million, or 2%, while total deposits increased $552.3 million, or 6%, from December 31, 2020. The increase in loans was primarily driven by higher Commercial and industrial loans, as well as higher PPP loans, while the increase in deposits was primarily driven by new and existing clients maintaining additional cash liquidity. The Company’s loan-to-deposit ratio decreased from 83% as of December 31, 2020 to 79% as of March 31, 2021, driven by strong deposit inflows. Deposits are the Company’s primary source of funds to originate loans. If the Company has excess deposits, the Company may seek to earn a better yield by investing excess cash in loan growth, purchasing investment securities or other cash management strategies.
▪Income tax expense for the three months ended March 31, 2021 was $6.1 million, compared to $0.1 million for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 36.3%, compared to an effective tax rate of 11.2% for the same period of 2020. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible.
The Company’s Private Banking segment reported Net income attributable to the Company of $21.8 million in the first quarter of 2021, compared to $0.6 million for the same period of 2020. Net income attributable to the Company increased $21.3 million from the same period in 2020, primarily driven by a decrease in Provision for loan losses of $24.0 million, as well as an increase in Total revenue of $4.8 million. These items were partially offset by an increase in Income tax expense of $5.7 million, as well as an increase of $1.9 million in Operating expense primarily due to increases in Salaries and employee benefits expense, and Information systems expense as a result of new IT initiatives being placed in service.
The Company’s Wealth Management and Trust segment reported Net income attributable to the Company of $1.2 million in the first quarter of 2021, compared to $2.0 million for the same period of 2020. The decrease of $0.8 million, or 40%, was primarily driven by an increase of $2.0 million in Operating expense, partially offset by an increase of $0.6 million in Total revenue. The increase in Operating expense was primarily driven by increases in Salaries and employee benefits expense, and Information systems expense as a result of new IT initiatives being placed in service to support the Company's strategic objectives. The increase in Total revenue was driven by the impact of higher AUM on fee revenues. Wealth Management and Trust AUM increased $3.5 billion, or 26%, to $17.0 billion at March 31, 2021 from $13.5 billion at March 31, 2020. The increase in AUM was primarily driven by favorable market returns of $3.6 billion, partially offset by total net outflows of $0.1 billion for the twelve months ended March 31, 2021.
Announced Merger
On January 4, 2021, the Company announced that it entered into an Agreement and Plan of Merger (the "Merger Agreement") with SVB, pursuant to which SVB will acquire the Company. On May 4, 2021, the shareholders of the Company approved the Merger Agreement. The transaction is expected to close mid-2021, subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has caused, and continues to cause, substantial disruptions to the global economy and to the customers and communities that we serve. In response to the pandemic, the Company implemented business continuity contingency plans, including company-wide remote working arrangements. We are also focused on supporting our clients who may be experiencing a financial hardship due to the COVID-19 pandemic, including by participating in the Small Business Administration’s (the “SBA”) PPP and offering loan deferrals and forbearance as needed, including our mortgage deferment program and Commercial and industrial loan deferment program, and creating the Commercial real estate second loan program. We will continue to evaluate this fluid situation and take additional actions as necessary.     
Participation in the PPP
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") initially appropriated $349 billion for “paycheck protection loans” through the PPP. The amount appropriated was subsequently increased to $659 billion. The CARES Act provided funding to the SBA for use for the PPP. Under the terms of the PPP, certain businesses can apply for loans through qualified financial institutions, such as the Bank, based on eligibility criteria. The PPP provides loans to eligible businesses with an initial term of up to five years at an interest rate of 1.0%. Loans issued under the PPP will be forgiven if the borrower uses at least 60% of the proceeds on payroll costs and other eligible costs such as utilities or rent for a period of up to
43

24 weeks, following the loan funding date. This was changed from 75% and 8 weeks by the Paycheck Protection Program Flexibility Act signed into law on June 5, 2020. The SBA has issued an interim final rule in which it has provided that a lender may rely on certifications made by a borrower to determine the borrower’s eligibility for a PPP loan and use of loan proceeds, subject to a good faith review, and to determine the qualifying loan amount and eligibility for loan forgiveness. Additionally, on December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "Economic Aid Act") was enacted which, among other items, provides for a second round of PPP loans.
Loans issued by participating financial institutions are 100% guaranteed by the SBA. Banks will receive a processing fee from the SBA from 1.0% to 5.0% based on the size of the loan. Loans up to $350 thousand will have a 5.0% fee, loans between $350 thousand and $2.0 million will have a 3.0% fee, and loans greater than $2.0 million will have a 1.0% fee.
In conjunction with the PPP, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection Program Liquidity Facility (the “PPPLF”) will extend credit to depository institutions with a term of up to five years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility. As of March 31, 2021, the Bank has not participated in the PPPLF.
As of March 31, 2021, the Bank processed 1,594 loans totaling $511.1 million under the PPP program, primarily in the second quarter of 2020 and the first quarter of 2021. The Bank has received $15.5 million in processing fees from the SBA, which is netted against the principal balance on the Consolidated Balance Sheets and will be accreted through net interest income on a straight-line basis over the life of the loan. If a loan is forgiven or otherwise paid off, the remainder of the processing fee will be accreted through net interest income. As of March 31, 2021, the balance of PPP loans was $351.2 million, and $8.2 million was accreted through net interest income. On May 5, 2021, the SBA stopped accepting PPP loan applications from most lenders, including the Company, because PPP funding has been exhausted.
Mortgage deferment program    
In response to the COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 residential and home equity loans totaling approximately $220.0 million have been processed under the program. As of March 31, 2021, approximately 47 loans totaling approximately $20.0 million remain in deferral under the program. Approximately 13 loans totaling $1.5 million are delinquent on payment terms as of March 31, 2021 after the deferral expired, primarily First Time Home Buyer loans as defined by the U.S. Department of Housing and Urban Development, while the remainder have expired with the loans returning to payment.
Commercial and industrial loan deferment program    
Also in response to the COVID-19 pandemic, the Bank initiated a program offering qualified Commercial and industrial borrowers principal payment deferral for six months, with the deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under the program. As of March 31, 2021, approximately four loans totaling approximately $5.7 million remain in deferral under the program, while the remainder have expired with the loans returning to payment. Of the loans that came off deferral, no loans are delinquent on payment terms as of March 31, 2021.
Commercial real estate second loan program
In response to the COVID-19 pandemic, the Bank also initiated a program to offer qualifying Commercial real estate borrowers a second mortgage to cover up to one year of principal and interest payments. In order to qualify for the loan, the total exposure after receiving the second mortgage for each borrower could not exceed a 75% loan-to-value ratio, and the loans were required to be current at the time of application, amongst other conditions. In total, borrowers with approximately 240 existing loans totaling $1.3 billion requested and were approved for these second mortgages, representing approximately 50% of the Commercial real estate loan balance. As of March 31, 2021, the borrowers associated with the $1.3 billion of existing loans received approximately $69.9 million in additional funding under this program. The Company does not anticipate a material increase in the $69.9 million balance of new loans in the future, and the principal balance will amortize down over the life of the loan, generally five years. The 12 month coverage period for debt service reserve balances will elapse in the second quarter of 2021.
In addition to, and outside of the Commercial real estate second loan program, the Bank offered qualified Commercial real estate borrowers principal payment deferral for up to twelve months, with the deferred principal added to the balance due at maturity. In total, approximately ten Commercial real estate borrowers with loans totaling approximately $55.0 million accepted this accommodation. As of March 31, 2021, one borrower with loans totaling $4.7 million remains in deferral. Of the loans that came off deferral, no loans are delinquent on payment terms as of March 31, 2021. The entire Commercial real estate portfolio will continue to be monitored for credit deterioration regardless of their participation in the plan.
Credit quality and Allowance for loan loss
44

The Company continues to monitor and evaluate the impact of the COVID-19 pandemic on the credit quality of our assets. Total criticized and classified loans as of March 31, 2021 was $314.4 million, an increase of $3.6 million, or 1%, linked quarter. During the first quarter of 2021, the Company recognized a total net provision credit of $9.0 million. The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.
Other accounting matters
There have been no significant changes to judgments in determining the fair value of assets or liabilities, and there have been no material impairments of financial assets. The Company will continue to monitor the fair value of assets to determine if trigger events exist to warrant further impairment testing.
