UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q10-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, 2020
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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.INC.
(Exact name of registrant as specified in its charter)
Massachusetts04-2976299
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
Massachusetts04-2976299
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification Number)
Ten Post Office Square
02109
Boston,Massachusetts
(Address of Principal Executive Offices)(Zip Code)

Registrant's telephone number, including area code: (617)(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 October 31, 2019:April 30, 2020:
Common Stock, Par Value $1.00 Per Share83,242,00181,800,550
(class)(outstanding)




BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Unaudited Consolidated Financial Statements
Item 2
Executive Summary
Critical Accounting Policies
Results of Operations
Financial Condition
59
Condensed Consolidated Balance Sheets and Discussion
Loan Portfolio and Credit Quality
Liquidity
Capital Resources
Recent Accounting Pronouncements
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)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, 2019 December 31, 2018 March 31, 2020December 31, 2019
(In thousands, except share 
and per share data)
(In thousands, except share 
and per share data)
Assets:   Assets:
Cash and cash equivalents$78,010
 $127,259
Cash and cash equivalents$61,714  $292,479  
Investment securities available-for-sale (amortized cost of $922,112 and $1,018,774 at September 30, 2019 and December 31, 2018, respectively)935,538
 994,065
Investment securities held-to-maturity (fair value of $51,015 and $68,595 at September 30, 2019 and December 31, 2018, respectively)51,379
 70,438
Investment securities available-for-sale (amortized cost of $961,351 and $966,900 at March 31, 2020 and December 31, 2019, respectively)Investment securities available-for-sale (amortized cost of $961,351 and $966,900 at March 31, 2020 and December 31, 2019, respectively)993,166  978,284  
Investment securities held-to-maturity (fair value of $46,096 and $47,949 at March 31, 2020 and December 31, 2019, respectively)Investment securities held-to-maturity (fair value of $46,096 and $47,949 at March 31, 2020 and December 31, 2019, respectively)45,395  48,212  
Equity securities at fair value21,780
 14,228
Equity securities at fair value23,080  18,810  
Stock in Federal Home Loan Bank and Federal Reserve Bank47,756
 49,263
Stock in Federal Home Loan Bank and Federal Reserve Bank45,273  39,078  
Loans held for sale6,658
 2,812
Loans held for sale7,671  7,386  
Total loans7,067,151
 6,893,158
Total loans7,043,338  6,976,704  
Less: Allowance for loan losses75,359
 75,312
Less: Allowance for loan losses68,211  71,982  
Net loans6,991,792
 6,817,846
Net loans6,975,127  6,904,722  
Other real estate owned (“OREO”)—
 401
Premises and equipment, net42,658
 45,412
Premises and equipment, net43,544  44,527  
Goodwill57,607
 57,607
Goodwill57,607  57,607  
Intangible assets, net10,622
 12,227
Intangible assets, net9,637  10,352  
Fees receivable5,007
 5,101
Fees receivable4,249  4,095  
Accrued interest receivable24,851
 24,366
Accrued interest receivable24,054  24,175  
Deferred income taxes, net15,704
 26,638
Deferred income taxes, net5,630  11,383  
Right-of-use assets107,045
 —
Right-of-use assets98,896  102,075  
Other assets294,537
 246,962
Other assets351,283  287,316  
Total assets$8,690,944
 $8,494,625
Total assets$8,746,326  $8,830,501  
Liabilities:   Liabilities:
Deposits$6,658,242
 $6,781,170
Deposits$6,835,572  $7,241,476  
Securities sold under agreements to repurchase48,860
 36,928
Securities sold under agreements to repurchase45,319  53,398  
Federal funds purchased230,000
 250,000
Federal funds purchased145,000  —  
Federal Home Loan Bank borrowings570,904
 420,144
Federal Home Loan Bank borrowings491,254  350,829  
Junior subordinated debentures106,363
 106,363
Junior subordinated debentures106,363  106,363  
Lease liabilities122,799
 —
Lease liabilities113,574  117,214  
Other liabilities143,607
 143,540
Other liabilities180,452  140,820  
Total liabilities7,880,775
 7,738,145
Total liabilities7,917,534  8,010,100  
Redeemable Noncontrolling Interests1,481
 2,526
Redeemable Noncontrolling Interests—  1,383  
Shareholders’ Equity:   Shareholders’ Equity:
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 83,241,952 shares at September 30, 2019 and 83,655,651 shares at December 31, 201883,242
 83,656
Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 81,800,486 shares at March 31, 2020 and 83,265,674 shares at December 31, 2019Common stock, $1.00 par value; authorized: 170,000,000 shares; issued and outstanding: 81,800,486 shares at March 31, 2020 and 83,265,674 shares at December 31, 201981,800  83,266  
Additional paid-in capital599,877
 600,196
Additional paid-in capital593,167  600,708  
Retained earnings116,210
 87,821
Retained earnings131,761  127,469  
Accumulated other comprehensive income/ (loss)9,359
 (17,719)
Accumulated other comprehensive income/(loss)Accumulated other comprehensive income/(loss)22,064  7,575  
Total shareholders’ equity808,688
 753,954
Total shareholders’ equity828,792  819,018  
Total liabilities, redeemable noncontrolling interests and shareholders’ equity$8,690,944
 $8,494,625
Total liabilities, redeemable noncontrolling interests and shareholders’ equity$8,746,326  $8,830,501  
See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
1
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (In thousands, except share and per share data)
Interest and dividend income:       
Loans$71,036
 $68,254
 $212,912
 $193,231
Taxable investment securities938
 1,510
 3,244
 4,521
Non-taxable investment securities1,924
 1,779
 5,726
 5,261
Mortgage-backed securities2,622
 2,941
 8,225
 9,168
Short-term investments and other1,084
 1,617
 3,049
 3,831
Total interest and dividend income77,604
 76,101
 233,156
 216,012
Interest expense:       
Deposits15,487
 11,487
 44,060
 26,376
Federal Home Loan Bank borrowings4,337
 3,877
 12,144
 11,668
Junior subordinated debentures1,022
 1,028
 3,223
 2,882
Repurchase agreements and other short-term borrowings605
 68
 1,778
 517
Total interest expense21,451
 16,460
 61,205
 41,443
Net interest income56,153
 59,641
 171,951
 174,569
Provision/ (credit) for loan losses167
 (949) 104
 (2,291)
Net interest income after provision/ (credit) for loan losses55,986
 60,590
 171,847
 176,860
Fees and other income:       
Wealth management and trust fees19,067
 25,505
 57,037
 76,030
Investment management fees2,496
 3,245
 7,601
 18,897
Other banking fee income2,658
 2,775
 8,024
 7,793
Gain on sale of loans, net934
 67
 1,065
 204
Gain/ (loss) on sale of investments, net—
 —
 —
 (17)
Gain/ (loss) on OREO, net—
 —
 91
 —
Other(29) 722
 936
 1,245
Total fees and other income25,126
 32,314
 74,754
 104,152
Operating expense:       
Salaries and employee benefits31,684
 38,944
 100,116
 125,461
Occupancy and equipment8,260
 8,164
 24,460
 24,141
Information systems5,169
 6,233
 16,166
 18,889
Professional services4,435
 2,877
 11,308
 8,926
Marketing and business development1,403
 1,710
 4,422
 5,373
Amortization of intangibles671
 750
 2,015
 2,249
FDIC insurance59
 674
 1,304
 2,126
Restructuring—
 5,763
 1,646
 5,763
Other3,856
 3,442
 10,312
 10,870
Total operating expense55,537
 68,557
 171,749
 203,798
Income before income taxes25,575
 24,347
 74,852
 77,214
Income tax expense5,517
 5,461
 15,803
 28,886
Net income from continuing operations20,058
 18,886
 59,049
 48,328
Net income from discontinued operations—
 —
 —
 1,696
Net income before attribution to noncontrolling interests20,058
 18,886
 59,049
 50,024
(Continued)       


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

 Three months ended March 31,
 20202019
 (In thousands, except share and per share data)
Interest and dividend income:
Loans$66,358  $69,933  
Taxable investment securities868  1,185  
Non-taxable investment securities1,998  1,901  
Mortgage-backed securities2,787  2,897  
Short-term investments and other1,071  908  
Total interest and dividend income73,082  76,824  
Interest expense:
Deposits12,796  14,058  
Federal Home Loan Bank borrowings2,034  2,780  
Junior subordinated debentures917  1,121  
Repurchase agreements and other short-term borrowings78  527  
Total interest expense15,825  18,486  
Net interest income57,257  58,338  
Provision/(credit) for loan losses16,962  (1,426) 
Net interest income after provision/(credit) for loan losses40,295  59,764  
Fees and other income:
Wealth management and trust fees18,371  19,058  
Investment management fees1,925  2,650  
Other banking fee income2,490  2,499  
Gain on sale of loans, net100  73  
Gain on OREO, net—  91  
Other(1,365) 877  
Total fees and other income21,521  25,248  
Operating expense:
Salaries and employee benefits35,096  35,726  
Occupancy and equipment7,646  8,348  
Information systems6,725  5,860  
Professional services3,601  3,560  
Marketing and business development1,890  1,085  
Amortization of intangibles715  672  
FDIC insurance—  660  
Restructuring—  1,646  
Other5,235  2,996  
Total operating expense60,908  60,553  
Income before income taxes908  24,459  
Income tax expense102  4,917  
Net income before attribution to noncontrolling interests806  19,542  
(Continued)
2

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

 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Less: Net income attributable to noncontrolling interests96
 924
 265
 2,942
Net income attributable to the Company$19,962
 $17,962
 $58,784
 $47,082
Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders304
 (829) 1,045
 (4,376)
Net income attributable to common shareholders for earnings per share calculation$20,266
 $17,133
 $59,829
 $42,706
Basic earnings per share attributable to common shareholders:       
From continuing operations:$0.24
 $0.20
 $0.72
 $0.49
From discontinued operations:$—
 $—
 $—
 $0.02
Total attributable to common shareholders:$0.24
 $0.20
 $0.72
 $0.51
Weighted average basic common shares outstanding83,631,403
 84,017,284
 83,495,361
 83,544,754
Diluted earnings per share attributable to common shareholders:       
From continuing operations:$0.24
 $0.20
 $0.71
 $0.48
From discontinued operations:$—
 $—
 $—
 $0.02
Total attributable to common shareholders:$0.24
 $0.20
 $0.71
 $0.50
Weighted average diluted common shares outstanding83,956,708
 85,498,568
 84,003,281
 85,254,295

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

 Three months ended March 31,
 20202019
Less: Net income attributable to noncontrolling interests6  100  
Net income attributable to the Company$800  $19,442  
Adjustments to net income attributable to the Company to arrive at net income attributable to common shareholders414  1,557  
Net income attributable to common shareholders for earnings per share calculation$1,214  $20,999  
Basic earnings per share attributable to common shareholders:
Total attributable to common shareholders:$0.01  $0.25  
Weighted average basic common shares outstanding83,005,064  83,285,095  
Diluted earnings per share attributable to common shareholders:
Total attributable to common shareholders:$0.01  $0.25  
Weighted average diluted common shares outstanding83,318,041  84,010,450  
 See accompanying notes to consolidated financial statements.Consolidated Financial Statements.

3
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (In thousands)
Net income attributable to the Company$19,962
 $17,962
 $58,784
 $47,082
Other comprehensive income/ (loss), net of tax:       
Net unrealized gain/ (loss) on securities available-for-sale5,236
 (4,040) 27,469
 (18,888)
Unrealized gain/ (loss) on cash flow hedges2
 (138) (31) 574
Reclassification adjustment for net realized (gain)/ loss included in net income(4) (72) (360) (273)
Net unrealized gain/ (loss) on cash flow hedges(2) (210) (391) 301
Net unrealized gain/ (loss) on other—
 —
 —
 1
Other comprehensive income/ (loss), net of tax5,234
 (4,250) 27,078
 (18,586)
Total comprehensive income attributable to the Company, net$25,196
 $13,712
 $85,862
 $28,496

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

 Three months ended March 31,
 20202019
(In thousands)
Net income attributable to the Company$800  $19,442  
Other comprehensive income, net of tax:
Net unrealized gain/(loss) on securities available-for-sale14,489  11,568  
Unrealized gain/(loss) on cash flow hedges—  (27) 
Reclassification adjustment for net realized (gain)/loss included in net income—  (220) 
Net unrealized gain/(loss) on cash flow hedges—  (247) 
Other comprehensive income, net of tax14,489  11,321  
Total comprehensive income attributable to the Company, net$15,289  $30,763  
 See accompanying notes to consolidated financial statements.Consolidated Financial Statements.


4
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income/
(Loss)
 
Non-
controlling
Interests
 Total
 (In thousands, except share data)
Balance, December 31, 2017$47,753
 $84,208
 $607,929
 $49,526
 $(8,658) $5,186
 $785,944
Reclassification due to change in accounting principles (1)—
 —
 —
 334
 (334) —
 —
Net income attributable to the Company—
 —
 —
 47,082
 —
 —
 47,082
Other comprehensive income/ (loss), net—
 —
 —
 —
 (18,586) —
 (18,586)
Dividends paid to common shareholders:
$0.36 per share		—
 —
 —
 (30,586) —
 —
 (30,586)
Dividends paid to preferred shareholders—
 —
 —
 (1,738) —
 —
 (1,738)
Net change in noncontrolling interests—
 —
 —
 —
 —
 (2,977) (2,977)
Redemption of Series D preferred stock(47,753) —
 (2,247) —
 —
 —
 (50,000)
Repurchase of 137,114 shares of common stock—
 (137) (1,768) —
 —
 —
 (1,905)
Net proceeds from issuance of:             
142,738 shares of common stock—
 143
 1,722
 —
 —
 —
 1,865
7,355 shares of incentive stock grants, net of 132,964 incentive stock grant shares canceled or forfeited and 127,894 shares withheld for employee taxes—
 (253) (1,699) —
 —
 —
 (1,952)
Exercise of warrants—
 438
 (277) —
 —
 —
 161
Amortization of stock compensation and employee stock purchase plan—
 —
 5,131
 —
 —
 —
 5,131
Stock options exercised—
 204
 1,457
 —
 —
 —
 1,661
Other equity adjustments—
 —
 3,909
 —
 —
 —
 3,909
Balance at September 30, 2018$—
 $84,603
 $614,157
 $64,618
 $(27,578) $2,209
 $738,009
              
Balance, December 31, 2018$—
 $83,656
 $600,196
 $87,821
 $(17,719) $—
 $753,954
Net income attributable to the Company—
 —
 —
 58,784
 —
 —
 58,784
Other comprehensive income/ (loss), net—
 —
 —
 —
 27,078
 —
 27,078
Dividends paid to common shareholders:
$0.36 per share		—
 —
 —
 (30,395) —
 —
 (30,395)
Repurchase of 678,165 shares of common stock—
 (678) (6,515) —
 —
 —
 (7,193)
Net proceeds from issuance of:             
265,937 shares of common stock—
 266
 2,008
 —
 —
 —
 2,274
42,004 shares of incentive stock grants, net of 9,377 shares canceled or forfeited and 115,173 shares withheld for employee taxes—
 (83) (522) —
 —
 —
 (605)
Amortization of stock compensation and employee stock purchase plan—
 —
 3,359
 —
 —
 —
 3,359
Stock options exercised—
 81
 464
 —
 —
 —
 545
Other equity adjustments—
 —
 887
 —
 —
 —
 887
Balance at September 30, 2019$—
 $83,242
 $599,877
 $116,210
 $9,359
 $—
 $808,688

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 data)
Balance at December 31, 2018$83,656  $600,196  $87,821  $(17,719) $753,954  
Net income attributable to the Company—  —  19,442  —  19,442  
Other comprehensive income/(loss), net—  —  —  11,321  11,321  
Dividends paid to common shareholders: $0.12 per share—  —  (10,108) —  (10,108) 
Net proceeds from issuance of:
103,991 shares of common stock104  876  —  —  980  
20,595 shares of incentive stock grants, net of 2,976 shares canceled or forfeited and 13,911 shares withheld for employee taxes4  166  —  —  170  
Amortization of stock compensation and employee stock purchase plan—  1,352  —  —  1,352  
Stock options exercised10  40  —  —  50  
Other equity adjustments—  1,658  —  —  1,658  
Balance at March 31, 2019$83,774  $604,288  $97,155  $(6,398) $778,819  
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—  —  —  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 stock88  832  —  —  920  
5,539 shares of incentive stock grants, net of 964 shares withheld for employee taxes5  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  
_____________________
(1) ReclassificationImpact due to the adoption of ASU 2016-01 and 2016-13, Financial Instruments (Topic 326) (“ASU 2017-12.2016-13”). See Part I. Item 1. “Financial“Notes to Unaudited Consolidated Financial Statements and Supplementary Data - Note 15: Recent Accounting Pronouncements.”

See accompanying notes to consolidated financial statements.

Consolidated Financial Statements.
5
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 Nine months ended September 30,
 2019 2018
 (In thousands)
Cash flows from operating activities:   
Net income attributable to the Company$58,784
 $47,082
Adjustments to arrive at net income from continuing operations   
Net income attributable to noncontrolling interests265
 2,942
Less: Net income from discontinued operations—
 (1,696)
Net income from continuing operations59,049
 48,328
Adjustments to reconcile net income from continuing operations to net cash provided by/ (used in) operating activities:   
Depreciation and amortization17,726
 17,192
Net income attributable to noncontrolling interests(265) (2,942)
Stock compensation, net of cancellations4,022
 5,232
Provision/ (credit) for loan losses104
 (2,291)
Loans originated for sale(32,796) (32,364)
Proceeds from sale of loans held for sale29,176
 33,935
Deferred income tax expense/ (benefit)432
 8,548
Increase in right-of-use assets1,416
 —
Increase in operating lease liabilities(1,465) —
Net decrease/ (increase) in other operating activities(36,916) (14,348)
Net cash provided by/ (used in) operating activities of continuing operations40,483
 61,290
Net cash provided by/ (used in) operating activities of discontinued operations—
 1,696
Net cash provided by/ (used in) operating activities40,483
 62,986
Cash flows from investing activities:   
Investment securities available-for-sale:   
Purchases(24,977) (25,204)
Sales—
 24
Maturities, calls, redemptions, and principal payments115,857
 86,085
Investment securities held-to-maturity:   
Purchases—
 (11,876)
Maturities, calls, and principal payments18,880
 10,726
Equity securities at fair value:   
Purchases(44,537) (38,042)
Sales36,985
 51,757
(Investments)/ distributions in trusts, net357
 1,252
Contingent considerations from divestitures3,254
 —
(Purchase)/ redemption of Federal Home Loan Bank and Federal Reserve Bank stock1,507
 11,246
Net increase in portfolio loans(268,238) (217,317)
Proceeds from recoveries of loans previously charged-off887
 1,578
Proceeds from sale of OREO492
 —
Proceeds from sale of portfolio loans92,304
 —
Capital expenditures(5,795) (18,349)
Proceeds from sale of affiliate—
 34,120
Net cash provided by/ (used in) investing activities(73,024) (114,000)
(Continued)   


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

 Three months ended March 31,
 20202019
 (In thousands)
Cash flows from operating activities:
Net income attributable to the Company$800  $19,442  
Adjustments to arrive at net income:
Net income attributable to noncontrolling interests6  100  
Net income before attribution to noncontrolling interests806  19,542  
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization6,345  5,933  
Net income attributable to noncontrolling interests(6) (100) 
Stock compensation, net of cancellations1,421  1,677  
Provision/(credit) for loan losses16,962  (1,426) 
Loans originated for sale(15,324) (6,796) 
Proceeds from sale of loans held for sale15,127  9,401  
Deferred income tax expense/(benefit)(5,731) (523) 
Decrease/(increase) in right-of-use assets3,179  3,817  
Increase/(decrease) in operating lease liabilities(3,640) (4,102) 
Net decrease/(increase) in other operating activities(27,617) (19,247) 
Net cash provided by/(used in) operating activities(8,478) 8,176  
Cash flows from investing activities:
Investment securities available-for-sale:
Purchases(8,874) —  
Maturities, calls, redemptions, and principal payments12,472  26,265  
Investment securities held-to-maturity:
Principal payments2,730  2,860  
Equity securities at fair value:
Transfers out(19,713) (15,149) 
Transfers in15,443  21,886  
(Investments)/distributions in trusts, net569  853  
Contingent considerations from divestitures1,277  836  
(Purchase)/redemption of Federal Home Loan Bank and Federal Reserve Bank stock(6,195) 2,210  
Net increase in portfolio loans(67,890) (34,670) 
Proceeds from recoveries of loans previously charged off180  492  
Proceeds from sale of OREO—  492  
Capital expenditures(1,975) (750) 
Net cash provided by/(used in) investing activities(71,976) 5,325  
(Continued)
6

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

 Nine months ended September 30,
 2019 2018
 (In thousands)
Cash flows from financing activities:   
Net increase/ (decrease) in deposits(122,928) 258,477
Net increase/ (decrease) in securities sold under agreements to repurchase11,932
 7,284
Net increase/ (decrease) in federal funds purchased(20,000) 90,000
Net increase/ (decrease) in short-term Federal Home Loan Bank borrowings110,000
 (230,000)
Advances of long-term Federal Home Loan Bank borrowings340,000
 91,444
Repayments of long-term Federal Home Loan Bank borrowings(299,240) (113,289)
Redemption of Series D preferred stock—
 (50,000)
Dividends paid to common shareholders(30,395) (30,586)
Dividends paid to preferred shareholders—
 (1,738)
Proceeds from warrant exercises—
 161
Repurchase of common stock(7,193) (1,905)
Proceeds from stock option exercises545
 1,661
Proceeds from issuance of common stock2,274
 1,865
Tax withholding for share based compensation awards(1,268) (2,053)
Distributions paid to noncontrolling interests(265) (2,848)
Other equity adjustments(170) 4,634
Net cash provided by/ (used in) financing activities(16,708) 23,107
Net increase/ (decrease) in cash and cash equivalents(49,249) (27,907)
Cash and cash equivalents at beginning of year127,259
 120,541
Cash and cash equivalents at end of period$78,010
 $92,634
Supplemental disclosure of cash flow items:   
Cash paid for interest$60,489
 $40,703
Cash paid for income taxes, (net of refunds received)18,122
 18,898
Change in unrealized gain/ (loss) on available-for-sale securities, net of tax27,469
 (18,888)
Change in unrealized gain/ (loss) on cash flow hedges, net of tax(391) 301
Change in unrealized gain/ (loss) on other, net of tax—
 1
Non-cash transactions:   
Loans transferred into other real estate owned from loan portfolio—
 108
Loans charged-off(944) (529)

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

 Three months ended March 31,
 20202019
(In thousands)
Cash flows from financing activities:
Net increase/(decrease) in deposits(405,904) (1,325) 
Net increase/(decrease) in securities sold under agreements to repurchase(8,079) 21,401  
Net increase/(decrease) in federal funds purchased145,000  (250,000) 
Net increase/(decrease) in short-term Federal Home Loan Bank borrowings115,000  10,000  
Advances of long-term Federal Home Loan Bank borrowings175,000  190,000  
Repayments of long-term Federal Home Loan Bank borrowings(149,575) (5,074) 
Dividends paid to common shareholders(10,000) (10,108) 
Repurchase of common stock(12,807) —  
Proceeds from stock option exercises55  50  
Proceeds from issuance of common stock920  980  
Tax withholding for share based compensation awards(11) (155) 
Distributions paid to noncontrolling interests(6) (100) 
Other equity adjustments96  (218) 
Net cash provided by/(used in) financing activities(150,311) (44,549) 
Net increase/(decrease) in cash and cash equivalents(230,765) (31,048) 
Cash and cash equivalents at beginning of year292,479  127,259  
Cash and cash equivalents at end of period$61,714  $96,211  
Supplemental disclosure of cash flow items:
Cash paid for interest$15,628  $16,775  
Cash paid for income taxes, (net of refunds received)$872  $1,029  
Change in unrealized gain/(loss) on available-for-sale securities, net of tax$14,489  $11,568  
Change in unrealized gain/(loss) on cash flow hedges, net of tax$—  $(247) 
Non-cash transactions:
Loans charged off$(528) $(564) 
See accompanying notes to consolidated financial statements.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 2 reportable segments: (i) Private Banking and (ii) Wealth Management and Trust.
The Private Banking segment is comprised of the banking operations of Boston Private Bank & Trust Company (the “Bank” or “Boston Private Bank”), a trust company chartered by the Commonwealth of Massachusetts, whose deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”), and a wholly-owned subsidiary of the Company. Boston Private Bank is a member of the Federal Reserve Bank of Boston. Boston Private Bank primarily operates in 3 geographic markets: New England, the San Francisco Bay Area,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, and the trust operations of Boston Private Bank. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office, financial planning, tax planning, and trust services to individuals, families, institutions, and nonprofit institutions. On September 1, 2019, KLS Professional Advisors Group, LLC ("KLS"(“KLS”) merged with and into Boston Private Wealth. The results of KLS were previously reported in a third reportable segment, "Affiliate Partners"“Affiliate Partners”, as further discussed below. The Wealth Management and Trust segment operates in New England, New York, Southeast Florida, the San Francisco Bay Area,Northern California, and Southern California.
Prior to the third quarter of 2019, the Company had 3 reportable segments: Affiliate Partners, Private Banking, and Wealth Management and Trust. ForPrior to the first two quartersthird quarter of 2019, the Affiliate Partners segment was comprised of 2 affiliates: KLS and Dalton, Greiner, Hartman, Maher & Co., LLC (“DGHM”), each of which are RIAs. Prior to the first quarter of 2019, the Affiliate Partners segment also included Anchor Capital Advisors, LLC (“Anchor”) and Bingham, Osborn & Scarborough, LLC (“BOS”). On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. On December 3, 2018, the Company completed the sale of its ownership interest in BOS.
With the integration of KLS into Boston Private Wealth in the third quarter of 2019, the Company reorganized theits segment reporting structure to align with how the Company'sits financial performance and strategy isare reviewed and managed. The results of KLS are now included in the results of Boston Private Wealth within the Wealth Management and Trust segment, and the results of DGHM are now included within the Holding Company and Eliminations for all periods presented. The results of Anchor and BOS for the periods owned are included in the Holding Company and Eliminations. See Part II. Item 8. “Financial Statements and Supplementary Data - Note 3: Asset Sales and Divestitures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 for additional information.
The Company conducts substantially all of its business through its 2 reportable segments. All significant intercompany accounts and transactions have been eliminated in consolidation, and the portion of income allocated to the owners of DGHM, Anchor, and BOS other than the Company is included in “Net income attributable to noncontrolling interests” in the Consolidated StatementStatements of Operations for the periods owned. Redeemable noncontrolling interests in the Consolidated Balance Sheets reflect the maximum redemption value of agreements with other owners.the owners of DGHM.
The unaudited interim consolidated financial statementsConsolidated 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 statementsConsolidated Financial Statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2018,2019, as filed with the Securities and Exchange Commission (“SEC”). Prior period amounts are reclassified whenever necessary to conform to the current period presentation. With the integration of KLS into Boston Private Wealth and the related change to reportable segments, fee revenue from KLS is reported in Wealth management and trust fees for all periods on the Consolidated StatementStatements of Operations, which was previously presented as Wealth advisory fees in prior periods. The Company identified an immaterial change relating to the presentation of equity securities at fair value in the Consolidated Statement of Cash Flows. The impact


was a change in the presentation of cash flows relating to $38.0 million of purchases and $51.8 million of sales for the nine months ended September 30, 2018, which were previously presented as investment securities available-for-sale but should have been presented as equity securities at fair value, within investing activities in the Consolidated Statement of Cash Flows.
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, 2018,2019, as filed with the SEC. For interim reporting purposes, the Company follows the same significant accounting policies, except for the following new accounting pronouncements from the Financial Accounting Standards Board (the “FASB”) that were adopted effective January 1, 2019:
•
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update and the related amendments to Topic 842 require lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”); ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”); and ASU No. 2019-01, Leases (Topic 842), Codification Improvements (“ASU 2019-01”). The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective on January 1, 2019 and the Company adopted these provisions on January 1, 2019. The most significant effects relate to the recognition of new ROU assets and lease liabilities on the balance sheet for real estate operating leases, providing significant new disclosures about leasing activities, and the impact of additional assets on certain financial measures such as capital ratios and return on average asset ratios. Additionally, the Company elected the package of practical expedients, as prescribed by ASU 2016-02. The Company elected not to reassess whether any expired or existing contracts are or contain leases nor the lease classification of those leases. The Company also elected not to reassess any initial direct costs for any existing leases. On adoption, the Company recognized $124.1 million of lease liabilities and $108.5 million of ROU assets.
•
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) (“ASU 2018-15”). The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. This update is effective on a retrospective basis for the Company beginning January 1, 2021. The Company early adopted this update on January 1, 2019. The adoption of this update did not have a material impact on the consolidated financial statements.
•
In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting (“ASU 2018-16”). ASU 2018-16 introduces OIS Rate based on the SOFR as an acceptable US benchmark interest rate for purposes of applying hedge accounting under Topic 815. This update is effective for interim and annual reporting periods beginning after December 15, 2018 because the Company has already adopted ASU 2017-12. The Company adopted this update on January 1, 2019. The adoption of this update did not have a material impact on the consolidated financial statements.
2020:
•In June 2016, the FASB issued ASU 2016-13. Throughout 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
8

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 in current GAAP with a current expected credit losses (“CECL”) model methodology that reflects expected credit losses and requires consideration of a reasonable and supportable 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 on January 1, 2020, 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 shown in the Consolidated Statements of Changes in Shareholders’ Equity.
2. Earnings Per Share
The treasury stock method of calculating earnings per share (“EPS”) is presented below for the three months ended March 31, 2020 and 2019. The following tables present the computations of basic and diluted EPS:
Three months ended March 31,
20202019
(In thousands, except share and per share data)
Basic earnings per share - Numerator:
Net income before attribution to noncontrolling interests$806  $19,542  
Less: Net income attributable to noncontrolling interests6  100  
Net income attributable to the Company800  19,442  
Decrease in noncontrolling interests’ redemption values (1)414  1,557  
Total adjustments to income attributable to common shareholders414  1,557  
Net income attributable to common shareholders, treasury stock method$1,214  $20,999  
Basic earnings per share - Denominator:
Weighted average basic common shares outstanding83,005,064  83,285,095  
Per share data - Basic earnings per share:
Total attributable to common shareholders$0.01  $0.25  
Three months ended March 31,
20202019
(In thousands, except share and per share data)
Diluted earnings per share - Numerator:
Net income attributable to common shareholders, after assumed dilution$1,214  $20,999  
Diluted earnings per share - Denominator:
Weighted average basic common shares outstanding  83,005,064  83,285,095  
Dilutive effect of:  
Time-based and market-based stock options, performance-based and time-based restricted stock, and performance-based and time-based restricted stock units, and other dilutive securities (2) 312,977  725,355  
Dilutive common shares  312,977  725,355  
Weighted average diluted common shares outstanding (2) 83,318,041  84,010,450  
Per share data - Diluted earnings per share:
Total attributable to common shareholders$0.01  $0.25  
Dividends per share declared and paid on common stock$0.12  $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, 2019 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. Decreases in redemption value from period to period increase 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.
9
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

