Boston Private Financial Holdings Reports Fourth Quarter Results.

BOSTON -- Boston Private Financial Holdings, Inc. (NASDAQ: BPFH):

* Fourth quarter 2008 GAAP net loss was $24.9 million, or ($0.47) per diluted share, impacted primarily by non-cash impairment charges and increased provisions for loan losses. Non-GAAP cash earnings per share (as defined below) were $0.04 in the fourth quarter.

* Reduced risk exposure concentrated in Southern California by nearly 90% through sale or resolution of non-strategic loans from an original value of approximately $278 million (at March 31, 2008) to a now-current carrying value of $30 million.

* Provided a $22.8 million (pre-tax) loan loss provision during the fourth quarter, boosting the allowance for loan losses to $89.3 million and building a solid reserve to non-accrual loan ratio of 134% (excluding loans held for sale which have been marked to fair value).

* Bolstered capital through a private/public offering in July 2008 and participated in the U.S. Treasury's Troubled Asset Relief Program - Capital Purchase Program ("TARP-CPP") in November. Improved tangible common equity capital ("TCE") to tangible assets ("TA") ratio by 182 basis points during the year to 5.03%. Further, estimated Tier 1 Risk-Based Capital ("RBC") and Total RBC ratios were increased to 14.9% and 16.2% respectively over the year, ahead of industry median levels and well in excess of regulatory capital minimums.

* Franchise growth during the year included $1 billion in net AUM inflows from fee-based businesses and an increase in private banking deposits by 12% year-over-year. Overall, AUM declined $9.3 billion for the year, primarily due to market depreciation.

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) today reported a fourth quarter 2008 GAAP net loss of $24.9 million, or ($0.47) per diluted share, an improvement compared to a GAAP net loss of $31.2 million, or ($0.84) per diluted share reported in the fourth quarter 2007.

The $24.9 million GAAP net loss for the fourth quarter of 2008 included $25.0 million of non-cash, after-tax charges associated with goodwill and intangible impairments, $14.4 million of after-tax provisions for loan losses primarily due to declining credit quality in the Pacific Northwest and Florida, and a $2.6 million (after-tax) net loss on the disposition of non-strategic loans held for sale.

For the year, the Company reported a GAAP net loss of $388.8 million, or ($8.87) per diluted share, compared to GAAP earnings of $4.2 million, or $0.17 per diluted share, for the year in 2007. Included in the 2008 loss is $258.1 million in non-cash, after-tax charges associated with goodwill and intangible impairments, $133.2 million in after-tax provisions for loan losses, and a $66.0 million non-cash expense for re-equitizing affiliate partner Westfield Capital Management.

"While 2008 was a very disappointing year for the Company, we saw some positive results and have made solid headway in our efforts to strengthen and improve our core business," said Timothy L. Vaill, Chairman and CEO. "We are seeing continued strong credit performance in New England and Northern California, which represent 66% of our loan portfolio. Our decision to raise capital and sell the non-strategic assets in Southern California places us in a stronger position to face the continuing market challenges. The addition of TARP-CPP capital will enable us to continue to increase lending to our core small business and affluent clients, and contributed to our ability to originate new loans in the fourth quarter, while adhering to strict underwriting standards. With many of these 2008 steps behind us, we remain confident that the true earnings power of our franchise will become clearer in 2009."

Southern California Loan Portfolio Resolution

In the third quarter, the Company announced that it would sell a non-strategic loan portfolio consisting primarily of land and construction loans in the Inland Empire of Southern California. As of December 31, 2008, the Company has reduced its exposure from 72 loans with an original carrying value of approximately $278 million to 20 loans with a carrying value of approximately $34 million. During the quarter, the Company sold 52 loans for a net gain of $7.7 million which was offset by a further charge of $9.5 million to reflect updated fair value estimates, for a net loss of $1.8 million. The Company is in the process of working out the remaining loans in the portfolio and, subsequent to year end, has closed three additional loans, bringing the current carrying value to $30 million as of the date of this release.

Vaill commented, "We significantly reduced our risk exposure in Southern California through the loan sale and credit resolution efforts, nearly completing the disposition of the non-strategic loan portfolio. We have also effectively refocused that affiliate on its core private banking mission with a new management team and enhanced risk management practices in place. We are very pleased with progress so far and remain committed to growing this business over the long term."

Strengthening the Balance Sheet

"Throughout the year we took important measures to build up our capital to protect against further market declines," noted Vaill. "In the middle of the year, we executed a $173 million combination private/public fund raising transaction in partnership with the Carlyle Group. During the fourth quarter of 2008, we secured $154 million in TARP-CPP funding which will allow us to expand our lending programs through our private banks. We increased our loan loss provisions, greatly boosting our allowance for loan losses. Finally, we have absorbed our losses and maintained liquidity and capital ratios well in excess of industry benchmarks. We have the capital available to further increase our reserves should we deem such action necessary."