Critical Accounting Policies
Critical accounting policies reflect significant judgments and uncertainties, which could potentially result in materially different results under different assumptions and conditions. The Company believes that its most critical accounting policy upon which its financial condition depends, which involves the most complex or subjective decisions or assessments, is the Allowance for loan losses. This policy is discussed in Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Upon the adoption of ASU 2016-13, Financial Instruments (Topic 326) (“ASU 2016-13”) on January 1, 2020, management's policy and processes for the Allowance for loan losses have changed. The updates in this standard replace the incurred loss impairment methodology with a CECL model methodology. The CECL model methodology incorporates current conditions, reasonable and supportable economic forecasts, and prepayments to estimate loan losses over the life of the loan. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan Losses” for further discussion on the new policy and processes. There have been no other changes to the Company's policies through the filing of this Quarterly Report on Form 10-Q.
Results of operations for the three months ended March 31, 2021 versus March 31, 2020
Net income. The Company recorded Net income attributable to the Company for the three months ended March 31, 2021 of $10.7 million, compared to Net income attributable to the Company of $0.8 million for the same respective period in 2020.

The Company recognized Diluted earnings per share attributable to common shareholders for the three months ended March 31, 2021 of $0.13 per share, compared to Diluted earnings per share attributable to common shareholders of $0.01 per share for the same respective period in 2020. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 2: Earnings Per Share” for further detail on adjustments made to arrive at income available to common shareholders.
The following table presents selected financial highlights:
Three months ended March 31,$
Change		%
Change
20212020
(In thousands, except percentages)
Net interest income$59,477 $57,257 $2,220 4 %
Fees and other income26,170 21,521 4,649 22 %
Total revenue85,647 78,778 6,869 9 %
Provision/(credit) for loan losses(7,004)16,962 (23,966)nm
Operating expense75,923 60,908 15,015 25 %
Income tax expense6,076 102 5,974 nm
Net income before attribution to noncontrolling interests
10,652 806 9,846 nm
Less: Net income attributable to noncontrolling interests— 6 (6)(100)%
Net income attributable to the Company$10,652 $800 $9,852 nm
_____________________
nm = not meaningful
Net interest income. Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits and borrowings. Interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate paid on total interest-bearing liabilities. NIM is the amount of net interest income expressed as a percentage of average interest-earning assets. The average rate earned
45

on interest-earning assets is the amount of annualized interest income expressed as a percentage of average interest-earning assets. The average rate paid on interest-bearing liabilities is equal to annualized interest expense as a percentage of average interest-bearing liabilities. When credit quality declines and loans are placed on nonaccrual status, NIM can decrease because the same assets are earning less income. Loans graded as substandard but still accruing interest income totaled $136.1 million at March 31, 2021 and could be placed on nonaccrual status if their credit quality declines further.
Net interest income for the three months ended March 31, 2021 was $59.5 million, an increase of $2.2 million, or 4%, compared to the same period in 2020. The increase was primarily driven by the addition of PPP-related income and lower funding costs, partially offset by lower interest earned on interest-earning assets. NIM was 2.45% for the three months ended March 31, 2021, a decrease of 31 basis points compared to the same period in 2020. Although Net interest income increased, the decrease in NIM was primarily driven by excess cash balances held at lower yields.
46

The following tables present the composition of the Company’s NIM for the three months ended March 31, 2021 and 2020.
Average BalanceInterest Income/ExpenseAverage Yield/Rate (1)
As of and for the three months ended March 31,
AVERAGE BALANCE SHEET:202120202021202020212020
AVERAGE ASSETS(In thousands)
Interest-earning assets:
Cash and investments: (2)
Taxable investment securities$203,856 $201,174 $782 $868 1.54 %1.73 %
Non-taxable investment securities 322,057 315,681 2,045 1,998 2.54 %2.53 %
Mortgage-backed securities810,754 520,629 3,437 2,787 1.70 %2.14 %
Short-term investments and other1,238,677 147,482 593 1,071 0.19 %2.89 %
Total cash and investments2,575,344 1,184,966 6,857 6,724 1.07 %2.27 %
Loans: (3)
Commercial and industrial 1,034,369 1,148,986 8,352 10,724 3.23 %3.69 %
Paycheck Protection Program326,695 — 3,629 — 4.44 %— %
Commercial real estate 2,723,249 2,582,305 23,187 27,482 3.41 %4.21 %
Construction and land 165,350 233,324 1,605 2,572 3.88 %4.36 %
Residential2,667,440 2,850,833 20,226 23,468 3.03 %3.29 %
Home equity76,336 86,048 551 952 2.93 %4.45 %
Consumer and other121,900 132,237 486 1,160 1.62 %3.53 %
Total loans7,115,339 7,033,733 58,036 66,358 3.26 %3.75 %
Total earning assets9,690,683 8,218,699 64,893 73,082 2.68 %3.54 %
Less: Allowance for loan losses81,125 51,730 
Cash and due from banks (non-interest bearing)38,897 49,571 
Other assets631,970 562,851 
TOTAL AVERAGE ASSETS$10,280,425 $8,779,391 
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and NOW$877,100 $638,926 $180 $232 0.08 %0.15 %
Money market4,911,146 3,753,045 3,831 9,657 0.32 %1.03 %
Certificates of deposit489,037 668,818 680 2,907 0.56 %1.75 %
Total interest-bearing deposits6,277,283 5,060,789 4,691 12,796 0.30 %1.02 %
Junior subordinated debentures106,363 106,363 481 917 1.81 %3.41 %
FHLB borrowings and other180,234 455,813 244 2,112 0.54 %1.83 %
Total interest-bearing liabilities6,563,880 5,622,965 5,416 15,825 0.33 %1.13 %
Noninterest bearing demand deposits2,551,651 2,046,102 
Payables and other liabilities285,453 270,371 
Total average liabilities9,400,984 7,939,438 
Redeemable noncontrolling interests— 1,018 
Average shareholders’ equity879,441 838,935 
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY$10,280,425 $8,779,391 
Net interest income$59,477 $57,257 
Interest rate spread2.35 %2.41 %
NIM2.45 %2.76 %
__________________
(1) Annualized.    
(2) Investments classified as available-for-sale and held-to-maturity are shown in the average balance sheet at amortized cost.
(3) Includes loans held for sale and nonaccrual loans.
Interest and dividend income. Total interest and dividend income for the three months ended March 31, 2021 was $64.9 million, a decrease of $8.2 million, or 11%, compared to the same period in 2020. The decrease was primarily driven by lower yields on loans and investments, partially offset by higher volumes of loans and investments.
The Bank generally has interest related to nonaccrual loans that is either collected or reversed each quarter. When a loan is placed on nonaccrual, the interest income previously accrued but uncollected, is reversed which will have a negative
47

effect on the related yield. Interest collected on loans while on nonaccrual status is generally applied to the principal balance. If a nonaccruing loan pays off, previously collected interest income that was applied to principal may be recorded as interest income if the principal balance was paid in full. Based on the net amount collected or reversed, the impact on interest income and related yields can be either positive or negative. In addition, the Bank collects prepayment penalties on certain commercial loans that pay off prior to maturity which could also impact interest income and related yields positively. The amount and timing of prepayment penalties varies from quarter to quarter.
Interest income on Commercial and industrial loans (including Commercial loans and Commercial tax-exempt loans) for the three months ended March 31, 2021 was $8.4 million, a decrease of $2.4 million, or 22%, compared to the same period in 2020, as a result of a 46 basis point decrease in the average yield and a 10% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied and lower yields on recent loan originations. The decrease in the average balance was related primarily to lower revolving line of credit usage.
Interest income on PPP loans for the three months ended March 31, 2021 was $3.6 million. The Company began earning interest income on PPP loans in the second quarter of 2020. Interest income on PPP loans includes interest earned on the loans and the accretion of origination fees over the life of the loans. If a loan is forgiven or otherwise paid off, the remainder of the processing fee will be accreted through Net interest income. As of March 31, 2021, approximately $151.4 million of loans were forgiven by the SBA and a total of $8.2 million was accreted through Net interest income.
Interest income on Commercial real estate loans for the three months ended March 31, 2021 was $23.2 million, a decrease of $4.3 million, or 16%, compared to the same period in 2020, as a result of a 80 basis point decrease in the average yield, partially offset by a 5% increase in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied and lower yields on recent loan originations. The increase in the average balance was related primarily to the addition of approximately $80.0 million of loans under the Commercial real estate second loan program as part of relief measures provided to clients as a result of the COVID-19 pandemic, and the conversion of two loans from construction to permanent financing during the fourth quarter of 2020.
