BOSTON PRIVATE FINANCIAL HOLDINGS INC - 10-Q Quarterly Report

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As filed with the Securities and Exchange Commission on November 14, 2002
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2002

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _______.

Commission File Number: 0-17089

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

COMMONWEALTH OF MASSACHUSETTS 04-2976299
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

TEN POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (888) 666-1363

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 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 / /

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, 2002:

Common Stock - Par Value $1.00 22,499,107 shares
--------------------------------- -------------------
(class) (outstanding)

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BOSTON PRIVATE FINANCIAL HOLDINGS, INC.

FORM 10-Q

TABLE OF CONTENTS

2

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

5

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

6

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

The consolidated financial statements of Boston Private Financial Holdings,
Inc. (the "Company") include the accounts of the Company and its wholly-owned
subsidiaries, Boston Private Bank & Trust Company (the "Boston Private Bank"), a
Massachusetts chartered trust company; Borel Private Bank & Trust Company
("Borel"), a California state banking corporation, Westfield Capital Management
Company, LLC ("Westfield"), Sand Hill Advisors, Inc. ("Sand Hill") and Boston
Private Value Investors, Inc. ("BPVI"), registered investment advisors; and
RINET Company, LLC ("RINET"), a financial planning firm and a registered
investment advisor. Boston Private Bank's consolidated financial statements
include the accounts of its wholly-owned subsidiaries, BPB Securities
Corporation, Boston Private Asset Management Corporation, and Boston Private
Preferred Capital Corporation. All significant intercompany accounts and
transactions have been eliminated in consolidation.

The unaudited interim consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America, and include all necessary adjustments of a normal
recurring nature, which in the opinion of management, are required for a fair
presentation of the results and financial condition of the Company. The interim
results of consolidated operations are not necessarily indicative of the results
for the entire year.

The information in this report should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
December 31, 2001 Annual Report to Shareholders. Certain prior year information
has been reclassified to conform to current year presentation and restated to
reflect certain pooling of interest transactions.

(2) EARNINGS PER SHARE

Basic earnings per share ("EPS") excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. The
earnings per share calculation is based upon the weighted average number of
common shares and common share equivalents outstanding during the period. Stock
options, when dilutive, are included as common stock equivalents using the
treasury stock method.

The following tables are a reconciliation of the numerators and
denominators of basic and diluted earnings per share computations:

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

(3) BUSINESS SEGMENTS

MANAGEMENT REPORTING
The Company has six reportable segments, Boston Private Bank, Borel,
Westfield, RINET, Sand Hill and BPVI. The financial performance of the Company
is managed and evaluated by business segment. The segments are managed
separately because each business is an individual company with different
clients, employees, systems, risks, and marketing strategies.

DESCRIPTION OF BUSINESS SEGMENTS
Boston Private Bank pursues a "private banking" business strategy and is
principally engaged in providing banking, investment and fiduciary products to
high net worth individuals, their families and businesses in the greater Boston
area and New England. Boston Private Bank seeks to anticipate and respond to the
financial needs of its client base by offering high quality products, dedicated
personal service and long-term banking relationships. Boston Private Bank offers
its clients a broad range of basic deposit services, including checking and
savings accounts with automated teller machine ("ATM") access, and cash
management services. Boston Private Bank also offers commercial, residential
mortgage, home equity and consumer loans. In addition, it provides investment
advisory and asset management services, securities custody and trust
administration. Boston Private Bank's investment management emphasis is on
large-cap equity and actively managed fixed income portfolios.

Borel serves the financial needs of individuals, their families and their
businesses in Northern California. Borel conducts a commercial banking business
which includes accepting demand, savings and time deposits and making
commercial, real estate, mortgage and consumer loans. Borel offers various
savings plans and provides safe deposit boxes as well as other customary banking
services and facilities. Additionally, Borel offers trust services and provides
a variety of other fiduciary services including management, advisory and
administrative services to individuals.

Westfield provides investment services to high net worth individuals and
institutions, including endowments, foundations and pension plans throughout the
U.S. Westfield specializes in separately managed growth equity portfolios, and
also acts as the manager of Westfield Partners LLC, which is the general partner
of four limited partnerships that employ a long/short domestic growth equity
strategy, with styles focusing on the small cap growth and life sciences
sectors. Westfield is the investment manger for the partnerships. Westfield
serves as a subadvisor to three registered mutual funds. Westfield typically
invests client portfolios in stock of companies which appear to have broad
market opportunities, accelerating earnings growth, low financial leverage, and
cash flow sufficient to fund future growth. Its investment services include a
particular focus on identifying and managing small and mid-cap equity positions
as well as balanced growth accounts.

RINET provides fee-only financial planning, tax planning, investment
management, asset allocation services and supervision and reporting to high net
worth individuals and their families in the greater Boston area, New England,
and other areas of the U.S. Its capabilities include tax planning and
preparation, asset allocation, estate planning, charitable planning, planning
for employment benefits, including 401(k) plans, alternative investment
analysis, fixed income and mutual fund investing. It also provides an
independent mutual fund rating service.

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Sand Hill provides wealth management services to high net worth individuals and
select institutions in Northern California. The firm manages investments
covering a wide range of asset classes for both taxable and tax-exempt
portfolios. A registered investment advisor headquartered in Menlo Park, CA,
Sand Hill has special expertise in transitional wealth counsel.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BPVI serves the investment management needs of high net worth individuals
primarily in New England and the Northeast. The firm is a large-cap value style
investor headquartered in Concord, NH, with an office in Boston, Massachusetts.

MEASUREMENT OF SEGMENT PROFIT AND ASSETS

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Revenues, expenses, and assets
are recorded by each segment, and management reviews separate financial
statements. In addition to direct expenses, each business segment was allocated
a share of holding company expenses during 2001 based on the segment's
percentage of consolidated net income.

RECONCILIATION OF REPORTABLE SEGMENT ITEMS

The following tables are a reconciliation of the revenues, net income,
assets, and other significant items of reportable segments as of and for the
quarters ended September 30, 2002 and 2001. The reports are in thousands of
dollars.

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BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables are a reconciliation of the revenues, net income,
assets, and other significant items of reportable segments as of and for the
nine months ended September 30, 2002 and 2001.

4) RECENT ACCOUNTING DEVELOPMENTS

In June, 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards Nos. 141 "Business Combinations"
(Statement 141), and 142, "Goodwill and Other Intangible Assets" (Statement
142). Statement 141 requires that the purchase method of accounting be used for
all business combinations and eliminated the use of pooling of interests for
transactions initiated subsequent to June 30, 2001. Statement 142 eliminates the
amortization to expense of goodwill recorded as a result of such combinations,
but requires periodic evaluation of the goodwill for impairment. Write-downs of
the balance, if necessary, are to be charged to results of operations. Goodwill
existing prior to the issuance of the statement was required to be amortized
through December 31, 2001.

The Company evaluated its recorded goodwill under Statement 142 as of
January 1, 2002, and concluded that there was no impairment as of that date.
Under Statement 142, goodwill and identifiable intangible assets with indefinite
lives will no longer be amortized, but will be reviewed at least annually for
impairment. Identifiable intangible assets with discrete useful lives will be
amortized over their useful lives. The estimated deferred purchase price for
Sand Hill is contingent upon performance hurdles and other factors. An
adjustment was made to reduce the estimated purchase price based on current
performance and market conditions and the estimated impact that has on future
payments. During 2002, BPVI recorded $598,000 of goodwill in connection with the
acquisition of Edward Goldberg's business and services (SEE MANAGEMENT'S
DISCUSSION AND ANALYSIS).

