After the sale of its ownership stake in Anchor Capital Advisors and a one-time write down that most banks are taking due to tax reform, Boston Private Financial Holdings reported a net loss of $18.3 million in the fourth quarter of 2017, following three straight quarters of double-digit net income.

The company reported net income for the year of $40.6 million, down from $79.5 million annual net income in 2016.

When the company sold its stake in Anchor, a move that executives said would allow Boston Private to focus on its own wealth management brand, it resulted in a $1.3 million loss on sale, a $400,000 legal expense and a $24.9 million goodwill impairment related to the held for sale classification.

Then tax reform was passed, which for most banks reduced the value of their deferred tax assets. Under generally accepted accounting principles, many financial institutions determine the value of their deferred tax assets based on the current enacted federal and state tax rates. So, by the very nature of the federal corporate rate going down, so too will the value of the deferred tax assets.

Boston Private estimates a one-time $12.9 million charge as a result of the recalculation.

“Our results this quarter include a combined impact of $38.9 million of charges resulting from our agreement to divest Anchor and the Tax Cuts and Jobs Act,” Clayton G. Deutsch, CEO of the company, said in a statement. “Divesting Anchor will liberate capital for us, creating flexibility to reinvest in a more focused company, and the Tax Cuts and Jobs Act will result in a significantly lower effective tax rate going forward.”

Excluding the impact of these items, Boston Private would have generated $74.6 million of operating net income in 2017 with an operating return on average common equity of 10.1 percent. Net interest income for the year was over $232 million, up $25 million from 2016. The net interest margin ticked up to 3.04 percent, up 16 basis points from one year ago.

Total assets at the $8.3 billion asset institution increased more than $550 million year-over-year, while total loans reached past $6.5 billion, up almost $400 million year-over-year. Deutsch during an earnings call said he thinks the company can do 10 percent balance sheet growth over the next year.

Deutsch also said he is pleased with the progress he sees in the wealth management division, which had positive net flows in every quarter of 2017.

When asked by an investor about expectations for the wealth division and the company’s long term goal of 20 percent growth, Deautsch said, “We are ending this year more than halfway there. The team continues to make really good progress… We are operating leverage through favorable growth dynamics.”

Investors also questioned Boston Private management about whether the sale of Anchor could signal more sales of other subsidiaries the company owns in the future, but Deautsch cautioned investors about looking at it this way.

“For Anchor, I just came to the view that our company has not been a great owner of autonomous asset management firms,” he said, adding that he didn’t see Boston Private being able to provide any value to Anchor going forward. “Affiliates have had appealing ROE characteristics and that math continues to work.”

In other news, Deautsch announced that Steve Gaven, the former CFO of the Boston Private wealth group, has been named the new CFO of Boston Private Financial Holdings, as part of a broader reorganization of top management in order to structure the company around client development.



Boston Private Sees Millions in Losses in Q4 as Result of Tax Reform and Sale of Subsidiary

by Bram Berkowitz time to read: 2 min