Interest income on Construction and land loans for the three months ended March 31, 2021 was $1.6 million, a decrease of $1.0 million, or 38%, compared to the same period in 2020, as a result of a 48 basis point decrease in the average yield, and a 29% decrease in the average balance. The overall yields on Construction and land loans fluctuate due to the short-term nature of the loans and the related impact of draws and payoffs. Due to the relatively low balances in Construction and land loans, a large drawdown or paydown can result in a significant change in the overall yield depending on the interest rate of the particular loans that caused the balance changes. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance was related primarily to payoffs in New England and Southern California, as well as the conversion of two loans from construction to permanent financing during the fourth quarter of 2020.
Interest income on Residential mortgage loans for the three months ended March 31, 2021 was $20.2 million, a decrease of $3.2 million, or 14%, from the same period in 2020, as a result of a 26 basis point decrease in the average yield and a 6% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied and lower yields on recent loan originations. The decrease in the average balance was primarily driven by the sale of approximately $72.0 million of Residential loans in the third quarter of 2020 and slowed originations throughout 2020 and the first quarter of 2021.
Interest income on Home equity loans for the three months ended March 31, 2021 was $0.6 million, a decrease of $0.4 million, or 42%, compared to the same period in 2020, as a result of a 152 basis point decrease in the average yield and an 11% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance was primarily driven by reduced demand as a result of economic uncertainty related to the COVID-19 pandemic.
Interest income on Other consumer loans for the three months ended March 31, 2021 was $0.5 million, a decrease of $0.7 million, or 58%, compared to the same period in 2020, as a result of a 191 basis point decrease in the average yield and an 8% decrease in the average balance. The decrease in the average yield was primarily the result of decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance was primarily driven by strategic decisions to slow new consumer loan growth.
Investment income for the three months ended March 31, 2021 was $6.9 million, an increase of $0.1 million, or 2%, compared to the same period in 2020, as a result of a 117% increase in the average balance, partially offset by a 120 basis point decrease in the average yield. The increase in the average balance was primarily due to investing additional cash from higher client deposit balances. The decrease in the average yield was primarily due to the lower interest rate environment.
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Interest expense. Total interest expense for the three months ended March 31, 2021 was $5.4 million, a decrease of $10.4 million, or 66%, compared to the same period in 2020. The decrease in interest expense was primarily driven by the impact of lower rates on interest-bearing deposits and borrowings, as well as a decrease in the average volume of borrowings due to higher deposits, partially offset by an increase in the volume of interest-bearing deposits.
Interest expense on interest-bearing deposits for the three months ended March 31, 2021 was $4.7 million, a decrease of $8.1 million, or 63%, compared to the same period in 2020, as a result of a 72 basis point decrease in the average rate, partially offset by a 24% increase in the average balance. The decrease in the average rate paid on deposits was driven primarily by wholesale reductions in rates paid for deposit accounts given decreases in interest rates. The increase in the average balance for interest-bearing deposits was primarily driven by increases in deposits as clients hold additional cash deposit balances.
Interest expense paid on non-deposit interest-bearing liabilities for the three months ended March 31, 2021 was $0.7 million, a decrease of $2.3 million, or 76%, compared to the same period in 2020, as a result of a 129 basis point decrease in the average rate paid on FHLB borrowings and other borrowings, a 60% decrease in the average balance of FHLB borrowings and other borrowings, and a 160 basis point decrease in the average rate on Junior subordinated debentures. The decreases in the average rates paid were primarily driven by the decreases in benchmark interest rates to which the instruments are tied. The decrease in the average balance was primarily driven by the increase in client deposits reducing the need for higher-cost borrowings.
Provision/(credit) for loan losses. The Company recorded a Provision credit of $7.0 million for the three months ended March 31, 2021, compared to a Provision for loan losses of $17.0 million for the same period in 2020. The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio. Under the CECL methodology, the Provision for loan losses required may be significantly affected by reasonable and supportable economic forecasts.
The Provision/(credit) for loan losses is determined as a result of the required level of the Allowance for loan losses, estimated by management, which reflects the inherent risk of loss in the loan portfolio as of the balance sheet dates. 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 forecast risk and model risk inherent in the quantitative model output. The quantitative model utilizes a factor-based approach to estimate expected credit losses using probability of default and loss given default, which are derived from a selected peer group's historical default and loss experience. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments and curtailments. 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. Qualitative factors are estimated by management and include trends in problem loans, strength of management, concentration risk and underwriting standards. For further details, see “Loan Portfolio and Credit Quality” below.
Fees and other income
Three months ended March 31,$
Change		%
Change
20212020
(In thousands, except percentages)
Wealth management and trust fees$19,136 $18,371 $765 4 %
Investment management fees489 1,925 (1,436)(75)%
Other banking fee income2,411 2,490 (79)(3)%
Gain on sale of loans, net747 100 647 nm
Total core fees and income22,783 22,886 (103)— %
Total other income3,387 (1,365)4,752 nm
Total fees and other income$26,170 $21,521 $4,649 22 %
_____________________
nm = not meaningful
Total fees and other income for the three months ended March 31, 2021 increased $4.6 million, or 22%, compared to the same period in 2020, primarily driven by higher Total other income, Wealth Management and trust fees, and Gain on sale of loans, net, partially offset by lower Investment management fees.
•Total other income for the three months ended March 31, 2021 increased $4.8 million, compared to the same period in 2020, driven primarily by a gain related to the revaluation of a receivable from the divestiture of former affiliate, BOS, and the impact of mark-to-market adjustments on derivatives and deferred compensation securities.
49

•Wealth management and trust fees for the three months ended March 31, 2021 increased $0.8 million, or 4%, compared to the same period in 2020, driven primarily by higher AUM. Wealth Management and Trust AUM was $17.0 billion at March 31, 2021, an increase of $3.5 billion, or 26%, compared to the same period in 2020. The increase in AUM was primarily driven by favorable market returns of $3.6 billion, partially offset by net outflows of $0.1 billion for the twelve months ended March 31, 2021.
•Gain on sale of loans, net, for the three months ended March 31, 2021 increased $0.6 million, compared to the same period in 2020, primarily driven by increased volume in the sale of secondary loans.
•Investment management fees for the three months ended March 31, 2021 decreased $1.4 million, or 75%, compared to the same period in 2020, driven primarily by lower AUM at DGHM. DGHM AUM was $0.2 billion at March 31, 2021, a decrease of $0.8 billion, or 81%, compared to the same period in 2020. The decrease in AUM was primarily driven by net outflows of $1.2 billion, partially offset by favorable market returns of $0.3 billion for the twelve months ended March 31, 2021.
Operating expense
Three months ended March 31,$
Change		%
Change
20212020
(In thousands, except percentages)
Salaries and employee benefits$40,904 $35,096 $5,808 17 %
Occupancy and equipment8,205 7,646 559 7 %
Information systems9,719 6,725 2,994 45 %
Professional services3,302 3,601 (299)(8)%
Merger costs10,665 — 10,665 nm
Marketing and business development624 1,890 (1,266)(67)%
Amortization of intangibles667 715 (48)(7)%
FDIC insurance967 — 967 nm
Other870 5,235 (4,365)(83)%
Total operating expense$75,923 $60,908 $15,015 25 %
_____________________
nm = not meaningful
Total operating expense for the three months ended March 31, 2021 increased $15.0 million, or 25%, to $75.9 million, compared to the same period in 2020, driven by increases in Merger costs expense related to the proposed merger with SVB, Salaries and employee benefits expense, Information systems expense, and FDIC insurance expense, partially offset by decreases in Other expense and Marketing and business development.
•Merger costs expense for the three months ended March 31, 2021 was $10.7 million, and consisted primarily of legal and advisory fees related to the proposed merger with SVB that was announced in the first quarter of 2021.
•Salaries and employee benefits expense increased $5.8 million, or 17%, for the three months ended March 31, 2021, compared to the same period in 2020. The increase was primarily driven by increased variable compensation, the mark-to-market adjustment on deferred compensation securities, vacation accruals, and severance.
•Information systems expense increased $3.0 million, or 45%, for the three months ended March 31, 2021, compared to the same period in 2020. The increase was primarily driven by information technology initiatives placed into service to support the Company's strategic objectives.