Key Financials

"Our GAAP loss for the quarter was primarily driven by non-cash charges resulting from continued market declines and recessionary pressures," said David J. Kaye, Chief Financial Officer. "None of these non-cash charges will directly impact our regulatory capital strength or liquidity. To address the difficult economic environment, we have raised capital and have taken affirmative steps to sell or negotiate the non-strategic loans in Southern California, both of which have greatly reduced our risk exposure, while we have carefully managed our costs and reduced fixed expenses. We have also prudently managed our credit and liquidity positions, significantly improved our tangible common equity to tangible assets ratio, and raised our Tier 1 RBC ratio to 14.9%, ahead of the industry median and more than double the regulatory requirements to be considered well capitalized."

* Net Interest Income for the fourth quarter was flat at $49.9 million, compared to $50.2 million for the same period in 2007. On a linked quarter basis, Net Interest Income was down by $0.7 million, or 1%.

* Expenses for the fourth quarter, excluding impairments, were reduced 10% to $72.8 million compared to $80.7 million for the same period in 2007. On a linked quarter basis, expenses declined by $9.3 million, or 11%.

* Total Balance Sheet Assets for the fourth quarter increased 7% to $7.3 billion, compared to $6.8 billion at year end 2007. On a linked quarter basis, Balance Sheet Assets were up $244.5 million, or 3%, including a 2% increase in loans.

* There were no Other Than Temporary Impairment (OTTI) charges in the securities portfolio of $856.4 million and the Company had an unrealized gain of $8.6 million at the end of the fourth quarter.

Private Banking

Chief Executive Officer of the Private Banking Business James D. Dawson said, "We are pleased with the progress we've made in selling or otherwise working out our non-strategic loans in Southern California in the face of continuing declines in the overall economic environment. We have been working proactively and aggressively to identify and resolve problem loan issues across the enterprise. We recognize that the entire industry continues to face a very difficult credit environment, and we are positioning ourselves to address this environment as it unfolds."

* Total deposits increased 6% during the quarter to $4.9 billion and were up 12% on a year-over-year basis.

* Excluding Loans Held for Sale, total loans increased 2% during the quarter to $5.5 billion and were up 4% on a year-over-year basis.

* Net charge-offs for the fourth quarter of 2008 were $4.1 million, which represented less than 1 basis point of total loans compared to $164.5 million of net charge-offs during the third quarter of 2008 primarily related to the transfer of non-strategic loans to Loans Held for Sale.

* Loan loss provision expense of $22.8 million exceeded charge-offs, boosting the allowance for loan losses to $89.3 million, or 1.63% as a percentage of total loans in the fourth quarter, as compared to 1.31% in the third quarter. This represents reserve coverage of 134% of the $66.7 million of non-accrual loans as of December 31, 2008, excluding the non-strategic Loans Held for Sale, which have been marked to fair value.

* Classified loans (loans classified as either sub-standard, doubtful or loss) (including Loans Held for Sale) for the fourth quarter were $148.0 million, down 16% from $175.8 million in the third quarter of 2008. The improvement in classified loans was driven by the loan sale in Southern California and was partially offset by increased classified loans in the Pacific Northwest. The non-strategic Loans Held for Sale represent 18% of these classified loans as of December 31, 2008.

* NPAs at the Company decreased by 11% on a linked quarter basis, driven primarily by the loan sale in Southern California. Difficult economic conditions continue to pressure NPAs in California and the Pacific Northwest.

Wealth Advisory and Investment Management

Chief Executive Officer of the Wealth Advisory and Investment Management Business Jay Cromarty commented, "In an incredibly challenging market, our wealth advisors and investment managers are continuing to provide great value to our clients, illustrated by the high client retention rates we achieved this year as we served our customers well, acting as a steady and measured voice in the midst of volatile market conditions."

Cromarty also added, "Despite the year's extraordinary headwinds, the Investment Management business held its own, with 85% of this segment's investment strategies in the top quartile of performance for the three-year period. As a result, while fees and assets under management were down as a result of market deterioration, our managers continued to attract new clients, achieving a second year of positive net flows of $1.0 billion. Although we incurred modest outflows in the fourth quarter in our investment management segment, our wealth advisory segment sustained net inflows, reflecting strong customer trust especially when viewed relative to the industry."

* AUM outflows (includes private banking trust assets) for the fourth quarter were ($277) million, down from positive flows of $547 million for the same period last year and $713 million in the third quarter of 2008.