2.    Earnings Per Share
(2)The treasury stock method of calculating earnings per share (“EPS”) is presented belowdiluted EPS computations for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018. Thedo not assume the conversion, exercise, or contingent issuance of the following tables presentshares for the computationsfollowing periods because the result would have been anti-dilutive for the periods indicated. As a result of basic andthe anti-dilution, the potential common shares excluded from the diluted EPS:EPS computation are as follows:
Three months ended March 31,
20202019
Shares excluded due to exercise price exceeding the average market price of common shares during the period (total outstanding):(In thousands)
Potential common shares from:
Options, restricted stock, or other dilutive securities1,254  796  
Total shares excluded due to exercise price exceeding the average market price of common shares during the period1,254  796  
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (In thousands, except share and per share data)
Basic earnings per share - Numerator:       
Net income from continuing operations$20,058
 $18,886
 $59,049
 $48,328
Less: Net income attributable to noncontrolling interests96
 924
 265
 2,942
Net income from continuing operations attributable to the Company19,962
 17,962
 58,784
 45,386
Decrease/ (increase) in noncontrolling interests’ redemption values (1)304
 (829) 1,045
 (391)
Dividends on preferred stock—
 —
 —
 (3,985)
Total adjustments to income attributable to common shareholders304
 (829) 1,045
 (4,376)
Net income from continuing operations attributable to common shareholders, treasury stock method20,266
 17,133
 59,829
 41,010
Net income from discontinued operations—
 —
 —
 1,696
Net income attributable to common shareholders, treasury stock method$20,266
 $17,133
 $59,829
 $42,706
        
Basic earnings per share - Denominator:       
Weighted average basic common shares outstanding83,631,403
 84,017,284
 83,495,361
 83,544,754
Per share data - Basic earnings per share from:       
Continuing operations$0.24
 $0.20
 $0.72
 $0.49
Discontinued operations$—
 $—
 $—
 $0.02
Total attributable to common shareholders$0.24
 $0.20
 $0.72
 $0.51

 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
 (In thousands, except share and per share data)
Diluted earnings per share - Numerator:       
Net income from continuing operations attributable to common shareholders, after assumed dilution$20,266
 $17,133
 $59,829
 $41,010
Net income from discontinued operations—
 —
 —
 1,696
Net income attributable to common shareholders, after assumed dilution$20,266
 $17,133
 $59,829
 $42,706
Diluted earnings per share - Denominator:       
Weighted average basic common shares outstanding83,631,403
 84,017,284
 83,495,361
 83,544,754
Dilutive effect of:       
Time-based and market-based stock options, performance-based and time-based restricted stock, and performance-based and time-based restricted stock units, and other dilutive securities (2)325,305
 853,906
 507,920
 1,052,855
Warrants to purchase common stock—
 627,378
 —
 656,686
Dilutive common shares325,305
 1,481,284
 507,920
 1,709,541
Weighted average diluted common shares outstanding (2)83,956,708
 85,498,568
 84,003,281
 85,254,295
Per share data - Diluted earnings per share from:       
Continuing operations$0.24
 $0.20
 $0.71
 $0.48
Discontinued operations$—
 $—
 $—
 $0.02
Total attributable to common shareholders$0.24
 $0.20
 $0.71
 $0.50
Dividends per share declared and paid on common stock$0.12
 $0.12
 $0.36
 $0.36
_____________________
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

(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, 2018 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. Decreases in redemption value from period to period increase 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 and nine months ended September 30, 2019 and 2018 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. As a result of the anti-dilution, the potential common shares excluded from the diluted EPS computation are as follows:
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Shares excluded due to exercise price exceeding the average market price of common shares during the period (total outstanding):(In thousands)
Potential common shares from:       
Options, restricted stock, or other dilutive securities808
 408
 760
 226
Total shares excluded due to exercise price exceeding the average market price of common shares during the period808
 408
 760
 226


3. Reportable Segments
Management Reporting
The Company has 2 reportable segments: (i) Private Banking and (ii) Wealth Management and Trust, as well as the Parent Company (Boston Private Financial Holdings, Inc., the “Holding Company”) within Holding Company and Eliminations. The financial performance of the Company is managed and evaluated according to these 2 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 3 geographic markets: New England, the San Francisco Bay Area,Northern California and Southern California.
The Bank currently conducts business under the name of Boston Private Bank & Trust Company in all markets. The Bank is chartered by the Commonwealth of Massachusetts and is insured by the FDIC. The Bank is principally engaged in providing private banking services to high net worth individuals, privately ownedprivately-owned businesses and partnerships, and nonprofit organizations. In addition, the Bank is an active provider of financing for affordable housing, first-time homebuyers, economic development, social services, community revitalization and small businesses.
Wealth Management and Trust
The Wealth Management and Trust segment is comprised of the trust operations of the Bank and the operations of Boston Private Wealth. On September 1, 2019, KLS merged into Boston Private Wealth. As a result, the results of KLS are included in the results of Boston Private Wealth within the Wealth Management and Trust segment for all periods presented. The Wealth Management and Trust segment offers planning-based financial strategies, wealth management, family office,
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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, the San Francisco Bay Area,Northern California and Southern California.

Changes to Segment Reporting

The 2018 segment results have been adjusted for comparability to the 2019 segment results for the following changes. Prior to the third quarter of 2019, the Company had 3 reportable segments: Affiliate Partners, Private Banking, and Wealth Management and Trust. For the first two quarters of 2019, the Affiliate Partners segment was comprised of 2 affiliates: KLS and DGHM, each of which are RIAs. Prior to the first quarter of 2019, the Affiliate Partners segment also included Anchor and BOS for the periods owned. On April 13, 2018, the Company completed the sale of its ownership interest in Anchor. On December 3, 2018, the Company completed the sale of its ownership interest in BOS.

With the integration of KLS into Boston Private Wealth in the third quarter of 2019, the Company reorganized the segment reporting structure to align with how the Company's financial performance and strategy is reviewed and managed. The results of KLS are now included in the results of Boston Private Wealth within the Wealth Management and Trust segment, and the results of DGHM are now included in Holding Company and Eliminations for all periods presented. The results of Anchor and BOS for the periods owned are included in Holding Company and Eliminations. See Part II. Item 8. “Financial
10
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements and Supplementary Data - Note 3: Asset Sales and Divestitures” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.(Continued)
Measurement of Segment Profit and Assets
The accounting policies of the segments are the same as those described in Part II.I. Item 8. “Financial1. "Notes to Unaudited Consolidated Financial Statements and Supplementary Data - Note 1: Basis of Presentation and Summary of Significant Accounting Policies.”"

Reconciliation of Reportable Segment Items
The following tables present a reconciliation of the revenues, profits, assets, and other significant items of reportable segments as of and for the three and nine months ended September 30, 2019March 31, 2020 and 2018.2019.
Three months ended March 31,
20202019
Private Banking (1)(In thousands)
Net interest income$58,090  $59,337  
Fees and other income1,108  3,258  
Total revenue59,198  62,595  
Provision/(credit) for loan losses16,962  (1,426) 
Operating expense (2)42,588  41,317  
Income/(loss) before income taxes(352) 22,704  
Income tax expense/(benefit)(931) 4,430  
Net income before attribution to noncontrolling interests579  18,274  
Net income attributable to the Company$579  $18,274  
Assets$8,692,069  $8,481,160  
Amortization of intangibles$77  $—  
Depreciation$2,626  $2,670  
Three months ended March 31,
20202019
Wealth Management and Trust (1)(In thousands)
Net interest income$72  $106  
Fees and other income18,485  19,126  
Total revenue18,557  19,232  
Operating expense (2)15,449  15,567  
Income before income taxes3,108  3,665  
Income tax expense1,074  1,194  
Net income before attribution to noncontrolling interests2,034  2,471  
Net income attributable to the Company$2,034  $2,471  
Assets$143,998  $147,771  
Amortization of intangibles$638  $672  
Depreciation$294  $367  
Three months ended March 31,
20202019
Holding Company and Eliminations (1)(In thousands)
Net interest income (3)$(905) $(1,105) 
Fees and other income1,928  2,864  
Total revenue1,023  1,759  
Operating expense2,871  3,669  
Income/(loss) before income taxes(1,848) (1,910) 
Income tax expense/(benefit)(41) (707) 
Net income/(loss) before attribution to noncontrolling interests(1,807) $(1,203) 
Noncontrolling interests6  100  
Net income/(loss) attributable to the Company$(1,813) $(1,303) 
Assets (including eliminations)$(89,741) $(56,788) 
Depreciation$39  $47  
11
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Private Banking(In thousands)
Net interest income$57,058
 $60,551
 $174,814
 $177,129
Fees and other income3,403
 3,337
 9,465
 8,637
Total revenue60,461
 63,888
 184,279
 185,766
Provision/ (credit) for loan losses167
 (949) 104
 (2,291)
Operating expense (1)38,134
 44,706
 117,256
 124,003
Income before income taxes22,160
 20,131
 66,919
 64,054
Income tax expense4,212
 4,469
 13,520
 13,063
Net income from continuing operations17,948
 15,662
 53,399
 50,991
Net income attributable to the Company$17,948
 $15,662
 $53,399
 $50,991
        
Assets$8,617,207
 $8,292,901
 $8,617,207
 $8,292,901
Depreciation$2,229
 $2,398
 $7,271
 $6,013
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

Three months ended March 31,
20202019
Total Company (1)(In thousands)
Net interest income$57,257  $58,338  
Fees and other income21,521  25,248  
Total revenue78,778  83,586  
Provision/(credit) for loan losses16,962  (1,426) 
Operating expense60,908  60,553  
Income before income taxes908  24,459  
Income tax expense102  4,917  
Net income before attribution to noncontrolling interests806  19,542  
Noncontrolling interests6  100  
Net income attributable to the Company$800  $19,442  
Assets$8,746,326  $8,572,143  
Amortization of intangibles$715  $672  
Depreciation$2,959  $3,084  
_____________________
(1)Due to rounding, the sum of individual segment results may not add up to the Total Company results.
(2)Operating expense related to the Private Banking and Wealth Management and Trust segments includes restructuring expense for the three months ended March 31, 2019 of $1.3 million and $0.4 million, respectively.
(3)Interest expense on junior subordinated debentures is included in Holding Company and Eliminations.
12
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Wealth Management and Trust(In thousands)
Net interest income$99
 $98
 $309
 $222
Fees and other income19,106
 19,769
 57,188
 59,108
Total revenue19,205
 19,867
 57,497
 59,330
Operating expense (1)13,888
 16,434
 43,864
 49,981
Income before income taxes5,317
 3,433
 13,633
 9,349
Income tax expense1,751
 1,130
 4,465
 3,019
Net income from continuing operations3,566
 2,303
 9,168
 6,330
Net income attributable to the Company$3,566
 $2,303
 $9,168
 $6,330
        
Assets$143,326
 $127,229
 $143,326
 $127,229
Amortization of intangibles$671
 $701
 $2,015
 $2,103
Depreciation$290
 $409
 $991
 $1,230
 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Holding Company and Eliminations (2)(In thousands)
Net interest income (3)$(1,004) $(1,008) $(3,172) $(2,782)
Fees and other income2,617
 9,208
 8,101
 36,407
Total revenue1,613
 8,200
 4,929
 33,625
Operating expense3,515
 7,417
 10,629
 29,814
Income/ (loss) before income taxes(1,902) 783
 (5,700) 3,811
Income tax expense/ (benefit)(446) (138) (2,182) 12,804
Net income/ (loss) from continuing operations(1,456) 921
 (3,518) (8,993)
Noncontrolling interests96
 924
 265
 2,942
Discontinued operations (4)—
 —
 —
 1,696
Net income/ (loss) attributable to the Company$(1,552) $(3) $(3,783) $(10,239)
        
Assets (including eliminations)$(69,589) $(44,290) $(69,589) $(44,290)
Amortization of intangibles$—
 $49
 $—
 $146
Depreciation$51
 $109
 $147
 $336
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
Total Company (2)(In thousands)
Net interest income$56,153
 $59,641
 $171,951
 $174,569
Fees and other income25,126
 32,314
 74,754
 104,152
Total revenue81,279
 91,955
 246,705
 278,721
Provision/ (credit) for loan losses167
 (949) 104
 (2,291)
Operating expense55,537
 68,557
 171,749
 203,798
Income before income taxes25,575
 24,347
 74,852
 77,214
Income tax expense5,517
 5,461
 15,803
 28,886
Net income from continuing operations20,058
 18,886
 59,049
 48,328
Noncontrolling interests96
 924
 265
 2,942
Discontinued operations (4)—
 —
 —
 1,696
Net income attributable to the Company$19,962
 $17,962
 $58,784
 $47,082
        
Assets$8,690,944
 $8,375,840
 $8,690,944
 $8,375,840
Amortization of intangibles$671
 $750
 $2,015
 $2,249
Depreciation$2,570
 $2,916
 $8,409
 $7,579

_____________________
(1)Operating expense includes restructuring expense of $1.3 million and $0.4 million for the nine months ended September 30, 2019 related to the Private Banking and Wealth Management and Trust segments, respectively. Operating expense includes restructuring expense of $5.2 million and $0.6 million for the nine months ended September 30, 2018 related to the Private Banking and Wealth Management & Trust segments, respectively.
(2)The results of Anchor and BOS for the periods owned in 2018 are included in Holding Company and Eliminations and the Total Company.
(3)Interest expense on junior subordinated debentures is included in Holding Company and Eliminations.
(4)The Holding Company and Eliminations calculation of net income attributable to the Company includes net income from discontinued operations of 0 and $1.7 million for the nine months ended September 30, 2019 and 2018, respectively. The Company received the final payment related to a revenue sharing agreement with Westfield Capital Management Company, LLC (“Westfield”) in the first quarter of 2018. The Company will not receive additional income from Westfield now that the final payment has been received.
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 September 30, 2019March 31, 2020 and December 31, 2018:2019:
Amortized
Cost		UnrealizedFair
Value
Amortized
Cost
 Unrealized 
Fair
Value
GainsLosses
Gains Losses (In thousands)
(In thousands)
At September 30, 2019       
At March 31, 2020At March 31, 2020
Available-for-sale securities at fair value:       Available-for-sale securities at fair value:
U.S. government and agencies$19,953
 $104
 $—
 $20,057
U.S. government and agencies$19,957  $1,130  $—  $21,087  
Government-sponsored entities155,081
 1,483
 (8) 156,556
Government-sponsored entities154,844  5,598  —  160,442  
Municipal bonds314,970
 13,055
 (10) 328,015
Municipal bonds319,844  12,784  (128) 332,500  
Mortgage-backed securities (1)432,108
 1,847
 (3,045) 430,910
Mortgage-backed securities (1)466,706  12,670  (239) 479,137  
Total$922,112
 $16,489
 $(3,063) $935,538
Total$961,351  $32,182  $(367) $993,166  
       
Held-to-maturity securities at amortized cost:       Held-to-maturity securities at amortized cost:
Mortgage-backed securities (1)$51,379
 $33
 $(397) $51,015
Mortgage-backed securities (1)$45,395  $731  $(30) $46,096  
Total$51,379
 $33
 $(397) $51,015
Total$45,395  $731  $(30) $46,096  
       
Equity securities at fair value:       Equity securities at fair value:
Money market mutual funds (2)$21,780
 $—
 $—
 $21,780
Money market mutual funds (2)$23,080  $—  $—  $23,080  
Total$21,780
 $—
 $—
 $21,780
Total$23,080  $—  $—  $23,080  
       
At December 31, 2018       
At December 31, 2019At December 31, 2019
Available-for-sale securities at fair value:       Available-for-sale securities at fair value:
U.S. government and agencies$30,043
 $—
 $(929) $29,114
U.S. government and agencies$19,955  $42  $(57) $19,940  
Government-sponsored entities211,655
 —
 (3,952) 207,703
Government-sponsored entities154,963  1,292  —  156,255  
Municipal bonds309,837
 2,223
 (3,101) 308,959
Municipal bonds312,977  12,551  (73) 325,455  
Mortgage-backed securities (1)467,239
 214
 (19,164) 448,289
Mortgage-backed securities (1)479,005  1,117  (3,488) 476,634  
Total$1,018,774
 $2,437
 $(27,146) $994,065
Total$966,900  $15,002  $(3,618) $978,284  
       
Held-to-maturity securities at amortized cost:       Held-to-maturity securities at amortized cost:
U.S. government and agencies$9,898
 $2
 $—
 $9,900
Mortgage-backed securities (1)60,540
 —
 (1,845) 58,695
Mortgage-backed securities (1)48,212  53  (316) 47,949  
Total$70,438
 $2
 $(1,845) $68,595
Total$48,212  $53  $(316) $47,949  
       
Equity securities at fair value:       Equity securities at fair value:
Money market mutual funds (2)$14,228
 $—
 $—
 $14,228
Money market mutual funds (2)$18,810  $—  $—  $18,810  
Total$14,228
 $—
 $—
 $14,228
Total$18,810  $—  $—  $18,810  
_____________________
(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.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES(1)All mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
Notes(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 held-to-maturity portfolio to meet the "zero loss" expectation requirements. All held-to-maturity securities owned by the Company are AAA rated mortgage-backed securities that are backed by the guarantees of 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, 2020, 0 held-to-maturity securities were past due. Therefore, 0 credit allowance was recorded on the held-to-maturity investment portfolio. The Company evaluated the available-for-sale investment securities on a security by security basis and identified 0 security with impairment. Therefore, 0 credit allowance was booked on the available-for-sale investment portfolio. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - (Continued)
Note 15: Recent Accounting Pronouncements” for additional information on ASU 2016-13.

The following table presents the maturities of available-for-sale investment securities, based on contractual maturity, as of September 30, 2019.March 31, 2020. Certain securities are callable before their final maturity. Additionally, certain securities (such 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.
 Available-for-sale Securities
Amortized
Cost
 
Fair
Value
(In thousands)
Within one year$12,614
 $12,647
After one, but within five years290,921
 292,357
After five, but within ten years250,045
 253,765
Greater than ten years368,532
 376,769
Total$922,112
 $935,538
13

The following table presents the maturities of held-to-maturity investment securities, based on contractual maturity, as of September 30, 2019.
 Held-to-maturity Securities
Amortized
Cost
 
Fair
Value
(In thousands)
After five, but within ten years$41,912
 $41,593
Greater than ten years9,467
 9,422
Total$51,379
 $51,015

The following table presents the proceeds from sales, gross realized gains and gross realized losses for available-for-sale securities that were sold or called during the following periods as well as changes in the fair value of equity securities as prescribed by ASC 321, Investment - Equity Securities. ASU 2016-01, Recognition and Measurements of Financial Assets and Financial Liabilities was adopted on January 1, 2018, at which time a cumulative effect adjustment of $339 thousand was recorded to reclassify the amount of accumulated unrealized gains related to equity securities from accumulated other comprehensive income to retained earnings.
 Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
(In thousands)
Proceeds from sales$—
 $16,231
 $—
 $51,781
Realized gains—
 —
 —
 7
Realized losses—
 —
 —
 (1)
Change in unrealized gain/ (loss) on equity securities reflected in the Consolidated Statement of Operations—
 —
 —
 (23)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 Available-for-sale Securities
Amortized
Cost		Fair
Value
(In thousands)
Within one year$33,686  $33,916  
After one, but within five years312,665  322,256  
After five, but within ten years230,955  239,899  
Greater than ten years384,045  397,095  
Total$961,351  $993,166  
The following table presents the maturities of held-to-maturity investment securities, based on contractual maturity, as of March 31, 2020.
 Held-to-maturity Securities
Amortized
Cost		Fair
Value
(In thousands)
After five, but within ten years$37,086  $37,569  
Greater than ten years8,309  8,527  
Total$45,395  $46,096  
The following table presents the maturities of equity securities, based on contractual maturity, as of March 31, 2020.
 Equity Securities
Amortized
Cost		Fair
Value
(In thousands)
Within one year$23,080  $23,080  
Total$23,080  $23,080  
During the three months ended March 31, 2020 and 2019, there were 0 sales of available-for-sale, held-to- maturity, or equity securities.
The following tables present information regarding securities at September 30, 2019March 31, 2020 and December 31, 20182019 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.
 Less than 12 months 12 months or longer Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
# of
Securities
 (In thousands, except number of securities)
September 30, 2019             
Available-for-sale securities             
U.S. government and agencies$—
 $—
 $—
 $—
 $—
 $—
 —
Government-sponsored entities6,735
 (8) —
 —
 6,735
 (8) 4
Municipal bonds8,506
 (10) —
 —
 8,506
 (10) 3
Mortgage-backed securities (1)63,489
 (226) 206,795
 (2,819) 270,284
 (3,045) 79
Total$78,730
 $(244) $206,795
 $(2,819) $285,525
 $(3,063) 86
              
Held-to-maturity securities             
Mortgage-backed securities (1)$5,608
 $(21) $32,425
 $(376) $38,033
 $(397) 13
Total$5,608
 $(21) $32,425
 $(376) $38,033
 $(397) 13

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, 2020
Available-for-sale securities
Municipal bonds$14,009  $(128) $—  $—  $14,009  $(128) 3  
Mortgage-backed securities (1)3,568  (25) 18,972  (214) 22,540  (239) 36
Total$17,577  $(153) $18,972  $(214) $36,549  $(367) 39  
Held-to-maturity securities
Mortgage-backed securities (1)$—  $—  $4,442  $(30) $4,442  $(30) 2  
Total$—  $—  $4,442  $(30) $4,442  $(30) 2  
14
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Less than 12 months12 months or longerTotal
Less than 12 months 12 months or longer TotalFair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		# of
Securities
Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses		 # of
Securities		(In thousands, except number of securities)
(In thousands, except number of securities)
December 31, 2018             
December 31, 2019December 31, 2019
Available-for-sale securities             Available-for-sale securities
U.S. government and agencies$—
 $—
 $29,114
 $(929) $29,114
 $(929) 5
U.S. government and agencies$9,899  $(57) $—  $—  $9,899  $(57) 1  
Government-sponsored entities—
 —
 207,703
 (3,952) 207,703
 (3,952) 32
Government-sponsored entities1,725  —  —  —  1,725  —  1  
Municipal bonds25,394
 (128) 130,209
 (2,973) 155,603
 (3,101) 85
Municipal bonds9,149  (73) —  —  9,149  (73) 4  
Mortgage-backed securities (1)2,469
 (11) 433,888
 (19,153) 436,357
 (19,164) 110
Mortgage-backed securities (1)140,723  (1,016) 187,043  (2,472) 327,766  (3,488) 85  
Total$27,863
 $(139) $800,914
 $(27,007) $828,777
 $(27,146) 232
Total$161,496  $(1,146) $187,043  $(2,472) $348,539  $(3,618) 91  
             
Held-to-maturity securities             Held-to-maturity securities
Mortgage-backed securities (1)$—
 $—
 $58,695
 $(1,845) $58,695
 $(1,845) 16
Mortgage-backed securities (1)$10,328  $(11) $30,451  $(305) $40,779  $(316) 14  
Total$—
 $—
 $58,695
 $(1,845) $58,695
 $(1,845) 16
Total$10,328  $(11) $30,451  $(305) $40,779  $(316) 14  
_____________________
(1)All mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
(1)All mortgage-backed securities are guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
As of September 30, 2019,March 31, 2020, the government-sponsored entities securities and mortgage-backed securities in the first table above had current Standard and Poor’s credit rating of at least AAA. TheAs of March 31, 2020, the municipal bonds in the first table above had a current Standard and Poor’s credit rating of at least AA.AAA. As of September 30, 2019,March 31, 2020, the Company does not consider thesedetermined that the unrealized losses on investments, other-than-temporarily impaired as the decline in fair value on investmentssince their purchase, is primarily attributed to changes in interest rates and not as a result of the deterioration of credit quality. As of September 30, 2019,March 31, 2020, 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 Company 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 Company makes these investments as an indirect subsidy that allows investors, such as the Company, 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
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

of the tax credits allocated to the entity that owns the qualified affordable housing project. The Company 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 no0 other investments with unrealized losses as of September 30, 2019March 31, 2020 or December 31, 2018.2019. The Company’s other investments primarily include low income housing partnerships which generate tax credits. The Company also holds partnership interests in venture capital funds formed to provide financing to small businesses and to promote community development. The Company had $65.4$66.1 million and $54.4$65.5 million in other investments included in other assets as of September 30, 2019March 31, 2020 and December 31, 2018,2019, 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.
15
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 September 30, 2019March 31, 2020 and December 31, 2018,2019, aggregated by the level in the fair value hierarchy within which those measurements fall:
 As of March 31, 2020Fair 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:
Available-for-sale securities:
U.S. government and agencies$21,087  $—  $21,087  $—  
Government-sponsored entities160,442  —  160,442  —  
Municipal bonds332,500  —  332,500  —  
Mortgage-backed securities479,137  —  479,137  —  
Total available-for-sale securities993,166  —  993,166  —  
Equity securities23,080  23,080  —  —  
Derivatives - interest rate customer swaps93,391  —  93,391  —  
Derivatives - risk participation agreement46  —  46  —  
Trading securities held in the “rabbi trust” (1)5,550  5,550  —  —  
Liabilities:
Derivatives - interest rate customer swaps$94,437  $—  $94,437  $—  
Derivatives - risk participation agreement480  —  480  —  
Deferred compensation “rabbi trust” (1)5,550  5,550  —  —  
 As of September 30, 2019 Fair 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:       
Available-for-sale securities:       
U.S. government and agencies$20,057
 $—
 $20,057
 $—
Government-sponsored entities156,556
 —
 156,556
 —
Municipal bonds328,015
 —
 328,015
 —
Mortgage-backed securities430,910
 —
 430,910
 —
Total available-for-sale securities935,538
 —
 935,538
 —
Equity securities21,780
 21,780
 —
 —
Derivatives - interest rate customer swaps47,851
 —
 47,851
 —
Derivatives - risk participation agreement74
 —
 74
 —
Trading securities held in the “rabbi trust” (1)6,482
 6,482
 —
 —
        
Liabilities:       
Derivatives - interest rate customer swaps$48,891
 $—
 $48,891
 $—
Derivatives - risk participation agreement344
 —
 344
 —
Deferred compensation “rabbi trust” (1)6,482
 6,482
 —
 —



BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

   Fair value measurements at reporting date using:
As of December 31, 2018 
Quoted prices in
active markets
for identical
assets (Level 1)
 
Significant 
other
observable
inputs (Level 2)
 
Significant
unobservable
inputs (Level 3)
(In thousands)
Assets:       
Available-for-sale securities:       
U.S. government and agencies$29,114
 $—
 $29,114
 $—
Government-sponsored entities207,703
 —
 207,703
 —
Municipal bonds308,959
 —
 308,959
 —
Mortgage-backed securities448,289
 —
 448,289
 —
Total available-for-sale securities994,065
 —
 994,065
 —
Equity securities14,228
 14,228
 —
 —
Derivatives - interest rate customer swaps21,889
 —
 21,889
 —
Derivatives - interest rate swaps553
 —
 553
 —
Derivatives - risk participation agreements2
 —
 2
 —
Trading securities held in the “rabbi trust” (1)6,839
 6,839
 —
 —
        
Liabilities:       
Derivatives - interest rate customer swaps$22,385
 $—
 $22,385
 $—
Derivatives - risk participation agreements152
 —
 152
 —
Deferred compensation “rabbi trust” (1)6,839
 6,839
 —
 —

  Fair value measurements at reporting date using:
As of December 31, 2019Quoted prices in
active markets
for identical
assets (Level 1)		Significant 
other
observable
inputs (Level 2)		Significant
unobservable
inputs (Level 3)
(In thousands)
Assets:
Available-for-sale securities:
U.S. government and agencies$19,940  $—  $19,940  $—  
Government-sponsored entities156,255  —  156,255  —  
Municipal bonds325,455  —  325,455  —  
Mortgage-backed securities476,634  —  476,634  —  
Total available-for-sale securities978,284  —  978,284  —  
Equity securities18,810  18,810  —  —  
Derivatives - interest rate customer swaps36,089  —  36,089  —  
Derivatives - risk participation agreements10  —  10  —  
Trading securities held in the “rabbi trust” (1)6,119  6,119  —  —  
Liabilities:
Derivatives - interest rate customer swaps$36,580  $—  $36,580  $—  
Derivatives - risk participation agreements242  —  242  —  
Deferred compensation “rabbi trust” (1)6,112  6,112  —  —  
_____________________
(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.
(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.
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, available-for-sale securities consisted of U.S. government and agencies securities, government-sponsored entities securities, municipal bonds, and mortgage-backed securities. Available-for-sale Level 2 securities generally have quoted prices but are traded less frequently than exchange-traded securities and can be
16
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
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 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”.“off-the-run.” NaN investments held as of September 30, 2019March 31, 2020 or December 31, 20182019 were categorized as Level 3.
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, 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 utilizesmay 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 September 30, 2019March 31, 2020 and December 31, 2018.2019. 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.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
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 sheet.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 sheet.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 September 30, 2019. During the year endedMarch 31, 2020 and December 31, 2018, 5 U.S. Treasury securities totaling $33.4 million transferred from Level 1 to Level 2 as the securities were determined to be “off-the-run”. There were no other transfers for assets or liabilities recorded at fair value on a recurring basis for the year ended December 31, 2018.
2019. There were 0 Level 3 assets valued on a recurring basis at September 30, 2019March 31, 2020 or December 31, 2018.
2019. There were no changes in the valuation techniques used for measuring the fair value.
The following tables present the Company’s assets and liabilities measured at fair value on a non-recurring basis during the periods ended September 30,March 31, 2020 and 2019, and 2018, respectively, aggregated by the level in the fair value hierarchy within which those measurements fall.
As of September 30, 2019 Fair value measurements at reporting date using: Gain (losses) from fair value changes 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 September 30, 2019 Nine months ended September 30, 2019
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)(In thousands)
Assets:           Assets:
Impaired loans (1)$729
 $—
 $—
 $729
 $(388) $204
Impaired loans (1)$97  $—  $—  $97  $21  
_____________________
(1)Collateral-dependent impaired loans held as of September 30, 2019 that had write-downs or recoveries in fair value or whose specific reserve changed during the nine months ended September 30, 2019.