•FDIC insurance expense increased $1.0 million for the three months ended March 31, 2021, compared to the same period in 2020. The increase was driven by an FDIC insurance assessment credit received in the third quarter of 2019, as the FDIC's Deposit Insurance Fund reserve ratio exceeded the target level. The credit was utilized in full by the end of the first quarter of 2020, and the Bank has resumed paying FDIC insurance.
•Other expense decreased $4.4 million, or 83%, for the three months ended March 31, 2021, compared to the same period in 2020. The decrease was primarily driven by a decrease to the reserve for unfunded loan commitments of $3.8 million for the three months ended March 31, 2021, compared to the same period in 2020. The change in the reserve was driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts.
Income tax expense. Income tax expense for the three months ended March 31, 2021 was $6.1 million, compared to $0.1 million for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 36.3%, compared to an effective tax rate of 11.2% for the same period of 2020. The effective tax rate is more than the statutory rate of 21% due primarily to Merger costs related to the proposed merger with SVB, state and local income taxes, and the accounting for investments in affordable housing projects. These items were partially offset by earnings from tax-exempt investments and income tax credits. During the first quarter of 2021, the Company recorded a tax expense of approximately $3.0 million due to
50

certain Merger costs related to the proposed merger with SVB that are expected to be non-deductible. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 9: Income Taxes” for further detail.
Financial Condition
Condensed Consolidated Balance Sheets and Discussion
 March 31,
2021		December 31, 2020$
Change		%
Change
 (In thousands, except percentages)
Assets:
Total cash and investments$2,829,653 $2,404,619 $425,034 18 %
Loans held for sale8,434 17,421 (8,987)(52)%
Total loans7,216,325 7,104,309 112,016 2 %
Less: Allowance for loan losses74,010 81,238 (7,228)(9)%
Net loans7,142,315 7,023,071 119,244 2 %
Goodwill and intangible assets, net65,996 66,663 (667)(1)%
Right-of-use assets93,224 97,859 (4,635)(5)%
Other assets398,870 439,100 (40,230)(9)%
Total assets$10,538,492 $10,048,733 $489,759 5 %
Liabilities and Equity:
Deposits$9,147,618 $8,595,366 $552,252 6 %
Total borrowings267,644 274,494 (6,850)(2)%
Lease liabilities107,143 112,339 (5,196)(5)%
Other liabilities157,664 198,526 (40,862)(21)%
Total liabilities9,680,069 9,180,725 499,344 5 %
Total shareholders’ equity858,423 868,008 (9,585)(1)%
Total liabilities and shareholders’ equity$10,538,492 $10,048,733 $489,759 5 %
Total assets. Total assets increased $489.8 million, or 5%, to $10.5 billion at March 31, 2021 from $10.0 billion at December 31, 2020, primarily driven by increases in Total cash and investments and Net loans due to an increase in client deposits, which generated additional liquidity.
Total cash and investments. Total cash and investments (consisting of Cash and cash equivalents, Investment securities available-for-sale, Investment securities held-to-maturity, Equity securities at fair value, and Stock in the FHLB and FRB) increased $425.0 million, or 18%, from December 31, 2020. The increase was primarily driven by increases of $334.4 million, or 32%, in Cash and cash equivalents and $94.0 million, or 7%, in Investment securities available-for-sale and Equity securities at fair value. The increase in Cash and cash equivalents was primarily driven by an increase in deposits as clients maintained additional cash liquidity. Total cash and investments represents 27% of Total assets at March 31, 2021 and 24% of Total assets at December 31, 2020.
The majority of the investments held by the Company are held by the Bank. The Bank’s asset-liability management policy requires management to maintain a portfolio of securities which will provide liquidity necessary to facilitate funding of loans, to cover deposit fluctuations, and to mitigate the Bank’s overall balance sheet exposure to interest rate risk, while at the same time earning a satisfactory return on the funds invested. The securities in which the Bank may invest are subject to regulation and are generally limited to securities that are considered “investment grade.”
Investment maturities, redemptions, principal payments, and sales of securities, if any, net of purchases (includes Investment securities available-for-sale, Investment securities held-to-maturity, and Equity securities at fair value), used $118.6 million of cash during the three months ended March 31, 2021, compared to cash proceeds of $2.1 million in the same period in 2020. The timing of sales and reinvestments is based on various factors, including management’s evaluation of interest rate trends, credit risk, and the Company’s liquidity. The increase in the cash used during the three months ended March 31, 2021 was driven by the need to invest additional client deposits. The Company’s Investment securities available-for-sale portfolio carried a total of $34.1 million of unrealized gains and $14.1 million of unrealized losses at March 31, 2021, compared to $45.8 million of unrealized gains and $0.6 million of unrealized losses at December 31, 2020. The decrease in the total net unrealized gains was primarily driven by the increase in interest rates.
No impairment losses were recognized through earnings related to investment securities during the three months ended March 31, 2021 and 2020. The Company does not consider these investments to be credit impaired as the decline in fair value on investments is primarily attributed to changes in interest rates and not due to credit quality or other risk factors.
Additionally, at March 31, 2021 and December 31, 2020, the Company held $31.9 million and $35.2 million, respectively, of Investment securities held-to-maturity at amortized cost. All of the Investment securities held-to-maturity at
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March 31, 2021 were mortgage-backed securities guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities. Given the recent strong deposits and excess cash balances, the Company may consider investing these funds in investment securities, thereby earning a better yield and improving overall return on these assets.
See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 4: Investments” for further details of the Company’s investment securities.
Loans held for sale. Loans held for sale at March 31, 2021 decreased $9.0 million, or 52%, to $8.4 million from the balance at December 31, 2020. The balance of Loans held for sale usually relates to the timing and volume of Residential loans originated for sale and the ultimate sale transaction, which is typically executed within a short time following the loan origination. From time to time, the Company may also sell loans that have been held in the loan portfolio. The sale of such loans may improve the Bank’s liquidity and capital position or may provide the Bank additional flexibility for more profitable and strategic future lending opportunities.
Goodwill and intangible assets, net. Goodwill and intangible assets, net at March 31, 2021 decreased $0.7 million, or 1%, to $66.0 million from the balance at December 31, 2020, due to Amortization of intangibles. There was no change to Goodwill during the three months ended March 31, 2021.
Goodwill is subject to annual impairment tests, or more frequently, if there is indication of impairment, based on guidance in ASC 350, Intangibles-Goodwill and Other. Long-lived intangible assets such as advisory contracts are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable in accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”).
Management performed its annual goodwill impairment testing during the fourth quarter of 2020. Based on the qualitative assessments, there was no indication of impairment. Management determined that there was not a trigger event from the economic conditions related to the COVID-19 pandemic or any other factors, and will continually monitor for triggering events that would warrant testing. Management will perform the annual goodwill impairment testing for this year in the fourth quarter of 2021. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 8: Goodwill and Other Intangible Assets” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for additional information
Right-of-use assets. Right-of-use ("ROU") assets at March 31, 2021 decreased $4.6 million, or 5%, to $93.2 million, compared to the balance at December 31, 2020 due to amortization of ROU assets and impairment of lease assets, partially offset by the addition of new or renewed real estate leases and new equipment leases during the three months ended March 31, 2021. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details.
Other assets. Other assets, as presented in the table above, consist of the following line items from the Consolidated Balance Sheets: Premises and equipment, net; Fees receivable; Accrued interest receivable; Deferred income taxes, net; and other receivables. Other assets at March 31, 2021 decreased $40.2 million, or 9%, to $398.9 million from the balance at December 31, 2020. These changes resulted from the following factors:
•Other assets, which consist primarily of bank-owned life insurance, investment in partnerships, prepaid expenses, interest rate derivatives, and other receivables decreased $41.6 million, or 12%, to $317.6 million at March 31, 2021 from $359.2 million at December 31, 2020. The decrease was primarily driven by a decrease in the market value of derivative assets.
•Deferred income taxes, net, increased $4.6 million, or 68%, to $11.4 million at March 31, 2021 from $6.8 million at December 31, 2020. The increase was due to the current year tax effect of other comprehensive loss of $7.2 million, partially offset by deferred tax expense of $2.6 million.
Deposits. Deposits at March 31, 2021 increased $552.3 million, or 6%, compared to the balance at December 31, 2020. The increase in deposits was primarily due to an increase in deposits from new and existing clients maintaining additional cash liquidity, as well as deposits related to the funding of PPP loans that have not yet been utilized. Average total deposits for the three months ended March 31, 2021 increased 24% from the same period in 2020 as shown in the average balance sheet driven by the same factors. For further details, see “Results of Operations” above.