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BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortization and changes in the carrying amount of goodwill by segment are
as follows:

5) OTHER MATTERS

Boston Private Financial Holdings, Inc. (the "Company") is the holding
company for Boston Private Bank & Trust Company (the "Bank") and its
subsidiary company, Boston Private Preferred Capital Corporation ("BPPCC"), a
real estate investment trust 99.9% owned by the Bank. The Bank has received
notice of assessment from The Commonwealth of Massachusetts Department of
Revenue ("DOR") for tax years ended December 31, 1999, 2000 and 2001. The
Company is aware that the DOR has sent similar notices to numerous other
financial institutions in Massachusetts that reported a deduction for
dividends received from a REIT on their Massachusetts financial institution
excise tax returns.

The DOR contends that dividend distributions by BPPCC to the Bank are fully
taxable in Massachusetts. The Company believes that the Massachusetts statute
that provides for a dividends received deduction equal to 95% of certain
dividend distributions applies to the distributions made by BPPCC to the Bank.
Accordingly, no provision has been made in the Company's financial statements
for the amounts assessed or additional amounts that might be assessed in the
future. Management has estimated the potential impact to be approximately $2.6
million, net of federal tax benefit and excluding

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interest and penalties, for 1999 through September of 2002. The Company intends
to vigorously appeal the assessment and to pursue all available means to defend
its position.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2002

The discussions set forth below and elsewhere herein contain certain
statements that may be considered 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. All statements, other than
statements of historical facts, including statements regarding our strategy,
effectiveness of investment programs, evaluations of future interest rate trends
and liquidity, expectations as to growth in assets, deposits and results of
operations, success of acquisitions, future operations, market position,
financial position, and prospects, plans and objectives of management are
forward-looking statements. These forward looking statements are based on the
current assumptions and beliefs of management and are only expectations of
future results. Our actual results could differ materially from those projected
in the forward-looking statements as the result of, among other factors, changes
in interest rates, changes in the securities or financial markets, a
deterioration in general economic conditions on a national basis or in the local
markets in which we operate, including changes which adversely affect borrowers'
ability to service and repay our loans, changes in loan defaults and charge-off
rates, reduction in deposit levels necessitating increased borrowing to fund
loans and investments, the risk that difficulties will arise in connection with
the integration of the operations of acquired businesses with the operations of
our banking or investment management businesses, the passing of adverse
government regulation, changes in assumptions used in making such forward
looking statements, as well as those factors set forth below under the heading
"Risk Factors and Factors Affecting Forward-Looking Statements." These
forward-looking statements are made as of the date of this report and we do not
intend or undertake to update any such forward-looking statement.

GENERAL

Boston Private Financial Holdings, Inc. is incorporated under the laws of
The Commonwealth of Massachusetts and is registered with the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board") as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA"). On
July 1, 1988, the Company became the parent holding company of Boston Private
Bank & Trust Company, a trust company chartered by The Commonwealth of
Massachusetts and insured by the Federal Deposit Insurance Corporation (the
"FDIC"). In recent years, some substantial acquisitions have contributed to our
growth.

On June 10, 2002, BPVI appointed Edward Goldberg("Goldberg") as a senior
vice president. In connection with this appointment, BPVI agreed to purchase
Goldberg's business. The estimated purchase price at close was $1.7 million and
is to be paid in three installments as follows: 40% in September, 2002, 30% in
September, 2003 and 2004. The estimated purchase price was increased by $258,000
in connection with the first payment which was made during the third quarter of
2002.

On November 30, 2001, we acquired by merger Borel, a private bank with $375
million in total assets located in San Mateo, California, in exchange for
5,629,872 newly issued shares of the Company's common stock. In addition,
Borel's previously outstanding stock options were converted into options to
acquire 229,998 shares of our common stock. In connection with the Borel merger,
we recorded approximately $12 million of merger expenses which are non-recurring
operating expenses. On October 1, 2001, RINET acquired by merger Kanon Bloch
Carre, a Boston-based independent mutual fund rating service and investment
advisor, in exchange for 100,288 newly issued shares of the Company's common
stock. On February 28, 2001, the Company acquired by merger BPVI, formerly E. R.
Taylor Investments, Inc., a New Hampshire corporation engaged in providing
value-style investment advisory services to the wealth management market, in
exchange for 629,731 newly issued shares of the Company's common stock. These
mergers were initiated prior to June 30, 2001 and were accounted for as
"poolings of interests".

On August 31, 2000, we acquired Sand Hill, an investment advisory firm
servicing the wealth management market, primarily in Northern California. The
estimated purchase price at closing was $16.5 million, with 70% paid at close,
and the remainder to be paid in four annual payments contingent upon performance
using a combination of approximately 70% cash and 30% common stock for each
payment. At closing, we issued 258,395 shares of our common stock in connection
with the transaction. In the fourth quarter of 2001, we issued an additional
15,933 shares of our common stock in connection with the first annual contingent
payment. The estimated purchase price was reduced by $1.1 million due to a
reduction in the amount of the estimated remaining deferred purchase payments.
This acquisition was accounted for as a

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"purchase" and, accordingly, our results of operations and financial position
include this enterprise on a consolidated basis since the date of the
acquisition.

Our results of operations have been restated to reflect the financial
position and results of operations on a consolidated basis for all of the
mergers accounted for as a pooling of interests for all years presented.

We conduct substantially all of our business through our wholly owned
operating subsidiaries, Boston Private Bank, Borel, Westfield, RINET, Sand Hill
and BPVI. A description of each subsidiary is provided in Note 3 to the
Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

Management considers the determination of its allowance for loan losses to
be a critical accounting policy. Management assesses the adequacy of the
allowance and evaluates available information in establishing the allowances;
future adjustments to the allowance may be necessary if economic conditions
differ substantially from assumptions used in making these estimates.
Historically, the Company has not experienced such material differences in
estimates for its allowance.

IMPACT OF ACCOUNTING ESTIMATES

Management of the Company is required to make certain estimates and
assumptions during the preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United States.
These estimates and assumptions impact the reported amount of assets,
liabilities and disclosures of contingent assets and liabilities as of the date
of the consolidated financial statements. They also impact the reported amount
of net earnings during any period. Actual results could differ from those
estimates.

Significant estimates underlying the accompanying consolidated financial
statements include the allowance for loan loss, recoverability of intangibles
and various other operating allowances and accruals. Material estimates that are
particularly susceptible to change relate to the determination of the allowance
for loan loss as well as the evaluation of goodwill and other intangibles. The
allowance for loan losses is determined using a systematic analysis and
procedural discipline based on historical experience, product types, and
industry benchmarks. See "Allowance for Loan Losses".

In evaluating the recorded goodwill for impairment, management must
estimate the fair value of the business segments that have goodwill. The
estimated valuation requires estimates of future performance and is susceptible
to changes in the capital market environment as well as changes that occur at
the business segment. Impairment testing was performed upon adoption of
Statement 142 in January 2002. Management engaged independent consultants to
assist in this initial impairment testing. Management intends to test for
impairment periodically, but at least annually, as required by Statement 142. As
of September 30, 2002, we had recorded goodwill and identifiable intangible
assets in an aggregate amount of approximately $18.0 million.

FINANCIAL CONDITION

TOTAL ASSETS. Total assets increased $253.5 million, or 16.8%, to $1.8
billion at September 30, 2002 from $1.5 billion at December 31, 2001. This
increase was primarily driven by deposit growth, which was used to fund new
loans.