(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.
17
 As of September 30, 2018 Fair 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 September 30, 2018 Nine months ended September 30, 2018
(In thousands)
Assets:           
Impaired loans (1)$2,005
 $—
 $—
 $2,005
 $(440) $(1,367)
_____________________
(1)Collateral-dependent impaired loans held as of September 30, 2018 that had write-downs or recoveries in fair value or whose specific reserve changed during the nine months ended September 30, 2018.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 As of March 31, 2019Fair 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, 2019
(In thousands)
Assets:
Impaired loans (1)$957  $—  $—  $957  $372  
_____________________
(1)Collateral-dependent impaired loans held as of March 31, 2019 that had write-downs or recoveries in fair value or whose specific reserve changed during the three months ended March 31, 2019.
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, 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 sell10% - 10%10%
Appraisal adjustments—%—%
 As of September 30, 2019
 Fair Value 
Valuation
Technique
 
Unobservable
Input
 
Range of
Inputs
Utilized
 
Weighted
Average of
Inputs
Utilized
 (In thousands)  
Impaired Loans$729
 Appraisals of Collateral Discount for costs to sell 0% - 6% 6%
Appraisal adjustments —% —%

 As of September 30, 2018
 Fair Value 
Valuation
Technique
 
Unobservable
Input
 
Range of
Inputs
Utilized
 
Weighted
Average of
Inputs
Utilized
 (In thousands)  
Impaired Loans$2,005
 Appraisals of Collateral Discount for costs to sell 0% - 23% 6%
Appraisal adjustments —% —%

 As of March 31, 2019
Fair ValueValuation
Technique		Unobservable
Input		Range of
Inputs
Utilized		Weighted
Average of
Inputs
Utilized
(In thousands)
Impaired Loans$957  Appraisals of CollateralDiscount for costs to sell—% - 6%1%
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.
18
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, 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$61,714  $61,714  $61,714  $—  $—  
Investment securities held-to-maturity45,395  46,096  —  46,096  —  
Loans held for sale7,671  7,724  —  7,724  —  
Loans, net6,975,127  6,752,894  —  —  6,752,894  
Other financial assets73,576  73,576  —  73,576  —  
FINANCIAL LIABILITIES:
Deposits6,835,572  6,838,860  —  6,838,860  —  
Securities sold under agreements to repurchase45,319  45,319  —  45,319  —  
Federal funds purchased145,000  145,000  —  145,000  —  
Federal Home Loan Bank borrowings491,254  493,532  —  493,532  —  
Junior subordinated debentures106,363  96,363  —  —  96,363  
Other financial liabilities2,154  2,154  —  2,154  —  
 As of September 30, 2019
Book Value Fair Value 
Quoted 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$78,010
 $78,010
 $78,010
 $—
 $—
Investment securities held-to-maturity51,379
 51,015
 —
 51,015
 —
Loans held for sale6,658
 6,708
 —
 6,708
 —
Loans, net6,991,792
 7,006,120
 —
 —
 7,006,120
Other financial assets77,614
 77,614
 —
 77,614
 —
FINANCIAL LIABILITIES:         
Deposits6,658,242
 6,658,538
 —
 6,658,538
 —
Securities sold under agreements to repurchase48,860
 48,860
 —
 48,860
 —
Federal funds purchased230,000
 230,000
 —
 230,000
 —
Federal Home Loan Bank borrowings570,904
 571,606
 —
 571,606
 —
Junior subordinated debentures106,363
 96,363
 —
 —
 96,363
Other financial liabilities2,730
 2,730
 —
 2,730
 —

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 As of December 31, 2018
Book Value Fair Value 
Quoted 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$127,259
 $127,259
 $127,259
 $—
 $—
Investment securities held-to-maturity70,438
 68,595
 —
 68,595
 —
Loans held for sale2,812
 2,837
 —
 2,837
 —
Loans, net6,817,846
 6,734,216
 —
 —
 6,734,216
Other financial assets78,730
 78,730
 —
 78,730
 —
FINANCIAL LIABILITIES:         
Deposits6,781,170
 6,777,928
 —
 6,777,928
 —
Securities sold under agreements to repurchase36,928
 36,928
 —
 36,928
 —
Federal funds purchased250,000
 250,000
 —
 250,000
 —
Federal Home Loan Bank borrowings420,144
 417,092
 —
 417,092
 —
Junior subordinated debentures106,363
 96,363
 —
 —
 96,363
Other financial liabilities2,001
 2,001
 —
 2,001
 —

 As of December 31, 2019
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$292,479  $292,479  $292,479  $—  $—  
Investment securities held-to-maturity48,212  47,949  —  47,949  —  
Loans held for sale7,386  7,475  —  7,475  —  
Loans, net6,904,722  6,883,360  —  —  6,883,360  
Other financial assets67,348  67,348  —  67,348  —  
FINANCIAL LIABILITIES:
Deposits7,241,476  7,241,739  —  7,241,739  —  
Securities sold under agreements to repurchase53,398  53,398  —  53,398  —  
Federal Home Loan Bank borrowings350,829  351,233  —  351,233  —  
Junior subordinated debentures106,363  96,363  —  —  96,363  
Other financial liabilities1,957  1,957  —  1,957  —  
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.
19
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Cash and cash equivalents
The carrying value reported in the balance sheet 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 currently consist of mortgage-backed securities. Assecurities as of March 31, 2020 and December 31, 2018, investment securities held-to-maturity consisted of mortgage-backed securities and a U.S. Treasury security. The U.S. Treasury security held as of December 31, 2018 is an “off-the-run” U.S. Treasury security and, therefore, it has been categorized as Level 2.2019. 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, held-to-maturity mortgage-backed securities are classified as Level 2.
There were no transfers of the Company's financial instruments that are not measured at fair value on a recurring basis as of September 30, 2019March 31, 2020 and December 31, 2018.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

2019.
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. Following the adoption of ASU 2016-01 in 2018, theThe Company updated its process for estimating the fair value of loans, net of allowance for loan losses. The updated process 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. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for additional information on ASU 2016-01.
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 (“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 balance sheet 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
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 of 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, a consideration for illiquidity of trading in the debt, and regulatory changes that would result in an unfavorable change in the regulatory capital treatment of this type of debt.
20
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Other financial liabilities
Other financial liabilities consists of accrued interest payable for which the carrying amount approximates fair value and is classified as Level 2 measurements.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

Financial instruments with off-balance sheet risk
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, the San Francisco Bay Area,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, in particular, 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, San Francisco Bay Area,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:
 September 30, 2019 December 31, 2018
 (In thousands)
Commercial and industrial$695,029
 $623,037
Commercial tax-exempt448,488
 451,671
Total commercial and industrial1,143,517
 1,074,708
Commercial real estate2,533,346
 2,395,692
Construction and land209,741
 240,306
Residential2,964,042
 2,948,973
Home equity84,432
 90,421
Consumer and other132,073
 143,058
Total$7,067,151
 $6,893,158

In the third quarter of 2019, the Bank sold $92.4 million of the residential loan portfolio for a $0.8 million net gain.
 March 31, 2020December 31, 2019
 (In thousands)
Commercial and industrial$670,744  $694,034  
Commercial tax-exempt445,319  447,927  
Commercial real estate2,626,299  2,551,274  
Construction and land238,293  225,983  
Residential2,841,926  2,839,155  
Home equity89,350  83,657  
Consumer and other131,407  134,674  
Total$7,043,338  $6,976,704  
The following table presents nonaccrual loans receivable by class of receivable as of the dates indicated:
 September 30, 2019 December 31, 2018
 (In thousands)
Commercial and industrial$800
 $2,554
Commercial tax-exempt—
 —
Total commercial and industrial800
 2,554
Commercial real estate—
 546
Residential14,219
 7,914
Home equity2,545
 3,031
Consumer and other1
 12
Total$17,565
 $14,057

March 31, 2020December 31, 2019
(In thousands)
Commercial and industrial$1,371  $582  
Commercial tax-exempt—  —  
Commercial real estate5,392  —  
Residential16,074  13,993  
Home equity1,476  1,525  
Consumer and other1  3  
Total$24,314  $16,103  
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 0 loans 90 days or more past due, but still accruing, as of both September 30, 2019March 31, 2020 and December 31, 2018.2019. 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.
21
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:
 September 30, 2019
 Accruing Past Due Nonaccrual Loans    
 30-59 Days Past Due 60-89 Days Past Due Total Accruing Past Due Current 30-89 Days Past Due 
90 Days or
Greater
Past Due
 Total Non-Accrual Loans Current Accruing Loans 
Total
Loans
Receivable
 (In thousands)
Commercial and industrial$554
 $2,494
 $3,048
 $83
 $186
 $531
 $800
 $691,181
 $695,029
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
 448,488
 448,488
Commercial real estate497
 —
 497
 —
 —
 —
 —
 2,532,849
 2,533,346
Construction and land—
 —
 —
 —
 —
 —
 —
 209,741
 209,741
Residential—
 266
 266
 9,084
 301
 4,834
 14,219
 2,949,557
 2,964,042
Home equity74
 279
 353
 991
 —
 1,554
 2,545
 81,534
 84,432
Consumer and other15
 —
 15
 1
 —
 —
 1
 132,057
 132,073
Total$1,140
 $3,039
 $4,179
 $10,159
 $487
 $6,919
 $17,565
 $7,045,407
 $7,067,151

March 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 Due		Total Non-Accrual LoansCurrent Accruing LoansTotal
Loans
Receivable
(In thousands)
Commercial and industrial$1,401  $92  $1,493  $381  $—  $990  $1,371  $667,880  $670,744  
Commercial tax-exempt  —  —  —  —  —  —  —  445,319  445,319  
Commercial real estate  —  —  —  5,392  —  —  5,392  2,620,907  2,626,299  
Construction and land  —  —  —  —  —  —  —  238,293  238,293  
Residential  12,967  —  12,967  9,024  2,056  4,994  16,074  2,812,885  2,841,926  
Home equity  —  319  319  180  —  1,296  1,476  87,555  89,350  
Consumer and other  73  —  73  1  —  —  1  131,333  131,407  
Total  $14,441  $411  $14,852  $14,978  $2,056  $7,280  $24,314  $7,004,172  $7,043,338  
 December 31, 2018
 Accruing Past Due Nonaccrual Loans    
 30-59 Days Past Due 60-89 Days Past Due Total Accruing Past Due Current 30-89 Days Past Due 90 Days or Greater Past Due Total Non-Accrual Loans Current Accruing Loans Total Loans Receivable
 (In thousands)
Commercial and industrial$9,794
 $—
 $9,794
 $979
 $—
 $1,575
 $2,554
 $610,689
 $623,037
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
 451,671
 451,671
Commercial real estate—
 —
 —
 —
 —
 546
 546
 2,395,146
 2,395,692
Construction and land—
 —
 —
 —
 —
 —
 —
 240,306
 240,306
Residential6,477
 366
 6,843
 2,639
 716
 4,559
 7,914
 2,934,216
 2,948,973
Home equity252
 350
 602
 —
 48
 2,983
 3,031
 86,788
 90,421
Consumer and other17
 5,043
 5,060
 8
 4
 —
 12
 137,986
 143,058
Total$16,540
 $5,759
 $22,299
 $3,626
 $768
 $9,663
 $14,057
 $6,856,802
 $6,893,158

December 31, 2019
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  $828  $—  $828  $—  $241  $341  $582  $692,624  $694,034  
Commercial tax-exempt  —  —  —  —  —  —  —  447,927  447,927  
Commercial real estate1,420  —  1,420  —  —  —  —  2,549,854  2,551,274  
Construction and land—  —  —  —  —  —  —  225,983  225,983  
Residential19,133  1,038  20,171  9,593  759  3,641  13,993  2,804,991  2,839,155  
Home equity369  —  369  220  148  1,157  1,525  81,763  83,657  
Consumer and other1,008  2,149  3,157  1  —  2  3  131,514  134,674  
Total$22,758  $3,187  $25,945  $9,814  $1,148  $5,141  $16,103  $6,934,656  $6,976,704  
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 COVID-19 pandemic has limited the Bank’s ability to obtain updated appraisals. In lieu of appraisals, the Bank may use other valuation techniques in the short-term.
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.
22
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 continuing deterioration in general 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, 2018,2019, 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, also 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.
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 internally assigned grade and class of receivable as of the dates indicated:
March 31, 2020
By Loan Grade or Nonaccrual Status
PassSpecial
Mention		Accruing
Classified (1)		Nonaccrual
Loans		Total
(In thousands)
Commercial and industrial$609,537  $9,428  $50,408  $1,371  $670,744  
Commercial tax-exempt434,259  2,516  8,544  —  445,319  
Commercial real estate2,517,306  79,909  23,692  5,392  2,626,299  
Construction and land237,823  470  —  —  238,293  
Residential2,821,611  —  4,241  16,074  2,841,926  
Home equity86,811  —  1,063  1,476  89,350  
Consumer and other131,106  300  —  1  131,407  
Total$6,838,453  $92,623  $87,948  $24,314  $7,043,338  
December 31, 2019
By Loan Grade or Nonaccrual Status
PassSpecial
Mention		Accruing
Classified (1)		Nonaccrual
Loans		Total
(In thousands)
Commercial and industrial$656,364  $12,101  $24,987  $582  $694,034  
Commercial tax-exempt436,721  7,154  4,052  —  447,927  
Commercial real estate2,495,702  32,014  23,558  —  2,551,274  
Construction and land225,526  457  —  —  225,983  
Residential2,820,909  —  4,253  13,993  2,839,155  
Home equity81,060  —  1,072  1,525  83,657  
Consumer and other134,371  300  —  3  134,674  
Total$6,850,653  $52,026  $57,922  $16,103  $6,976,704  
______________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
The following table presents the loan portfolio’s credit risk profile by loan origination year and class of receivable as of the dates indicated:
24
 September 30, 2019
 By Loan Grade or Nonaccrual Status  
 Pass 
Special
Mention
 
Accruing
Classified (1)
 
Nonaccrual
Loans
 Total
 (In thousands)
Commercial and industrial$656,012
 $13,084
 $25,133
 $800
 $695,029
Commercial tax-exempt441,811
 2,625
 4,052
 —
 448,488
Commercial real estate2,460,408
 42,124
 30,814
 —
 2,533,346
Construction and land209,741
 —
 —
 —
 209,741
Residential2,946,823
 —
 3,000
 14,219
 2,964,042
Home equity81,308
 300
 279
 2,545
 84,432
Consumer and other132,072
 —
 —
 1
 132,073
Total$6,928,175
 $58,133
 $63,278
 $17,565
 $7,067,151
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

March 31, 2020
Loan Origination Year By Loan Grade or Nonaccrual Status
202020192018201720162015 & PriorTotal
(In thousands)
Commercial and industrial
Pass$26,987  $149,993  $147,350  $51,752  $39,825  $193,630  $609,537  
Special Mention—  488  1,765  3,836  232  3,107  9,428  
Accruing Classified (1)50  25,225  3,602  14,969  2,520  4,042  50,408  
Nonaccrual—  171  —  210  735  255  1,371  
Total$27,037  $175,877  $152,717  $70,767  $43,312  $201,034  $670,744  
Commercial tax-exempt
Pass$—  $13,741  $41,012  $24,823  $108,057  $246,626  $434,259  
Special Mention—  —  —  —  —  2,516  2,516  
Accruing Classified (1)—  —  —  4,021  —  4,523  8,544  
Total$—  $13,741  $41,012  $28,844  $108,057  $253,665  $445,319  
Commercial real estate
Pass$71,236  $491,954  $310,679  $349,161  $432,649  $861,627  $2,517,306  
Special Mention—  22,855  13,322  15,324  19,325  9,083  79,909  
Accruing Classified (1)—  1,424  —  1,184  8,919  12,165  23,692  
Nonaccrual—  5,392  —  —  —  —  5,392  
Total$71,236  $521,625  $324,001  $365,669  $460,893  $882,875  $2,626,299  
Construction and land
Pass$3,731  $52,620  $84,692  $53,428  $16,820  $26,532  $237,823  
Special Mention—  —  470  —  —  —  470  
Total$3,731  $52,620  $85,162  $53,428  $16,820  $26,532  $238,293  
Residential
Pass$131,395  $612,100  $480,529  $504,672  $471,195  $621,720  $2,821,611  
Accruing Classified (1)—  —  —  —  —  4,241  4,241  
Nonaccrual—  263  1,089  2,532  —  12,190  16,074  
Total$131,395  $612,363  $481,618  $507,204  $471,195  $638,151  $2,841,926  
Home equity
Pass$1,325  $13,322  $15,847  $7,781  $6,833  $41,703  $86,811  
Accruing Classified (1)—  —  —  —  —  1,063  1,063  
Nonaccrual—  —  —  —  139  1,337  1,476  
Total$1,325  $13,322  $15,847  $7,781  $6,972  $44,103  $89,350  
Consumer and other
Pass$6,326  $15,684  $23,993  $31,032  $5,227  $48,844  $131,106  
Special Mention—  —  —  300  —  —  300  
Nonaccrual—  —  —  —  —  1  1  
Total$6,326  $15,684  $23,993  $31,332  $5,227  $48,845  $131,407  
Total
Pass$241,000  $1,349,414  $1,104,102  $1,022,649  $1,080,606  $2,040,682  $6,838,453  
Special Mention—  23,343  15,557  19,460  19,557  14,706  92,623  
Accruing Classified (1)50  26,649  3,602  20,174  11,439  26,034  87,948  
Nonaccrual—  5,826  1,089  2,742  874  13,783  24,314  
Total$241,050  $1,405,232  $1,124,350  $1,065,025  $1,112,476  $2,095,205  $7,043,338  
______________________
(1) Accruing Classified may include both Substandard and Doubtful classifications.
 December 31, 2018
 By Loan Grade or Nonaccrual Status  
 Pass Special
Mention		 Accruing
Classified (1)		 Nonaccrual
Loans		 Total
 (In thousands)
Commercial and industrial$581,278
 $16,213
 $22,992
 $2,554
 $623,037
Commercial tax-exempt444,835
 2,785
 4,051
 —
 451,671
Commercial real estate2,314,223
 53,871
 27,052
 546
 2,395,692
Construction and land234,647
 5,659
 —
 —
 240,306
Residential2,941,059
 —
 —
 7,914
 2,948,973
Home equity87,390
 —
 —
 3,031
 90,421
Consumer and other143,046
 —
 —
 12
 143,058
Total$6,746,478
 $78,528
 $54,095
 $14,057
 $6,893,158
25
______________________
(1)Accruing Classified includes both Substandard and Doubtful classifications.
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 and nine months ended September 30, 2019As of and for the three months ended March 31, 2020
Recorded Investment (1) Unpaid Principal Balance Related Allowance QTD Average Recorded Investment YTD Average Recorded Investment QTD Interest Income Recognized while Impaired YTD Interest Income Recognized while ImpairedRecorded Investment (1)Unpaid Principal BalanceRelated AllowanceYTD Average Recorded InvestmentYTD Interest Income Recognized while Impaired
(In thousands)(In thousands)
With no related allowance recorded:             With no related allowance recorded:
Commercial and industrial$479
 $788
 n/a
 $1,233
 $1,256
 $192
 $217
Commercial and industrial$555  $632  n/a  $667  $6  
Commercial tax-exempt—
 —
 n/a
 —
 —
 —
 —
Commercial tax-exempt—  —  n/a  —  —  
Commercial real estate—
 —
 n/a
 —
 55
 —
 256
Commercial real estate6,119  6,151  n/a  2,403  9  
Construction and land—
 —
 n/a
 —
 —
 —
 —
Construction and land—  —  n/a  —  —  
Residential14,879
 15,140
 n/a
 15,026
 13,321
 236
 476
Residential16,352  16,612  n/a  15,587  117  
Home equity2,313
 2,995
 n/a
 2,359
 2,106
 12
 13
Home equity1,548  2,109  n/a  1,550  3  
Consumer and other—
 —
 n/a
 —
 —
 —
 —
Consumer and other—  —  n/a  —  —  
Subtotal$17,671
 $18,923
 n/a
 18,618
 $16,738
 440
 $962
Subtotal$24,574  $25,504  n/a  $20,207  $135  
With an allowance recorded:             With an allowance recorded:
Commercial and industrial$538
 $539
 $341
 491
 $877
 3
 $23
Commercial and industrial$273  $280  $175  $281  $—  
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate—
 —
 —
 —
 —
 —
 —
Commercial real estate—  —  —  —  —  
Construction and land—
 —
 —
 —
 —
 —
 —
Construction and land—  —  —  —  —  
Residential2,059
 2,059
 712
 1,419
 1,017
 5
 18
Residential532  532  64  535  4  
Home equity279
 279
 23
 276
 626
 1
 2
Home equity270  270  20  271  2  
Consumer and other—
 —
 —
 —
 —
 —
 —
Consumer and other—  —  —  —  —  
Subtotal$2,876
 $2,877
 $1,076
 $2,186
 $2,520
 $9
 $43
Subtotal$1,075  $1,082  $259  $1,087  $6  
Total:             Total:
Commercial and industrial$1,017
 $1,327
 $341
 $1,724
 $2,133
 $195
 $240
Commercial and industrial$828  $912  $175  $948  $6  
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate—
 —
 —
 —
 55
 —
 256
Commercial real estate6,119  6,151  —  2,403  9  
Construction and land—
 —
 —
 —
 —
 —
 —
Construction and land—  —  —  —  —  
Residential16,938
 17,199
 712
 16,445
 14,338
 241
 494
Residential16,884  17,144  64  16,122  121  
Home equity2,592
 3,274
 23
 2,635
 2,732
 13
 15
Home equity1,818  2,379  20  1,821  5  
Consumer and other—
 —
 —
 —
 —
 —
 —
Consumer and other—  —  —  —  —  
Total$20,547
 $21,800
 $1,076
 $20,804
 $19,258
 $449
 $1,005
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.

(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.
26
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

As of and for the three and nine months ended September 30, 2018As of and for the three months ended March 31, 2019
Recorded Investment (1) Unpaid Principal Balance Related Allowance QTD Average Recorded Investment YTD Average Recorded Investment QTD Interest Income Recognized while Impaired YTD Interest Income Recognized while ImpairedRecorded Investment (1)Unpaid Principal BalanceRelated AllowanceYTD Average Recorded InvestmentYTD Interest Income Recognized while Impaired
(In thousands)(In thousands)
With no related allowance recorded:             With no related allowance recorded:
Commercial and industrial$1,150
 $2,083
 n/a
 $1,617
 $1,730
 $33
 $55
Commercial and industrial$862  $1,730  n/a  $1,021  $15  
Commercial tax-exempt—
 —
 n/a
 —
 —
 —
 —
Commercial tax-exempt—  —  n/a  —  —  
Commercial real estate1,625
 2,966
 n/a
 2,526
 2,439
 583
 633
Commercial real estate  —  —  n/a  136  256  
Construction and land—
 —
 n/a
 —
 66
 —
 16
Construction and land—  —  n/a  —  —  
Residential7,097
 7,457
 n/a
 10,102
 10,002
 146
 335
Residential12,306  12,566  n/a  11,056  137  
Home equity—
 —
 n/a
 —
 1,056
 —
 24
Home equity2,147  2,709  n/a  1,709  —  
Consumer and other—
 —
 n/a
 —
 —
 —
 —
Consumer and other—  —  n/a  —  —  
Subtotal$9,872
 $12,506
 n/a
 $14,245
 $15,293
 $762
 $1,063
Subtotal$15,315  $17,005  n/a  $13,922  $408  
With an allowance recorded:             With an allowance recorded:
Commercial and industrial$1,635
 $1,638
 $577
 $625
 $322
 $4
 $6
Commercial and industrial$1,302  $1,353  $231  $1,542  $16  
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate—
 —
 —
 4,045
 5,314
 476
 704
Commercial real estate—  —  —  —  —  
Construction and land—
 —
 —
 —
 —
 —
 —
Construction and land—  —  —  —  —  
Residential682
 681
 74
 734
 787
 5
 17
Residential597  597  68  732  7  
Home equity1,769
 1,769
 596
 1,769
 729
 1
 1
Home equity—  —  —  1,290  —  
Consumer and other—
 —
 —
 —
 13
 —
 3
Consumer and other—  —  —  —  —  
Subtotal$4,086
 $4,088
 $1,247
 $7,173
 $7,165
 $486
 $731
Subtotal$1,899  $1,950  $299  $3,564  $23  
Total:             Total:
Commercial and industrial$2,785
 $3,721
 $577
 $2,242
 $2,052
 $37
 $61
Commercial and industrial$2,164  $3,083  $231  $2,563  $31  
Commercial tax-exempt—
 —
 —
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate1,625
 2,966
 —
 6,571
 7,753
 1,059
 1,337
Commercial real estate—  —  —  136  256  
Construction and land—
 —
 —
 —
 66
 —
 16
Construction and land—  —  —  —  —  
Residential7,779
 8,138
 74
 10,836
 10,789
 151
 352
Residential12,903  13,163  68  11,788  144  
Home equity1,769
 1,769
 596
 1,769
 1,785
 1
 25
Home equity2,147  2,709  —  2,999  —  
Consumer and other—
 —
 —
 —
 13
 —
 3
Consumer and other—  —  —  —  —  
Total$13,958
 $16,594
 $1,247
 $21,418
 $22,458
 $1,248
 $1,794
Total$17,214  $18,955  $299  $17,486  $431  
_____________________
(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.

(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, 2018As of and for the year ended December 31, 2019
Recorded Investment (1) Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized while ImpairedRecorded Investment (1)Unpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income Recognized while Impaired
(In thousands)(In thousands)
With no related allowance recorded:         With no related allowance recorded:
Commercial and industrial$1,435
 $2,397
 n/a
 $1,614
 $69
Commercial and industrial$470  $553  n/a  $1,062  $268  
Commercial tax-exempt—
 —
 n/a
 —
 —
Commercial tax-exempt—  —  n/a  —  —  
Commercial real estate546
 900
 n/a
 2,002
 1,544
Commercial real estate733  733  n/a  155  262  
Construction and land—
 —
 n/a
 50
 16
Construction and land—  —  n/a  —  —  
Residential8,403
 8,764
 n/a
 9,638
 408
Residential15,362  15,622  n/a  13,700  636  
Home equity990
 990
 n/a
 1,041
 24
Home equity1,557  2,119  n/a  2,095  35  
Consumer and other—
 —
 n/a
 —
 —
Consumer and other—  —  n/a  —  —  
Subtotal$11,374
 $13,051
 n/a
 $14,345
 $2,061
Subtotal$18,122  $19,027  n/a  $17,012  $1,201  
With an allowance recorded:         With an allowance recorded:
Commercial and industrial$1,770
 $1,972
 $598
 $631
 $15
Commercial and industrial$254  $254  $146  $736  $33  
Commercial tax-exempt—
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate—
 —
 —
 4,087
 705
Commercial real estate—  —  —  —  —  
Construction and land—
 —
 —
 —
 —
Construction and land—  —  —  —  —  
Residential780
 780
 75
 785
 22
Residential538  538  67  1,130  23  
Home equity1,719
 1,719
 562
 959
 11
Home equity273  273  22  545  4  
Consumer and other—
 —
 —
 10
 3
Consumer and other—  —  —  —  —  
Subtotal$4,269
 $4,471
 $1,235
 $6,472
 $756
Subtotal$1,065  $1,065  $235  $2,411  $60  
Total:         Total:
Commercial and industrial$3,205
 $4,369
 $598
 $2,245
 $84
Commercial and industrial$724  $807  $146  $1,798  $301  
Commercial tax-exempt—
 —
 —
 —
 —
Commercial tax-exempt—  —  —  —  —  
Commercial real estate546
 900
 —
 6,089
 2,249
Commercial real estate733  733  —  155  262  
Construction and land—
 —
 —
 50
 16
Construction and land—  —  —  —  —  
Residential9,183
 9,544
 75
 10,423
 430
Residential15,900  16,160  67  14,830  659  
Home equity2,709
 2,709
 562
 2,000
 35
Home equity1,830  2,392  22  2,640  39  
Consumer and other—
 —
 —
 10
 3
Consumer and other—  —  —  —  —  
Total$15,643
 $17,522
 $1,235
 $20,817
 $2,817
Total$19,187  $20,092  $235  $19,423  $1,261  
_____________________
(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.
(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.
As of March 31, 2020, 10 loans with a current outstanding principal balance of approximately $5.0 million were processed under this mortgage deferment program. As of the date of this filing, the Bank has approved approximately 170 additional deferments for mortgage loans with a current outstanding principal balance of approximately $90.0 million.
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.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

As of September 30, 2019,March 31, 2020, the Bank has pledged $2.6$2.3 billion of loans in a blanket lien agreement with the FHLB. The Bank also has $437.2$386.2 million of loans pledged as collateral at the FRB for access to their discount window. As of December 31, 2018,2019, the Bank had pledged $2.6$2.5 billion of loans to the FHLB and $540.0$395.3 million of loans at 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 September 30, 2019March 31, 2020 and December 31, 2018,2019, TDRs totaled $9.5$14.9 million and $8.0$12.6 million, respectively. As of September 30, 2019, $6.9March 31, 2020, $7.1 million of the $9.5$14.9 million in TDRs were on accrual status. As of December 31, 2018, $3.82019, $7.1 million of the $8.0$12.6 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 or allocated reserve on the particular loan. Therefore, depending uponPrior to the resultadoption of the impairment analysis, there could be an increaseASU 2016-13 on January 1, 2020, a general or decrease in the related allowance for loan losses.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, 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  —  $—  
Commercial tax exempt—  —  —  —  —  
Commercial real estate—  —  —  —  —  
Construction and land—  —  —  —  —  
Residential (2)1  2,373  2,373  —  —  
Home equity—  —  —  —  —  
Consumer and other—  —  —  —  —  
Total2  $2,423  $2,423  —  $—  
_____________________
(1)Represents the following type of concession: extension of maturity, reduction in interest rate.
(2)Represents the following type of concession: payment deferral.
29
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