Deposits are the principal source of the Bank’s funds for use in lending, investments, and liquidity. Deposit levels can fluctuate from quarter to quarter as a result of large short-term transactions by commercial clients. Seasonality can also affect the deposit balances.
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The following table presents the composition of the Company’s deposits at March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Balanceas a % of totalBalanceas a % of total
(In thousands, except percentages)
Demand deposits (non-interest bearing)$2,651,733 29 %$2,481,676 29 %
NOW (1)819,995 9 %824,226 10 %
Savings86,897 1 %81,466 1 %
Money market (1)5,106,911 56 %4,699,882 55 %
Certificates of deposit less than $100,000 (1)30,014 — %30,269 — %
Certificates of deposit $100,000 to $250,00098,614 1 %102,133 1 %
Certificates of deposit more than $250,000353,454 4 %375,714 4 %
Total deposits$9,147,618 100 %$8,595,366 100 %
_____________________
(1) Includes brokered deposits of $250.0 million at March 31, 2021 and December 31, 2020. Funds in the sweep deposit program between the Bank and Boston Private Wealth are not considered brokered deposits.
Total borrowings. Total borrowings (consisting of Securities sold under agreements to repurchase, FHLB borrowings, and Junior subordinated debentures) at March 31, 2021 decreased $6.9 million, or 2%, compared to the balance at December 31, 2020, driven by a decrease in repurchase agreements, partially offset by an increase in FHLB borrowings. The need for higher cost borrowings has decreased due to increased client deposits.
•Repurchase agreements decreased $7.2 million, or 13%, to $46.3 million at March 31, 2021 from $53.5 million at December 31, 2020. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature.
•FHLB borrowings increased $0.4 million to $115.0 million at March 31, 2021 from $114.7 million at December 31, 2020. FHLB borrowings are generally used to provide additional funding for loan growth when it is in excess of deposit growth and to manage interest rate risk, but can also be used as an additional source of liquidity for the Bank.
Lease liabilities. Lease liabilities decreased $5.2 million, or 5%, to $107.1 million at March 31, 2021 compared to the balance at December 31, 2020 due to lease payments and impairment of leases, partially offset by the addition of new or renewed real estate leases and new equipment leases during the three months ended March 31, 2021. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details of the Company’s leases.
Other liabilities. Other liabilities, which consist primarily of accrued interest, accrued employee benefits, interest rate derivatives, the unfunded portion of partnership investment commitments, and other accrued expenses, decreased $40.9 million, or 21%, to $157.7 million at March 31, 2021, compared to the balance at December 31, 2020. The decrease was primarily driven by a decrease in the market value adjustment on derivative liabilities and a decrease in accrued employee benefits driven by the payment of accrued variable compensation, bonuses, and employee benefits, partially offset by an increase in accrued legal expense driven by Merger costs related to the proposed merger with SVB.
Loan Portfolio and Credit Quality
Total loans. Total loans increased $112.0 million, or 2%, to $7.2 billion, or 68% of total assets, as of March 31, 2021, from $7.1 billion, or 71% of total assets, as of December 31, 2020. The following table presents a summary of the loan portfolio based on the portfolio segment and changes in balances as of the dates indicated:
 March 31,
2021		December 31, 2020$ Change% Change
 (In thousands, except percentages)
Commercial and industrial$668,217 $558,343 $109,874 20 %
Paycheck Protection Program351,170 312,356 38,814 12 %
Commercial tax-exempt488,507 442,159 46,348 10 %
Commercial real estate2,697,677 2,757,375 (59,698)(2)%
Construction and land181,482 159,204 22,278 14 %
Residential2,632,554 2,677,464 (44,910)(2)%
Home equity71,752 77,364 (5,612)(7)%
Consumer and other124,966 120,044 4,922 4 %
Total loans$7,216,325 $7,104,309 $112,016 2 %
The Bank specializes in lending to individuals, real estate investors, and middle market businesses, including corporations, partnerships, associations and nonprofit organizations. Loans made by the Bank to individuals may include
53

residential mortgage loans and mortgage loans on investment or vacation properties, unsecured and secured personal lines of credit, home equity loans, and overdraft protection. Loans made by the Bank to businesses include commercial and mortgage loans, revolving lines of credit, working capital loans, equipment financing, community lending programs, and construction and land loans. The types and sizes of loans the Bank originates are limited by regulatory requirements.
Beginning in the second quarter of 2020, the Company added a segment for PPP loans originated. For the periods ended March 31, 2021 and December 31, 2020, there were $351.2 million and $312.4 million of PPP loans, respectively.
The Bank’s loans are affected by the economic and real estate markets in which they are located. Generally, commercial real estate, construction, and land loans are affected more than residential loans in an economic downturn. The ability to grow the loan portfolio is traditionally partially related to the Bank's ability to increase deposit levels. If, as a result of general economic conditions, market interest rates, competitive pressures, or otherwise, deposit levels at the Bank decrease relative to its overall banking operations, the Bank may be limited in its ability to grow its loan portfolio or may need to increase higher cost borrowings to fund growth in the loan portfolio.
The Bank’s commercial real estate loan portfolio includes loans secured by the following types of collateral as of the dates indicated:
 March 31, 2021December 31, 2020
 (In thousands)
 Multifamily and residential investment $982,493 $982,128 
 Retail584,566 593,440 
 Office and medical 566,262 562,805 
 Manufacturing, industrial, and warehouse257,360 261,083 
 Hospitality 172,849 173,741 
 Other 134,147 184,178 
Total commercial real estate loans$2,697,677 $2,757,375 
Geographic concentration. The following tables present the Company’s outstanding loan balance concentrations as of the dates indicated based on the location of the regional offices to which they are attributed.
As of March 31, 2021
New EnglandNorthern CaliforniaSouthern CaliforniaTotal
AmountPercentAmountPercentAmountPercentAmountPercent
(In thousands, except percentages)
Commercial and industrial $555,336 7 %$37,256 1 %$75,625 1 %$668,217 9 %
Paycheck Protection Program174,443 2 %121,607 2 %55,120 1 %351,170 5 %
Commercial tax-exempt 322,101 5 %156,245 2 %10,161 — %488,507 7 %
Commercial real estate 1,088,660 15 %876,019 12 %732,998 10 %2,697,677 37 %
Construction and land 103,068 1 %34,373 1 %44,041 1 %181,482 3 %
Residential 1,360,321 19 %516,301 7 %755,932 10 %2,632,554 36 %
Home equity 45,142 1 %16,230 — %10,380 — %71,752 1 %
Consumer and other 86,686 1 %1,781 — %36,499 1 %124,966 2 %
Total loans (1)$3,735,757 51 %$1,759,812 25 %$1,720,756 24 %$7,216,325 100 %
As of December 31, 2020
New EnglandNorthern CaliforniaSouthern CaliforniaTotal
AmountPercentAmountPercentAmountPercentAmountPercent
(In thousands, except percentages)
Commercial and industrial $437,235 6 %$38,650 1 %$82,458 1 %$558,343 8 %
Paycheck Protection Program162,373 2 %101,149 1 %48,834 1 %312,356 4 %
Commercial tax-exempt 286,549 4 %145,014 2 %10,596 — %442,159 6 %
Commercial real estate 1,124,232 16 %904,174 13 %728,969 10 %2,757,375 39 %
Construction and land 91,765 1 %27,775 — %39,664 1 %159,204 2 %
Residential 1,357,843 19 %539,608 8 %780,013 11 %2,677,464 38 %
Home equity 51,070 1 %16,292 — %10,002 — %77,364 1 %
Consumer and other 82,858 1 %4,020 — %33,166 1 %120,044 2 %
Total loans (1)$3,593,925 50 %$1,776,682 25 %$1,733,702 25 %$7,104,309 100 %
________________________
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(1)Regional percentage totals may not foot due to rounding.
Allowance for loan losses. The Allowance for loan losses is reported as a reduction of outstanding loan balances and totaled $74.0 million and $81.2 million as of March 31, 2021 and December 31, 2020, respectively.