INVESTMENTS. Total investments (consisting of cash, federal funds sold,
investment securities, mortgage-backed securities, and stock in the FHLB of
Boston) increased $62.4 million or 17.9% to $411.9 million, or 23.4% of total
assets, at September 30, 2002, from $349.5 million, or 23.2% of total assets, at
December 31, 2001. Management periodically evaluates investment alternatives to
properly manage the overall balance sheet. The timing of sales and reinvestments
is based on various factors, including management's evaluation of interest rate
trends and our liquidity.

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The following table is a summary of investment and mortgage-backed
securities available for sale as of September 30, 2002 and December 31, 2001:

LOANS. Total loans not held for sale increased $158.2 million, or 14.3%,
during the first nine months of 2002 to $1.263 billion, or 71.7% of total
assets, at September 30, 2002, from $1.105 billion, or 73.2% of total assets, at
December 31, 2001. Both the commercial and residential mortgage loan portfolios
continued to experience growth due to the demand for financing. Residential
lending in the New England area continued to experience growth both in the
refinancing and purchase markets due to the low interest rate environment.
Commercial loans increased $89.8 million, or 16.7%, and residential mortgage
loans increased $63.2 million, or 13.0%, during the first nine months of 2002.
Loans held for sale increased $28.6 million as more mortgage loans are being
originated for sale to manage our balance sheet, satisfy our customers demand
for long term fixed rate loans and increase our fee income.

RISK ELEMENTS. Total non-performing assets, which consist of non-accrual
loans and other real estate owned, increased by $261,000 during the first nine
months of 2002 to $1,165,000, or 0.07% of total assets, at September 30, 2002,
from $904,000, or 0.06% of total assets, at December 31, 2001. We continue to
evaluate the underlying collateral and value of each of our non-performing
assets and pursue the collection of all amounts due.

At September 30, 2002, loans with an aggregate balance of $617,000, or
0.05% of total loans, were 30 to 89 days past due, a decrease of $3.0 million as
compared to $3.6 million, or 0.33% of total loans, as of December 31, 2001.
Although these loans are generally secured, our success in keeping these
borrowers current varies from month to month, and it is uncertain whether
available collateral would, in all cases, be adequate to cover the amounts owed.

We discontinue the accrual of interest on a loan when the collectibility of
principal or interest is in doubt. In certain instances, loans that have become
90 days past due may remain on accrual status if we believe that full principal
and interest due on the loan is collectible.

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a charge to operations. When we believe that the collection of a loan's
principal balance is unlikely, the principal amount is charged against the
allowance. Recoveries on loans that have been previously charged off are
credited to the allowance as received.

The allowance for loan losses is determined using a systematic analysis and
procedural discipline based on historical experience, product types, and
industry benchmarks. The allowance is segregated into three components;
"general," "specific" and "unallocated". The general component is determined by
applying coverage percentages to groups of loans based on risk ratings and
product types. A system of periodic loan reviews is performed to assess the
inherent risk and assign risk ratings to each loan individually. Coverage
percentages applied are determined based on industry practice and our judgment.
The specific component is established by allocating a portion of the allowance
for loan losses to individual

15

classified loans on the basis of specific circumstances and assessments. The
unallocated component supplements the first two components based on management's
judgment of the effect of current and forecasted economic conditions on
borrowers' abilities to repay, an evaluation of the allowance for loan losses in
relation to the size of the overall loan portfolio, and consideration of the
relationship of the allowance for loan losses to nonperforming loans, net
charge-off trends, and other factors. While this evaluation process utilizes
historical and other objective information, the classification of loans and the
establishment of the allowance for loan losses relies to a great extent on our
judgment and experience.

While we evaluate currently available information in establishing the
allowance for loan losses, future adjustments to the allowance may be necessary
if economic conditions differ substantially from the assumptions used in making
the evaluations. In addition, various regulatory agencies, as an integral part
of their examination process, periodically review a financial institution's
allowance for loan losses. Such agencies may require the financial institution
to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.

The following table is an analysis of our allowance for loan losses for the
periods indicated:

DEPOSITS. We experienced an increase in total deposits of $202.5 million,
or 17.7%, during the first nine months of 2002, to $1.348 billion, or 76.4% of
total assets, at September 30, 2002, from $1.145 billion, or 75.9% of total
assets, at December 31, 2001. This increase was due to higher average balances
in existing client accounts, as well as a significant number of new accounts
opened during the first nine months of 2002. In addition, we believe clients are
seeking more stable investment opportunities in bank deposits due to the current
uncertainty in the marketplace. The following table shows the composition of our
deposits at September 30, 2002 and December 31, 2001:

BORROWINGS. Total borrowings (consisting of federal funds purchased, FHLB
borrowings, and securities sold under agreements to repurchase ("repurchase
agreements")) increased $30.3 million, or 15.9%, during the first nine

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months of 2002 to $221.3 million from $191.0 million at December 31, 2001. To
better manage interest rate risk and to help protect our net interest margin, we
utilize borrowings to fund a portion of fixed rate assets.

LIQUIDITY. Liquidity is defined as the ability to meet current and future
financial obligations of a short-term nature. We further define liquidity as the
ability to respond to the needs of depositors and borrowers as well as to
earnings enhancement opportunities in a changing marketplace. Primary sources of
liquidity consist of investment management fees, financial planning fees,
deposit inflows, loan repayments, borrowed funds, and cash flows from investment
securities. These sources fund our lending and investment activities.

Management is responsible for establishing and monitoring liquidity targets
as well as strategies to meet these targets. At September 30, 2002, cash,
federal funds sold and securities available for sale amounted to $404.3 million,
or 22.9% of total assets of the Company. This compares to $342.6 million, or
22.7% of total assets, at December 31, 2001.

In general, Boston Private Bank maintains a liquidity target of 15% to 20%
of total assets. Boston Private Bank is a member of the FHLB of Boston and as
such has access to both short and long-term borrowings of up to $432.8 million
as of September 30, 2002. In addition, Boston Private Bank maintains short-term
lines of credit at the Federal Reserve Bank and other correspondent banks
totaling $79.0 million, and has established brokered certificate of deposit
lines with several institutions aggregating $120.0 million. We believe that at
September 30, 2002, Boston Private Bank had adequate liquidity to meet its
commitments for the foreseeable future.

In general, Borel maintains a minimum liquidity target of 20%. Borel is a
member of the FHLB of San Francisco, and as such has access to both short and
long-term borrowings of up to $17.0 million as of September 30, 2002. Borel
manages its cash position in a way that avoids reliance on short-term borrowings
or brokered deposits. Concentrations of deposits from any one source are also
avoided. We believe that at September 30, 2002, Borel had adequate liquidity to
meet its commitments for the foreseeable future.

Westfield's primary source of liquidity consists of investment management
fees that are collected on a quarterly basis. At September 30, 2002 Westfield
had working capital of approximately $5.6 million. We believe that at September
30, 2002, Westfield had adequate liquidity to meet its commitments for the
foreseeable future.

RINET's primary source of liquidity consists of financial planning and
asset management fees that are collected on a quarterly basis. At September 30,
2002, RINET had working capital of approximately $809,000. We believe that at
September 30, 2002, RINET had adequate liquidity to meet its commitments for the
foreseeable future.

Sand Hill's primary source of liquidity consists of investment management
fees that are collected on a quarterly basis. At September 30, 2002 Sand Hill
had working capital of approximately $51,000. We believe that at September 30,
2002, Sand Hill had adequate liquidity to meet its commitments for the
foreseeable future.