As of and for the three months ended March 31, 2019
Restructured Current QuarterTDRs that defaulted in the Current Quarter that were restructured in prior twelve months
# of LoansPre- modification recorded investmentPost- modification recorded investment# of LoansPost- modification recorded investment
(In thousands, except number of loans)
Commercial and industrial (1)1  $179  $179  —  $—  
Commercial tax exempt—  —  —  —  —  
Commercial real estate—  —  —  —  —  
Construction and land—  —  —  —  —  
Residential (2)1  3,000  3,000  —  —  
Home equity—  —  —  —  —  
Consumer and other—  —  —  —  —  
Total2  $3,179  $3,179  —  $—  
_____________________
 As of and for the nine months ended September 30, 2019
 Restructured Year to Date 
TDRs 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 industrial1
 $179
 $179
 —
 $—
Commercial tax exempt—
 —
 —
 —
 —
Commercial real estate—
 —
 —
 —
 —
Construction and land—
 —
 —
 —
 —
Residential (1)2
 3,222
 3,227
 —
 —
Home equity (1)1
 274
 283
 —
 —
Consumer and other—
 —
 —
 —
 —
Total4
 $3,675
 $3,689
 —
 $—

 As of and for the three and nine months ended September 30, 2019
 Extension of term Temporary rate reduction Payment deferral Combination of concessions (1) Total concessions
 # of
Loans		 
Post-
modifi-
cation
recorded
invest-
ment
 # of
Loans		 Post-
modifi-
cation
recorded
invest-
ment		 # of
Loans		 Post-
modifi-
cation
recorded
invest-
ment		 # of
Loans		 Post-
modifi-
cation
recorded
invest-
ment		 # of
Loans		 Post-
modifi-
cation
recorded
invest-
ment
 (In thousands, except number of loans)
Commercial and industrial1
 $179
 —
 $—
 —
 $—
 —
 $—
 1
 $179
Commercial real estate—
 —
 —
 —
 —
 —
 —
 —
 —
 —
Construction and land—
 —
 —
 —
 —
 —
 —
 —
 —
 —
Residential—
 —
 2
 3,227
 —
 —
 —
 —
 2
 3,227
Home equity—
 —
 1
 283
 —
 —
 —
 —
 1
 283
Consumer and other—
 —
 —
 —
 —
 —
 —
 —
 —
 —

(1)Represents the following type of concession: extension of term.
There were no(2)Represents the following type of concession: temporary reduction of interest rate.
In the first quarter of 2020, in response to the COVID-19 pandemic, the Bank initiated a mortgage deferment program under which principal and interest payments on qualifying loans that were restructured or defaulted during theare generally deferred for three months ended September 30, 2019.and the loan term is extended three months. Loans that are deferred under the program are not considered TDRs or past due based on current regulatory guidance. As of March 31, 2020, 10 loans totaling approximately $5.0 million were approved under the program. As this program was started late in the first quarter of 2020, the Bank has been experiencing increased volume in the second quarter of 2020 due to the COVID-19 pandemic. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 16: Subsequent Events” for additional information on the mortgage deferment 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:
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 September 30, 2019 December 31, 2018
 (In thousands)
Commercial and industrial$14,358
 $8,024
Commercial tax-exempt18,711
 19,105
Commercial real estate34,816
 60,688
Construction and land23,133
 39,966
Total loan participations serviced for others$91,018
 $127,783
    
Residential$119,389
 $33,168
Total loans serviced for others$119,389
 $33,168

 March 31, 2020December 31, 2019
 (In thousands)
Commercial and industrial$14,706  $14,533  
Commercial tax-exempt17,959  18,101  
Commercial real estate117,782  121,929  
Construction and land79,517  75,451  
Total loan participations serviced for others$229,964  $230,014  
Residential$145,299  $204,696  
Total loans serviced for others$145,299  $204,696  
Total loans include deferred loan origination (fees)/costs, net, of $8.4$7.7 million and $8.5$8.1 million as of September 30, 2019March 31, 2020 and December 31, 2018,2019, 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. Loan losses are charged against the allowance 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 when collected.
Under the CECL methodology, which the Company adopted on January 1, 2020, the Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address 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 estimated prepayments and curtailments. Reasonable and supportable economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical long-run average. Management has
30
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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. The Company's qualitative assessment is based on factors outlined in regulatory guidance and include the following:
7.• Volume and trend of past-due, non-accrual, and adversely-graded loans
• Trends in volume and terms of loans
• Concentration Risk
• Experience and depth of management
• Risk surrounding lending policy and underwriting standards
• Risk surrounding loan review
• Banking industry conditions, other external factors, and inherent model risk
Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that will be individually assessed, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable.
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 sheet. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy as generally any loan over 89 days past-due is put on non-accrual status and any associated accrued interest is reversed.
For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Allowance for Loan Lossesloan losses was determined under the incurred loss model. Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology.
The allowance for loan losses, which is reported as a reduction of outstanding loan balances, totaled $75.4$68.2 million and $75.3$72.0 million as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.
Beginning in the first quarter of 2020, the Company made a change to the loan portfolio segmentation as it relates to the allowance for loan losses in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics. For the period ended March 31, 2019, the provision/ (credit) for loan losses and related allowance balance in the allowance for loan losses for tax-exempt commercial and industrial loans is included with commercial and industrial loans. The following tables present a summary of the changes in the allowance for loan losses for the periods indicated:
 As of and for the three months ended September 30, As of and for the nine months ended September 30,
 2019 2018 2019 2018
 (In thousands)
Allowance for loan losses, beginning of period:       
Commercial and industrial$16,082
 $12,381
 $15,912
 $11,735
Commercial real estate43,741
 45,183
 41,934
 46,820
Construction and land4,780
 4,613
 6,022
 4,949
Residential9,555
 9,804
 10,026
 9,773
Home equity805
 1,336
 1,284
 835
Consumer and other104
 147
 134
 630
Total allowance for loan losses, beginning of period75,067
 73,464
 75,312
 74,742
Loans charged-off:       
Commercial and industrial(180) —
 (375) (339)
Commercial real estate—
 —
 —
 (135)
Construction and land—
 —
 —
 —
Residential—
 —
 —
 (16)
Home equity—
 —
 (562) —
Consumer and other(5) —
 (7) (39)
Total charge-offs(185) —
 (944) (529)
        
Recoveries on loans previously charged-off:       
Commercial and industrial275
 153
 503
 387
Commercial real estate27
 820
 246
 995
Construction and land—
 —
 —
 —
Residential—
 —
 100
 27
Home equity6
 —
 6
 1
Consumer and other2
 12
 32
 168
Total recoveries310
 985
 887
 1,578
Provision/ (credit) for loan losses:       
Commercial and industrial361
 1,921
 498
 2,672
Commercial real estate(762) (3,179) 826
 (4,856)
Construction and land6
 172
 (1,236) (164)
Residential617
 144
 46
 164
Home equity(57) 6
 26
 506
Consumer and other2
 (13) (56) (613)
Total provision/(credit) for loan losses167
 (949) 104
 (2,291)
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,
20202019
(In thousands)
Allowance for loan losses, beginning of period:
Commercial and industrial$10,048  $15,912  
Commercial tax-exempt6,016  n/a  
Commercial real estate40,765  41,934  
Construction and land5,119  6,022  
Residential8,857  10,026  
Home equity778  1,284  
Consumer and other399  134  
Total allowance for loan losses, beginning of period$71,982  $75,312  
Impact of adopting ASU 2016-13:
Commercial and industrial$(565) n/a  
Commercial tax-exempt(4,409) n/a  
Commercial real estate(14,455) n/a  
Construction and land(2,158) n/a  
Residential685  n/a  
Home equity(535) n/a  
Consumer and other1,052  n/a  
Total impact of adopting ASU 2016-13$(20,385) n/a  
Provision/(credit) for loan losses:
Commercial and industrial$1,245  $(413) 
Commercial tax-exempt320  n/a  
Commercial real estate10,270  (310) 
Construction and land2,748  (669) 
Residential2,237  (69) 
Home equity(72) 74  
Consumer and other214  (39) 
Total provision/(credit) for loan losses$16,962  $(1,426) 
Loans charged off:
Commercial and industrial$(518) $—  
Commercial tax-exempt—  —  
Commercial real estate—  —  
Construction and land—  —  
Residential—  —  
Home equity—  (562) 
Consumer and other(10) (2) 
Total charge offs$(528) $(564) 
Recoveries on loans previously charged off:
Commercial and industrial$45  $188  
Commercial tax-exempt—  —  
Commercial real estate—  189  
Construction and land—  —  
Residential—  100  
Home equity132  —  
Consumer and other3  15  
Total recoveries$180  $492  
Allowance for loan losses, end of period:
Commercial and industrial$10,255  $15,687  
Commercial tax-exempt1,927  n/a  
Commercial real estate36,580  41,813  
Construction and land5,709  5,353  
Residential11,779  10,057  
Home equity303  796  
Consumer and other1,658  108  
Total allowance for loan losses, end of period$68,211  $73,814  
The balance of the allowance for loan losses of $68.2 million as of March 31, 2020 represents a decrease of $3.8 million from December 31, 2019. Upon the adoption of ASU 2016-13 on January 1, 2020, the Company recognized a decrease
 As of and for the three months ended September 30, As of and for the nine months ended September 30,
 2019 2018 2019 2018
 (In thousands)
Allowance for loan losses, end of period:       
Commercial and industrial16,538
 14,455
 16,538
 14,455
Commercial real estate43,006
 42,824
 43,006
 42,824
Construction and land4,786
 4,785
 4,786
 4,785
Residential10,172
 9,948
 10,172
 9,948
Home equity754
 1,342
 754
 1,342
Consumer and other103
 146
 103
 146
Total allowance for loan losses, end of period$75,359
 $73,500
 $75,359
 $73,500
32

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
in the allowance for loan losses of $20.4 million. The adoption amount was driven primarily by the portfolio composition, the short-term nature of many commercial loans, estimated prepayments and curtailments, a change to the loan portfolio segmentation in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics, and the reasonable and supportable economic forecasts at the time of adoption. During the first quarter of 2020, the Company recognized a provision for loan losses of $17.0 million. The increase in the allowance for loan losses of $17.0 million in the first quarter of 2020 was primarily driven by the changes in economic forecasts late in the first quarter of 2020 to reflect deteriorating economic conditions related to the COVID-19 pandemic.
The balance of reserve for unfunded loan commitments of $4.3 million as of March 31, 2020 represents an increase of $3.2 million from December 31, 2019. Upon the adoption of ASU 2016-13 on January 1, 2020, the Company recognized an increase in the reserve of $1.4 million in the unfunded loan commitments expense. The net, after-tax impact of the $20.4 million 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. During the first quarter of 2020, the Company recognized a $1.8 million expense for the increase in the reserve for unfunded loan commitments, which is recognized as Other expense within Noninterest expense, driven by the change in economic forecasts.
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 based on all relevant information available. Changes to the required level in the allowance 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 when available information confirms that specific loans, or portions thereof, are uncollectible. Recoveries on loans previously charged-offcharged off are credited to the allowance when received in cash or when the Bank takes possession of other assets.
The provision/ (credit) for loan losses and related allowance balance in the allowance for loan losses for tax-exempt commercial and industrial loans is included with commercial and industrial loans. The provision/ (credit) for loan losses and related allowance balance in the allowance for loan losses for tax-exempt commercial real estate loans is included with commercial real estate loans. There were no charge-offs or recoveries, for any period presented, for both commercial and industrial and commercial real estate tax-exempt loans.
The following tables present the Company’s allowance for loan losses and loan portfolio as of September 30, 2019March 31, 2020 and December 31, 20182019 by portfolio segment, disaggregated by method of impairment analysis. The Company had 0 loans acquired with deteriorated credit quality as of September 30, 2019March 31, 2020 or December 31, 2018.2019.
March 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$828  $175  $669,916  $10,080  $670,744  $10,255  
Commercial tax-exempt—  —  445,319  1,927  445,319  1,927  
Commercial real estate6,119  —  2,620,180  36,580  2,626,299  36,580  
Construction and land—  —  238,293  5,709  238,293  5,709  
Residential16,884  64  2,825,042  11,715  2,841,926  11,779  
Home equity1,818  20  87,532  283  89,350  303  
Consumer and other—  —  131,407  1,658  131,407  1,658  
Total$25,649  $259  $7,017,689  $67,952  $7,043,338  $68,211  

December 31, 2019
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$724  $146  $1,141,237  $15,918  $1,141,961  $16,064  
Commercial real estate733  —  2,550,541  40,765  2,551,274  40,765  
Construction and land—  —  225,983  5,119  225,983  5,119  
Residential15,900  67  2,823,255  8,790  2,839,155  8,857  
Home equity1,830  22  81,827  756  83,657  778  
Consumer and other—  —  134,674  399  134,674  399  
Total$19,187  $235  $6,957,517  $71,747  $6,976,704  $71,982  
33
 September 30, 2019
 
Individually Evaluated
for Impairment
 
Collectively Evaluated
for Impairment
 Total
 
Recorded investment
(loan balance)
 Allowance for loan losses 
Recorded investment
(loan balance)
 Allowance for loan losses 
Recorded investment
(loan balance)
 Allowance for loan losses
 (In thousands)
Commercial and industrial$1,017
 $341
 $1,142,500
 $16,197
 $1,143,517
 $16,538
Commercial real estate—
 —
 2,533,346
 43,006
 2,533,346
 43,006
Construction and land—
 —
 209,741
 4,786
 209,741
 4,786
Residential16,938
 712
 2,947,104
 9,460
 2,964,042
 10,172
Home equity2,592
 23
 81,840
 731
 84,432
 754
Consumer and other—
 —
 132,073
 103
 132,073
 103
Total$20,547
 $1,076
 $7,046,604
 $74,283
 $7,067,151
 $75,359
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

 December 31, 2018
 
Individually Evaluated
for Impairment
 
Collectively Evaluated
for Impairment
 Total
 
Recorded investment
(loan balance)
 Allowance for loan losses 
Recorded investment
(loan balance)
 Allowance for loan losses 
Recorded investment
(loan balance)
 Allowance for loan losses
 (In thousands)
Commercial and industrial$3,205
 $598
 $1,071,503
 $15,314
 $1,074,708
 $15,912
Commercial real estate546
 —
 2,395,146
 41,934
 2,395,692
 41,934
Construction and land—
 —
 240,306
 6,022
 240,306
 6,022
Residential9,183
 75
 2,939,790
 9,951
 2,948,973
 10,026
Home equity2,709
 562
 87,712
 722
 90,421
 1,284
Consumer and other—
 —
 143,058
 134
 143,058
 134
Total$15,643
 $1,235
 $6,877,515
 $74,077
 $6,893,158
 $75,312


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 sheetsConsolidated Balance Sheets as of September 30, 2019March 31, 2020 and December 31, 2018:2019:
March 31, 2020December 31, 2019
September 30, 2019 December 31, 2018 Asset derivativesLiability derivativesAsset derivativesLiability derivatives
Asset derivatives Liability derivatives Asset derivatives Liability 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)
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)
(In thousands)
Derivatives designated as hedging instruments:
Interest rate swapsOther assets $—
 Other liabilities $—
 Other assets $553
 Other liabilities $—
Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:Derivatives not designated as hedging instruments:
Interest rate swapsOther assets 47,851
 Other liabilities 48,891
 Other assets 21,889
 Other liabilities 22,385
Interest rate customer swapsInterest rate customer swapsOther assets93,391  Other liabilities94,437  Other assets36,089  Other liabilities36,580  
Risk participation agreementsOther assets 74
 Other liabilities 344
 Other assets 2
 Other liabilities 152
Risk participation agreementsOther assets46  Other liabilities480  Other assets10  Other liabilities242  
Total $47,925
 $49,235
 $22,444
 $22,537
Total$93,437  $94,917  $36,099  $36,822  
_____________________
(1)
(1)For additional details, see Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 5: Fair Value Measurements”.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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 and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
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 incomeDerivatives in cash
flow hedging
relationships		Amount of gain or (loss) recognized in OCI on derivativesLocation of gain
or (loss) reclassified
from accumulated
OCI into income		Amount of gain or (loss) reclassified from accumulated OCI into income
Three months ended September 30, Three months ended September 30,Three months ended March 31,Three months ended March 31,
2019 2018 2019 20182020201920202019
 (In thousands) (In thousands)(In thousands)(In thousands)
Interest rate swaps $1
 $(193) Interest expense $6
 $101
Interest rate swaps$—  $(38) Interest expense  $—  $(311) 
Total $1
 $(193) $6
 $101
Total$—  $(38) $—  $(311) 


Derivatives in cash
flow hedging
relationships		 Amount of gain or (loss) recognized in OCI on derivatives (1) Location of gain
or (loss) reclassified
from accumulated
OCI into income		 Amount of gain or (loss) reclassified from accumulated OCI into income
 Nine months ended September 30,  Nine months ended September 30,
 2019 2018  2019 2018
  (In thousands)   (In thousands)
Interest rate swaps $(46) $818
 Interest expense $508
 $385
Total $(46) $818
   $508
 $385
____________________
(1)The guidance in ASU 2017-12 requires that amounts in accumulated other comprehensive income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. Transition guidance for this ASU further states that upon adoption, previously recorded cumulative ineffectiveness for cash flow hedges existing at the adoption date be eliminated by means of a cumulative-effect adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the initial application date. There was a $5 thousand reclassification related to the adoption of ASU 2017-12 effective January 1, 2018.
The following table presents the effect of the Company’s derivative financial instruments in the Consolidated StatementStatements of Operations for the three and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
 
Location of gain or (loss) reclassified from accumulated
OCI into income
Amount of gain or
(loss) recognized in
income on cash flow
hedging relationships		 
Amount of gain or
(loss) recognized in
income on cash flow
hedging relationships
Three months ended September 30, Nine months ended September 30,
2019 2018 2019 2018
  (In thousands)
Total amounts of income and (expense) line items presented in the statement of operations in which the effects of fair value or cash flow hedges are recordedInterest expense$6
 $101
 $508
 $385
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 expense$6
 $101
 $508
 $385

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,
20202019
(In thousands)
Total amounts of income and (expense) line items presented in the statement of operations in which the effects of fair value or cash flow hedges are recordedInterest expense  $—  $(311) 
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 expense  $—  $(311) 
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
34
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
Bank could also be declared in default on its derivative obligations. The Bank was in compliance with these provisions as of September 30, 2019March 31, 2020 and December 31, 2018.2019.
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 September 30, 2019March 31, 2020 and December 31, 2018.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

2019.
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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, the termination amounts related to collateral determinations of derivatives in a liability position were $48.7$94.7 million and $2.2$35.7 million, respectively. The Company has minimum collateral posting thresholds with its derivative counterparties. As of September 30,March 31, 2020 and December 31, 2019,, the Company had pledged securities with a market value of $51.8$96.8 million and $40.0 million, respectively, against its obligations under these agreements. As of December 31, 2018, the Company had 0 pledged securities. 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. The Company has utilized interest rate derivatives in the past, but as of September 30, 2019,March 31, 2020, there were no active cash flow hedges.
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 Company’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 StatementStatements of Operations in other income. The Bank has interest rate swaps and caps related to this program with an aggregate notional amount of $1.5$1.7 billion as of September 30, 2019March 31, 2020 and $1.3$1.6 billion as of December 31, 2018.2019. As of September 30,March 31, 2020 and December 31, 2019, there were 0 foreign currency exchange contracts and as of December 31, 2018, there were foreign currency exchange contracts with an aggregate notional amount of $0.1 million 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 September 30, 2019March 31, 2020 and December 31, 2018,2019, there were 7 of these risk participation transactions with an aggregate notional amount of $59.1$58.4 million and $59.8$58.8 million, respectively.
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 September 30, 2019 andMarch 31, 2020, there were 5 of these risk participation transactions with an aggregate notional amount of $30.4 million. As of December 31, 2018,2019, there were 4 of these risk participation transactions with an aggregate notional amount of $20.6 million and $20.7 million, respectively.$20.5 million.
35
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
The following table presents the effect of the Bank’s derivative financial instruments not designated as hedging instruments in the Consolidated StatementStatements of Operations for the three and nine months ended September 30, 2019March 31, 2020 and 2018.2019.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Amount of gain or (loss), net,
recognized in income on derivatives
Derivatives not designated as
hedging instruments		Location of gain or (loss) recognized in income on derivativesThree months ended March 31,
20202019
 (In thousands)
Interest rate swapsOther income/ (expense)$(555) $(191) 
Risk participation agreementsOther income/ (expense)(202) 104  
Total$(757) $(87) 
Notes to Unaudited Consolidated Financial Statements - (Continued)

    
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 derivatives Three months ended September 30, Nine months ended September 30,
 2019 2018 2019 2018
    (In thousands)
Interest rate swaps Other income/ (expense) $(289) $8
 $(544) $(39)
Risk participation agreements Other income/ (expense) (11) 18
 (120) 238
Total   $(300) $26
 $(664) $199


9. Income Taxes
The following table presents the components of income tax expense and effective tax rates for continuing operations, discontinued operations, noncontrolling interests and the Company:periods indicated:
 Nine months ended September 30,
 2019 2018
 (In thousands)
Income from continuing operations:   
Income before income taxes$74,852
 $77,214
Income tax expense15,803
 28,886
Net income from continuing operations$59,049
 $48,328
Effective tax rate, continuing operations21.1% 37.4%
    
Income from discontinued operations:   
Income before income taxes$—
 $2,388
Income tax expense—
 692
Net income from discontinued operations$—
 $1,696
Effective tax rate, discontinued operations—% 29.0%
    
Less: Income attributable to noncontrolling interests:   
Income before income taxes$265
 $2,942
Income tax expense—
 —
Net income attributable to noncontrolling interests$265
 $2,942
Effective tax rate, noncontrolling interests—% —%
    
Income attributable to the Company   
Income before income taxes$74,587
 $76,660
Income tax expense15,803
 29,578
Net income attributable to the Company$58,784
 $47,082
Effective tax rate attributable to the Company21.2% 38.6%

Three months ended March 31,
20202019
(In thousands)
Income before income taxes$908  $24,459  
Income tax expense102  4,917  
Net income before attribution to noncontrolling interests$806  $19,542  
Effective tax rate11.2 %20.1 %
The effective tax rate for continuing operations for the ninethree months ended September 30, 2019March 31, 2020 of 21.1%11.2%, with related tax expense of $15.8$0.1 million, was calculated based on a projected 2019forecasted 2020 annual effective tax rate. The effective tax rate for the three months ended March 31, 2019 of 20.1%, with related tax expense of $4.9 million, was morecalculated based on a forecasted 2019 annual effective tax rate.
The effective tax rates for the three months ended March 31, 2020 and March 31, 2019 of 11.2% and 20.1%, respectively, were calculated based on forecasted annual effective tax rates. The effective tax rate for both periods was less than the statutory rate of 21% due primarily to earnings from tax-exempt investments and income tax credits, which were partially offset by state and local income taxes and the accounting for investments in affordable housing projects. These savings were partially offset by earnings from tax-exempt investments and income tax credits.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

The effective tax rate for continuing operations for the ninethree months ended September 30, 2018 of 37.4%, with related tax expense of $28.9 million, was calculated based on a projected 2018 annual effective tax rate. The effective tax rate was more than the statutory rate of 21% due primarily to the sale of Anchor and state and local income taxes. These items were partially offset by earnings from tax-exempt investments and income tax credits. The Company recorded tax expense of $12.7 million on the sale of Anchor in April 2018, which was primarily due to a book-to-tax basis difference associated with nondeductible goodwill.
The effective tax rate for continuing operations for the nine months ended September 30, 2019March 31, 2020 is less than the effective tax rate for the same period in 20182019 due primarily to the lower level of income in 2020 as a result of the $12.7 million tax expense that was recorded on the sale of Anchor in April 2018.compared to 2019.

10. Noncontrolling Interests
Noncontrolling interests consist of equity owned by management of the Company’s respective majority-owned affiliates, DGHM, BOS, and Anchor for the periods in which the Company had an ownership interest in them.affiliate, DGHM. Net income attributable to noncontrolling interests in the Consolidated StatementStatements of Operations represents the net income allocated to the noncontrolling interest owners of the affiliates.DGHM. Net income allocated to the noncontrolling interest owners was $0.1 million$6 thousand and $0.9 million$100 thousand for the three-month periods ended September 30,March 31, 2020 and 2019, and 2018, respectively, and $0.3 million and $2.9 million for the nine-month periods ended September 30, 2019 and 2018, respectively.
On the consolidated balance sheets,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.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 sheetsConsolidated Balance Sheets of $1.5 million0 and $2.5$1.4 million as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. The aggregate amount of such redeemable noncontrolling equity interests are recorded at the estimated maximum redemption values. The Company had 0 noncontrolling interests included in permanent shareholder’s equity at September 30, 2019March 31, 2020 and December 31, 2018.2019.
Each non-wholly owned affiliateThe DGHM operating agreement provides the Company and/or the noncontrolling interestsinterest holders with contingent call orand put redemption featuresoptions and mandatory repurchase obligations used for the orderly transfer of noncontrolling equity interests between the affiliate noncontrolling interest ownersholders and the Company at either a contractually predetermined fair value; multiple of earnings before interest, taxes, depreciation, and amortization (“EBITDA”); or fair value. The Company may liquidate these noncontrolling interests in cash, shares of the Company’s common stock, or other forms of consideration dependent on the operating agreement. These agreements arevalues. 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, 2018.2019.
Generally, these put and call redemption features refer to shareholder rights of both the Company and the noncontrolling interest owners of the Company’s majority-owned affiliate companies. The affiliate company noncontrolling interests generallyin DGHM take the form of limited liability company units, profits interests, or common stock (collectively, the “noncontrolling equity interests”). In most circumstances, the put and call redemption features generally relate to the Company’s right and, in some cases, obligation to purchase and the noncontrolling equity interests’ right to sell their equity interests.units. There are various events that could cause the putstrigger a put, call or calls to be exercised,mandatory repurchase, such as a change in control, death, disability, retirement, resignation or termination. The puts and calls are generally to be exercised at the then fair value or a contractually agreed upon approximation thereof. The terms of these rights vary and obligations are governed by the respective individual operating and legal documents.agreement of DGHM.
Redeemable noncontrolling interests recorded as of September 30, 2019 and December 31, 2018 were exclusively related to the rights of DGHM owners. The divestitures of BOS and Anchor in 2018 resulted in the Company no longer carrying noncontrolling interests within permanent shareholders' equity. The following tables present a rollforward of the Company’s redeemable noncontrolling interests and noncontrolling interests for the periods indicated:
36
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

The following table presents a rollforward of the Company’s redeemable noncontrolling interests for the periods indicated:
Three months ended
March 31, 2020March 31, 2019
(In thousands)
Redeemable noncontrolling interests at beginning of period$1,383  $2,526  
Net income attributable to noncontrolling interests6  100  
Distributions(6) (100) 
Purchases/(sales) of ownership interests(64) 12  
Amortization of equity compensation8  17  
Adjustments to fair value(1,327) (1,893) 
Redeemable noncontrolling interests at end of period$—  $662  
 Three months ended Nine months ended
 September 30, 2019 September 30, 2019
 Redeemable noncontrolling interests Redeemable noncontrolling interests
 (In thousands)
Noncontrolling interests at beginning of period$1,786
 $2,526
Net income attributable to noncontrolling interests96
 265
Distributions(96) (265)
Purchases/ (sales) of ownership interests—
 12
Amortization of equity compensation10
 36
Adjustments to fair value(315) (1,093)
Noncontrolling interests at end of period$1,481
 $1,481
 Three months ended Nine months ended
 September 30, 2018 September 30, 2018
 Redeemable noncontrolling interests Noncontrolling interests Redeemable noncontrolling interests Noncontrolling interests
 (In thousands)
Noncontrolling interests at beginning of period$10,747
 $1,996
 $17,461
 $5,186
Net income attributable to noncontrolling interests711
 213
 2,202
 740
Distributions(687) (203) (2,136) (712)
Purchases/ (sales) of ownership interests—
 —
 (6,353) (3,051)
Amortization of equity compensation125
 —
 373
 161
Adjustments to fair value790
 203
 139
 (115)
Noncontrolling interests at end of period$11,686
 $2,209
 $11,686
 $2,209


11. Accumulated Other Comprehensive Income
The following table presents a summary of the amounts reclassified from accumulatedAccumulated other comprehensive income/ (loss) for the three and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
Description of component of accumulated other comprehensive income/ (loss) Three months ended September 30, Nine months ended September 30, 
Affected line item in
Statement of Operations
 2019 2018 2019 2018 
  (In thousands) (In thousands)  
Net realized gain/ (loss) on cash flow hedges:          
Hedges related to deposits and borrowings:          
Pre-tax gain/ (loss) $6
 $101
 $508
 $385
 Interest (expense)
Tax (expense)/ benefit (2) (29) (148) (112) Income tax (expense)/ benefit
Net $4
 $72
 $360
 $273
 Net income/ (loss) attributable to the Company
Total reclassifications for the period, net of tax $4
 $72
 $360
 $273
  

Description of component of Accumulated other comprehensive income/(loss)Three months ended March 31,Affected line item in
Statement of Operations
20202019
(In thousands)
Net realized gain/(loss) on cash flow hedges:
Hedges related to deposits:
Pre-tax gain/(loss)$—  $(311) Interest (expense)
Tax (expense)/ benefit—  (91) Income tax (expense)/benefit
Net$—  $(220) Net income/(loss) attributable to the Company
Total reclassifications for the period, net of tax$—  $(220) 
On January 1, 2018,The following table presents the Company elected to early adopt ASU No. 2017-12. As a result,after-tax changes in the Company reclassified unrealized losses on cash flow hedgescomponents of $5 thousand from accumulatedthe Company’s Accumulated other comprehensive income/(loss) to beginning retained earnings.for the three months ended March 31, 2020 and 2019:
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Components of Accumulated other comprehensive income/(loss)
Unrealized
gain/(loss)
on securities
available-for-sale		Unrealized
gain/(loss)
on cash flow
hedges		Unrealized
gain/(loss)
on other		Accumulated
other
comprehensive
income/(loss)
(In thousands)
Balance at December 31, 2018$(17,556) $391  $(554) $(17,719) 
Other comprehensive income/(loss) before reclassifications11,568  (27) —  11,541  
Reclassified from other comprehensive income/(loss)—  (220) —  (220) 
Other comprehensive income/(loss), net11,568  (247) —  11,321  
Balance at March 31, 2019$(5,988) $144  $(554) $(6,398) 
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  
Notes to Unaudited Consolidated Financial Statements - (Continued)

On January 1, 2018, the Company adopted ASU No. 2016-01. As a result, the Company reclassified unrealized gains on equity securities available-for-sale, net of tax, of $339 thousand from accumulated other comprehensive income/ (loss) to beginning retained earnings.
 Components of accumulated other comprehensive income/ (loss)  
 