* Total Assets Under Management/Advisory decreased 18% or $6.2 billion to $28.5 billion in the fourth quarter from consolidated and unconsolidated affiliates (including the private banking wealth management business) on a linked quarter basis due primarily to market depreciation.

* Investment Management and Trust fees for the fourth quarter were down 27% to $33.0 million, compared to $45.0 million for the same period in 2007. On a linked quarter basis, Investment Management and Trust fees were down $6.1 million, or 16%.

* Wealth Advisory fees for the fourth quarter were up 7% to $11.9 million, compared to $11.1 million for the same period in 2007. On a linked quarter basis, Wealth Advisory fees were down $0.6 million, or 5%.

Summary and Outlook

"This has been a challenging and difficult period for the financial services industry," Mr. Vaill concluded. "Through it all, our diversification across our private banking and fee-based businesses has been a critical asset which has helped us weather the storm. Going forward, we remain committed to our core business strategy of serving high-net-worth customers by building long-term personal relationships. We recognize they need our services now more than ever and believe our specialized service model can make significant inroads in these difficult times. We have built a strong capital position, implemented continuing cost containment efforts, enhanced our credit processes, and are aggressively managing our credit risk. With all of these elements in place, we entered 2009 well-positioned for an extended downturn, if it should occur, and will continue to look for ways to expand our franchise as market conditions permit."

Dividend Payments

Concurrent with the release of the fourth quarter 2008 earnings, the Board of Directors of the Company declared a cash dividend to shareholders of $0.01 per share. The record date for this dividend is February 2, 2009 and the payment date is February 16, 2009.

Cash Earnings

The Company calculates its cash earnings/(loss) by adjusting net income/(loss) to exclude the amortization of the purchased intangibles (net of tax), the tax benefit on the portion of the purchase price allocated to goodwill, which is deductible over a 15 year life, impairment, certain non-cash share based compensation plans (net of tax), and warrant expense. The tax savings are deferred under GAAP accounting but are included in cash earnings since the tax savings (lower tax payment) will be retained unless the acquired company is sold. The computation of cash earnings per share includes the effect of dividends paid or accrued on Preferred Securities but excludes the accretion of the beneficial conversion feature and the accretion of the Preferred Series C Discount. The Company uses certain non-GAAP financial measures, such as Cash Earnings/(Loss), to provide information for investors to effectively analyze financial trends of ongoing business activities. (A detailed reconciliation table is attached.)

Conference Call

Management will hold a conference call at 9:00 a.m. Eastern Time on Thursday, January 29, 2009, to discuss its financial results in more detail. To access the call:

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The call will be simultaneously webcast and may be accessed on the Internet by linking through www.bostonprivate.com.

Boston Private Financial Holdings, Inc.

BPFH is a national financial service organization comprised of independently operated affiliates located in key regions of the U.S. that offer private banking, wealth advisory and investment management services to the high net worth marketplace, selected businesses and institutions. The Company enters demographically attractive markets through a very selective acquisition process and then expands by way of organic growth. It employs a distinct business strategy, empowering its affiliates to run independently such that they can best serve their clients at the local level, while at the same time providing strategic oversight and access to resources, both financial and intellectual, to support management, compliance, legal, marketing, and operations. (NASDAQ: BPFH).

For more information about BPFH, visit the Company's web site at www.bostonprivate.com.

Note to Editors:

Boston Private Financial Holdings, Inc. (NASDAQ: BPFH) is not to be confused with Boston Private Bank & Trust Company. Boston Private Bank & Trust Company is an independently operated and wholly-owned subsidiary of BPFH. The information reported in this press release is related to the performance and results of BPFH and do not reflect or impact the results of Boston Private Bank & Trust Company.

Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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 include, among others, statements regarding our strategy, evaluations of future interest rate trends and liquidity, prospects for growth in assets, and prospects for overall results over the long term. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, adverse conditions in the capital and debt markets and the impact of such conditions on the Company's private banking and asset investment advisory activities, changes in interest rates, competitive pressures from other financial institutions, a deterioration in general economic conditions on a national basis or in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay our loans, changes in loan defaults and charge-off rates, adequacy of loan loss reserves, reduction in deposit levels necessitating increased borrowing to fund loans and investments, the passing of adverse government regulation, the risk that goodwill and intangibles recorded in the Company's financial statements will become impaired, and risks related to the identification and implementation of acquisitions, as well as the other risks and uncertainties detailed in the Company's Annual Report on Form 10-K, as updated by our quarterly reports on Form 10Q; and other filings submitted to the Securities and Exchange Commission. 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.

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