BPVI's primary source of liquidity consists of investment management fees
that are collected on a quarterly basis. At September 30, 2002 BPVI had working
capital of approximately $125,000. We believe that at September 30, 2002, BPVI
had adequate liquidity to meet its commitments for the foreseeable future.

Boston Private Financial Holdings' primary sources of funds are dividends
from our subsidiaries, issuance of our common stock and borrowings. We believe
that we have adequate liquidity to meet our commitments for the foreseeable
future.

CAPITAL RESOURCES. Our stockholders' equity at September 30, 2002 was
$161.7 million, or 9.2% of total assets, compared to $139.6 million, or 9.2% of
total assets at December 31, 2001. The dollar increase was the result of our net
income for the first nine months of 2002 of $17.9 million, combined with common
stock issued in connection with stock grants to employees, proceeds from options
exercised and the change in accumulated other comprehensive income reduced by
dividends paid to shareholders.

The Company is subject to various regulatory capital requirements
administered by federal agencies. Failure to meet minimum capital requirements
can result in certain mandatory, and possibly additional discretionary actions
by regulators that, if undertaken, could have a material effect on our financial
statements. For example, under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Boston Private Bank and Borel, which are
our wholly-owned

17

subsidiaries, must each meet specific capital guidelines that involve
quantitative measures of each of their respective assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. Boston Private Bank's and Borel's respective capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Similarly, the Company is
also subject to capital requirements administered by the Federal Reserve Bank
with respect to certain non-banking activities, including adjustments in
connection with off- balance sheet items. The following table presents actual
capital amounts and regulatory capital requirements as of September 30, 2002 and
December 31, 2001:

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002

NET INCOME. The Company recorded net income of $5.9 million, or $0.25 per
diluted share, for the quarter ended September 30, 2002 compared to $5.5
million, or $0.24 per diluted share for the quarter ended September 30, 2001.
This represented a 6.0% increase in net income and a 4.2% increase in earnings
per share.

NET INTEREST INCOME. For the quarter ended September 30, 2002, net interest
income was $16.4 million, an increase of $2.5 million, or 17.8%, over the same
period in 2001. This increase was due to increases in average balances of both
interest earning assets and liabilities offset by decreases in the average rates
of both interest earning assets and liabilities. The Company's net interest
margin was 4.06% for the third quarter of 2002, an increase of 2 basis points
compared to the same period last year.

INTEREST INCOME. During the third quarter of 2002, interest income was
$23.3 million, a decrease of $400,000 or 1.7%, compared to $23.7 million for the
same period in 2001. Interest income on commercial loans decreased 0.4% to $10.2
million for the quarter ended September 30, 2002, compared to $10.3 million for
the same period in 2001. Interest income from residential mortgage loans
increased 15.1% to $8.9 million for the third quarter of 2002, compared to $7.7
million for the same period in 2001, and interest on home equity and other loans
decreased 7.3% to $1.3 million for the third quarter of 2002, compared to $1.4
million, for the same period in 2001. The average balance of commercial loans
increased 20.1% and the average rate decreased 17%, or 139 basis points to 6.76%
for the quarter ended September 30, 2002. The average balance of residential
mortgage loans increased 29.7%, and the average rate decreased 11.3%, or 78
basis points to 6.15% for the same period. The average balance of home equity
and other loans increased 10.3% and the average rate decreased 16.0%, or 118
basis points, to 6.19%.

Total investment income (consisting of interest and dividend income from
cash, federal funds sold, investment securities, mortgage-backed securities, and
stock in the FHLB of Boston) decreased $1.4 million, or 32.9%, to $2.9 million
for the quarter ended September 30, 2002, compared to $4.3 million for the same
period in 2001. This decrease was primarily attributable to a decrease in the
average interest rate of 140 basis points on the investments. This represents a
31.1% decline to 3.10%. This decrease was compounded by a decrease in the
average balance of $9.6 million, or 2.5% for the quarter ended September 30,
2002.

INTEREST EXPENSE. During the third quarter of 2002, interest expense was
$6.9 million, a decrease of $2.8 million, or 29.4%, compared to $9.8 million for
the same period in 2001. This decrease in the Company's interest expense was the
result of a decrease in the average cost of interest-bearing liabilities of 135
basis points, or 39.5%, to 2.07% for the quarter ended September 30, 2002. This
decrease was partially offset by an increase in the average balance of
interest-bearing liabilities of $192,000, or 16.8%, between the two periods.

PROVISION FOR LOAN LOSSES. The provision for loan losses was $630,000 for
the quarter ended September 30, 2002, compared to $840,000 for the same period
in 2001. These provisions reflect continued loan growth and a low level of
non-performing assets. We evaluate several factors including new loan
originations, estimated charge-offs, and risk characteristics of the loan
portfolio when determining the provision for loan losses. These factors include
the level and mix of loan growth, the level of non-accrual and delinquent loans,
and the level of charge-offs and recoveries. Also see discussion under
"FINANCIAL CONDITION - ALLOWANCE FOR LOAN LOSSES." Recoveries net of charge-offs
were $4,000 during the third quarter of 2002, compared to $11,000, for the same
period in 2001.

FEES AND OTHER INCOME. Fees and other income increased $161,000, or 1.3%,
to $12.7 million for the three-month period ending September 30, 2002, compared
to $12.6 million for the same period in 2001. The majority of fee income was
attributable to investment management and trust fees earned on assets under
management. These fees decreased $258,000, or 2.7% to $9.1 million for the third
quarter of 2002, compared to $9.4 million for the same period in 2001. This
decrease is attributable to a decrease in the average fees earned on assets
under management offset by a 3.3% increase in AUM.

Financial planning fees increased $158,000, or 12.2%, to $1.5 million for
the third quarter of 2002, compared to $1.3 million for the same period in 2001.
This increase was due to both new business and special projects.

Gain on sale of investment securities was $617,000 for the third quarter of
2002 compared to $530,000 for the third quarter of 2001. The amount of security
gains recorded in the portfolios are dependent on current market conditions and
the status of the banks' balance sheets. Gain on sale of loans increased
$293,000 to $655,000 for the third quarter of

19

2002 compared to $362,000 for the third quarter of 2001. Of the total gain,
$625,000 was due to individual fixed rate loans sold in the secondary market and
$30,000 was a result of portfolio loans sold in the ordinary course of business.
Boston Private Bank sells virtually all of its fixed rate loans and periodically
sells loans out of portfolio to free up capital and adjust the balance sheet
gap.

Cash administration fees, which consist primarily of cash management fees
and liquid asset management fees, were $216,000 for the quarter ended September
30, 2002 compared to $314,000 for the third quarter of 2001. These fees have
decreased due to clients choosing to keep their assets in deposits rather than
other cash management products. Other fee income, which consists primarily of
loan fees and banking fees, decreased $67,000 to $451,000 for the third quarter
of 2002.

OPERATING EXPENSE. Total operating expense for the third quarter of 2002
increased $2.4 million, or 13.7%, to $19.9 million compared to $17.5 million for
the same period in 2001. This increase was attributable to our continued growth
and expansion. We experienced an 18.1% increase in total balance sheet assets
and a 12.9% increase in the number of employees from September 30, 2001 to
September 30, 2002.

Salaries and benefits, the largest component of operating expense,
increased $1.2 million, or 10.1%, to $13.2 million for the quarter ended
September 30, 2002, from $12.0 million for the same period in 2001. This
increase was due to a 12.9% increase in the number of employees, normal salary
increases, and the related taxes and benefits thereon, partially offset by a
reduced level of employee incentive-based compensation.