Unrealized
gain/ (loss)
on securities
available-for-sale
 
Unrealized
gain/ (loss)
on cash flow
hedges
 
Unrealized
gain/ (loss)
on other
 
Accumulated
other
comprehensive
income/ (loss)
 (In thousands)
Balance at December 31, 2017$(8,140) $332
 $(850) $(8,658)
Other comprehensive income/ (loss) before reclassifications(18,888) 574
 1
 (18,313)
Reclassified from other comprehensive income/ (loss)—
 (273) —
 (273)
Other comprehensive income/ (loss), net(18,888) 301
 1
 (18,586)
Reclassification from the adoption of ASUs 2017-12 and 2016-01$(339) $5
 $—
 $(334)
Balance at September 30, 2018$(27,367) $638
 $(849) $(27,578)
        
Balance at December 31, 2018$(17,556) $391
 $(554) $(17,719)
Other comprehensive income/ (loss) before reclassifications27,469
 (31) —
 27,438
Reclassified from other comprehensive income/ (loss)—
 (360) —
 (360)
Other comprehensive income/ (loss), net27,469
 (391) —
 27,078
Balance at September 30, 2019$9,913
 $—
 $(554) $9,359


12. Restructuring
InThere were 0 restructuring charges in the third and fourth quartersfirst quarter of 2018 and2020. In the first quarter of 2019, the Company incurred restructuring charges of $5.8 million, $2.1 million, and $1.6 million, respectively.million. The charges were in connection with a previously announced reduction to the Company’s workforce, of approximately 7% of total staffing, which included executive transition changes as well as other employee benefit and technology related initiatives. The restructuring is intended to improve the Company’s operating efficiency and enhance earnings.
37
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

The following table presents a summary of the restructuring activity for the three and nine months ended September 30, 2019March 31, 2020 and 2018:
 Severance Charges Other Associated Costs Total
 (In thousands)
Accrued charges at December 31, 2018$3,896
 $790
 $4,686
Cost incurred1,646
 —
 1,646
Costs paid(1,986) —
 (1,986)
Accrued charges at March 31, 20193,556
 790
 4,346
Costs paid(1,364) —
 (1,364)
Accrued charges at June 30, 20192,192
 790
 2,982
Costs paid(1,156) —
 (1,156)
Accrued charges at September 30, 2019$1,036
 $790
 $1,826
      
      
      
Accrued charges at December 31, 2017$337
 $—
 $337
Costs paid(254) —
 (254)
Accrued charges at March 31, 201883
 —
 83
Costs paid(83) —
 (83)
Accrued charges at June 30, 2018—
 $—
 $—
Costs incurred5,763
 —
 5,763
Accrued charges at September 30, 2018$5,763
 $—
 $5,763

2019:

Severance ChargesOther Associated CostsTotal
(In thousands)
Accrued charges at December 31, 2019$526  $789  $1,315  
Costs paid(434) —  (434) 
Accrued charges at March 31, 2020$92  $789  $881  
Accrued charges at December 31, 2018$3,896  $789  $4,685  
Cost incurred1,646  —  1,646  
Costs paid(1,986) —  (1,986) 
Accrued charges at March 31, 2019$3,556  $789  $4,345  
13. Revenue Recognition
On January 1, 2018, the Company adopted ASU 2014-09 et al. As stated in Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting,” the implementation of the new standard did not have an impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented underIn accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), while prior period amounts were not adjusted and continuethe Company recognizes revenue when it transfers promised goods or services to be reportedcustomers in accordance with our historic accounting under ASC 605, Revenue Recognition.
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 including interest income onsuch as loans and investment securities. In addition, certain noninterest income such as fees associated with mortgage servicing rights, late fees, BOLI income, and derivatives are also not in scope of the new guidance. ASC 606 is applicable to noninterest income such as investment management fees, wealth management and trust fees, and certain banking fees. However, the recognition of this revenue did not change upon adoption of ASC 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest income considered in-scope of ASC 606 is discussed below.
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 assets under management and advisory (“AUM”) and the applicable fee rate, depending on the terms of the contract. 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 sheet in the fees receivable line item.
All of the investment management fee income on the Consolidated Statement of Operations for the three and nine months ended September 30, 2019 and 2018 is considered in-scope of ASC 606.
Wealth managementManagement and trust fees
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

Trust Fees
Wealth management and trust fees are earned for providing investment management, 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 contract.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 (“asset based fees”), depending on the terms of the contract.contracts. No performance based incentives are earned on wealth management contracts. Receivables are recorded on the consolidated balance sheetConsolidated Balance Sheets in the feesFees receivable line item. Deferred revenues of $6.2$6.4 million and $6.9$6.7 million as of September 30,March 31, 2020 and 2019, and 2018, respectively, are recorded on the consolidated balance sheetConsolidated Balance Sheets within the otherOther liabilities line item.
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 sheetConsolidated Balance Sheets in the feesFees receivable line item.
AllInvestment 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 wealth managementAUM and trustthe applicable fee incomerate, 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 Statement of Operations forBalance Sheets in the three and nine months ended September 30, 2019 and 2018 is considered in-scope of ASC 606.Fees receivable line item.
Other banking fee incomeBanking 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, credit card 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 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.
38
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
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 as it relatesrelating to foreign exchange fees as they are governed by client disclosure statements and the Bank’s internal policies and procedures.
ForThe following table presents the three months ended September 30, 2019 and 2018, $0.7 million and $1.1 million, respectively, of other banking fee income as described above is considered in-scope forof ASC 606. For the nine months ended September 30, 2019 and 2018, $2.0 million and $3.1 million, respectively, of other banking fee income as described above is considered in-scope for ASC 606.606 by contracts with customers:

 Three months ended March 31,
 20202019
 (In thousands)
Fees and other income:
Wealth management and trust fees$18,371  $19,058  
Investment management fees1,925  2,650  
Other income752  684  
Revenue from contracts with customers21,048  22,392  
Non-interest income within the scope of other GAAP topics473  2,856  
Total non-interest income$21,521  $25,248  
14. Lease Accounting

On adoption of ASU 2016-02 on January 1, 2019, the Company adopted ASU 2016-02. As stated in Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 1: Basis of Presentation and Summary of Significant Accounting Policies”, the implementation of the new standard had a material effect on the financial statements. The most significant effects relate to the recognition of new operating ROU assets and operating lease liabilities on the balance sheet for real estate operating leases, providing significant new disclosures about leasing activities, and the impact of additional assets on certain financial measures, such as capital ratios and return on average asset ratios. On adoption, the Company recognized $124.1 million of lease liabilities and $108.5 million of ROUright-of-use ("ROU") assets on the face of the balance sheet. ROU assets obtained in exchange for lease liabilities are net of tenant improvement allowances and deferred rent. There was no impact to the Company’s Consolidated StatementStatements of Cash Flows upon adoption, since the net impact of all adjustments recorded upon transition represents non-cash activity. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 15: Recent Accounting Pronouncements” for additional information on the Company's adoption of this standard.
The Company, as lessee, has 4142 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
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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 following table presents information about the Company's leases as of the dates indicated.
Three months ended March 31,
20202019
(In thousands)
Lease cost
Operating lease cost$4,601  $4,685  
Short-term lease cost48  32  
Variable lease cost(9) 2  
Less: Sublease income(28) (18) 
Total operating lease cost$4,612  $4,701  
 Three months ended September 30, Nine months ended September 30,
 2019 2019
 (In thousands)
Lease cost   
Operating lease cost$4,866
 $14,392
Short-term lease cost12
 41
Variable lease cost143
 147
Less: Sublease income(27) (73)
Total operating lease cost$4,994
 $14,507

Three months ended March 31, 2020
(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$5,100 
ROU assets obtained in exchange for new operating lease liabilities$443 
Weighted-average remaining lease term for operating leases7.9 years
Weighted-average discount rate for operating leases3.2 %
 Nine months ended September 30,
 (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$15,013
ROU assets obtained in exchange for new operating lease liabilities$10,510
Weighted-average remaining lease term for operating leases8.2 years
Weighted-average discount rate for operating leases3.4%
39


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 September 30, 2019:
 September 30, 2019
 (In thousands)
Remainder of 2019$5,084
202020,224
202120,406
202220,360
202319,575
Thereafter57,005
Total future minimum lease payments142,654
Less: Amounts representing interest(19,855)
Present value of net future minimum lease payments$122,799


Prior to the adoption of ASC 842, the Company’s operating leases were not recognized on the balance sheet. The following table presents the undiscounted future minimum lease payments under the Company’s operating leases as of December 31, 2018:

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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, 2020:
 December 31, 2018
(In thousands)
2019$20,053
202019,344
202119,064
202218,802
202316,552
Thereafter41,412
Total$135,227

March 31, 2020
(In thousands)
Remainder of 2020$14,962  
202119,974  
202219,934  
202318,984  
202412,961  
Thereafter44,194  
Total future minimum lease payments131,009  
Less: Amounts representing interest(17,435) 
Present value of net future minimum lease payments$113,574  
Rent expense for the three and nine months ended September 30, 2018, prior to the adoption of ASU 2016-02, was $5.3 million and $16.1 million, respectively.

15. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 replaces existing revenue recognition standards and expands the disclosure requirements for revenue agreements with customers. ASU 2014-09 has been subsequently amended by additional ASUs, including ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, collectively, “ASU 2014-09 et al.” Under the new standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. ASU 2014-09 et al. does not apply to revenue associated with financial instruments such as loans and securities. ASU 2014-09 et al. was adopted using the modified retrospective transition method as of January 1, 2018, however no cumulative effect adjustment was required. This new guidance was applied to all revenue contracts in place at the date of adoption. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 13: Revenue Recognition” for further details.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This ASU requires equity investments to be measured at fair value with changes in fair value, net of tax, recognized in net income. As a result of implementing this standard, the Company reclassified $339 thousand in unrealized gains on available-for-sale equity investments, net of tax, from accumulated other comprehensive income to retained earnings as of January 1, 2018. Additionally, this amendment requires that entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. As a result of implementing this standard, the Company’s updated process includes identifying a fair value for loans using the exit price notion. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 5: Fair Value Measurements” for further details.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). This update and the related amendments to Topic 842 require lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”); ASU No. 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”); and ASU No. 2019-01, Leases (Topic 842), Codification Improvements (“ASU 2019-01”). The new standard establishes a right-of-usean ROU model ("ROU") that requires a lessee to recognize a ROU asset and lease liability on the balance sheetConsolidated Balance Sheets for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective on January 1, 2019, with early adoption permitted.Consolidated Statements of Operations. The Company adopted these provisions on January 1, 2019. The most significant effects relate to the recognition of new ROU assets and lease liabilities on the balance sheet for real estate operating leases and providing significant new disclosures about leasing activities. Additionally, the Company elected the package of practical expedients, as prescribed by ASU 2016-02. The Company elected not to reassess whether any expired or existing contracts are or contain leases nor the lease classification of those leases. The Company also elected not to reassess any initial direct costs for any existing leases. On adoption, the Company recognized $124.1 million of lease liabilities and $108.5 million of ROU assets. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326)(“ (“ASU 2016-13”). Throughout 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 isand related amendments to Topic 326 are intended to provide financial statement users with more decision-useful information about the expected credit losses on
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

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 in current GAAP with a current expected credit losses (“CECL”)CECL model methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable informationeconomic forecast to inform credit loss estimates. This ASU will be effective for fiscal years beginning after December 15, 2019. Early adoption is available as of the fiscal year beginning after December 15, 2018, but the Company does not plan on adopting early. The Company plans to adopt on January 1, 2020 utilizing a modified retrospective approach and is currently assessing the impact on the Company's consolidated financial statements and disclosures. Management assembled a project team that has developed an approach for implementation. The project team has selected a third-party software service provider and is implementing a probability of default/loss given default model where the project team has evaluated the use of both peer data and internal data to estimate the expected losses over the remaining life of the portfolio as required by the standard. Further, the team has identified the necessary data requirements and is in the process of testing the material data inputs, and assessing and validating potential model options. Within the Expected Loss model, the project team has determined to use a two factor regression based model identifying two economic factors per loan segment. In addition, we have determined both the forecast and reversion method to be used. The Company continues to develop accounting policies and establish internal controls relevant to the updated methodologies and models.
In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). This amendment requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. This ASU was effective for fiscal years beginning after December 15, 2017, and interim periods within those years. For the three and nine months ended September 30, 2019, $0.8 million and $1.4 million, respectively, are presented within other expense that would have been presented within salaries and employee benefits prior to adoption of ASU 2017-07. For the three and nine months ended September 30, 2018, $131 thousand and $411 thousand, respectively, are presented within other expense that would have been presented within salaries and employee benefits prior to adoption of ASU 2017-07.
In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The standard is intended to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting by preparers. ASU No. 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The Company early adopted this ASU as of January 1, 2018 with a modified retrospective transition. As a result of implementing this standard, the Company reclassified $5 thousand in unrealized losses on derivatives from accumulated other comprehensive income to retained earnings as of January 1, 2018. This ASU will provide more flexibility in the Company’s risk management activities and we believe it will enhance the Company’s ability to employ risk management strategies, while improving the transparency and understanding of those strategies for financial statement users.
In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). This update was issued to address a narrow-scope financial reporting issue that arose as a consequence of the change in the tax law. On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (the “Tax Act”), which, among other significant changes, lowers the federal corporate tax rate from 35% to 21% effective January 1, 2018. This update requires a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the enactment of the Tax Act. ASC 740 requires that the tax effects of changes in tax rates be recognized in income tax expense/ (benefit) attributable to continuing operations in the period in which the law is enacted. As a result, the tax effect of accumulated other comprehensive income does not reflect the appropriate tax rate. The amendments in this ASU would eliminate the stranded tax effects associated with the change in the federal corporate income tax rate related to the Tax Act and would improve the usefulness of information reported to financial statement users. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted for public business entities for reporting periods for which financial statements have not yet been issued.2019. The Company adopted this update on January 1, 2020 utilizing a modified retrospective approach. On adoption of ASU 2016-13 on December 31, 2017January 1, 2020, the Company recognized a decrease in the allowance for loan losses of $20.4 million, and made a one-time reclassificationan increase in the reserve for unfunded loan commitments of $1.5$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 from accumulated other comprehensive income to retained earnings, which is reflectedshown in the Consolidated StatementStatements of Changes in Shareholders’ Equity.
In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”), and ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). These updates clarify the guidance in ASU 2016-02 which introduced Topic 842 and add an additional transition method for leases. ASU 2018-11 allows entities to
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)

initially apply the new lease standard at the adoption date (January 1, 2019 for the Company) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This transition method is in addition to the initial modified retrospective transition method, which would require an entity to initially apply the new leases standard (subject to specific transition requirements and optional practical expedients) at the beginning of the earliest period presented in the financial statements. Lessees also must provide the new and enhanced disclosures in the period of adoption; ASU 2018-11 would not require the amended disclosures of Topic 842 for comparative periods. The Company adopted these provisions along with those of ASU 2016-02 as of January 1, 2019. The Company has elected to use the prospective transition method and has deemed a cumulative effect adjustment not necessary at adoption. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting”4: Investments, Note 6 - Loan Portfolio and Credit Quality, and Note 7 - Allowance for Loan Losses” for further details.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Among other changes, this update removes the requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. This update adds to required disclosures for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted but the Company does not plan on adopting early.
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). The amendments in ASU 2018-14 remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. This update is effective on a retrospective basis for interim and annual reporting periods beginning January 1, 2021. The Company is still assessing the potential impact for this update and how it applies to the Company’s disclosures surrounding its two non-qualified supplemental executive retirement plans (“SERP”) and a long-term incentive plan (“LTIP”).plan.
In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus
40
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
16. Subsequent Events
Impact of the FASB Emerging Issues Task Force) (“ASU 2018-15”). COVID-19 pandemic
The amendmentsCOVID-19 pandemic has caused substantial disruptions to the global economy and to the customers and communities that we serve. In response to the pandemic, the Company has 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 ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract withSmall Business Administration’s (the “SBA”) Paycheck Protection Program (the “PPP”) and offering loan deferrals, forbearance, and second mortgages as appropriate, including through our mortgage deferment program.
As of March 31, 2020, the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. This update is effective on a retrospective basis for interim and annual reporting periods beginning January 1, 2021. The Company early adopted this update on January 1, 2019. The adoption of this updateCOVID-19 pandemic did not have a materialsignificant impact on the consolidatedCompany’s financial statements.
In October 2018,condition, results of operations, or capital position other than the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusionprovision for loan loss expense described in Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan Losses.” Below is a summary of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rateimpact to the Company subsequent to March 31, 2020 until the filing date of this Form 10-Q.
Participation in the PPP
The CARES Act 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 two years at an interest rate of 1.0%. Payments can be deferred for a Benchmark Interest Rateperiod of six months. Loans issued under the PPP will be forgiven if the borrower uses at least 75% of the proceeds on payroll, rent, utilities and other qualified benefits for Hedge Accounting (“ASU 2018-16”). ASU 2018-16 introduces OIS Ratea period of eight weeks, following the loan funding date, and are 100% guaranteed by the SBA. 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.
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 SOFR assize 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 two years at an acceptable US benchmark interest rate for purposes of applying hedge accounting0.35%. Only loans issued under Topic 815. This updatethe PPP can be pledged as collateral to access the facility.
The Bank is effective for interimparticipating in the PPP and annual reporting periods beginning after December 15, 2018 becausePPPLF programs. As of March 31, 2020, an immaterial amount of loans were processed under the PPP program, though the Company has already adopted ASU 2017-12. The Company adopted this update on January 1, 2019. The adoptionexpects increased volume in the second quarter of 2020. As of the date of this update didfiling, the Bank has approved approximately 1,100 PPP loans totaling approximately $425.0 million and does not haveanticipate to approve any additional loans under the current conditions.
Mortgage Deferment Program 
In the first quarter of 2020, in response to the COVID-19 pandemic, the Bank initiated a materialmortgage deferment program under which principal and interest payments on qualifying mortgage loans are generally deferred for three months and the loan term is extended three months. Loans that meet the requirements for deferral under the program are not considered TDRs or past due based on current regulatory guidance. As of March 31, 2020, 10 loans totaling approximately $5.0 million were processed under this program, though the Company expects increased volume in the second quarter of 2020. As of the date of this filing, the Bank has initially approved approximately 170 deferments for loans totaling approximately $90.0 million.
Massachusetts COVID-19 Emergency Legislation
On April 20, 2020, legislation enacted in Massachusetts in response to the COVID-19 emergency declared by Governor Baker was signed into law by the Governor. The legislation establishes a temporary moratorium on foreclosures on one- to four-family, owner occupied residential real estate in Massachusetts. The legislation also requires a creditor to grant to a borrower of a mortgage loan secured by one- to four-family, owner occupied residential real estate in Massachusetts a forbearance of up to 180 days, if requested by the borrower, who must affirm that the borrower has experienced a financial impact from the COVID-19 pandemic. A borrower is entitled to request a forbearance while the legislation is in effect even if the borrower is already in default. In connection with a forbearance, a creditor may not charge fees, penalties or interest beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in full under the consolidated financial statements.
In April and May 2019,terms of the FASB issued ASU 2019-04, Codification Improvementsrelevant loan agreement. The legislation specifies that a payment subject to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”) and ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”), respectively. These updates clarifyforbearance shall be added to the guidance in ASU 2016-13 which introduced Topic 326. ASU 2019-04 clarifies and improves areasend of guidancethe term of the loan unless otherwise agreed by the parties. The legislation also prohibits a creditor from furnishing negative information to a consumer reporting agency related to mortgage payments subject to forbearance. Because the recently issued standardslegislation was enacted on credit losses, hedging, and recognition and measurement. ASU 2019-05an emergency basis, it went into effect immediately upon being signed into law. The legislation provides entities that have certain instruments within the scope of subtopic 326-20 with an option to irrevocably electtemporary moratorium on foreclosures expires 120 days after the fair value option. These ASUs will be effective for fiscal years beginning after December 15, 2019. Early adoption is available asdate of the fiscal year beginninglegislation, which is August 18, 2020, or 45 days after December 15, 2018,the COVID-19 emergency declaration has been lifted, whichever is sooner, but the Company doesGovernor may extend the moratorium in increments of up 90 days as long as the moratorium ends not plan on adopting early. The Companylater than 45 days after the COVID-19 emergency declaration
41
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements - (Continued)
has been lifted. A borrower may request a forbearance under the legislation at any time while the foreclosure moratorium is still assessingin effect. Forbearances, if any, granted under the potential disclosure impactMassachusetts legislation to borrowers who are currently in default may not qualify for the reporting exclusion as a TDR or delinquency status as was provided under the national guidance from regulators.
Commercial Real Estate Second Loan Program
In the first quarter of 2020, 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 for each borrower could not exceed a 75% loan-to-value ratio and the loans were current at the time of application, amongst other conditions. As of March 31, 2020, approximately 70% of our total Commercial real estate portfolio balance qualified for the plan. As of the date of this filing, borrowers for approximately 260 existing loans totaling $1.4 billion have requested and been approved for these amendments andsecond mortgages, representing approximately 50% of the Commercial real estate loan balance. Approximately $90.0 million in new loans are expected to be funded under this program. The entire Commercial real estate portfolio will adopt on January 1, 2020continue to be monitored regardless of their participation in conjunction with ASU 2016-13.the plan.
42


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of and for the three and nine months ended September 30, 2019March 31, 2020
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 (the “Exchange Act”), 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, effectiveness of our investment programs,strategy; evaluations of future interest rate trends and liquidity,future liquidity; expectations as to growthchanges in assets, deposits and results of operations, receiptoperations; the impact of regulatory approval for pending acquisitions, success of acquisitions,the COVID-19 pandemic; future operations, market position and financial position,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 others, factors referenced herein under the section captioned “Risk Factors”; adverse conditionsthe 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 length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in the capitalgeneral business and debt markets and the impact of such conditions on the Company’s business; changes in interest rates; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis orand in the local markets in which the Company operates; changes in customer behavior due to changing business and economic conditions or legislative or regulatory initiatives; continued 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 default and charge-off rates; the adequacy of loan loss reserves, orreserves; 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 natural disasters;future pandemics; changes in government regulation; reputational risk relating to the riskCompany’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 assetsasset 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; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K and updated in the Company’s Quarterly Reports on Form 10-Q 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.made

43

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 ourthe Company's operating segments and the Company’s operations in the thirdfirst quarter of 2019.2020. 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 September 30,    As of and for the three months ended March 31,
2019 2018 $ Change % Change20202019$ Change% Change
(In thousands, except per share data)  (In thousands, except per share data)
Total revenue$81,279
 $91,955
 $(10,676) (12)%Total revenue$78,778  $83,586  $(4,808) (6)%
Provision/ (credit) for loan losses167
 (949) 1,116
 nm
Provision/(credit) for loan lossesProvision/(credit) for loan losses16,962  (1,426) 18,388  nm  
Total operating expense55,537
 68,557
 (13,020) (19)%Total operating expense60,908  60,553  355  1 %
Net income from continuing operations20,058
 18,886
 1,172
 6 %
Net income before attribution to noncontrolling interestsNet income before attribution to noncontrolling interests806  19,542  (18,736) (96)%
Net income attributable to noncontrolling interests96
 924
 (828) (90)%Net income attributable to noncontrolling interests6  100  (94) (94)%
Net income attributable to the Company19,962
 17,962
 2,000
 11 %Net income attributable to the Company800  19,442  (18,642) (96)%
Diluted earnings per share:       
From continuing operations$0.24
 $0.20
 $0.04
 20 %
Diluted earnings per share attributable to common shareholdersDiluted earnings per share attributable to common shareholders$0.01  $0.25  $(0.24) (96)%
       
ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):      ASSETS UNDER MANAGEMENT AND ADVISORY (“AUM”):
Wealth Management and Trust$14,695,000
 $15,598,000
 (903,000) (6)%Wealth Management and Trust$13,497,000  $14,564,000  (1,067,000) (7)%
Other (1)1,533,000
 6,832,000
 (5,299,000) (78)%
OtherOther1,016,000  1,558,000  (542,000) (35)%
Total AUM$16,228,000
 $22,430,000
 $(6,202,000) (28)%Total AUM$14,513,000  $16,122,000  $(1,609,000) (10)%
_____________________
nm = not meaningful
(1)Includes the AUM at DGHM of $1.5 billion at September 30, 2019 and $2.1 billion at September 30, 2018, and the AUM at BOS of $4.7 billion at September 30, 2018.
Net income attributable to the Company was $20.0$0.8 million for the three months ended September 30, 2019March 31, 2020 and $18.0$19.4 million for the same period of 2018.2019. The Company recognized total diluted earnings per share attributable to common shareholders of $0.24$0.01 and $0.20$0.25 for the three months ended September 30,March 31, 2020 and 2019, and 2018, respectively.
Key items that affected the Company’s results in the thirdfirst quarter of 20192020 compared to the same period of 20182019 include:
▪Total revenue decreased 12%, or $10.7 million, to $81.3 million for the three months ended September 30,
▪Provision expense for loan losses increased $18.4 million to $17.0 million for the three months ended March 31, 2020, compared to the same period of 2019. During the first quarter of 2020, the Company recognized a total provision for loan losses and unfunded loan commitments expense of $18.8 million, which includes a provision for loan loss expense of $17.0 million and $1.8 million for unfunded loan commitments, which is recognized as Other expense within Noninterest expense. The provision for loan losses in the first quarter of 2020 was primarily driven by changes in economic forecasts late in the first quarter of 2020 to reflect deteriorating economic conditions related to the COVID-19 pandemic.
•Upon adoption of ASU 2016-13 on January 1, 2020, 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.
▪Total revenue decreased $4.8 million, or 6%, to $78.8 million for the three months ended March 31, 2020, compared to the same period of 2019 as described below.
•Total fees and other income decreased $3.7 million, or 15%, to $21.5 million for the three months ended March 31, 2020, compared to the same period of 2019. The decrease was primarily driven by lower Other income, Investment management fees, and Wealth management and trust fees. Total fees and other income represents 27% of Total revenue for the three months ended March 31, 2020, compared to 30% of Total revenue for the same period of 2019.
•Net interest income decreased $1.1 million, or 2%, to $57.3 million for the three months ended March 31, 2020, compared to the same period of 2019. Net interest margin (“NIM”) was 2.76% for the three months ended March 31, 2020, a decrease of 14 basis points compared to $92.0 million for the same period of 2018 as described below.
▪Total fees and other income decreased 22%, or $7.2 million, to $25.1 million for the three months ended September 30, 2019, compared to $32.3 million for the same period of 2018. This decrease was primarily driven by the divestiture of BOS in 2018, as well as lower AUM balances at September 30, 2019. Total fees and other income represents 31% of Total revenue for the three months ended September 30, 2019, compared to 35% of Total revenue for the same period of 2018.
▪Net interest income decreased 6%, or $3.5 million, to $56.2 million for the three months ended September 30, 2019, compared to $59.6 million for the same period of 2018. Net interest margin (“NIM”) was 2.72% for the three months ended September 30, 2019, representing a decrease of 18 basis points compared to the same period in 2018. The decreases in net interest income and NIM were primarily driven by higher funding costs, partially offset by higher asset yields on cash and investments.
▪Total operating expenses decreased 19%, or $13.0 million, to $55.5 million for the three months ended September 30, 2019, compared to $68.6 million for the same period of 2018. The decrease was primarily

driven by the divestitureimpact of BOS,recent rate cuts as lower interest on interest-earning assets was partially offset by lower funding costs.
▪Total operating expenses increased $0.4 million, or 1%, to $60.9 million for the three months ended March 31, 2020, compared to the same period of 2019. The increase was primarily driven by an increase in Other expense, Information systems, and Marketing and business development, partially offset by a restructuring charge of $1.6 million in the first
44

quarter of 2019 as well as realized savingsa decrease in Occupancy and equipment, FDIC insurance, and Salaries and employee benefits due to accrual adjustments.
▪For the three months ended March 31, 2020, total loans increased by $66.6 million, or 1%, while total deposits decreased $405.9 million, or 6%, from efficiency initiatives and restructuring chargesprior quarter. The Company’s loan-to-deposit ratio was 103% as of $5.9 millionMarch 31, 2020. Deposits are the Company’s primary source of funds to originate loans. When the Company’s loan-to-deposit ratio exceeds 100%, the Company relies on other funding sources such as FHLB borrowings or federal funds to fund loan growth. If the Company is unable to grow deposits in the third quarterline with loan growth, we will evaluate other options such as slowing loan growth, selling a portion of 2018.portfolio loans, or originating mortgage loans as held-for-sale.
▪For the three months ended September 30, 2019, total loans decreased slightly by $13.1 million, while total deposits increased $220.3 million, or 3%, from prior quarter. During the third quarter of 2019, the Company sold $92.4 million of residential mortgage loans. The Company’s loan-to-deposit ratio was 106% as of September 30, 2019. Deposits are the Company’s primary source of funds to originate loans. When the Company’s loan-to-deposit ratio exceeds 100%, we rely on other funding sources such as FHLB borrowings or federal funds to fund loan growth. If the Company is unable to grow deposits in line with loan growth, we will evaluate other options such as slowing loan growth, selling a portion of portfolio loans, or originating mortgage loans as held for sale.
The Company’s Private Banking segment reported netNet income attributable to the Company of $17.9$0.6 million in the thirdfirst quarter of 2019,2020, compared to $15.7$18.3 million for the same period of 2018.2019. Net income attributable to the Company increased $2.3decreased $17.7 million, or 15%97%, from the same period in 2018 largely2019 primarily driven by a decreasean increase of $6.6$18.4 million in operating expenses due to realized savings from efficiency initiatives, a $5.2 million restructuring charge in the third quarter of 2018, and an FDIC insurance credit, partially offset byProvision for loan losses, a decrease of $3.4 million in totalTotal revenue primarily due to lower net interestFees and other income, and an increase of $1.1$1.3 million in Operating expense primarily due to higher Other expense related to the provisionreserve for unfunded loan loss.commitments expense.
The Company’s Wealth Management and Trust segment reported netNet income attributable to the Company of $3.6$2.0 million in the thirdfirst quarter of 2019,2020, compared to $2.3$2.5 million for the same period of 2018.2019. The increasedecrease of $1.3$0.4 million, or 18%, was primarily driven by a decrease of $2.5 million in total operating expenses due to realized savings from efficiency initiatives, and a $0.6 million restructuring charge in the third quarter of 2018, partially offset by a decrease of $0.7 million in totalTotal revenue due to the impact of lower AUM on accounts that are billed based on AUM levels.levels, partially offset by a decrease of $0.1 million in Total operating expense. The decrease in Total operating expense was primarily due to a $0.4 million restructuring charge in the first quarter of 2019, a decrease in Occupancy and equipment expense, and a decrease in Professional services expense, partially offset by an increase in Information systems expense and Salaries and employee benefits expense. Wealth Management and Trust AUM decreased $0.9$1.1 billion, or 6%7%, to $14.7$13.5 billion at September 30, 2019March 31, 2020 from $15.6$14.6 billion at September 30, 2018.March 31, 2019. The decrease in AUM was primarily driven by lost business of $1.3$1.2 billion and current client net outflowsunfavorable market returns of $0.5$0.8 billion, partially offset by new business of $0.7 billion and positive results of $0.2$1.0 billion for the twelve months ended September 30, 2019.March 31, 2020.
Impact of the COVID-19 Pandemic
The Company completedCOVID-19 pandemic has caused substantial disruptions to the saleglobal economy and to the customers and communities that we serve. In response to the pandemic, we have 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 COVID-19, including participating in the SBA's PPP, offering loan deferrals and forbearance as needed, including our mortgage 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. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 16: Subsequent events” for further details on the Company's participation in these programs.
As of its ownership interest in BOSMarch 31, 2020, the COVID-19 pandemic did not have a material impact on December 3, 2018. Thethe Company’s financial condition, results of BOS through its closing date remain consolidatedoperations, or capital position other than the provision for loan loss expense discussed below. As described in Part II. Item 1A. "Risk Factors", the COVID-19 pandemic could have a material impact on the Company’s financial condition, results of operations or capital position in the resultsfuture.
During the first quarter of 2020, the Company recognized a total provision for loan losses expense of $18.8 million for loans and off-balance sheet commitments driven by the changes in economic forecasts late in the first quarter of 2020 to reflect deteriorating economic conditions related to the COVID-19 pandemic. 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.
Company-wide remote working arrangements have not adversely affected our ability to maintain operations, including financial reporting systems and internal controls over financial reporting.
Regulatory Developments
The CARES Act
On March 27, 2020, Congress passed, and the President signed, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to address the economic effects of the COVID-19 pandemic.
•Paycheck Protection Program. The CARES Act appropriated $349 billion for “paycheck protection loans” through the PPP. The amount appropriated was subsequently increased to $659 billion. Loans under the PPP that meet SBA requirements may be forgiven in certain circumstances, and are 100% guaranteed by the SBA. As of the date of this filing, the Bank has initially approved approximately 1,100 PPP loans totaling approximately $425.0 million. 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”)
45