The Allowance for loan losses decreased $7.2 million to $74.0 million, or 1.03% of total loans, as of March 31, 2021 from $81.2 million, or 1.14% of total loans, as of December 31, 2020. The Company recognized a Provision credit of $7.0 million during the three months ended March 31, 2021. The decrease in the Allowance for loan losses for the three months ended March 31, 2021 was primarily driven by the latest current reasonable and supportable economic forecasts, which indicated improving economic conditions from the prior quarter, as well as a change in the weighting of the forecast scenarios used to account for risks and assumptions not incorporated in the forecasts. These improvements were partially offset by the net impact of the change in the composition and volume of the loan portfolio.
The following table presents a summary of loans charged-off, net of recoveries, by geography for the periods indicated. The geography assigned to the data is based on the location of the regional offices to which the loans are attributed.
Three months ended March 31,
20212020

(In thousands)
Net loans (charged-off)/recovered:
New England$20 $15 
Northern California9 122 
Southern California(253)(485)
Total net loans (charged-off)/recovered$(224)$(348)
There were $0.2 million in net charge-offs recorded in the first quarter of 2021 compared to $0.3 million of net charge-offs for the same period of 2020.
Nonperforming assets. The Company’s nonperforming assets include nonaccrual loans and OREO, if any. OREO consists of real estate acquired through foreclosure proceedings and real estate acquired through acceptance of deeds in lieu of foreclosure. As of March 31, 2021, nonperforming assets totaled $25.8 million, or 0.24% of total assets, an increase of $1.9 million, or 8%, compared to $23.9 million, or 0.24% of total assets, as of December 31, 2020.
The Bank’s policy is to discontinue the accrual of interest on a loan when the collectability of principal or interest in accordance with the contractual terms of the loan agreement is in doubt. Despite a loan having a current payment status, if the Bank has reason to believe it may not collect all principal and interest on the loan in accordance with the related contractual terms, the Bank will generally discontinue the accrual of interest income and will apply any future interest payments received to principal. Of the $25.8 million of loans on nonaccrual status as of March 31, 2021, $11.9 million, or 46%, had a current payment status, $3.6 million, or 14%, were 30-89 days past due, and $10.3 million, or 40%, were 90 days or more past due. Of the $23.9 million of loans on nonaccrual status as of December 31, 2020, $12.4 million, or 52%, had a current payment status, $1.6 million, or 7%, were 30-89 days past due, and $9.9 million, or 41%, were 90 days or more past due.
The Bank continues to evaluate the underlying collateral of each nonperforming loan and pursue the collection of interest and principal. Where appropriate, the Bank obtains updated appraisals on collateral. Reductions in fair values of the collateral for nonaccrual loans, if they are collateral dependent, could result in additional future provision for loan losses depending on the timing and severity of the decline. See Part I. Item 1. “Financial Statements and Supplementary Data - Note 6: Loans Portfolio and Credit Quality” for further information on nonperforming loans.
Delinquencies. The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loans 30-89 days past due decreased $12.7 million, or 64%, to $7.2 million as of March 31, 2021 from $19.9 million as of December 31, 2020. Loan delinquencies can be attributed to many factors, such as continuing weakness in, or deteriorating, economic conditions in the region in which the collateral is located, the loss of a tenant or lower lease rates for commercial borrowers, or the loss of income for consumers and the resulting liquidity impacts on the borrowers. The economic conditions created by the COVID-19 pandemic represent an example of an event that could cause an increase in delinquencies in future quarters. The Bank has instituted programs such as deferment programs, forbearance programs, and the commercial real estate second mortgage program to help borrowers who have been impacted by the COVID-19 pandemic. Further deterioration in the credit condition of these delinquent loans could lead to the loans going to nonaccrual status and/or being downgraded. Downgrades would generally result in additional charge-offs or provisions for loan losses. Past due loans may be included with accruing substandard loans.
In certain instances, although very infrequently, loans that have become 90 days or more 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. There were no loans 90 days or more past due, but still accruing, as of both March 31, 2021 and December 31, 2020.
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Impaired loans. Impaired loans individually evaluated for impairment in the Allowance for loan losses totaled $25.3 million as of March 31, 2021, an increase of $0.2 million, or .01%, compared to $25.1 million as of December 31, 2020. As of March 31, 2021, $6.5 million of the individually evaluated impaired loans had $0.7 million in specific reserve allocations. The remaining $18.8 million of individually evaluated impaired loans did not have specific reserve allocations due to the adequacy of collateral, prior charge-offs taken, interest collected and applied to principal, or a combination of these items. As of December 31, 2020, $2.7 million of individually evaluated impaired loans had $0.4 million in specific reserve allocations, and the remaining $22.4 million of individually evaluated impaired loans did not have specific reserve allocations.
The Bank may, under certain circumstances, restructure loans as a concession to borrowers who are experiencing financial difficulty. Such loans are classified as TDRs and are included in impaired loans. TDRs typically result from the Bank’s loss mitigation activities which, among other things, could include rate reductions, payment extensions, and/or principal forgiveness. As of March 31, 2021 and December 31, 2020, TDRs totaled $14.0 million and $13.9 million, respectively. As of March 31, 2021, $7.1 million of the $14.0 million in TDRs were on accrual status. As of December 31, 2020, $7.2 million of the $13.9 million in TDRs were on accrual status.
In response to the COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans are generally deferred for initially three months and the loan term is extended three months; if requested, the loan may be deferred for a subsequent three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. In total, approximately 365 residential and home equity loans totaling approximately $220.0 million have been processed under the program. As of March 31, 2021, approximately 47 loans totaling approximately $20.0 million remain in deferral under the program. Approximately 13 loans totaling $1.5 million are delinquent on payment terms as of March 31, 2021 after the deferral expired, primarily First Time Home Buyer loans as defined by the U.S. Department of Housing and Urban Development, while the remainder have expired with the loans returning to payment.
Also in response to the COVID-19 pandemic, the Bank initiated a program offering qualified Commercial and industrial borrowers principal payment deferral for six months, with the deferred principal added to the last payment. In total, approximately 85 Commercial and industrial loans totaling approximately $125.0 million have been processed under the program. As of March 31, 2021, approximately four loans totaling approximately $5.7 million remain in deferral under the program, while the remainder have expired with the loans returning to payment. Of the loans that came off deferral, no loans are delinquent on payment terms as of March 31, 2021.
Potential problem loans. Loans that evidence weakness or potential weakness related to repayment history, the borrower’s financial condition, or other factors are reviewed by the Bank’s management to determine if the loan should be adversely classified. Delinquent loans may or may not be adversely classified depending upon management’s judgment with respect to each individual loan. The Bank classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators. Potential problem loans consist of accruing classified loans where known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in classification of such loans as nonperforming at some time in the future. Management cannot predict the extent to which economic conditions may worsen or other factors which may impact borrowers and the potential problem loans. Triggering events for loan downgrades include updated appraisal information, inability of borrowers to cover debt service payments, loss of tenants, notification by the tenant of non-renewal of lease or inability of tenants to pay rent, inability of borrowers to sell completed construction projects, and the inability of borrowers to sell properties. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, be restructured, or require increased allowance coverage and provision for loan losses.
As of March 31, 2021, the Bank has identified $136.1 million in potential problem loans, an increase of $29.2 million, or 27%, compared to $106.9 million as of December 31, 2020. Numerous factors impact the level of potential problem loans, including economic conditions and real estate values. These factors affect the borrower’s liquidity and, in some cases, the borrower’s ability to comply with loan covenants, such as debt service coverage. For instance, when there is a loss of a major tenant in a commercial real estate building, the appraised value of the building generally declines. Loans may be downgraded when this occurs as a result of the additional risk to the borrower in obtaining a new tenant in a timely manner and negotiating a lease with similar or better terms than the previous tenant. In many cases, these loans are still current and paying as agreed, although future performance may be impacted.
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The following table presents a roll-forward of nonaccrual loans for the three months ended March 31, 2021 and 2020:
As of and for the three months ended March 31,
20212020
(In thousands)
Nonaccrual loans, beginning of period$23,851 $16,103 
Transfers in to nonaccrual status2,515 11,336 
Transfers out to accrual status(203)(2,230)
Charge-offs (1)(218)(528)
Paid off/paid down(181)(367)
Nonaccrual loans, end of period$25,764 $24,314 
___________________
(1) During the second quarter of 2020, one nonaccrual loan was charged-off and transferred to OREO with a value of zero. As of March 31, 2021, it represents the only asset in OREO.