Occupancy and equipment expense increased $1.2 million, or 66.0%, to $3.1
million for the third quarter of 2002, from $1.9 million for the same period
last year. The increase was primarily attributable to the increased occupancy
expenses related to expansion at Ten Post Office Square, Boston, Massachusetts,
and the new banking offices in Cambridge, Massachusetts, Newton, Massachusetts
and Palo Alto, California as well as our continued investments in technology.

Professional services include legal fees, consulting fees, and other
professional services such as audit and tax preparation. These expenses
increased $187,000, or 24.9%. This is a result of increased expenditures for
legal, audit and consulting.

Contract services and processing, which are mostly costs associated with
custody and data processing, increased $91,000 from the third quarter in
2001. This increase was due primarily to continued investments in our data
processing systems and due to increased transaction volumes and expansion of
the Boston Private Bank ATM network .

Amortization of goodwill was eliminated in January 1, 2002 due to the
adoption of FASB statement 142 on that date. Amortization was $340,000 for the
third quarter of 2001. Statement 142 eliminated the amortization of goodwill and
the amortization of other indefinite life intangibles.

Other expenses include insurance, supplies, telephone, mailing expense,
publications and subscriptions, employee training, interest on deferred
acquisition payments and other miscellaneous business expenses. These expenses
have increased $7,000, or 0.5% to $1.5 million.

INCOME TAX EXPENSE. We recorded income tax expense of $2.7 million for the
third quarter of 2002 as compared to $2.6 million for the same period last year.
The effective tax rate was 31.3% for the third quarter of 2002, compared to
31.7% for the same period in 2001. The decrease in our effective tax rate is a
result of a lower percentage of fully taxable income. We have been notified by
the Department of Revenue of The Commonwealth of Massachusetts that there is a
proposed deficiency in the 1999, 2000 and 2001 tax returns associated with
our real estate investment trust subsidiary. See "RISK FACTORS AND FACTORS
AFFECTING FORWARD LOOKING STATEMENTS - BOSTON PRIVATE MAY OWE ADDITIONAL
MASSACHUSETTS STATE TAXES" and "LEGAL PROCEEDINGS."

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

NET INCOME. The Company recorded net income of $17.9 million, or $0.77 per
diluted share, for the nine months ended September 30, 2002 compared to $15.8
million, or $0.69 per diluted share for the nine months ended September 30,
2001. This represented a 13.3% increase in net income and an 11.6% increase in
earnings per share.

20

NET INTEREST INCOME. For the nine months ended September 30, 2002, net
interest income was $47.5 million, an increase of $7.4 million, or 18.4%, over
the same period in 2001. This increase was due to increases in average balances
of both interest earning assets and liabilities offset by decreases in the
average rates of both interest earning assets and liabilities. Our net interest
margin was 4.21% for the nine months ended September 30, 2002, an increase of 6
basis points compared to the same period last year.

INTEREST INCOME. During the first nine months of 2002, interest income was
$67.3 million, a decrease of $3.3 million, or 4.7%, compared to $70.6 million
for the same period in 2001. The average rate for interest earning assets
decreased 17.6% or 125 basis point to 5.85%, while the average balance of
earning assets increased by 15.6% or $207.5 million to $1.53 billion.
Interest income on commercial loans decreased 5.7% to $29.4 million for the
nine months ended September 30, 2002, compared to $31.2 million for the same
period in 2001. Interest income from residential mortgage loans increased
22.9% to $25.7 million for the first nine months of 2002, compared to $20.9
million for the same period in 2001, and interest on home equity and other
loans decreased 17.6% to $3.7 million for the first nine months of 2002,
compared to $4.5 million for the same period in 2001. The average balance of
commercial loans increased 19.0% and the average rate decreased 20.8%, or 180
basis points to 6.9% for the nine months ended September 30, 2002. The
average balance of residential mortgage loans increased 36.9%, and the
average rate decreased 10.2%, or 72 basis points to 6.3% for the same period.
The average balance of home equity and other loans increased 8.6% and the
average rate decreased 24.2% or 197 basis points to 6.18% causing interest
earned on these loans to decrease to $3.7 million from $4.5 million.

Total investment income (consisting of interest and dividend income from
cash, federal funds sold, investment securities, mortgage-backed securities, and
stock in the FHLB of Boston) decreased $5.6 million, or 39.6% to $8.5 million
for the nine months ended September 30, 2002, compared to $14.1 million for the
same period in 2001. This decrease was primarily attributable to the decrease in
the average yield of investments of 165 basis points, or 33.2%, to 3.32%,
compounded with a decrease in the average balance of $36.0 million, or 9.6%, for
the nine months ended September 30, 2002.

INTEREST EXPENSE. During the first nine months of 2002, interest expense
was $19.8 million, a decrease of $10.7 million, or 35.1%, compared to $30.5
million for the same period in 2001. This decrease in our interest expense was
the result of a decrease in the average cost of interest-bearing liabilities of
167 basis points, or 44.1%, to 2.12% for the nine months ended September 30,
2002. This decrease was partially offset by an increase in the average balance
of interest-bearing liabilities of $172,000, or 16.1%, between the two periods.

PROVISION FOR LOAN LOSSES. The provision for loan losses was $1.9 million
for the nine months ended September 30, 2002, compared to $2.2 million for the
same period in 2001. These provisions reflect continued loan growth and a low
level of non-performing assets. We evaluate several factors including new loan
originations, estimated charge-offs, and risk characteristics of the loan
portfolio when determining the provision for loan losses. These factors include
the level and mix of loan growth, the level of non-accrual and delinquent loans,
and the level of charge-offs and recoveries. Also see discussion under
"FINANCIAL CONDITION - ALLOWANCE FOR LOAN LOSSES." Charge-offs net of recoveries
were $21,000 during the first nine months of 2002, compared to $43,000 in
recoveries, net of charge-offs, for the same period in 2001.

FEES AND OTHER INCOME. Fees and other income increased $1.7 million, or
4.5%, to $38.9 million for the nine month period ending September 30, 2002,
compared to $37.2 million for the same period in 2001. The majority of fee
income was attributable to investment management and trust fees earned on assets
under management.

Investment management and trust fees earned on assets under management
increased $202,000, or 0.7% to $28.9 million for the first nine months of 2002,
compared to $28.7 million for the same period in 2001. Assets under management
at September 30, 2002 increased 3.3% over the year earlier figure. However, when
assets under management are adjusted for those affiliates that bill in advance,
assets under management increased by 0.4%, consistent with the 0.7% increase in
fees.

Financial planning fees increased $897,000, or 24.9% to $4.5 million for
the first nine months of 2002, compared to $3.6 million for the same period in
2001. RINET had strong new business in the first nine months of this year as
well as a number of special projects.

21

Gain on sale of investment securities was $1.2 million for the first nine
months of 2002 compared to $1.7 million for 2001. The amount of security gains
recorded in the portfolios are dependent on current market conditions and the
status of the banks' balance sheets. Gain on sale of loans increased $839,000 to
$1.5 million for the first nine months of 2002. Of the total gain, $1.2 million
was due to individual fixed rate loans sold in the secondary market and $297,000
was a result of portfolio loans sold in the ordinary course of business. Boston
Private Bank sells virtually all of its fixed rate loans and periodically sells
loans out of portfolio to free up capital and adjust the balance sheet.

Cash administrative fees, which consist of cash management fees and liquid
asset management fees, were $630,000 for the nine months ended 2002 compared to
$887,000 for the same period in 2001. These fees have decreased, in part, due to
clients choosing to keep their assets in deposits rather than other cash
management products. Other fee income, which consists primarily of loan fees and
banking fees, increased $340,000 to $2.2 million for the first nine months of
2002.