will extend credit to depository institutions with a term of up to two years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility.
•Troubled Debt Restructuring Relief. From March 1, 2020 through the earlier of December 31, 2020 or 60 days after the termination date of the national emergency declared by the President on March 13, 2020 concerning the COVID–19 outbreak (the “national emergency”), a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a troubled debt restructured (“TDR”), including impairment accounting. The Company elected this accounting policy. This TDR relief is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which TDR relief is applicable. In the first quarter of 2020, the Company initiated a mortgage loan deferment program in line with the preceding guidance. As of March 31, 2020, 10 loans totaling approximately $5.0 million were processed under this program. As of the date of this filing, the Bank has initially approved approximately 170 deferments for loans totaling approximately $90.0 million.
•CECL Delay. Banks, savings associations, credit unions, bank holding companies and their affiliates are not required to comply with the Financial Accounting Standards Board Accounting Standards Update No. 2016–13 (“Measurement of Credit Losses on Financial Instruments”), including the current expected credit losses methodology for estimating allowances for credit losses (“CECL”), from the date of the law’s enactment until the earlier of the end of the national emergency or December 31, 2020. On March 27, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation (the “FDIC”), and the Office of the Comptroller of the Currency issued an interim final rule that allows banking organizations that are required to adopt CECL this year to mitigate the estimated cumulative regulatory capital effects for up to two years. The relief afforded by the CARES Act and interim final rule is in addition to the three-year transition period already in place. The Company adopted CECL effective January 1, 2020.
•Reduction of the Community Bank Leverage Ratio. The CARES Act reduced the community bank leverage ratio from 9% to 8% until the earlier of the end of the national emergency or December 31, 2020. In response to the CARES Act, federal banking regulators set the community bank leverage ratio at 8% for the remainder of 2020, 8.5% for 2021 and 9% thereafter.
•Revival of Bank Debt Guarantee Program. The CARES Act amends the Dodd-Frank Act to provide the FDIC with the authority to guarantee bank-issued debt and noninterest-bearing transaction accounts that exceed the FDIC's $250,000 limit through its closing dateDecember 31, 2020. The FDIC has discretion to determine whether and how to exercise this authority.
•Forbearance. The CARES Act codifies in part recent guidance from state and federal regulators and government-sponsored enterprises, including the 60-day suspension of foreclosures on federally-backed mortgages and requirements that servicers grant forbearance to borrowers affected by COVID-19.
•Moratorium on Negative Credit Reporting. Any furnisher of credit information that agrees to defer payments, forbear on any delinquent credit or account, or provide any other relief to consumers affected by the COVID-19 pandemic must report the credit obligation or account as current if the credit obligation or account was current before the accommodation.
Massachusetts COVID-19 Emergency Legislation
On April 20, 2020, legislation enacted in Massachusetts in response to the COVID-19 emergency declared by Governor Baker was signed into law by the Governor. The legislation establishes a temporary moratorium on foreclosures on one- to four-family, owner occupied residential real estate in Massachusetts. The legislation also requires a creditor to grant to a borrower of a mortgage loan secured by one- to four-family, owner occupied residential real estate in Massachusetts a forbearance of up to 180 days, if requested by the borrower, who must affirm that the borrower has experienced a financial impact from the COVID-19 pandemic. A borrower is entitled to request a forbearance while the legislation is in effect even if the borrower is already in default. In connection with a forbearance, a creditor may not charge fees, penalties or interest beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in prior periods. Resultsfull under the terms of the relevant loan agreement. The legislation specifies that a payment subject to forbearance shall be added to the end of the term of the loan unless otherwise agreed by the parties. The legislation also prohibits a creditor from furnishing negative information to a consumer reporting agency related to mortgage payments subject to forbearance. Because the legislation was enacted on an emergency basis, it went into effect immediately upon being signed into law. The legislation provides that the temporary moratorium on foreclosures expires 120 days after the closeeffective date of the transaction dolegislation, which is August 18, 2020, or 45 days after the COVID-19 emergency declaration has been lifted, whichever is sooner, but the Governor may extend the moratorium in increments of up 90 days as long as the moratorium ends not include BOS operations.later than 45 days after the COVID-19 emergency declaration has been lifted. A borrower may request a forbearance under the legislation at any time while the foreclosure moratorium is in effect. Forbearances, if any, granted under the Massachusetts legislation to borrowers who are currently in default may not qualify for the reporting exclusion as a TDR or delinquency status as was provided under the national guidance from regulators.

46

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 policies upon which its financial condition depends, which involve the most complex or subjective decisions or assessments, are the allowance for loan losses, the valuation of goodwill and intangible assets and the analysis for impairment, and income tax estimates. These policies are 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, 20182019.
. There have been no changeswas one change to these policies through the filing of this Quarterly Report on Form 10-Q. 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 has changed. The updates in this standard replace the incurred loss impairment methodology in current GAAP with a CECL model methodology. The CECL model methodology incorporates current conditions, and “reasonable and supportable” forecasts, as well as prepayments to estimate loan losses over the life of 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.

Results of operations for the three and nine months ended September 30,March 31, 2020 versus March 31, 2019 versus September 30, 2018
Net Income. The Company recorded netNet income from continuing operations before attribution to noncontrolling interestsfor the three and nine months ended September 30, 2019March 31, 2020 of $20.1$0.8 million, and $59.0 million, respectively, compared to $18.9 million and $48.3$19.5 million for the same respective periodsperiod in 2018.2019. Net income attributable to the Company which includes income from both continuing and discontinued operations, if any, as well as net income attributable to noncontrolling interests, for the three and nine months ended September 30, 2019March 31, 2020 was $20.0$0.8 million, and $58.8 million, respectively, compared to $18.0 million and $47.1 million for the same respective periods in 2018.
The Company recorded no net income from discontinued operations for the nine months ended September 30, 2019, compared to $1.7$19.4 million for the same period in 2018, the majority of which was recorded in the first quarter of 2018. The Company received the final payment related to a revenue sharing agreement with Westfield Capital Management Company, LLC (“Westfield”) in the first quarter of 2018. The Company recognized a tax credit in the fourth quarter of 2018, recorded in discontinued operations, related to an adjustment to deferred taxes in connection with the Westfield revenue share. The Company will not receive additional income from Westfield now that the final payment has been received.

2019.
The Company recognized dilutedDiluted EPS attributable to common shareholders which includes both continuing and discontinued operations, if any, for the three and nine months ended September 30, 2019March 31, 2020 of $0.24$0.01 per share, and $0.71 per share, respectively, compared to $0.20 per share and $0.50$0.25 per share for the same respective periodsperiod in 2018.2019. Net income from continuing operationsattributable to the Company for 2020 and 2019 and 2018 were partially offsetwas positively impacted by charges that reducedecreases in the redemption value of certain redeemable noncontrolling interests, which increases Net income available to common shareholders. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 2: Earnings Per Share” for further detail on these charges to income available to common shareholders.
The following discussions are based on the Company’s continuing operations, unless otherwise stated. The following table presents selected financial highlights:
Three months ended September 30, $
Change		 % Change Nine months ended September 30, 
$
Change
 
%
Change
Three months ended March 31,
$
Change
%
Change
2019 2018 2019 2018 20202019
(In thousands)(In thousands)
Net interest income$56,153
 $59,641
 (3,488) (6)% $171,951
 $174,569
 $(2,618) (1)%Net interest income$57,257  $58,338  $(1,081) (2)%
Fees and other income25,126
 32,314
 (7,188) (22)% 74,754
 104,152
 (29,398) (28)%Fees and other income21,521  25,248  (3,727) (15)%
Total revenue81,279
 91,955
 (10,676) (12)% 246,705
 278,721
 (32,016) (11)%Total revenue78,778  83,586  (4,808) (6)%
Provision/ (credit) for loan losses167
 (949) 1,116
 nm
 104
 (2,291) 2,395
 nm
Provision/(credit) for loan lossesProvision/(credit) for loan losses16,962  (1,426) 18,388  nm  
Operating expense55,537
 68,557
 (13,020) (19)% 171,749
 203,798
 (32,049) (16)%Operating expense60,908  60,553  355  1 %
Income tax expense5,517
 5,461
 56
 1 % 15,803
 28,886
 (13,083) (45)%Income tax expense102  4,917  (4,815) (98)%
Net income from continuing operations20,058
 18,886
 1,172
 6 % 59,049
 48,328
 10,721
 22 %
Net income from discontinued operations—
 —
 —
 nm
 —
 1,696
 (1,696) nm
Net income before attribution to noncontrolling interestsNet income before attribution to noncontrolling interests806  19,542  (18,736) (96)%
Less: Net income attributable to noncontrolling interests96
 924
 (828) (90)% 265
 2,942
 (2,677) (91)%Less: Net income attributable to noncontrolling interests6  100  (94) (94)%
Net income attributable to the Company$19,962
 $17,962
 $2,000
 11 % $58,784
 $47,082
 $11,702
 25 %Net income attributable to the Company$800  $19,442  $(18,642) (96)%
_____________________
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 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 $63.3$87.9 million at September 30, 2019March 31, 2020 and could be placed on nonaccrual status if their credit quality declines further.
Net interest income for the three months ended September 30, 2019March 31, 2020 was $56.2$57.3 million, a decrease of $3.5$1.1 million, or 6%2%, compared to the same period in 2018. For the nine months ended September 30, 2019, net interest income2019. The decrease was $172.0 million, a decrease of $2.6 million, or 1%, compared to the same period in 2018. The decreases for the three and nine months were primarily driven by higher funding costs,the impact of recent rate cuts as lower interest on interest-earning assets was partially offset by higher asset yields and higher loan volumes. Thelower funding costs. NIM was 2.72%2.76% for the three months ended September 30, 2019,March 31, 2020, a decrease of eighteen14 basis points compared to the same period in 2018. For the nine months ended September 30, 2019, the NIM was 2.80%, a decrease of eight basis points compared to the same period in 2018.2019. The decrease in NIM for the three and nine month periods ended September 30, 2019 iswas also primarily driven by higher funding costs,the impact of recent rate cuts as lower interest on interest-earning assets was partially offset by higher asset yields and higher loan volumes.lower funding costs.
Previously, the Company reported NIM on both a GAAP basis and on a fully taxable equivalent ("FTE") basis to enhance comparability. Currently, the FTE adjustment for interest income on non-taxable investments and loans is immaterial due to the decline in the federal tax rate in 2018 and the recent increases in interest expense. Therefore, FTE has not been applied, and for comparison purposes GAAP amounts are shown for all periods presented.
47

The following tables present the composition of the Company’s NIM for the three and nine months ended September 30, 2019March 31, 2020 and 2018.2019.

Average Balance Interest Income/Expense Average Yield/Rate (1)Average BalanceInterest Income/ExpenseAverage Yield/Rate (1)
As of and for the three months ended September 30,As of and for the three months ended March 31,
AVERAGE BALANCE SHEET:2019 2018 2019 2018 2019 2018AVERAGE BALANCE SHEET:202020192020201920202019
AVERAGE ASSETS(In thousands)    AVERAGE ASSETS(In thousands)
Interest-earning assets:           Interest-earning assets:
Cash and investments: (2)           Cash and investments: (2)
Taxable investment securities$198,655
 $324,583
 $938
 $1,510
 1.95% 1.86%Taxable investment securities$201,174  $244,230  $868  $1,185  1.73 %1.94 %
Non-taxable investment securities305,108
 297,710
 1,924
 1,779
 2.52% 2.39%Non-taxable investment securities315,681  306,868  1,998  1,901  2.53 %2.48 %
Mortgage-backed securities492,514
 552,820
 2,622
 2,941
 2.13% 2.13%Mortgage-backed securities520,629  521,788  2,787  2,897  2.14 %2.22 %
Short-term investments and other101,958
 204,814
 1,084
 1,617
 4.06% 3.11%Short-term investments and other147,482  79,603  1,071  908  2.89 %4.58 %
Total cash and investments1,098,235
 1,379,927
 6,568
 7,847
 2.39% 2.27%Total cash and investments1,184,966  1,152,489  6,724  6,891  2.27 %2.39 %
Loans: (3)           Loans: (3)
Commercial and industrial1,101,672
 998,817
 11,523
 9,894
 4.09% 3.88%Commercial and industrial1,148,986  1,070,161  10,724  10,979  3.69 %4.10 %
Commercial real estate2,518,048
 2,475,143
 29,118
 29,482
 4.52% 4.66%Commercial real estate2,582,305  2,398,413  27,482  28,151  4.21 %4.69 %
Construction and land195,843
 179,248
 2,410
 2,193
 4.82% 4.79%Construction and land233,324  211,351  2,572  2,641  4.36 %5.00 %
Residential3,016,265
 2,836,593
 25,567
 23,907
 3.39% 3.37%Residential2,850,833  2,972,945  23,468  25,545  3.29 %3.44 %
Home equity89,068
 94,050
 1,121
 1,089
 4.99% 4.59%Home equity86,048  90,646  952  1,121  4.45 %5.02 %
Other consumer127,987
 163,224
 1,297
 1,689
 4.02% 4.11%Other consumer132,237  133,937  1,160  1,496  3.53 %4.53 %
Total loans7,048,883
 6,747,075
 71,036
 68,254
 3.98% 3.99%Total loans7,033,733  6,877,453  66,358  69,933  3.75 %4.07 %
Total earning assets8,147,118
 8,127,002
 77,604
 76,101
 3.76% 3.70%Total earning assets8,218,699  8,029,942  73,082  76,824  3.54 %3.83 %
LESS: Allowance for loan losses75,199
 73,861
        LESS: Allowance for loan losses51,730  75,537  
Cash and due from banks (non-interest bearing)49,065
 46,056
        Cash and due from banks (non-interest bearing)49,571  46,172  
Other assets544,368
 392,757
        Other assets562,851  493,148  
TOTAL AVERAGE ASSETS$8,665,352
 $8,491,954
        TOTAL AVERAGE ASSETS$8,779,391  $8,493,725  
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY
AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITYAVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:           Interest-bearing liabilities:
Interest-bearing deposits:           Interest-bearing deposits:
Savings and NOW$615,730
 $693,419
 $275
 $301
 0.18% 0.17%Savings and NOW$638,926  $674,872  $232  $296  0.15 %0.18 %
Money market3,378,006
 3,244,628
 11,523
 8,110
 1.35% 0.99%Money market3,753,045  3,341,397  9,657  10,072  1.03 %1.22 %
Certificates of deposit711,299
 730,117
 3,689
 3,076
 2.06% 1.67%Certificates of deposit668,818  775,817  2,907  3,690  1.75 %1.93 %
Total interest-bearing deposits4,705,035
 4,668,164
 15,487
 11,487
 1.31% 0.98%Total interest-bearing deposits5,060,789  4,792,086  12,796  14,058  1.02 %1.19 %
Junior subordinated debentures106,363
 106,363
 1,022
 1,028
 3.76% 3.78%Junior subordinated debentures106,363  106,363  917  1,121  3.41 %4.22 %
FHLB borrowings and other833,535
 768,015
 4,942
 3,945
 2.32% 2.01%FHLB borrowings and other455,813  615,985  2,112  3,307  1.83 %2.15 %
Total interest-bearing liabilities5,644,933
 5,542,542
 21,451
 16,460
 1.50% 1.17%Total interest-bearing liabilities5,622,965  5,514,434  15,825  18,486  1.13 %1.36 %
Non-interest bearing demand deposits1,953,214
 2,063,642
        Non-interest bearing demand deposits2,046,102  1,974,526  
Payables and other liabilities258,371
 135,508
        Payables and other liabilities270,371  236,426  
Total average liabilities7,856,518
 7,741,692
        Total average liabilities7,939,438  7,725,386  
Redeemable noncontrolling interests944
 13,074
        Redeemable noncontrolling interests1,018  2,056  
Average shareholders’ equity807,890
 737,188
        Average shareholders’ equity838,935  766,283  
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY$8,665,352
 $8,491,954
        
TOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITYTOTAL AVERAGE LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY$8,779,391  $8,493,725  
Net interest income    $56,153
 $59,641
    Net interest income$57,257  $58,338  
Interest rate spread        2.26% 2.53%Interest rate spread2.41 %2.47 %
Net interest margin        2.72% 2.90%
NIMNIM2.76 %2.90 %
__________________
(1)Annualized.    
(2)Investments classified as available-for-sale and held-to-maturity are shown in the average balance sheet at amortized cost.
(3)
(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.

 Average Balance Interest Income/Expense Average Yield/Rate (1)
 As of and for the nine months ended September 30,
AVERAGE BALANCE SHEET:2019 2018 2019 2018 2019 2018
AVERAGE ASSETS(In thousands)    
Interest-earning assets:           
Cash and investments: (2)           
Taxable investment securities$223,072
 $328,054
 $3,244
 $4,521
 1.94% 1.84%
Non-taxable investment securities305,422
 297,509
 5,726
 5,261
 2.50% 2.36%
Mortgage-backed securities507,338
 570,578
 8,225
 9,168
 2.16% 2.14%
Short-term investments and other104,225
 174,736
 3,049
 3,831
 3.78% 2.91%
Total cash and investments1,140,057
 1,370,877
 20,244
 22,781
 2.36% 2.21%
Loans: (3)           
Commercial and industrial1,088,027
 969,063
 33,673
 27,554
 4.08% 3.75%
Commercial real estate2,474,804
 2,464,788
 87,222
 83,020
 4.65% 4.44%
Construction and land203,211
 171,825
 7,610
 6,142
 4.94% 4.71%
Residential2,999,480
 2,771,875
 76,847
 68,263
 3.42% 3.28%
Home equity90,361
 95,217
 3,388
 3,172
 5.01% 4.45%
Other consumer128,879
 176,086
 4,172
 5,080
 4.33% 3.86%
Total loans6,984,762
 6,648,854
 212,912
 193,231
 4.04% 3.85%
Total earning assets8,124,819
 8,019,731
 233,156
 216,012
 3.80% 3.57%
LESS: Allowance for loan losses74,863
 73,894
        
Cash and due from banks (non-interest bearing)46,906
 47,859
        
Other assets516,642
 404,375
        
TOTAL AVERAGE ASSETS$8,613,504
 $8,398,071
        
AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:           
Interest-bearing deposits:           
Savings and NOW$658,154
 $709,751
 $847
 $820
 0.17% 0.15%
Money market3,317,117
 3,139,107
 32,072
 17,967
 1.29% 0.77%
Certificates of deposit746,453
 691,670
 11,141
 7,589
 2.00% 1.47%
Total interest-bearing deposits4,721,724
 4,540,528
 44,060
 26,376
 1.25% 0.78%
Junior subordinated debentures106,363
 106,363
 3,223
 2,882
 4.05% 3.62%
FHLB borrowings and other801,519
 889,178
 13,922
 12,185
 2.29% 1.81%
Total interest-bearing liabilities5,629,606
 5,536,069
 61,205
 41,443
 1.45% 1.00%
Non-interest bearing demand deposits1,949,948
 1,948,573
        
Payables and other liabilities243,370
 130,410
        
Total average liabilities7,822,924
 7,615,052
        
Redeemable noncontrolling interests1,642
 16,294
        
Average shareholders’ equity788,938
 766,725
        
TOTAL AVERAGE LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY$8,613,504
 $8,398,071
        
Net interest income    $171,951
 $174,569
    
Interest rate spread        2.35% 2.57%
Net interest margin        2.80% 2.88%
__________________
(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 September 30, 2019March 31, 2020 was $77.6$73.1 million, an increasea decrease of $1.5$3.7 million, or 2%5%, compared to the same period in 2018. Interest and dividend income for the nine months ended September 30, 20192019. The decrease was $233.2 million, an increase of $17.1 million, or 8%, compared to the same period in 2018. The increase for the three months is primarily driven by higher volumes on loans, partially offset by lower yields on loans and lower investment security volumes. The increase for the nine months is primarily driven by higher yields and volumes on loans,investments, partially offset by lower investment security volumes.a higher volume 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 effect on the related yield. Interest collected on loans while on nonaccrual status is generally applied to the principal balance. If
48

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 September 30, 2019March 31, 2020 was $11.5$10.7 million, an increasea decrease of $1.6$0.3 million, or 16%2%, compared to the same period in 2018,2019, as a result of a 10% increase in the average balance and a 21 basis point increase in the average yield. For the nine months ended September 30, 2019, commercial and industrial interest income was $33.7 million, an increase of $6.1 million, or 22%, compared to the same period in 2018, as a result of a 12% increase in the average balance and a 33 basis point increase in the average yield. The increases in the average balance for the three and nine month periods are related primarily to growth in the New England region. The increases in the average yield for the three and nine month periods are the result of higher yields on recent loan originations and the timing of changes in interest rates, specifically changes to the interest rate benchmarks to which the variable rate loans are tied.
Interest income on commercial real estate loans for the three months ended September 30, 2019 was $29.1 million, a decrease of $0.4 million, or 1%, compared to the same period in 2018, as a result of a 1441 basis point decrease in the average yield, partially offset by a 2%7% increase in the average balance. For the nine months ended September 30, 2019, commercial real estate interest income was $87.2 million, an increase of $4.2 million, or 5%, compared to the same period in 2018, as a result of a 21 basis point increaseThe decrease in the average yield andwas the average balance remaining flat. The increases in the average yield for the three and nine month periods are primarily driven by the higherresult of lower yields on recent loan originations and timing of changes in interest rates, specifically changesdecreases to the interest rate benchmarks to which the variable rate loans are tied. The increase in the average balance was related primarily to growth in all regions in which the Bank operates.
Interest income on commercial real estate loans for the three monthmonths ended March 31, 2020 was $27.5 million, a decrease of $0.7 million, or 2%, compared to the same period isin 2019, as a result of a 48 basis point decrease in the average yield, partially offset by an 8% increase in the average balance. The decrease in the average yield was the result of lower yields on recent loan originations and decreases to the interest rate benchmarks to which the variable rate loans are tied. The increase in the average balance was primarily driven by increasesorganic growth in the New EnglandSouthern California and San Francisco Bay AreaNorthern California regions.
Interest income on construction and land loans for the three months ended September 30, 2019March 31, 2020 was $2.4$2.6 million, an increasea decrease of $0.2$0.1 million, or 10%3%, compared to the same period in 2018,2019, as a result of a 9%64 basis point decrease in the average yield partially offset by a 10% increase in the average balance and a 3 basis point increase in the average yield. For the nine months ended September 30, 2019, construction and land interest income was $7.6 million, an increase of $1.5 million, or 24%, compared to the same period in 2018, as a result of an 18% increase in the average balance and a 23 basis point increase in the average yield.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 draw- or pay-down 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 increases in the average balance for the three and nine month periods are driven primarily by increased utilization of existing loans in all regions in which the Bank operates. The increasedecrease in the average yield for the three and nine months iswas primarily driven by the timing of changesdecreases to the interest rate benchmarks to which the variable rate loans are tied. The increase in the average balance was driven primarily by increased utilization of existing loans in the Southern California and New England regions.
Interest income on residential mortgage loans for the three months ended September 30, 2019March 31, 2020 was $25.6$23.5 million, an increasea decrease of $1.7$2.1 million, or 7%8%, from the same period in 2018,2019, as a result of a 6% increase15 basis point decrease in the average yield and 4% decrease in the average balance. The decrease in the average yield was the result of lower yields on recent loan originations and decreases to the interest rate benchmarks to which the variable rate loans are tied. The decrease in the average balance and a 2 basis point increase in the average yield. For the nine months ended September 30, 2019, residential mortgage interest income was $76.8 million, an increase of $8.6 million, or 13%, compared to the same period in 2018, as a result of an 8% increase in the average balance and a 14 basis point increase in the average yield. The increases in the average balance for the three and nine month periods are related to the organic growth of the residential loan portfolio across all regions in which the Bank operates, partially offsetprimary driven by the sale of $92.4$190.7 million of residential mortgage loans in the New England region. The increases in the average yield for the threethird and nine month periods are related to higher yields on residential mortgage originations.fourth quarters of 2019.
Interest income on home equity loans for the three months ended September 30, 2019March 31, 2020 was $1.1$1.0 million, an increasea decrease of 3%15% compared to the same period in 2018,2019, as a result of a 4057 basis point increasedecrease in the average yield partially offset by a 5% decrease in the average balance. For the nine months ended September 30, 2019, home equity interest income was $3.4 million, an increase of 7% compared to the same period in 2018, as a result of a 56 basis point increase in the average yield, partially

offset byand a 5% decrease in the average balance. The increasesdecrease in the average yield for the three and nine month periods arewas the result of the timing of changes to benchmark interest rates, while the decreasesdecrease in the average balance for the three and nine month periods arewas primarily driven by reduced demand.
Interest income on other consumer loans for the three months ended September 30, 2019March 31, 2020 was $1.3$1.2 million, a decrease of $0.4$0.3 million, or 23%22%, compared to the same period in 2018,2019, as a result of a 22% decrease in the average balance, and a 9100 basis point decrease in the average yield. For the nine months ended September 30, 2019, other consumer interest income was $4.2 million,yield, and a decrease of $0.9 million, or 18%, compared to the same period in 2018, as a result of a 27%1% decrease in the average balance, partially offset by a 47 basis point increase in the average yield.balance. The decreases in the average balance for the three and nine month periods are primarily driven by strategic decisions to run off non-core balances, while the changesdecrease in the average yield for the three and nine month periods arewas the result of the timing of changes in interest rate benchmarks to which loans are tied.tied, while the decrease in the average balance was primarily driven by strategic decisions to run off non-core balances.
Investment income for the three months ended September 30, 2019March 31, 2020 was $6.6$6.7 million, a decrease of $1.3$0.2 million, or 16%2%, from the same period in 2018,2019, as a result of a 20%12 basis point decrease in the average balance,yield, partially offset by a 12 basis point3% increase in the average yield. For the nine months ended September 30, 2019, investment income was $20.2 million, a decrease of $2.5 million, or 11%, compared to the same period in 2018, as a result of a 17%balance. The decrease in the average balance, partially offset by a 15 basis point increase in the average yield. The decreases in the average balance for the three and nine month periods are primarily due to the proceeds from maturing investment securities being utilized to pay down higher cost borrowings and to fund loan generation. The increases in the average yield for the three and nine month periods areis primarily due to recent purchases made at higherlower interest rates. The increase in the average balance was primarily due to short-term fluctuations in liquidity from deposits.
Interest expense. Total interest expense for the three months ended September 30, 2019March 31, 2020 was $21.5$15.8 million, an increasea decrease of $5.0$2.7 million, or 30%14%, compared to the same period in 2018. For the nine months ended September 30, 2019, total interest expense2019. The decrease was $61.2 million, an increase of $19.8 million, or 48%, compared to the same period in 2018. The increases for the three and nine month periods are primarily driven by the impact of higher interestlower rates on interest-bearing deposits and borrowings, and increasesa decrease in the average volume of borrowings, partially offset by an increase in the volume of interest-bearing deposits and borrowings.deposits.
Interest expense on interest-bearing deposits for the three months ended September 30, 2019March 31, 2020 was $15.5$12.8 million, an increasea decrease of $4.0$1.3 million, or 35%9%, compared to the same period in 2018,2019, as a result of a 1% increase in the average balance and a 3317 basis point increase in the average rate. For the nine months ended September 30, 2019, interest expense on interest-bearing deposits was $44.1 million, an increase of $17.7 million, or 67%, compared to the same period in 2018, as a result of a 47 basis point increasedecrease in the average rate, paid andpartially offset by a 4%6% increase in the average balance. The increases for the three and nine month periodsdecrease in the average rate paid on deposits arewas driven primarily by increaseswholesale reductions in the rates paid for certificates of deposit and money market demand accounts due to market competition.given the recent decreases in interest rates. The increases for the three and nine month periodsincrease in the average balance for interest-bearing deposits arewas primarily driven by an increase in savings, and money market balances in the New England region.
49