The following table presents a summary of credit quality by geography, based on the location of the regional offices:
March 31,
2021		December 31, 2020
 (In thousands)
Nonaccrual loans:
New England$14,197 $12,643 
Northern California6,791 6,331 
Southern California4,776 4,877 
Total nonaccrual loans$25,764 $23,851 
Loans 30-89 days past due and accruing:
New England $6,647 $9,248 
Northern California253 3,892 
Southern California349 6,722 
Total loans 30-89 days past due$7,249 $19,862 
Accruing classified loans: (1)
New England$106,375 $89,582 
Northern California13,147 340 
Southern California16,608 16,961 
Total accruing classified loans$136,130 $106,883 
___________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
The following table presents a summary of credit quality by loan type. The loan type assigned to the credit quality data is based on the purpose of the loan.
 March 31,
2021		December 31, 2020
 (In thousands)
Nonaccrual loans:
Commercial and industrial$4,766 $4,394 
Paycheck Protection Program— — 
Commercial tax-exempt— — 
Commercial real estate5,859 5,261 
Construction and land— — 
Residential14,475 13,780 
Home equity651 415 
Consumer and other13 1 
Total nonaccrual loans$25,764 $23,851 
Loans 30-89 days past due and accruing:
Commercial and industrial$2,914 $2,359 
Paycheck Protection Program— — 
Commercial tax-exempt— — 
57

Commercial real estate— 627 
Construction and land— — 
Residential4,044 15,498 
Home equity104 1,363 
Consumer and other187 15 
Total loans 30-89 days past due$7,249 $19,862 
Accruing classified loans: (1)
Commercial and industrial$27,403 $22,955 
Paycheck Protection Program— — 
Commercial tax-exempt— 4,503 
Commercial real estate105,727 76,169 
Construction and land— — 
Residential3,000 3,000 
Home equity— 256 
Consumer and other— — 
Total accruing classified loans$136,130 $106,883 
___________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
Liquidity
Liquidity is defined as the Company’s ability to generate adequate cash to meet its needs for day-to-day operations and material long and short-term commitments. Liquidity risk is the risk of potential loss if the Company were unable to meet its funding requirements at a reasonable cost. The Company manages its liquidity based on demand, commitments, specific events and uncertainties to meet current and future financial obligations of a short-term nature. The Company’s objective in managing liquidity is to respond to the needs of depositors and borrowers as well as earnings enhancement opportunities in a changing marketplace.
The following table presents certain liquidity measurements as of the dates indicated:
March 31,
2021		December 31, 2020$
Change		%
Change
(In thousands, except percentages)
Cash and cash equivalents$1,389,943 $1,055,588 $334,355 32 %
Investment securities available-for-sale 1,339,408 1,243,693 95,715 8 %
Equity securities at fair value39,708 41,452 (1,744)(4)%
Less: Securities pledged against current borrowings and derivatives(79,268)(110,607)31,339 28 %
Cash and investments$2,689,791 $2,230,126 $459,665 21 %
As a percent of assets26 %22 %
Access to additional FHLB borrowings1,541,845 1,443,641 98,204 7 %
Total liquidity$4,231,636 $3,673,767 $557,869 15 %
As a percent of assets40 %37 %
As a percent of deposits46 %43 %
At March 31, 2021, the Company’s Cash and cash equivalents amounted to $1.4 billion. The Holding Company’s Cash and cash equivalents amounted to $78.3 million at March 31, 2021. Management believes that the Company has adequate liquidity to meet its commitments for the foreseeable future.
Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets. At March 31, 2021, consolidated Cash and cash equivalents, Investment securities available-for-sale and Equity securities at fair value less Securities pledged against current borrowings and derivatives amounted to $2.7 billion, or 26% of total assets, compared to $2.2 billion, or 22% of total assets, at December 31, 2020. The Bank also has the ability to access additional borrowing under the PPPLF by pledging funded PPP loans, if needed. In addition, the Company has access to available borrowings through the FHLB totaling $1.5 billion at March 31, 2021 and $1.4 billion at December 31, 2020. Combined, this liquidity totals $4.2 billion, or 40% of assets and 46% of deposits, as of March 31, 2021, compared to $3.7 billion, or 37% of assets and 43% of deposits, at December 31, 2020.
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The Bank has various internal policies and guidelines regarding liquidity, both on- and off-balance sheet, loans to deposits ratio, and limits on the use of wholesale funds. These policies and/or guidelines require certain minimum or maximum balances or ratios be maintained at all times. In light of the provisions in the Bank’s internal liquidity policies and guidelines, the Bank will carefully manage the amount and timing of future loan growth along with its relevant liquidity policies and balance sheet guidelines. As a general matter, deposits are a cheaper source of funds than borrowings, because interest rates paid for deposits are typically less than interest rates charged for borrowings. If, as a result of general economic conditions, market interest rates, competitive pressures, or otherwise, the balance of deposits at the Bank approaches or falls below internal policies and/or guidelines, the Bank may be limited in its ability to grow its loan portfolio, may rely more heavily on higher cost borrowings as a source of funds, or consider loan sales in the future.
Holding Company liquidity. The Company and noncontrolling interest holders of the Company’s majority-owned affiliate, DGHM, have contingent put options, call options, and mandatory repurchase obligations that would require the Company to purchase (and the noncontrolling interest owners of DGHM to sell) the remaining noncontrolling interest in DGHM at contractually predetermined values as determined by the operating agreement of DGHM. At March 31, 2021, the estimated maximum redemption value for DGHM related to outstanding put options was zero based on the contractually predetermined calculation in the DGHM operating agreement. These put and call options are discussed in detail in Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Although not a primary source of funds, the Holding Company has generated liquidity from the sale of affiliates in the past. Additional funds were generated at the time of the sale of Anchor Capital Advisors LLC (“Anchor”) which occurred in April 2018 and the sale of BOS which occurred in December 2018. As part of the sale agreements for both Anchor and BOS, the Company expects to receive future contingent payments for the remaining nine months of 2021 of approximately $1.8 million and $2.0 million, respectively.
Dividends from the Bank are limited by various regulatory requirements relating to capital adequacy and retained earnings. See Part II. Item 5. “Market for Registrant’s Common Equity, Related Stockholders Matters, and Issuers Purchases of Equity Securities” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for further details.
The Bank pays dividends to the Holding Company, subject to the approval of the Bank’s Board of Directors, depending on its profitability and asset growth. Dividends from the Bank to the Holding Company are limited to the sum of the Bank’s Net income during the current calendar year and the retained net income of the prior two calendar years unless approved by regulators. If regulatory agencies were to require banks to increase their capital ratios, or impose other restrictions, it may limit the ability of the Bank to pay dividends to the Holding Company and/or limit the amount that the Bank could grow.
Although the Bank’s capital currently exceeds regulatory requirements for capital, the Holding Company could downstream additional capital to increase the rate that the Bank could grow. Depending upon the amount of capital downstreamed by the Holding Company, the approval of the Holding Company’s Board of Directors may be required prior to the payment, if any.
The Company is required to pay interest quarterly on its junior subordinated debentures. The estimated cash outlay for the remaining nine months of 2021 for the interest payments is approximately $1.5 million based on the debt outstanding at March 31, 2021. LIBOR is expected to be phased out as an index by the end of 2021, and $103.1 million of the Company's junior subordinated debentures are tied to LIBOR. The Company will need to negotiate an alternative benchmark rate to be used at the time.
The Company presently pays cash dividends on its common stock on a quarterly basis dependent upon a number of factors such as profitability, Holding Company liquidity, and the Company’s capital levels. However, the ultimate declaration of dividends by the Board of Directors of the Company will depend on consideration of, among other things, recent financial trends and internal forecasts, regulatory limitations, alternative uses of capital deployment, general economic conditions, and regulatory changes to capital requirements. Additionally, the Company is required to inform and consult with the Federal Reserve in advance of declaring a dividend that exceeds earnings for the period for which the dividend is being paid. The Merger Agreement with SVB further limits and restricts the Company’s ability to declare and pay dividends on its common stock.