OPERATING EXPENSE. Total operating expense for the first nine months of
2002 increased $6.5 million, or 12.9% to $58.1 million compared to $51.5 million
for the same period in 2001. This increase is due to our continued growth and
expansion. We experienced an 18.1% increase in total balance sheet assets, and a
12.9% increase in the number of employees from September 30, 2001 to September
30, 2002.

Salaries and benefits, the largest component of operating expense,
increased $4.7 million, or 13.9%, to $38.8 million for the nine months ended
September 30, 2002, from $34.1 million for the same period in 2001. This
increase was due to a 12.9% increase in the number of employees, normal salary
increases, and the related taxes and benefits thereon.

Occupancy and equipment expense increased $2.7 million, or 48.7%, to $8.3
million for the first nine months of 2002, from $5.6 million for the same period
last year. The increase was primarily attributable to the increased occupancy
expenses related to expansion at Ten Post Office Square, Boston, Massachusetts,
and the new banking offices in Cambridge, Massachusetts, Newton, Massachusetts
and Palo Alto, California as well as our continued investments in technology.

Professional services include legal fees, consulting fees, and other
professional services such as audit and tax preparation. These expenses
decreased $112,000, or 4%. This decrease is due to certain legal expenses
incurred in the prior year.

Marketing and business development increased $13,000, or 0.5%, to $2.5
million for the first nine months of 2002 as a result of increased business
development activity due to growth in sales staff offset by decreases in
marketing and advertising.

Contract services and processing, which are the costs associated for
custody and data processing, were flat as compared to the nine months ended
September 30, 2002

Amortization of goodwill was zero in 2002 and was $1,019,000 for the first
nine months of 2001. On January 1, 2002 we adopted FASB Statement 142. Statement
142 requires that goodwill no longer be amortized to earnings and that other
indefinite life intangibles also not be amortized.

Other expenses include insurance, supplies, telephone, mailing expense,
publications and subscriptions, employee training, interest on deferred
acquisition payments and other miscellaneous business expenses. These expenses
have increased $310,000, or 7.4%, to $4.5 million primarily as a result of
increased business volume, an increase in the number of employees., and
increased insurance costs.

INCOME TAX EXPENSE. We recorded income tax expense of $8.4 million for the
first nine months of 2002 as compared to $7.7 million for the same period last
year. The effective tax rate was 32.0% for the nine months of 2002, compared to
32.8% for the same period in 2001. The decrease in the Company's effective tax
rate is a result of a lower percentage of fully taxable income. See description
of pending tax matter in "RISK FACTORS AND FACTORS AFFECTING FORWARD LOOKING
STATEMENTS - BOSTON PRIVATE MAY OWE ADDITIONAL MASSACHUSETTS STATE TAXES" and
"LEGAL PROCEEDINGS."

22

RISK FACTORS AND FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE
ACT. BOSTON PRIVATE'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS QUARTERLY REPORT
ON FORM 10-Q. FACTORS WHICH MAY CAUSE SUCH A MATERIAL DIFFERENCE INCLUDE THOSE
SET FORTH BELOW. INVESTORS IN BOSTON PRIVATE'S COMMON STOCK SHOULD CAREFULLY
CONSIDER THE DISCUSSION OF RISK FACTORS BELOW, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q. REFERENCE TO "WE,"
"OUR," AND "US" REFER TO BOSTON PRIVATE AND ITS SUBSIDIARIES ON A CONSOLIDATED
BASIS.

WE MAY NOT BE ABLE TO ATTRACT AND RETAIN BANKING CUSTOMERS AT CURRENT LEVELS

Competition in local banking industries coupled with our relatively small
size may limit the ability of Boston Private Bank and Borel to attract and
retain banking customers. Boston Private Bank and Borel face competition from
the following:

- other banking institutions (including larger Boston and Northern
California and suburban commercial banking organizations);

- savings banks;

- credit unions;

- other financial institutions;

- non-bank financial service companies serving eastern Massachusetts,
Northern California and their respective adjoining areas; and

- out of state financial intermediaries that have opened loan production
offices or that solicit deposits in our market areas.

In particular, our competitors include several major financial companies
whose greater resources may afford them a marketplace advantage by enabling them
to maintain numerous banking locations and mount extensive promotional and
advertising campaigns. Additionally, banks and other financial institutions with
larger capitalization and financial intermediaries not subject to bank
regulatory restrictions have larger lending limits and are thereby able to serve
the credit and investment needs of larger customers. Areas of competition
include interest rates for loans and deposits, efforts to obtain deposits and
range and quality of services provided.

Because Boston Private Bank and Borel maintain smaller staffs and have
fewer financial and other resources than larger institutions with which they
compete, they may be limited in their ability to attract customers. In addition,
some of the current commercial banking customers may seek alternative banking
sources as they develop needs for credit facilities larger than Boston Private
Bank and Borel can accommodate.

If we are unable to attract and retain banking customers, we may be unable
to continue our loan growth and our results of operations and financial
condition may otherwise be negatively impacted.

WE MAY NOT BE ABLE TO ATTRACT AND RETAIN INVESTMENT MANAGEMENT CLIENTS AT
CURRENT LEVELS

Due to the intense local competition, Boston Private Bank, Borel and our
investment management subsidiaries, Westfield, Sand Hill, BPVI, and RINET, may
not be able to attract and retain investment management clients at current
levels. In the investment management industry, we compete primarily with the
following:

- commercial banks and trust companies;

- mutual fund companies;

- investment advisory firms;

23

- stock brokerage firms;

- law firms; and

- other financial services companies.

Competition is especially keen in our geographic market area, because there
are numerous well-established and successful investment management firms in
Boston, New England and Northern California.

Our ability to successfully attract and retain investment management
clients is dependent upon our ability to compete with our competitors'
investment products, level of investment performance, fees, client services and
marketing and distribution capabilities.

In addition, our ability to retain investment management clients may be
impaired by the fact that our investment management contracts are typically
short-term in nature. For the six months ended September 30, 2002, approximately
35% of our revenues were derived from investment management contracts which are
typically terminable upon 30 days' notice or less. Most of our clients may
withdraw funds from accounts under management generally in their sole
discretion.

Moreover, Westfield receives performance-based fees resulting from its
status as investment manager of four limited partnerships. The amount of these
investment performance fees is impacted directly by the investment performance
of Westfield. As a result, the future revenues from such fees may fluctuate and
may be affected by conditions in the capital markets and other general economic
conditions. Westfield, BPVI, RINET, and Sand Hill are our major investment
management subsidiaries, and their financial performance is a significant factor
in our overall results of operations and financial condition.

DEFAULTS IN THE REPAYMENT OF LOANS MAY NEGATIVELY IMPACT OUR BUSINESS

Defaults in the repayment of loans by our customers may negatively impact
our business. A borrower's default on its obligations under one or more of our
loans may result in lost principal and interest income and increased operating
expenses as a result of the allocation of management time and resources to the
collection and work-out of the loan.

If collection efforts are unsuccessful or acceptable work-out arrangements
cannot be reached, we may have to write-off the loan in whole or in part. In
such situations, Boston Private Bank and Borel may acquire any real estate or
other assets, if any, which secure the loan through foreclosure or other similar
available remedies. The amount owed under the defaulted loan often exceeds the
value of the assets acquired.