Interest paid on non-deposit interest-bearing liabilities for the three months ended September 30, 2019March 31, 2020 was $6.0$3.0 million, an increasea decrease of $1.0$1.4 million, or 20%32%, compared to the same period in 2018,2019, as a result of a 3132 basis point increasedecrease in the average rate paid on FHLB borrowings and other borrowings, and a 9% increase26% decrease in the average balance of FHLB borrowings and other borrowings, partially offset by a 2and an 81 basis point decrease in the average rate on junior subordinated debentures. For the nine months ended September 30, 2019, interest paid on non-deposit interest-bearing liabilities was $17.1 million, an increase of $2.1 million, or 14%, compared to the same period in 2018, as a result of a 48 basis point increaseThe decreases in the average raterates paid on FHLB borrowings and other borrowings, and a 43 basis point increase in the average rate paid on junior subordinated debentures, partially offset by a 10% decrease in the average balance of FHLB borrowings and other borrowings. The increases for the three and nine month periods in the average rate paid on non-deposit interest-bearing liabilities arewere primarily driven by the timing of changes todecreases in benchmark interest rates to which the instruments are tied. The increase for the three month period and the decrease for the nine month period in the average balance for non-deposit interest-bearing liabilities arewas primarily driven by changesan increase in FHLB borrowings, which are used to fund loan growth based on current deposit levels.deposits, reducing the need for higher-cost borrowings.
Provision/(credit) for loan losses.losses. The Company recorded a provisionProvision for loan losses of $0.2$17.0 million for the three months ended September 30, 2019,March 31, 2020, compared to a credit to the provisionProvision for loan losses of $0.9$1.4 million for the same period in 2018. For the nine months ended September 30, 2019, the Company recorded a provision for loan losses of $0.1 million, compared to a credit to the provision for loan losses of $2.3 million for the same period in 2018.2019. The provision for loan losses in the thirdfirst quarter of 20192020 was primarily driven by required reserves for criticized and classified loans, and the mix of loanschanges in economic forecasts late in the portfolio, partially offsetfirst quarter of 2020 to reflect deteriorating economic conditions due to the COVID-19 pandemic. Under the CECL methodology, the provision for loan loss required may be significantly affected by improvedreasonable and supportable economic forecasts. Under the CECL methodology, the provision for loan loss rates.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 Bank

incorporates bothCompany 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 qualitativemodel 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 factors to determinegiven 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 appropriate levelcontractual life of the allowance for loan losses. Quantitative loss factorsexposure, considering the effect of prepayments and curtailments. Economic forecasts are based onincorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company's historical net charge-offs by loan portfolio.long-run average. Qualitative factors are estimated by management and include trends in problem loans, economic and business conditions, strength of management, real estate collateral values,concentration risk and underwriting standards. For further details, see “Loan Portfolio and Credit Quality” below. For periods disclosed prior to the adoption of ASU 2016-13 as of January 1, 2020, the Allowance for loan losses was determined under the incurred loss model. Refer to "Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the methodology.
Fees and other income
Three months ended September 30, 
$
Change
 % Change Nine months ended September 30, 
$
Change
 
%
Change
Three months ended March 31,$
Change		%
Change
2019 2018 2019 2018 20202019
(In thousands)(In thousands)
Wealth management and trust fees$19,067
 $25,505
 $(6,438) (25)% $57,037
 $76,030
 $(18,993) (25)%Wealth management and trust fees$18,371  $19,058  $(687) (4)%
Investment management fees2,496
 3,245
 (749) (23)% 7,601
 18,897
 (11,296) (60)%Investment management fees1,925  2,650  (725) (27)%
Other banking fee income2,658
 2,775
 (117) (4)% 8,024
 7,793
 231
 3 %Other banking fee income2,490  2,499  (9) — %
Gain on sale of loans, net934
 67
 867
 nm
 1,065
 204
 861
 nm
Gain on sale of loans, net100  73  27  37 %
Total core fees and income25,155
 31,592
 (6,437) (20)% 73,727
 102,924
 (29,197) (28)%Total core fees and income22,886  24,280  (1,394) (6)%
Total other income(29) 722
 (751) nm
 1,027
 1,228
 (201) (16)%Total other income(1,365) 968  (2,333) nm  
Total fees and other income$25,126
 $32,314
 $(7,188) (22)% $74,754
 $104,152
 $(29,398) (28)%Total fees and other income$21,521  $25,248  $(3,727) (15)%
_____________________
nm = not meaningful
Total fees and other income for the three months ended September 30, 2019March 31, 2020 decreased $7.2$3.7 million, or 22%15%, compared to the same period in 2018.2019 driven by lower Total fees and other income, for the nine months ended September 30, 2019 decreased $29.4 million, or 28%, compared to the same period in 2018. The decreases for the three and nine month periods in total fees and other income are primarily driven by the decreases in wealthlower Wealth management and trust fees, and investmentlower Investment management fees. The decrease in Wealth management and trust fees and Investment management fees as a result of the divestiture of BOS in the fourth quarter of 2018, and the divestiture of Anchor in the second quarter of 2018.
Total AUM managed or advised by the Company was $16.2 billion at September 30, 2019, a decrease of $6.2 billion, or 28%, compared to September 30, 2018. The decrease was primarily driven by the divestitureimpact of BOS in the fourth quarter of 2018. Excluding AUM at BOS as of September 30, 2018, AUM decreased $1.5 billion, or 8%, compared to September 30, 2018 driven by net outflows of $1.5 billion for the twelve months ended September 30, 2019.lower AUM.
Other banking fee income•Wealth management and trust fees for the three months ended September 30, 2019March 31, 2020 decreased $0.1$0.7 million, or 4%, compared to the same period in 2018. Other banking fee income for the nine months ended September 30, 2019, increased $0.2while Investment management fees decreased $0.7 million, or 3%27%, compared to the same period in 2018.2019. The decreases were primarily driven by the impact of lower AUM.
•Total AUM managed or advised by the Company was $14.5 billion at March 31, 2020, a decrease of $1.6 billion, or 10%, compared to March 31, 2019. The decrease was primarily driven by the impact of negative market returns of $1.1 billion and net outflows of $0.5 billion for the twelve months ended March 31, 2020.
•Total other income for the three monthmonths ended March 31, 2020 decreased $2.3 million compared to the same period is primarilyin 2019 driven by lower foreign exchange fee income. The increase for the nine month period is primarily driven by swap fee income reflecting changes in client demand for loan swap agreements.
Gain on saleimpact of loans, net for the three and nine months ended September 30, 2019 includes aunfavorable mark-to-market adjustments of $0.8 million gain on the sale of $92.4for derivatives and $0.8 million of residential mortgage loans from the New England regionfor deferred compensation securities in the thirdfirst quarter of 2019.2020.

50

Operating Expense
Three months ended September 30, 
$
Change
 % Change Nine months ended September 30, 
$
Change
 
%
Change
Three months ended March 31,$
Change		%
Change
2019 2018 2019 2018 20202019
(In thousands)(In thousands)
Salaries and employee benefits$31,684
 $38,944
 $(7,260) (19)% $100,116
 $125,461
 $(25,345) (20)%Salaries and employee benefits$35,096  $35,726  $(630) (2)%
Occupancy and equipment8,260
 8,164
 96
 1 % 24,460
 24,141
 319
 1 %Occupancy and equipment7,646  8,348  (702) (8)%
Information systems5,169
 6,233
 (1,064) (17)% 16,166
 18,889
 (2,723) (14)%Information systems6,725  5,860  865  15 %
Professional services4,435
 2,877
 1,558
 54 % 11,308
 8,926
 2,382
 27 %Professional services3,601  3,560  41  1 %
Marketing and business development1,403
 1,710
 (307) (18)% 4,422
 5,373
 (951) (18)%Marketing and business development1,890  1,085  805  74 %
Amortization of intangibles671
 750
 (79) (11)% 2,015
 2,249
 (234) (10)%Amortization of intangibles715  672  43  6 %
FDIC insurance59
 674
 (615) (91)% 1,304
 2,126
 (822) (39)%FDIC insurance—  660  (660) (100)%
Restructuring—
 5,763
 (5,763) (100)% 1,646
 5,763
 (4,117) (71)%Restructuring—  1,646  (1,646) (100)%
Other3,856
 3,442
 414
 12 % 10,312
 10,870
 (558) (5)%Other5,235  2,996  2,239  75 %
Total operating expense$55,537
 $68,557
 $(13,020) (19)% $171,749
 $203,798
 $(32,049) (16)%Total operating expense$60,908  $60,553  $355  1 %
Total operating expense for the three months ended September 30, 2019 decreased $13.0March 31, 2020 increased $0.4 million, or 19%1%, to $60.9 million compared to the same period in 20182019. The increase was primarily due to an increase in Other expense, Information systems expense, and total operatingMarketing and business development expense, partially offset by a decrease in Restructuring expense, Occupancy and equipment expense, FDIC insurance expense, and Salaries and employee benefits expense.
•Other expense increased $2.2 million, or 75%, for the ninethree months ended September 30, 2019 decreased $32.0 million, or 16%,March 31, 2020, compared to the same period in 2018.2019. The decreaseincrease was primarily driven by the reserve for unfunded loan commitments expense of $1.8 million in the first quarter of 2020, and an increase in non-service pension costs.
•Information systems expense increased $0.9 million, or 15%, for the three monthmonths ended March 31, 2020, compared to the same period in 2019. The increase was primarily driven by new information technology initiatives placed into service during the fourth quarter of 2019.
•Marketing and business development expense increased $0.8 million, or 74%, for the three months ended March 31, 2020, compared to the same period in 2019. The increase was primarily driven by new advertising campaigns and timing of spend.
•Restructuring expense decreased for the three months ended March 31, 2020, compared to the same period of 2019. In the first quarter of 2019, there was a restructuring expense of $1.6 million related to executive departures.
•Occupancy and equipment expense decreased $0.7 million, or 8%, for the three months ended March 31, 2020, compared to the same period in 2019. The decrease was primarily driven by a decrease in depreciation expense on leasehold improvements and a decrease in rent expense due to lease expirations.
•FDIC insurance decreased for the $5.8 million restructuring expensethree months ended March 31, 2020, compared to the same period in 2019. The decrease was driven by an FDIC insurance assessment credit received in the thirdfirst quarter of 20182020. In January 2019, the Bank received notification from the FDIC that it was eligible for small bank assessment credits of $2.0 million because the FDIC's Deposit Insurance Fund reserve ratio exceeded the target level. The full $2.0 million of credits have been utilized as of March 31, 2020.
•Salaries and employee benefits expense decreased $0.6 million, or 2%, for the divestiture of BOS.three months ended March 31, 2020, compared to the same period in 2019. The decrease for the nine month period was primarily due todriven by an unfavorable adjustment on deferred compensation securities held in the divestituresrabbi trust, the effect of Anchoraccrual adjustments, and BOS, a $1.6 million restructuringlower medical insurance premiums, partially offset by higher salary expense in the first quarter of 2019 compared to a $5.8 million restructuring expense in the third quarter of 2018, as well as the impact of efficiency initiatives.
Salaries and employee benefits expense decreased for the three and nine months ended September 30, 2019 compared to the same periods of 2018. The decrease for the three month period was primarily due to the divestiture of BOS and lower variable compensation. The decrease for the nine month period was primarily due to the divestitures of Anchor and BOS, as well as lower variable compensation. The Company also realized further cost savings as a result of a previously announced efficiency program.
Restructuring expense decreased for the three and nine months ended September 30, 2019, compared to the same periods in 2018, as the Company incurred a restructuring charge of $1.6 million due to severance of executives in the first quarter of 2019, which is less than the $5.8 million of restructuring charges in the third quarter of 2018. There were no restructuring charges in the third quarter of 2019.
Information systems expense for the three and nine months ended September 30, 2019 decreased compared to the same periods in 2018. The decrease for the three month period was primarily due to the divestiture of BOS and realized savings from telecommunication services and data processing contract renegotiations. The decrease for the nine month period was primarily due to the divestitures of Anchor and BOS, as well as realized savings from telecommunication services and data processing contract renegotiations.
Marketing and business development expense for the three and nine months ended September 30, 2019 decreased compared to the same periods in 2018. The decrease for the three month period was primarily due to the divestiture of BOS and a decrease in business development expenses. The decrease for the nine month period was primarily due to the divestitures of Anchor and BOS, as well as a decrease in business development expenses.
Professional services expense for the three and nine months ended September 30, 2019 increased compared to the same periods in 2018, primarily due to information technology consulting costs and recruiting expense, partially offset by the divestitures of Anchor and BOS for the periods owned.2020.
Income Tax Expense. Income tax expense for continuing operationsthe three months ended March 31, 2020 was $0.1 million, compared to $4.9 million for the nine months ended September 30, 2019 was $15.8 million.same period in 2019. The effective tax rate for continuing operations for the ninethree months ended September 30, 2019March 31, 2020 was 21.1%11.2%, compared to an effective tax rate of 37.4%20.1% for the same period of 2018.2019. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 9: Income Taxes” for further detail.


51

Financial Condition

Condensed Consolidated Balance Sheets and Discussion
 September 30,
2019		 December 31, 2018 
Increase/
(decrease)
 
%
Change
 (In thousands)
Assets:       
Total cash and investments$1,134,463
 $1,255,253
 $(120,790) (10)%
Loans held for sale6,658
 2,812
 3,846
 nm
Total loans7,067,151
 6,893,158
 173,993
 3 %
Less: Allowance for loan losses75,359
 75,312
 47
 — %
Net loans6,991,792
 6,817,846
 173,946
 3 %
Goodwill and intangible assets, net68,229
 69,834
 (1,605) (2)%
Right-of-use assets107,045
 —
 107,045
 nm
Total other assets382,757
 348,880
 33,877
 10 %
Total assets$8,690,944
 $8,494,625
 $196,319
 2 %
Liabilities and Equity:       
Deposits$6,658,242
 $6,781,170
 $(122,928) (2)%
Total borrowings956,127
 813,435
 142,692
 18 %
Lease liabilities122,799
 —
 122,799
 nm
Total other liabilities143,607
 143,540
 67
 — %
Total liabilities7,880,775
 7,738,145
 142,630
 2 %
Redeemable noncontrolling interests (“RNCI”)1,481
 2,526
 (1,045) (41)%
Total shareholders’ equity808,688
 753,954
 54,734
 7 %
Total liabilities, RNCI and shareholders’ equity$8,690,944
 $8,494,625
 $196,319
 2 %
_____________________
nm = not meaningful
 March 31,
2020		December 31, 2019Increase/
(decrease)		%
Change
 (In thousands)
Assets:
Total cash and investments$1,168,628  $1,376,863  $(208,235) (15)%
Loans held for sale7,671  7,386  285  4 %
Total loans7,043,338  6,976,704  66,634  1 %
Less: Allowance for loan losses68,211  71,982  (3,771) (5)%
Net loans6,975,127  6,904,722  70,405  1 %
Goodwill and intangible assets, net67,244  67,959  (715) (1)%
Right-of-use assets98,896  102,075  (3,179) (3)%
Total other assets428,760  371,496  57,264  15 %
Total assets$8,746,326  $8,830,501  $(84,175) (1)%
Liabilities and Equity:
Deposits$6,835,572  $7,241,476  $(405,904) (6)%
Total borrowings787,936  510,590  277,346  54 %
Lease liabilities113,574  117,214  (3,640) (3)%
Total other liabilities180,452  140,820  39,632  28 %
Total liabilities7,917,534  8,010,100  (92,566) (1)%
Redeemable noncontrolling interests (“RNCI”)—  1,383  (1,383) (100)%
Total shareholders’ equity828,792  819,018  9,774  1 %
Total liabilities, RNCI and shareholders’ equity$8,746,326  $8,830,501  $(84,175) (1)%
Total assets. Total assets increased $196.3decreased $84.2 million, or 2%1%, to $8.7 billion at September 30, 2019March 31, 2020 from $8.5$8.8 billion at December 31, 2018,2019, primarily driven by a decrease in Total cash and investments, partially offset by an increase in totalTotal loans and right-of-use assets, partially offset by a decrease in total cash and investments.Total other assets.
Total cash and investments.Total cash and investments (consisting of cashCash and cash equivalents, investmentInvestment securities available-for-sale, investmentInvestment securities held-to-maturity, equityEquity securities at fair value, and stockStock in the FHLBFederal Home Loan Bank and Federal Reserve Bank) decreased $120.8$208.2 million, or 10%15%, from December 31, 2018.2019. The decrease on a point-in-time basis was primarily driven by a decrease of $77.6$230.8 million in investment securities available-for-sale and held-to-maturity, and a decrease of $49.2 million in cashCash and cash equivalents, partially offset by an increase of $7.6$19.2 million in equityInvestment securities available-for-sale and Equity securities at fair value. The Company utilized cash and proceeds from maturing investment securities to partially fund loan growth.growth as deposits declined over the same period. Total cash and investments represent 13% of total assets at September 30, 2019March 31, 2020 and 15%16% of total assets at December 31, 2018.2019.
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”.grade.”
Investment maturities, redemptions, principal payments, and sales of securities, if any, net of purchases (includes investmentInvestment securities available-for-sale, investmentInvestment securities held-to-maturity and equityEquity securities at fair value), provided $102.2$2.1 million of cash proceeds during the ninethree months ended September 30, 2019,March 31, 2020, compared to $73.5$35.9 million in the same period in 2018. The Company used these cash proceeds primarily to fund loan growth.2019. 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 Company’s available-for-sale investment portfolio carried a total of $16.5$32.2 million of unrealized gains and $3.1$0.4 million of


unrealized losses at September 30, 2019,March 31, 2020, compared to $2.4$15.0 million of unrealized gains and $27.1$3.6 million of unrealized losses at December 31, 2018.2019.
No impairment losses were recognized through earnings related to investment securities during the ninethree months ended September 30, 2019March 31, 2020 and 2018.2019. The Company does not consider these investments other-than-temporarilyto 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 September 30, 2019March 31, 2020 and December 31, 2018,2019, the Company held $51.4$45.4 million and $70.4$48.2 million, respectively, of Investment securities held-to-maturity securities at amortized cost. All of the held-to-maturity securities held at September 30, 2019March 31, 2020 were mortgage-backed securities guaranteed by the U.S. government, U.S. government agencies, or government-sponsored entities.
52

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 September 30, 2019March 31, 2020 increased $3.8$0.3 million, comparedor 4%, to $7.7 million from the balance at December 31, 2018.2019. The balance of loansLoans 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 September 30, 2019March 31, 2020 decreased $1.6$0.7 million, or 2%1%, compared to $67.2 million from the balance at December 31, 2018, primarily2019, due to amortizationAmortization of intangible assets, partially offset by the addition of mortgage servicing rights from the sale, with servicing rights retained, of $92.4 million of residential mortgage loans in the third quarter of 2019.assets. There was no change to goodwillGoodwill during the ninethree months ended September 30, 2019.March 31, 2020.
Goodwill and indefinite-lived intangible assets such as trade names, are subject to annual impairment tests, or more frequently, if there is indication of impairment, based on guidance in ASC 350, Intangibles-Goodwill and Other(“ASC 350”). Long-livedIndefinite-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 and indefinite-lived intangible asset impairment testing during the fourth quarter of 2018.2019. The estimated fair value of Boston Private Wealth exceeded its carrying value. Management will perform the annual goodwill and indefinite-lived intangible asset impairment testing for this year duringin the fourth quarter of 2019.2020. Management determined that there was not a trigger event in the first quarter of 2020 from the economic conditions related to the COVID-19 pandemic, and will continually monitor for triggering events that would warrant testing prior to the fourth quarter of 2020.
Right-of-use assets. Total ROUright-of-use ("ROU") assets at September 30, 2019 increased $107.0March 31, 2020 decreased $3.2 million, or 3%, to $98.9 million compared to the balance at December 31, 2018.2019. Upon adoption of the new lease accounting standard, ASU 2016-02, the Company recognized $108.5 million of ROU assets on the face of the consolidated balance sheetConsolidated Balance Sheets as of January 1, 2019. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details of the Company’s leases.details.
Total other assets. Total other assets, as presented in the table above, consists of the following line items from the consolidated balance sheet: OREO, if any; premisesConsolidated Balance Sheets: Premises and equipment, net; feesFees receivable; accruedAccrued interest receivable; deferredDeferred income taxes, net; and otherOther assets. Total other assets at September 30, 2019March 31, 2020 increased $33.9$57.3 million, or 10%15%, compared to $428.8 million from the balance at December 31, 2018.2019. These changes resulted from the following factors:
•Other assets, which consist primarily of BOLI,bank-owned life insurance, investment in partnerships, prepaid expenses, the fair value of interest rate derivatives, and other receivables increased $47.6$64.0 million, or 19%22%, to $294.5$351.3 million at September 30, 2019March 31, 2020 from $247.0$287.3 million at December 31, 2018.2019. The increase was primarily driven by an increase in the market value adjustment onof derivative assets.assets, which was offset by an increase in the market value of derivative liabilities in Other liabilities.
•Deferred income taxes, net, decreased $10.9$5.8 million, or 41%51%, to $15.7$5.6 million at September 30, 2019March 31, 2020 from $26.6$11.4 million at December 31, 2018.2019. The decrease was primarily due to the current year tax effect of unrealized gains on securities available-for-sale at September 30, 2019 compared toother comprehensive income as the tax effect of unrealized losses on securities available-for-sale at December 31, 2018.


Premises and equipment, net, decreased $2.8the adoption of ASU 2016-13 of $5.5 million or 6%, to $42.7 million at September 30, 2019 from $45.4 million at December 31, 2018. The decrease is related towas offset by the timingtax effect of new purchases, primarily related to the Company's information technology initiatives, as well as leasehold improvements.provision expense in the first quarter of 2020.
Deposits. Deposits at September 30, 2019March 31, 2020 decreased $122.9$405.9 million, or 2%6%, compared to the balance at December 31, 2018.2019. Average total deposits for the three months ended September 30, 2019 decreased 1%March 31, 2020 increased 5% from the same period in 20182019 as shown in the average balance sheet. 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.
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 amount of deposits at the Bank decreases, the Bank may be limited in its ability to grow its loan portfolio or may have to rely more heavily on higher cost borrowings as a source of funds in the future.
53

The following table presents the composition of the Company’s deposits at September 30, 2019March 31, 2020 and December 31, 2018:2019:
September 30, 2019 December 31, 2018March 31, 2020December 31, 2019
Balance as a % of total Balance as a % of totalBalanceas a % of totalBalanceas a % of total
(In thousands)(In thousands)
Demand deposits (non-interest bearing)$1,947,363
 29% $1,951,274
 29%Demand deposits (non-interest bearing)$2,020,440  29 %$1,971,013  27 %
NOW (1)598,048
 9% 626,686
 9%NOW (1)586,718  9 %578,527  8 %
Savings68,059
 1% 73,834
 1%Savings66,288  1 %67,673  1 %
Money market (1)3,366,623
 51% 3,338,891
 49%Money market (1)3,468,701  51 %3,969,330  55 %
Certificates of deposit less than $100,000 (1)155,267
 2% 265,883
 4%Certificates of deposit less than $100,000 (1)161,845  2 %145,226  2 %
Certificates of deposit $100,000 to $250,000102,138
 2% 98,120
 2%Certificates of deposit $100,000 to $250,000105,866  2 %94,095  1 %
Certificates of deposit more than $250,000420,744
 6% 426,482
 6%Certificates of deposit more than $250,000425,714  6 %415,612  6 %
Total deposits$6,658,242
 100% $6,781,170
 100%Total deposits$6,835,572  100 %$7,241,476  100 %
_____________________
(1)Includes brokered deposits of $355.4 million and $541.1 million at September 30, 2019 and December 31, 2018, respectively.
(1) Includes brokered deposits of $580.5 million and $422.4 million at March 31, 2020 and December 31, 2019, respectively.
Total borrowings. Total borrowings (consisting of securitiesSecurities sold under agreements to repurchase, federalFederal funds purchased, FHLB borrowings, and juniorJunior subordinated debentures) at September 30, 2019March 31, 2020 increased $142.7$277.3 million, or 18%54%, compared to the balance at December 31, 2018,2019, primarily driven by an increase in FHLB borrowings and federal funds purchased, partially offset by a decrease in federal funds purchased. As described below,repurchase agreements. The increase in total borrowings increasedwas primarily driven by the decrease in total deposits over the same period, as higher cost borrowings were needed to fund loans as deposit balances decreased during the same period.balance sheet.
•FHLB borrowings increased $150.8$140.4 million, or 36%40%, to $570.9$491.3 million at September 30, 2019March 31, 2020 from $420.1$350.8 million at December 31, 2018.2019. The increase was primarily due to asset liability management considerations to reducefund the outstanding balance of brokeredsheet as deposits and overnight federal funds purchased with term FHLB borrowings.decreased over the same period. 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.
Repurchase agreements increased $11.9 million, or 32%, to $48.9 million at September 30, 2019 from $36.9 million at December 31, 2018. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature.
•From time to time, the Bank purchases federal funds from the FHLB and other banking institutions to supplement its liquidity position. At September 30, 2019,March 31, 2020, the Company had $230.0$145.0 million of federal funds purchased outstanding, compared to $250.0no federal funds purchased outstanding at December 31, 2019.
•Repurchase agreements decreased $8.1 million, or 15%, to $45.3 million at March 31, 2020 from $53.4 million at December 31, 2018.2019. Repurchase agreements are generally linked to commercial demand deposit accounts with an overnight sweep feature.
Lease liabilities. Lease liabilities decreased $3.6 million, or 3%, to $113.6 million at September 30, 2019 increased $122.8 millionMarch 31, 2020 compared to the balance at December 31, 2018.2019. Upon adoption of the new lease accounting standard discussed above, the Company recognized $124.1


million of lease liabilities on the face of the consolidated balance sheetConsolidated Balance Sheets as of January 1, 2019. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 14: Lease Accounting” for further details of the Company’s leases.
Total other liabilities. Total other liabilities, which consist primarily of accrued interest, accrued employee benefits, interest rate derivatives, the unfunded portion of partnership investment commitments, deferred rent, and other accrued expenses, increased $39.6 million, or 28% , to $180.5 million at September 30, 2019 increased $0.1 million,March 31, 2020 compared to the balance at December 31, 2018.2019. The increase was primarily driven by an increase in the market value adjustment on derivative liabilities, partially offset by deferred rent and landlord allowance balances at December 31, 2018 that were moved to right-of-use assets when ASU 2016-12 was adopted on January 1, 2019, and the payment of accrued variable compensation, bonuses, and employee benefits in the first quarter of 20192020 that had been accrued for at December 31, 2018.2019.

54

Loan Portfolio and Credit Quality
Loans. Total loans increased $174.0$66.6 million, or 3%1%, to $7.1$7.0 billion, or 81% of total assets, as of September 30, 2019,March 31, 2020, from $6.9$7.0 billion, or 81%79% of total assets, as of December 31, 2018.2019. The following table presents a summary of the loan portfolio based on the portfolio segment and changes in balances as of the dates indicated:
 September 30,
2019		 December 31, 2018 $ Change % Change
 (In thousands)  
Commercial and industrial$695,029
 $623,037
 $71,992
 12 %
Commercial tax-exempt448,488
 451,671
 (3,183) (1)%
Total commercial and industrial1,143,517
 1,074,708
 68,809
 6 %
Commercial real estate2,533,346
 2,395,692
 137,654
 6 %
Construction and land209,741
 240,306
 (30,565) (13)%
Residential2,964,042
 2,948,973
 15,069
 1 %
Home equity84,432
 90,421
 (5,989) (7)%
Consumer and other132,073
 143,058
 (10,985) (8)%
Total loans$7,067,151
 $6,893,158
 $173,993
 3 %

 March 31,
2020		December 31, 2019$ Change% Change
 (In thousands)
Commercial and industrial$670,744  $694,034  $(23,290) (3)%
Commercial tax-exempt445,319  447,927  (2,608) (1)%
Total commercial and industrial1,116,063  1,141,961  (25,898) (2)%
Commercial real estate2,626,299  2,551,274  75,025  3 %
Construction and land238,293  225,983  12,310  5 %
Residential2,841,926  2,839,155  2,771  — %
Home equity89,350  83,657  5,693  7 %
Consumer and other131,407  134,674  (3,267) (2)%
Total loans$7,043,338  $6,976,704  $66,634  1 %
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 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.