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Bank liquidity. The Bank has established various borrowing arrangements to provide additional sources of liquidity and funding. Management believes that the Bank currently has adequate liquidity available to respond to current demands. The Bank is a member of the FHLB of Boston, and as such, has access to short- and long-term borrowings from that institution. The FHLB can change the advance amounts that banks can utilize based on a bank’s current financial condition as obtained from publicly available data such as FDIC Call Reports. Decreases in the amount of FHLB borrowings available to the Bank would lower its liquidity and possibly limit the Bank’s ability to grow in the short-term. In addition, due to the elevated level of deposits in 2020 and in the first quarter of 2021, the Bank did not utilize any borrowings from the PPPLF, as originally anticipated. However, the Bank will continue to monitor its level of deposits and may utilize borrowings from the PPPLF in future quarters, if needed. Management believes that the Bank has adequate liquidity to meet its commitments for the foreseeable future.
In addition to the above liquidity, the Bank has access to the FRB discount window facility, which can provide short-term liquidity as “lender of last resort”. The use of non-core funding sources, including brokered deposits and borrowings, by the Bank may be limited by regulatory agencies. Generally, the regulatory agencies prefer that banks rely on core-funding sources for liquidity.
From time to time, the Bank purchases federal funds from the FHLB and other banking institutions to supplement its liquidity position. At March 31, 2021 and December 31, 2020, the Bank had unused federal fund lines of credit totaling $400.0 million with correspondent institutions to provide it with immediate access to overnight borrowings. Certain liquidity sources, such as federal funds lines, may be withdrawn by the correspondent bank at any time. At March 31, 2021 and December 31, 2020, the Bank did not have any outstanding borrowings under the federal funds lines with these correspondent institutions nor outstanding borrowings under federal funds lines with the FHLB.
The Bank has negotiated brokered deposit agreements with several institutions that have nationwide distribution capabilities. The Bank participates in deposit placement services that can be used to provide customers expanded deposit insurance coverage. At March 31, 2021 and December 31, 2020, the Bank had $250.0 million of brokered deposits outstanding under these agreements. Funds in the sweep deposit program between the Bank and Boston Private Wealth are not considered brokered deposits.
If the Bank is no longer able to utilize the FHLB for borrowing, collateral currently used for FHLB borrowings could be transferred to other facilities such as the FRB’s discount window. In addition, the Bank could increase its usage of brokered deposits. These other borrowing arrangements may have higher rates than the FHLB would typically charge.
Capital Resources
Total shareholders’ equity at March 31, 2021 was $858.4 million compared to $868.0 million at December 31, 2020, a decrease of $9.6 million. The decrease in shareholders' equity was primarily the result of the change in Accumulated other comprehensive income and dividends paid to common shareholders, partially offset by Net income attributable to the Company.
Under the Federal Reserve’s capital rules applicable to the Company and the Bank, the Company and the Bank are each required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum total Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0%, and a minimum Tier 1 leverage ratio of 4.0%. Additionally, Federal Reserve rules require the Company and the Bank to each establish a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total risk-weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases.
A Federal Reserve-supervised institution, such as the Bank, is considered “well capitalized” if it (i) has a total capital to risk-weighted assets ratio of 10.0% or greater; (ii) a Tier 1 capital to risk-weighted assets ratio of 8.0% or greater; (iii) a common equity Tier 1 capital ratio to risk-weighted assets of 6.5% or greater; (iv) a Tier 1 leverage ratio of 5.0% or greater; and (iv) is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. The Bank is currently considered “well capitalized” under all regulatory definitions.
The following table presents the Company’s and the Bank’s regulatory capital and related ratios as of March 31, 2021 and December 31, 2020. Also presented are the minimum requirements established by the Federal Reserve as of those dates for the Company and the Bank, respectively, to meet applicable capital requirements for the Bank to be considered “well capitalized” under the prompt corrective action provisions of the Federal Deposit Insurance Act. The Federal Reserve and the Massachusetts Division of Banks may impose higher capital ratios than those listed below based upon the results of regulatory exams.
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ActualFor capital adequacy purposes (at least)To be well capitalized under prompt corrective action provisions (at least)Minimum capital ratio with capital conservation buffer (1)
AmountRatioAmountRatioAmountRatioRatio
(In thousands, except percentages)
As of March 31, 2021
Common equity tier 1 risk-based capital
Company$782,105 11.43 %$307,991 4.5 % n/a n/a7.0%
Boston Private Bank799,284 11.71 %307,041 4.5 %$443,504 6.5%7.0%
Tier 1 risk-based capital
Company882,127 12.89 %410,655 6.0 % n/a n/a8.5%
Boston Private Bank799,284 11.71 %409,388 6.0 %545,851 8.0%8.5%
Total risk-based capital
Company960,609 14.04 %547,540 8.0 % n/a n/a10.5%
Boston Private Bank877,766 12.86 %545,851 8.0 %682,314 10.0%10.5%
Tier 1 leverage capital
Company882,127 8.67 %407,211 4.0 % n/a n/a4.0%
Boston Private Bank799,284 7.88 %405,487 4.0 %506,859 5.0%4.0%
As of December 31, 2020
Common equity tier 1 risk-based capital
Company$773,017 11.53 %$301,794 4.5 %n/an/a7.0%
Boston Private Bank788,375 11.79 %301,003 4.5 %$434,782 6.5%7.0%
Tier 1 risk-based capital
Company873,039 13.02 %402,391 6.0 %n/an/a8.5%
Boston Private Bank788,375 11.79 %401,337 6.0 %535,116 8.0%8.5%
Total risk-based capital
Company956,919 14.27 %536,522 8.0 %n/an/a10.5%
Boston Private Bank872,038 13.04 %535,116 8.0 %668,896 10.0%10.5%
Tier 1 leverage capital
Company873,039 8.92 %391,634 4.0 %n/an/a4.0%
Boston Private Bank788,375 8.08 %390,364 4.0 %487,955 5.0%4.0%
____________________
n/a - not applicable
(1) Required capital ratios with the capital conservation buffer added to the minimum risk-based capital ratios.
The Company has sponsored the creation of two statutory trusts for the sole purpose of issuing trust preferred securities and investing the proceeds in junior subordinated debentures of the Company. In accordance with ASC 810-10-55, Consolidation - Overall - Implementation Guidance and Illustrations - Variable Interest Entities, these statutory trusts are not consolidated into the Company’s financial statements; however, the Company reflects the amounts of junior subordinated debentures payable to the preferred stockholders of statutory trusts as debt in its financial statements. As of both March 31, 2021 and December 31, 2020, all $100.0 million of the net balance of these trust preferred securities qualified as Tier 1 capital.
Recent Accounting Pronouncements
See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for a description of upcoming changes to accounting principles generally accepted in the United States that may materially impact the Company.

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Item 3.     Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the Interest Rate Sensitivity and Market Risk as described in Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Sensitivity and Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Item 4.     Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
As required by Rule 13a-15 under the Exchange Act, the Company has evaluated, with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the Company’s disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives.
Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective as of March 31, 2021 in ensuring that material information required to be disclosed by the Company, including its consolidated subsidiaries, was made known to the certifying officers by others within the Company and its consolidated subsidiaries in the reports that it files or submits under the Exchange Act and is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. On a quarterly basis, the Company evaluates its disclosure controls and procedures; the Company may, from time to time, make changes to enhance the effectiveness of its disclosure controls and procedures and to ensure that its systems evolve with its business.
(b) Change in internal controls over financial reporting.
There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.


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PART II. Other Information
Item 1.     Legal Proceedings
The Company is involved in various legal proceedings from time to time. In the opinion of management, the final disposition of these proceedings will not have a material adverse effect on the financial condition or results of operations of the Company.
Item 1A.     Risk Factors
Before deciding to invest in us or deciding to maintain or increase your investment, you should carefully consider the risks described in Part I. Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC. There have been no material changes to these risk factors since the filing of that report. 
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities of the Company in the first quarter of 2021.
Item 3.     Defaults Upon Senior Securities
None.
Item 4.     Mine Safety Disclosures
Not applicable.
Item 5.     Other Information
None.
Item 6.     Exhibits
(a) Exhibits
Exhibit No.DescriptionIncorporated by Reference
Filed or
Furnished
with this
10-Q
Form
SEC Filing
Date
Exhibit
Number
31.1Filed
31.2Filed
32.1Furnished
32.2Furnished
101.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL documentFiled
101.SCHInline XBRL Taxonomy Extension Schema DocumentFiled
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled
104Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101)Filed
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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.
/s/    ANTHONY DECHELLIS
May 5, 2021Anthony DeChellis
Chief Executive Officer, President and Director
(Principal Executive Officer)
/s/    STEVEN M. GAVEN
May 5, 2021Steven M. Gaven
Executive Vice President, Chief Financial Officer
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