OUR ALLOWANCE FOR LOAN LOSSES MAY BE INADEQUATE

The respective management of Boston Private Bank and Borel periodically
make a determination of an allowance for loan losses based on available
information, including the quality of the loan portfolio, economic conditions,
the value of the underlying collateral and the level of non-accruing loans.
Increases in this allowance result in an expense for the period. If, as a result
of general economic conditions or an increase in defaulted loans, management
determines that additional increases in the allowance for loan losses are
necessary, Boston Private Bank or Borel may incur additional expenses.

In addition, bank regulatory agencies periodically review Boston Private
Bank's and Borel's respective allowances for loan losses and the values they
attribute to real estate acquired through foreclosure or other similar remedies.
Such regulatory agencies may require Boston Private Bank or Borel to adjust
their determination of the value for these items. These adjustments could
negatively impact our results of operations or financial position.

A DOWNTURN IN THE LOCAL ECONOMIES OR REAL ESTATE MARKETS COULD NEGATIVELY IMPACT
OUR BANKING BUSINESS

A downturn in the local economies or real estate markets could negatively
impact our banking business. Because Boston Private Bank and Borel serve
primarily individuals and smaller businesses located in Eastern Massachusetts
and adjoining areas, with a particular concentration in the greater Boston
metropolitan area, and Northern California, the ability of our customers to
repay their loans is impacted by the economic conditions in these areas.
Furthermore, current negative economic trends, including uncertainty regarding
an economic recovery, increased unemployment and recently announced significant
layoffs of employees by companies in Northern California and New England, as
well as continuing economic

24

uncertainty created by terrorist attacks, and the United States' war on
terrorism, may negatively impact businesses in Northern California and New
England. While the short-term and long-term effects of these events remain
uncertain, they could adversely affect general economic conditions, consumer
confidence or market liquidity, or result in changes in interest rates, any of
which could have a negative impact on our banking business.

The commercial loans are generally concentrated in the following customer
groups:

- real estate developers and investors;

- financial service providers;

- technology companies;

- manufacturing and communications companies;

- professional service providers;

- general commercial and industrial companies; and

- individuals.

Boston Private Bank and Borel commercial loans, with limited exceptions,
are secured by either real estate (usually, income producing residential and
commercial properties), marketable securities or corporate assets (usually,
accounts receivable, equipment or inventory). Our ability to continue to
originate real estate loans may be impaired by adverse changes in local and
regional economic conditions in the real estate markets, or by acts of nature,
including earthquakes and flooding. Due to the concentration of real estate
collateral, these events could have a material adverse impact on the value of
the collateral resulting in losses to either or both of Boston Private Bank and
Borel. Substantially all of Boston Private Bank's and Borel's residential
mortgage and home equity loans are secured by residential property in eastern
Massachusetts and Northern California. As a result, conditions in the real
estate markets specifically, and the Massachusetts and California economies
generally, can materially impact the ability of Boston Private Bank's and
Borel's borrowers to repay their loans and affect the value of the collateral
securing these loans.

ENVIRONMENTAL LIABILITY ASSOCIATED WITH COMMERCIAL LENDING COULD RESULT IN
LOSSES

In the course of business, Boston Private Bank and Borel may in the future
acquire, through foreclosure, properties securing loans they have originated or
purchased which are in default. Particularly in commercial real estate lending,
there is a risk that hazardous substances could be discovered on these
properties. In this event, we might be required to remove these substances from
the affected properties at our sole cost and expense. The cost of this removal
could substantially exceed the value of affected properties. We may not have
adequate remedies against the prior owner or other responsible parties, or could
find it difficult or impossible to sell the affected properties, which could
have a material adverse affect on our business, financial condition and
operating results.

FLUCTUATIONS IN INTEREST RATES MAY NEGATIVELY IMPACT OUR BANKING BUSINESS

Fluctuations in interest rates may negatively impact the business of Boston
Private Bank and Borel. 55.0% of consolidated revenues comes from net interest
income, which is equal to the difference between the interest income received on
interest-bearing assets (usually, loans and investment securities) and the
interest expense incurred in connection with interest-bearing liabilities
(usually, deposits and borrowings). These rates are highly sensitive to many
factors beyond our control, including general economic conditions, both domestic
and foreign, and the monetary and fiscal policies of various governmental and
regulatory authorities. Net interest income can be affected significantly by
changes in market interest rates and changes in the relationship between short
term and long term interest rates. Changes in relative interest rates may reduce
our net interest income as the difference between interest income and interest
expense decreases. We cannot assure that a change in interest rates will not
negatively impact our results from operations or financial position. Both banks
try to structure their balance sheets to minimize interest rate risk but changes
in interest rates may adversely impact our net interest margin.

25

An increase in interest rates could have a negative impact on our results
of operations by reducing the ability of borrowers to repay their current loan
obligations, which could not only result in increased loan defaults,
foreclosures and write-offs, but also necessitate further increases to our
allowances for loan losses. Specifically, Boston Private Bank and Borel are both
currently liability sensitive. This means that the interest-bearing liabilities
reprice faster than the interest-earning assets. As a result, during periods of
increasing interest rates, the results of operations may be negatively impacted.
Increases in interest rates also may reduce the demand for loans and, as a
result, the amount of loan and commitment fees. In addition, fluctuations in
interest rates may result in disintermediation, which is the flow of funds away
from depository institutions into direct investments that pay a higher rate of
return and may affect the value of our investment securities and other
interest-earning assets. The bank's employ interest floors on a portion of their
loan portfolios and prepayment penalties on some of the commercial loans at
Boston Private Bank and the commercial real estate loans at Borel to help manage
the interest margin in a falling-rate environment.

OUR COST OF FUNDS FOR BANKING OPERATIONS MAY INCREASE AS A RESULT OF GENERAL
ECONOMIC CONDITIONS, INTEREST RATES OR COMPETITIVE PRESSURES

Our cost of funds for banking operations may increase as a result of
general economic conditions, interest rates and competitive pressures. Boston
Private Bank and Borel have traditionally obtained funds principally through
deposits and through borrowings. 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. Historically and in
comparison to commercial banking averages, Boston Private Bank and Borel have
had a higher percentage of their time deposits in denominations of $100,000 or
more. Within the banking industry, the amounts of such deposits are generally
considered more likely to fluctuate than deposits of smaller denominations. If,
as a result of general economic conditions, market interest rates, competitive
pressures or otherwise, the value of deposits at Boston Private Bank and Borel
decrease relative to their overall banking operations, Boston Private Bank and
Borel may have to rely more heavily on borrowings as a source of funds in the
future, which may negatively impact our net interest margin.

OUR INVESTMENT MANAGEMENT BUSINESS MAY BE NEGATIVELY IMPACTED BY CHANGES IN
ECONOMIC AND MARKET CONDITIONS

Our investment management business may be negatively impacted by changes in
general economic and market conditions because the performance of such business
is directly affected by conditions in the financial and securities markets.

The financial markets and businesses operating in the securities industry
are highly volatile (meaning that performance results can vary greatly within
short periods of time) and are directly affected by, among other factors,
domestic and foreign economic conditions and general trends in business and
finance, all of which are beyond our control. We cannot assure you that broad
market performance will be favorable in the future. In particular, the financial
and securities markets have experienced a significant downturn since March 2000.
This decline has impacted our investment management business, in particular,
performance fees we earn on limited partnerships for which Westfield acts as a
manager. In addition, following the September 11, 2001 terrorist attacks on the
World Trade Center and the Pentagon, the world financial and securities markets
experienced significant and precipitous decline in value and will likely
continue to experience significant volatility as a result of, among other
things, world economic and political conditions. Continued decline in the
financial markets or a lack of sustained growth may result in a corresponding
decline in our performance and may adversely affect the assets which we manage.