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, the largest portfolio segment after residential, includes loans secured by the following types of collateral as of the dates indicated:


 March 31, 2020December 31, 2019
 (In thousands)
 Multifamily and residential investment$903,330  $899,583  
 Retail632,239  631,796  
 Office and medical506,086  487,133  
 Manufacturing, industrial, and warehouse253,106  223,913  
 Hospitality144,384  145,195  
 Other187,154  163,654  
Total commercial real estate loans$2,626,299  $2,551,274  
55
 September 30, 2019 December 31, 2018
 (In thousands)
 Multifamily and residential investment$901,163
 $687,395
 Retail622,431
 635,222
 Office and medical493,886
 543,697
 Manufacturing, industrial, and warehouse208,428
 193,472
 Hospitality136,119
 187,132
 Other171,319
 148,774
Total commercial real estate loans$2,533,346
 $2,395,692

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, 2020
New EnglandNorthern CaliforniaSouthern CaliforniaTotal
AmountPercentAmountPercentAmountPercentAmountPercent
(In thousands)
Commercial and industrial$504,592  7 %$61,243  1 %$104,909  2 %$670,744  10 %
Commercial tax-exempt335,166  5 %99,305  1 %10,848  — %445,319  6 %
Commercial real estate1,046,453  15 %838,735  12 %741,111  10 %2,626,299  37 %
Construction and land156,696  2 %34,647  — %46,950  1 %238,293  3 %
Residential1,521,187  22 %561,093  8 %759,646  11 %2,841,926  40 %
Home equity57,747  1 %19,103  — %12,500  — %89,350  1 %
Consumer and other103,118  2 %4,542  — %23,747  — %131,407  2 %
Total loans (1)$3,724,959  54 %$1,618,668  22 %$1,699,711  24 %$7,043,338  100 %
 As of September 30, 2019
 New England San Francisco Bay Area Southern California Total
 Amount Percent Amount Percent Amount Percent Amount Percent
 (In thousands)
Commercial and industrial$558,686
 8% $49,075
 1% $87,268
 1% $695,029
 10%
Commercial tax-exempt340,610
 5% 96,846
 1% 11,032
 —% 448,488
 6%
Commercial real estate1,030,865
 14% 785,156
 12% 717,325
 10% 2,533,346
 36%
Construction and land146,799
 2% 27,958
 —% 34,984
 1% 209,741
 3%
Residential1,628,082
 23% 569,920
 8% 766,040
 11% 2,964,042
 42%
Home equity56,732
 1% 18,068
 —% 9,632
 —% 84,432
 1%
Consumer and other106,916
 2% 12,546
 —% 12,611
 —% 132,073
 2%
Total loans (1)$3,868,690
 55% $1,559,569
 22% $1,638,892
 23% $7,067,151
 100%
As of December 31, 2018As of December 31, 2019
New England San Francisco Bay Area Southern California TotalNew EnglandNorthern CaliforniaSouthern CaliforniaTotal
Amount Percent Amount Percent Amount Percent Amount PercentAmountPercentAmountPercentAmountPercentAmountPercent
(In thousands)(In thousands)
Commercial and industrial$503,201
 7% $43,702
 1% $76,134
 1% $623,037
 9%Commercial and industrial$558,701  8 %$46,330  1 %$89,003  1 %$694,034  10 %
Commercial tax-exempt344,079
 5% 96,387
 2% 11,205
 —% 451,671
 7%Commercial tax-exempt338,737  5 %98,266  1 %10,924  — %447,927  6 %
Commercial real estate1,022,061
 15% 714,449
 10% 659,182
 10% 2,395,692
 35%Commercial real estate1,027,133  15 %769,777  11 %754,364  11 %2,551,274  37 %
Construction and land153,929
 2% 41,516
 —% 44,861
 1% 240,306
 3%Construction and land152,100  2 %31,484  — %42,399  1 %225,983  3 %
Residential1,689,318
 25% 559,578
 8% 700,077
 10% 2,948,973
 43%Residential1,540,592  22 %558,307  8 %740,256  11 %2,839,155  41 %
Home equity57,617
 1% 19,722
 —% 13,082
 —% 90,421
 1%Home equity55,226  1 %17,357  — %11,074  — %83,657  1 %
Consumer and other120,402
 2% 12,663
 —% 9,993
 —% 143,058
 2%Consumer and other104,258  2 %11,265  — %19,151  — %134,674  2 %
Total loans (1)$3,890,607
 57% $1,488,017
 21% $1,514,534
 22% $6,893,158
 100%Total loans (1)$3,776,747  55 %$1,532,786  21 %$1,667,171  24 %$6,976,704  100 %
________________________
(1)Regional percentage totals may not foot due to rounding.
(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 $75.4$68.2 million and $75.3$72.0 million as of September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.
Theallowance for loan losses increased $0.1decreased $3.8 million to $75.4$68.2 million, or 1.07%0.97% of total loans, as of September 30, 2019March 31, 2020 from $75.3$72.0 million, or 1.09%1.03% of total loans, as of December 31, 2018.2019. The decrease was a result of the adoption of ASU 2016-13 on January 1, 2020, when the Company recognized a decrease in the allowance for loan losses of $20.4 million, partially offset by a provision for loan loss expense of $17.0 million in the first quarter of 2020.
The decrease in the allowance for loan losses of $20.4 million on adoption was driven primarily by the portfolio composition including the short-term nature of Commercial real estate loans, estimated prepayments, a change to the loan portfolio segmentation in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics, and the reasonable and supportable economic forecasts at the time of adoption. The increase in the overall allowance for loan losses was primarily due to loan growth and the related mixof $17.0 million in the loan portfolio, partially offsetfirst quarter of 2020 was driven primarily by netthe changes in economic forecasts late in the first quarter of 2020 to loss factors and a decline in criticized loans.reflect deteriorating economic conditions related to the COVID-19 pandemic. See Part I. Item 1. “Notes to Unaudited Consolidated Financial Statements - Note 7: Allowance for Loan Losses” for an analysis of the Company’s allowance for loan losses.


An analysisPrior to the adoption of ASU 2016-13, the risk in the loan portfolio as well as management judgment is used to determine the estimated appropriate amount of the allowance for loan losses. The Company’s allowance for loan losses iswas comprised of three primary components (general reserves, allocated reserves on non-impaired special mention and substandard loans, and allocated reserves on impaired loans). See Part II. Item 8. “NotesRefer to Unaudited Consolidated Financial Statements - Note 6: Allowance for Loan Losses”"Note 1: Basis of Presentation and Summary of Significant Account Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 for further information.details on that methodology.
56

The following table presents a summary of loans charged-off,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 September 30, Nine months ended September 30,
 2019 2018 2019 2018


(In thousands)
Net loans (charged-off)/ recovered:       
New England$275
 $232
 $528
 $(126)
San Francisco Bay Area6
 706
 44
 864
Southern California(156) 47
 (629) 311
Total net loans (charged-off)/ recovered$125
 $985
 $(57) $1,049
Three months ended March 31,
20202019


(In thousands)
Net loans (charged off)/ recovered:
New England$15  $222  
Northern California122  18  
Southern California(485) (312) 
Total net loans (charged off)/ recovered$(348) $(72) 
There were $0.1$0.3 million in net recoveriescharge offs recorded in the thirdfirst quarter of 20192020 compared to $1.0$0.1 million of net recoveriescharge-offs for the same period of 2018.2019.
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 September 30, 2019,March 31, 2020, nonperforming assets totaled $17.6$24.3 million, or 0.20%0.28% of total assets, an increase of $3.1$8.2 million, or 21%51%, compared to $14.5$16.1 million, or 0.17%0.18% of total assets, as of December 31, 2018.2019.
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 $17.6$24.3 million of loans on nonaccrual status as of September 30, 2019, $10.2March 31, 2020, $15.0 million, or 58%62%, had a current payment status, $0.5$2.0 million, or 3%8%, were 30-89 days past due, and $6.9$7.3 million, or 39%30%, were 90 days or more past due. Of the $14.1$16.1 million of loans on nonaccrual status as of December 31, 2018, $3.62019, $9.8 million, or 26%61%, had a current payment status, $0.8$1.2 million, or 5%7%, were 30-89 days past due, and $9.7$5.1 million, or 69%32%, 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 $18.1$11.0 million, or 81%43%, to $4.2$14.9 million as of September 30, 2019March 31, 2020 from $22.3$25.9 million as of December 31, 2018.2019. 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 deferments, forbearances and second mortgages 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 provision 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 September 30, 2019March 31, 2020 and December 31, 2018.2019.
Impaired Loans. Impaired loans individually evaluated for impairment in the allowance for loan losses totaled $20.5$25.6 million as of September 30, 2019,March 31, 2020, an increase of $4.9$6.4 million, or 31%34%, compared to $15.6$19.2 million as of December 31,


2018. 2019. As of September 30, 2019, $2.9March 31, 2020, $1.1 million of the individually evaluated impaired loans had $1.1$0.3 million in specific reserve allocations. The remaining $17.6$24.5 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, 2018, $4.22019, $1.1 million of individually evaluated impaired loans had $1.2$0.2 million in specific reserve allocations, and the remaining $11.4$18.1 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
57

forgiveness. As of September 30, 2019March 31, 2020 and December 31, 2018,2019, TDRs totaled $9.5$14.9 million and $8.0$12.6 million, respectively. As of September 30, 2019, $6.9March 31, 2020, $7.1 million of the $9.5$14.9 million in TDRs were on accrual status. As of December 31, 2018, $3.82019, $7.1 million of the $8.0$12.6 million in TDRs were on accrual status.
In the first quarter of 2020, in response to the COVID-19 pandemic, the Company initiated a mortgage deferment program under which principal and interest payments on qualifying loans are deferred for three months and the loan term is extended three months. As of March 31, 2020, 10 loans totaling approximately $5.0 million were processed under this program, though the Company expects increased volume in the second quarter of 2020.
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 or notification by the tenant of non-renewal of lease, 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 September 30, 2019,March 31, 2020, the Bank has identified $63.3$87.9 million in potential problem loans, an increase of $9.2$30.0 million, or 17%52% compared to $54.1$57.9 million as of December 31, 2018.2019. One New England commercial and industrial loan for $25.0 million accounted for most of this increase. 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.
The following table presents a rollforwardroll-forward of nonaccrual loans for the three and nine months ended September 30, 2019March 31, 2020 and 2018:2019:
As of and for the three months ended March 31,
20202019
(In thousands)
Nonaccrual loans, beginning of period$16,103  $14,057  
Transfers in to nonaccrual status11,336  347  
Transfers out to accrual status(2,230) (33) 
Charge-offs(528) (564) 
Paid off/ paid down(367) (1,788) 
Nonaccrual loans, end of period  $24,314  $12,019  
58
 As of and for the three months ended September 30, As of and for the nine months ended September 30,
2019 2018 2019 2018
(In thousands)
Nonaccrual loans, beginning of period$17,155
 $15,651
 $14,057
 $14,295
Transfers in to nonaccrual status2,830
 3,901
 9,088
 8,819
Transfers out to OREO—
 —
 —
 (108)
Transfers out to accrual status(642) (2,122) (846) (3,914)
Charge-offs(185) —
 (944) (514)
Paid off/ paid down(1,593) (5,333) (3,790) (6,481)
Nonaccrual loans, end of period$17,565
 $12,097
 $17,565
 $12,097



The following table presents a summary of credit quality by geography, based on the location of the regional offices:
September 30,
2019		 December 31, 2018March 31,
2020		December 31, 2019
(In thousands) (In thousands)
Nonaccrual loans:   Nonaccrual loans:
New England$8,999
 $6,728
New England$11,965  $9,764  
San Francisco Bay Area2,395
 2,488
Northern CaliforniaNorthern California6,575  319  
Southern California6,171
 4,841
Southern California5,774  6,020  
Total nonaccrual loans$17,565
 $14,057
Total nonaccrual loans$24,314  $16,103  
Loans 30-89 days past due and accruing:   Loans 30-89 days past due and accruing:
New England$1,404
 $15,961
New England$8,955  $20,507  
San Francisco Bay Area15
 2,246
Northern CaliforniaNorthern California2,347  2,593  
Southern California2,760
 4,092
Southern California3,550  2,845  
Total loans 30-89 days past due$4,179
 $22,299
Total loans 30-89 days past due$14,852  $25,945  
Accruing classified loans: (1)   Accruing classified loans: (1)
New England$21,830
 $10,392
New England$50,483  $20,428  
San Francisco Bay Area23,938
 24,584
Northern CaliforniaNorthern California24,843  24,946  
Southern California17,510
 19,119
Southern California12,622  12,548  
Total accruing classified loans$63,278
 $54,095
Total accruing classified loans$87,948  $57,922  
___________________
(1)Accruing Classified includes
(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.
September 30,
2019		 December 31, 2018 March 31,
2020		December 31, 2019
(In thousands) (In thousands)
Nonaccrual loans:   Nonaccrual loans:
Commercial and industrial$800
 $2,554
Commercial and industrial$1,371  $582  
Commercial tax-exempt—
 —
Commercial tax-exempt—  —  
Commercial real estate—
 546
Commercial real estate5,392  —  
Construction and land—
 —
Construction and land—  —  
Residential14,219
 7,914
Residential16,074  13,993  
Home equity2,545
 3,031
Home equity1,476  1,525  
Consumer and other1
 12
Consumer and other1  3  
Total nonaccrual loans$17,565
 $14,057
Total nonaccrual loans$24,314  $16,103  
Loans 30-89 days past due and accruing:   Loans 30-89 days past due and accruing:
Commercial and industrial$3,048
 $9,794
Commercial and industrial$1,493  $828  
Commercial tax-exempt—
 —
Commercial tax-exempt—  —  
Commercial real estate497
 —
Commercial real estate—  1,420  
Construction and land—
 —
Construction and land—  —  
Residential266
 6,843
Residential12,967  20,171  
Home equity353
 602
Home equity319  369  
Consumer and other15
 5,060
Consumer and other73  3,157  
Total loans 30-89 days past due$4,179
 $22,299
Total loans 30-89 days past due$14,852  $25,945  
Accruing classified loans: (1)   Accruing classified loans: (1)
Commercial and industrial$25,133
 $22,992
Commercial and industrial$50,408  $24,987  
Commercial tax-exempt4,052
 4,051
Commercial tax-exempt8,544  4,052  
Commercial real estate30,814
 27,052
Commercial real estate23,692  23,558  
Construction and land—
 —
Construction and land—  —  
Residential3,000
 —
Residential4,241  4,253  
Home equity279
 —
Home equity1,063  1,072  
Consumer and other—
 —
Consumer and other—  —  
Total accruing classified loans$63,278
 $54,095
Total accruing classified loans$87,948  $57,922  
___________________
(1)Accruing Classified includes
(1) Accruing Classified may include both Substandard and Doubtful classifications.

59

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:
 September 30,
2019		 December 31, 2018 $
Change		 %
Change
 (In thousands)
Cash and cash equivalents$78,010
 $127,259
 $(49,249) (39)%
Investment securities available-for-sale935,538
 994,065
 (58,527) (6)%
Equity securities at fair value21,780
 14,228
 7,552
 53 %
LESS: Securities pledged against current borrowings and derivatives(96,055) (44,022) (52,033) nm
Cash and investments$939,273
 $1,091,530
 $(152,257) (14)%
As a percent of assets11% 13%   

        
Access to additional FHLB borrowings1,222,142
 1,405,083
 (182,941) (13)%
Total liquidity$2,161,415
 $2,496,613
 $(335,198) (13)%
As a percent of assets25% 29%   

As a percent of deposits32% 37%   

_____________________
nm = not meaningful
March 31,
2020		December 31, 2019$
Change		%
Change
(In thousands)
Cash and cash equivalents$61,714  $292,479  $(230,765) (79)%
Investment securities available-for-sale993,166  978,284  14,882  2 %
Equity securities at fair value23,080  18,810  4,270  23 %
Less: Securities pledged against current borrowings and derivatives(119,528) (88,444) (31,084) 35 %
Cash and investments$958,432  $1,201,129  $(242,697) (20)%
As a percent of assets11 %14 %
Access to additional FHLB borrowings1,100,533  1,432,603  (332,070) (23)%
Total liquidity$2,058,965  $2,633,732  $(574,767) (22)%
As a percent of assets24 %30 %
As a percent of deposits30 %36 %
At September 30, 2019,March 31, 2020, the Company’s cashCash and cash equivalents amounted to $78.0$61.7 million. The Holding Company’s cashCash and cash equivalents amounted to $41.2$41.8 million at September 30, 2019.March 31, 2020. Management believes that the Holding Company and its affiliates, including the Bank, have adequate liquidity to meet their commitments for the foreseeable future.
Management is responsible for establishing and monitoring liquidity targets as well as strategies to meet these targets. At September 30, 2019,March 31, 2020, consolidated cashCash and cash equivalents, investmentInvestment securities available-for-sale and equityEquity securities at fair value less securities pledged against current borrowings and derivatives amounted to $0.9$1.0 billion, or 11% of total assets, compared to $1.1$1.2 billion, or 13%14% of total assets, at December 31, 2018.2019. Future loan growth may depend upon the Company’s ability to grow its core deposit levels. The Bank anticipates funding the PPP loan originations with additional borrowing facilities under the PPPLF. In addition, the Company has access to available borrowings through the FHLB totaling $1.2$1.1 billion at September 30, 2019March 31, 2020 and $1.4 billion at December 31, 2018.2019. Combined, this liquidity totals $2.2$2.1 billion, or 25%24% of assets and 32%30% of deposits, as of September 30, 2019,March 31, 2020, compared to $2.5$2.6 billion, or 29%30% of assets and 37%36% of deposits, at December 31, 2018.2019.
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 exceeds 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. Liquidity. The Company and noncontrolling interest holders of the Company’s majority-owned affiliate, DGHM, holdhave contingent put andoptions, call options, and mandatory repurchase obligations that would require the Company to purchase (and the noncontrolling interest owners of the majority-owned affiliate to sell) the remaining noncontrolling interest in DGHM at either a contractually predetermined fair value, a multiple of EBITDA, or fair value,values as determined by the agreement.operating agreement of DGHM. At September 30, 2019,March 31, 2020, the estimated maximum redemption value for DGHM related to outstanding put options was $1.5 million, all of which could be redeemed within the next 12 months, under certain circumstances, and is classifiedzero based on the consolidated balance sheets as redeemable noncontrolling interests.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, 2018.2019.

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 saleCapital Advisors LLC (“Anchor”) which closedoccurred in April 2018 and the BOS sale of Bingham, Osborn & Scarborough, LLC (“BOS”) which closed


occurred in December 2018. As part of the
60

sale agreements for both Anchor and BOS, the Company expects to receive future contingent payments that have estimated present valuesfor the remaining nine months of $12.52020 of approximately $1.7 million and $12.6$1.6 million at September 30, 2019,March 31, 2020, 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, 20182019 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 threenine months of 20192020 for the interest payments is approximately $1.0$2.1 million based on the debt outstanding at September 30, 2019.March 31, 2020. 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 plans to paypays 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. Based on the current quarterly dividend rate of
The Company's $0.12 per share asdividend announced byon April 29, 2020 for the first quarter of 2020 exceeded the Company's earnings for the quarter. As required, the Company on October 24, 2019,received a non-objection letter from the Federal Reserve Bank of Boston to pay the proposed dividend. Given the current economic conditions and estimated shares outstanding, the Company estimates that the amount to be paid out for dividends to common shareholders in the remaining three months of 2019 will be approximately $10.0 million. The estimated dividend payments in 2019 could increase or decrease iffuture forecasts, the Company’s Board of Directors voteswill evaluate the amount of future dividends to increasebe declared on a quarter by quarter basis. The Board of Directors could reduce or decrease, respectively,eliminate quarterly cash dividends based on the current dividend rate, and/or forecasted conditions if deemed prudent.
In the numberthird quarter of shares2019, the Company's Board of Directors approved, and the Company received regulatory non-objection for, a share repurchase program of up to $20.0 million of the Company's outstanding changes significantly.common shares. As of March 31, 2020, the Company completed its share repurchase program. See Part II. Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” for further details.
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, starting in the second quarter of 2020, the Bank anticipates borrowing from the PPPLF set up by the Federal Reserve in order to fund loans made through the PPP. 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 September 30, 2019,March 31, 2020, the Bank had unused federal fund lines of credit totaling $380.0$365.0 million, compared to $465.0$500.0 million at December 31, 2018,2019, with correspondent institutions to provide it with immediate access to overnight borrowings. At September 30, 2019,March 31, 2020, the Bank had $150.0$135.0 million of outstanding borrowings under the federal funds lines with these correspondent institutions along with an additional $80.0$10.0 million of outstanding borrowings under federal funds lines with the FHLB. At December 31, 2018,2019, the Bank had $100.0 milliondid not have any outstanding borrowings under the federal funds lines with these correspondent institutions along with an additional $150.0 million ofnor outstanding borrowings under federal funds lines with the FHLB. Certain liquidity sources, such as federal funds lines, may be withdrawn by the correspondent bank at any time especially in the event of financial deterioration of the institution.

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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 to expanded deposit insurance coverage. At September 30, 2019,March 31, 2020, the Bank had $355.4$580.5 million of brokered deposits outstanding under these agreements, compared to $541.1$422.4 million at December 31, 2018.2019.
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. Other borrowing arrangements may have higher rates than the FHLB would typically charge.

Capital Resources
Total shareholders’ equity at September 30, 2019March 31, 2020 was $808.7$828.8 million compared to $754.0$819.0 million at December 31, 2018,2019, an increase of $54.7$9.8 million. The increase in shareholders’ equity was primarily the result of net income attributable to the Companyimpact of the adoption of ASU 2016-13 and the change in accumulated other comprehensive income, partially offset by dividends paid to common shareholders and the repurchase of common shares.
TheUnder the Federal Reserve’s capital rules applicable to the Company and the Bank, are subject to capital rules issued by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Under these rules, 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 September 30, 2019March 31, 2020 and December 31, 2018.2019. Also presented are the minimum requirements established by the Federal Reserve and the FDIC as of those dates for the Company and the Bank, respectively, to meet applicable capital requirements and the requirements of the FDIC as of those dates for the Bank to be considered “well capitalized” under all regulatory definitions.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)
Actual For 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
Amount Ratio Amount Ratio Amount Ratio Ratio(In thousands)
(In thousands) 
As of September 30, 2019          
As of March 31, 2020As of March 31, 2020
Common equity tier 1 risk-based capitalCommon equity tier 1 risk-based capital         Common equity tier 1 risk-based capital
Company$732,980
 11.22% $294,025
 4.5%  n/a
 n/a 7.0%Company$742,044  11.20 %$298,230  4.5 %n/a  n/a7.0%
Boston Private Bank775,161
 11.91
 292,785
 4.5
 $422,912
 6.5% 7.0Boston Private Bank784,981  11.88  297,357  4.5  $429,515  6.5%7.0
Tier 1 risk-based capital          Tier 1 risk-based capital
Company833,431
 12.76
 392,033
 6.0
  n/a
 n/a 8.5Company842,066  12.71  397,640  6.0  n/a  n/a8.5
Boston Private Bank775,161
 11.91
 390,380
 6.0
 520,507
 8.0 8.5Boston Private Bank784,981  11.88  396,475  6.0  528,634  8.08.5
Total risk-based capital          Total risk-based capital
Company910,076
 13.93
 522,711
 8.0
  n/a
 n/a 10.5Company914,572  13.80  530,187  8.0  n/a  n/a10.5
Boston Private Bank851,660
 13.09
 520,507
 8.0
 650,634
 10.0 10.5Boston Private Bank857,487  12.98  528,634  8.0  660,792  10.010.5
Tier 1 leverage capital          Tier 1 leverage capital
Company833,431
 9.70
 343,534
 4.0
  n/a
 n/a 4.0Company842,066  9.69  347,650  4.0  n/a  n/a4.0
Boston Private Bank775,161
 9.10
 340,674
 4.0
 425,843
 5.0 4.0Boston Private Bank784,981  9.07  346,277  4.0  432,846  5.04.0
          
As of December 31, 2018          
As of December 31, 2019As of December 31, 2019
Common equity tier 1 risk-based capitalCommon equity tier 1 risk-based capital         Common equity tier 1 risk-based capital
Company$702,728
 11.40% $277,275
 4.5% n/a
 n/a 7.0%Company$745,926  11.42 %$293,886  4.5 %n/an/a7.0%
Boston Private Bank745,051
 12.13
 276,352
 4.5
 $399,175
 6.5% 7.0Boston Private Bank778,635  11.97  292,717  4.5  $422,813  6.5%7.0
Tier 1 risk-based capital          Tier 1 risk-based capital
Company803,311
 13.04
 369,701
 6.0
 n/a
 n/a 8.5Company846,337  12.96  391,848  6.0  n/a  n/a8.5
Boston Private Bank745,051
 12.13
 368,469
 6.0
 491,292
 8.0 8.5Boston Private Bank778,635  11.97  390,289  6.0  520,386  8.08.5
Total risk-based capital          Total risk-based capital
Company879,927
 14.28
 492,934
 8.0
 n/a
 n/a 10.5Company919,573  14.08  522,464  8.0  n/a  n/a10.5
Boston Private Bank821,584
 13.38
 491,292
 8.0
 614,115
 10.0 10.5Boston Private Bank851,733  13.09  520,386  8.0  650,482  10.010.5
Tier 1 leverage capital          Tier 1 leverage capital
Company803,311
 9.54
 336,648
 4.0
 n/a
 n/a 4.0Company846,337  9.77  346,398  4.0  n/a  n/a4.0
Boston Private Bank745,051
 8.92
 334,029
 4.0
 417,537
 5.0 4.0Boston Private Bank778,635  9.03  344,958  4.0  431,198  5.04.0
____________________
(1)Required capital ratios with the fully phased-in capital conservation buffer added to the minimum risk-based capital ratios. The fully phased-in ratios are effective for 2019.
(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 September 30, 2019March 31, 2020 and December 31, 2018,2019, 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.


63

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, 2018.2019.

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 September 30, 2019March 31, 2020 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 the disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.
(b) Change in internal controls over financial reporting.
Effective January 1, 2020, the Company adopted the CECL accounting standard ASU 2016-13, Financial Instruments (Topic 326). The Company designed new controls and modified existing controls as part of the adoption. These additional controls over financial reporting included controls over model creation and design, model governance, and assumptions. There have beenwere no other changes in the Company’s internal controls over financial reporting that occurred during the quarter ended September 30, 2019,March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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 considerThis section supplements and updates certain of the risks described ininformation found under Part I.I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 as2019 filed with the SEC.SEC on February 28, 2020 (“Annual Report”), based on information currently known to us and recent developments since the date of the Annual Report filing. The matters discussed below should be read in conjunction with the risks described in Part I. Item 1A. “Risk Factors” of our Annual Report. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the Annual Report. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities, particularly in light of the fast-changing nature of the COVID-19 pandemic, responsive containment measures taken and the related impacts to economic and operating conditions.
The COVID-19 pandemic, and the measures taken to control its spread, will continue to adversely impact our employees, customers, business operations and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic has, and will likely continue to, severely impact the national economy and the regional and local markets in which we operate, lower equity market valuations, create significant volatility and disruption in capital and debt markets, and increase unemployment levels. Our business operations may be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. We are subject to heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements that we have put in place for our employees. Federal Reserve actions to combat the economic contraction caused by the COVID-19 pandemic, including the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect our net interest income and margins, and our profitability. The continued closures of many businesses and the institution of social distancing, shelter in place and stay home orders in the states and communities we serve, have reduced business activity and financial transactions, and may impact the execution of our strategic plan, such as by delaying strategic hiring. It is unclear whether any COVID-19 pandemic-related businesses losses that we or our customers may suffer will be covered by existing insurance policies. Additionally, these shelter in place and stay home orders may hinder our ability to conduct timely property appraisals, which could delay or impact the accuracy of the recognition of credit losses in our loan portfolios. Changes in customer behavior due to worsening business and economic conditions or legislative or regulatory initiatives may impact the demand for our products and services, which could adversely affect our revenue, including due to an increase in the Bank’s provision for loan loss expense. Because of adverse economic and market conditions affecting issuers, we may be required to recognize impairments on the securities we hold, goodwill, intangible assets, and right-of-use assets, as well as reductions in other comprehensive income. The increase in market volatility and a corresponding increase in trading frequency means that our Wealth Management and Trust business is subject to an increased risk of trading errors, and the risk that any trading errors are of an increased magnitude. While the COVID-19 pandemic negatively impacted our results of operations for the first quarter of 2020, the extent to which the COVID-19 pandemic will continue to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic, as well as further actions we may take as may be required by government authorities or that we determine is in the best interests of our employees and customers. There is no certainty that such measures will be sufficient to mitigate the risks posed by the pandemic.
Our participation in the SBA’s PPP may expose us to reputational harm, increased litigation risk, as well as the risk that the SBA may not fund some or all of the guarantees associated with PPP loans, which could result in these loans being charged off.
We have approved approximately 1,100 loans aggregating approximately $425.0 million through the PPP. Lenders participating in the PPP have faced increased public scrutiny about their loan application process and procedures, and the nature and type of the borrowers receiving PPP loans. We depend on our reputation as a trusted and responsible financial services company to compete effectively in the communities that we serve, and any negative public or customer response to, or any litigation or claims that might arise out of, our participation in the PPP and any other legislative or regulatory initiatives and programs that may be enacted in response to the COVID-19 pandemic, could adversely impact our business. Other larger banks have been no material changessubject to these risk factors sincelitigation regarding the filingprocess and procedures that such banks used in processing applications for the PPP,
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and we may be subject to the same or similar litigation. In addition, if the SBA determines that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty, reduce the amount of that report. the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

66

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes repurchases of the Company’s outstanding common shares in the thirdfirst quarter of 2019.2020.
  Issuer Purchases of Equity Securities
Period 
(a) Total number
of shares
purchased
 
(b) Average
price paid
per share
 
(c) Total number
of shares
purchased as
part of publicly
announced plans
 
(d) Maximum
approximate dollar
value of shares that
may yet be purchased
under the plans
July 1 - 31, 2019 —
 $—
 —
 $20,000,000
August 1 - 31, 2019 499,910
 10.58
 499,910
 14,710,315
September 1 - 30, 2019 178,255
 10.68
 678,165
 12,807,043
Total 678,165
 $10.61
 678,165
 $12,807,043
Issuer Purchases of Equity Securities
Period(a) Total number
of shares
purchased		(b) Average
price paid
per share		(c) Total number
of shares
purchased as
part of publicly
announced plans		(d) Maximum
approximate dollar
value of shares that
may yet be purchased
under the plans
January 1 - 31, 2020—  $—  —  $12,807,043  
February 1 - 29, 2020221,249  10.38  899,414  10,511,555  
March 1 - 31, 20201,343,811  7.82  2,243,225  —  
Total1,565,060  $8.18  2,243,225  $—  
On August 13, 2019, the Company received a notice of non-objection from the Federal Reserve Bank of Boston for a share repurchase program of up to $20.0 million of the Company’s outstanding common shares. Undershares and the program, shares may be repurchased from time to time in the open market or in privately negotiated transactions in amounts and at prices the Company deems appropriate, subject to market conditions and other considerations, for a one-year period. The program does not obligate the Company to purchase any shares. The repurchases will be funded from cash on hand, available borrowings or proceeds from potential debt or other capital markets sources. The share repurchase program may be suspended or discontinued at any time without prior notice. The Company’s Board of Directors approved the program, subject to regulatory non-objection, on August 7, 2019. The program was completed in March 2020.

Item 3.  Defaults Upon Senior Securities
None.

Item 4.  Mine Safety Disclosures
Not applicable.

Item 5.  Other Information
None.


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Item 6.  Exhibits
(a) Exhibits
Exhibit No.DescriptionIncorporated by Reference
Filed or
Furnished
with this
10-Q
Form
SEC Filing
Date
Exhibit
Number
3.1S-84/28/202099.1
3.2S-84/28/202099.2
3.3S-84/28/202099.3
3.4S-84/28/202099.4
3.5S-84/28/202099.5
3.6S-84/28/202099.6
3.7S-84/28/202099.7
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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Exhibit No.DescriptionIncorporated by Reference
Filed or
Furnished
with this
10-Q
Form
SEC Filing
Date
Exhibit
Number
10.1
Boston Private Financial Holdings, Inc. 2001 Employee Stock Purchase Plan (As Amended and Restated as of July 24, 2019)
Filed
14.1
Code of Business Conduct and Ethics
Filed
21.1
List of Subsidiaries of Boston Private Financial Holdings, Inc.
Filed
31.1
Certification of Chief Executive Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934
Filed
31.2
Certification of Chief Financial Officer pursuant to Rule 13a - 14(a)/15d - 14(a) under the Securities Exchange Act of 1934
Filed
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished
101.INSXBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL documentFiled
101.SCHXBRL Taxonomy Extension Schema DocumentFiled
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled




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
November 4, 2019May 8, 2020Anthony DeChellis
Chief Executive Officer, President and Director
(Principal Executive Officer)
/s/    STEVEN M. GAVEN
November 4, 2019May 8, 2020Steven M. Gaven
Executive Vice President, Chief Financial Officer


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