Most of the investment management contracts generally provide for fees
payable for investment management services based on the market value of assets
under management, although, as noted above, a portion of Westfield's contracts
also provide for the payment of fees based on investment performance. Because
most contracts provide for fees based on market values of securities
fluctuations in securities prices may have a material adverse effect on our
results of operations and financial condition.

OUR INVESTMENT MANAGEMENT BUSINESS IS HIGHLY REGULATED

Our investment management business is highly regulated, primarily at the
federal level. Four of our subsidiaries, namely Westfield, Sand Hill, BPVI, and
RINET are registered investment advisers under the Investment Advisers Act of
1940, as amended. Two of our subsidiaries, Boston Private Bank and Borel, also
provide investment management services, but are regulated as banks and are not
required to register as investment advisors. Each of our subsidiaries providing
investment management services is subject to fiduciary laws. The Investment
Advisers Act imposes numerous obligations

26

on registered investment advisers, including fiduciary, record keeping,
operational and disclosure obligations. In addition, Westfield and Sand Hill act
as subadvisors or advisors to mutual funds which are registered under the
Investment Company Act of 1940 and are subject to that act's provisions and
regulations.

Our subsidiaries are also subject to the provisions and regulations of
ERISA to the extent they act as a "fiduciary" under ERISA with respect to
certain of our clients. ERISA and the applicable provisions of the federal tax
laws, impose a number of duties on persons who are fiduciaries under ERISA and
prohibit transactions involving the assets of each ERISA plan which is a client,
as well as certain transactions by the fiduciaries (and certain other related
parties) to such plans.

Applicable law provides that all investment contracts with mutual fund
clients may be terminated by the mutual fund without penalty, upon no later than
60 days' notice. Investment contracts with institutional and other clients are
typically terminable by the client, without penalty, upon 30 days' notice or
less.

The failure of any of our subsidiaries that provide investment management
services to comply with applicable laws or regulations could result in fines,
suspensions of individual employees or other sanctions, including revocation of
such subsidiary's registration as an investment adviser.

OUR BANKING BUSINESS IS HIGHLY REGULATED

Bank holding companies and state chartered banks operate in a highly
regulated environment and are subject to supervision and examination by federal
and state regulatory agencies. Boston Private Financial Holdings is subject to
the Bank Holding Company Act of 1956, and to regulation and supervision by the
Federal Reserve Board. Boston Private Bank, as a Massachusetts chartered trust
company, the deposits of which are insured by the FDIC, is subject to regulation
and supervision by the Massachusetts Commissioner of Banks and the FDIC. Borel,
as a California banking corporation, is subject to regulation and supervision by
the California Department of Financial Institutions and the FDIC. Federal and
state laws and regulations govern numerous matters including:

- changes in the ownership or control of banks and bank holding companies,

- maintenance of adequate capital and the financial condition of a
financial institution,

- permissible types,

- amounts and terms of extensions of credit and investments,

- maintenance of permissible non-banking activities,

- the level of reserves against deposits and

- restrictions on dividend payments

The FDIC, the DFI and the Massachusetts Commissioner of Banks possess cease
and desist powers to prevent or remedy unsafe or unsound practices or violations
of law by banks subject to their regulation, and the Federal Reserve Board
possesses similar powers with respect to bank holding companies. These and other
restrictions limit the manner in which we and Boston Private Bank and Borel may
conduct business and obtain financing.

Furthermore, our banking business is affected not only by general economic
conditions, but also by the monetary policies of the Federal Reserve Board.
Changes in monetary or legislative policies may affect the interest rates Boston
Private Bank and Borel must offer to attract deposits and the interest rates
they must charge on their loans, as well as the manner in which it offers
deposits and makes loans. These monetary policies have had, and are expected to
continue to have, significant effects on the operating results of depository
institutions generally including Boston Private Bank and Borel.

OUR BUSINESS AND RESULTS OF OPERATIONS MAY BE NEGATIVELY IMPACTED BY CERTAIN
RISKS INHERENT WITH THE ACQUISITION OF OTHER COMPANIES

We have in the past considered, and will in the future continue to
consider, the acquisition of other banking and investment management companies.
To the extent that we acquire other companies in the future, our business may be
negatively impacted by certain risks inherent with such acquisitions.

27

These risks include the following:

- the risk that we will incur substantial expenses in pursuing potential
acquisitions without consummating our acquisitions;

- the risk that the acquired business will not perform in accordance with
management's expectations;

- the risk that difficulties will arise in connection with the integration
of the operations of the acquired business with the operations of our
banking or investment management businesses, particularly to the extent
we are covering new geographic markets;

- the risk that management will divert its attention from other aspects of
our business;

- the risk that we may lose key employees of the acquired business;

- the risk that unanticipated costs or charges relating to potential
acquisitions could reduce our earnings per share;

- the risks associated with entering into geographic and product markets
in which we have limited or no direct prior experience; and

- the risks of the acquired company which we may assume as a result of the
acquisition.

As a result of these risks, any given acquisition, if and when consummated,
may adversely affect our results of operations or financial condition. In
addition, because the consideration for an acquisition may involve cash, debt or
the issuance of shares of our stock and may involve the payment of a premium
over book and market values, existing shareholders may well experience dilution
in connection with any acquisition.

In addition, we are likely to record goodwill and other intangible assets
in connection with the acquisition of other companies. Under Financial
Accounting Standards Board Statement No. 142, goodwill and identifiable
intangible assets with indefinite lives will no longer be amortized, but will be
reviewed at least annually for impairment. Impairment may result from, among
other things, deterioration in performance of the acquired company, adverse
market conditions, adverse changes in applicable laws or regulations, including
changes that restrict the activities of the acquired business, and a variety of
other circumstances. We evaluated our recorded goodwill as of January 1, 2002,
and concluded that there was no impairment as of that date. Goodwill recorded
prior to implementation of Statement 142 in January 2002, contains certain
intangible assets that were not separately stated at that time. Should the
goodwill of a business segment be impaired, recognition of the related
intangible assets, if applicable, would not be permitted under Statement 142 and
would likely be included in the aggregate amount of any impairment loss. In the
event that we incur an impairment loss in the future, such loss could have a
material adverse effect on our consolidated financial results for the period in
which such charge is taken.

ADVERSE DEVELOPMENTS IN LITIGATION COULD NEGATIVELY IMPACT OUR BUSINESS

Since 1984, Borel has served as the trustee of a private trust that has
been the subject of protracted litigation. During the last eight years there
have been three actions filed in the Superior Court for San Mateo County,
California, by certain beneficiaries of the trust relating to the management and
proposed sale of certain real property. These beneficiaries have claimed, among
other things, that Borel breached its fiduciary duties as the trustee. Borel has
prevailed in the first action and final judgment has been entered in its favor.
Borel has prevailed in the trial court in the second action and a final decision
was issued in favor of Borel; however, the plaintiff beneficiaries made a number
of filings following the trial court's decision including a notice of appeal,
from the judgment on the merits. The plaintiff beneficiaries' motions for a new
trial and for a preliminary injunction were denied. While the plaintiffs filed a
notice of appeal from the denial of the preliminary injunction, this appeal was
rendered moot by the consummation of sale and settlement agreements with UNOCAL
on July 2, 2002. The third action has been held in abeyance by the trial court
for several years pending disposition of the first two matters. Adverse
developments in these lawsuits could have a material adverse effect on Borel's
business or the combined business of our banks. For a more detailed description
of this litigation, see "Legal Proceedings."

BOSTON PRIVATE BANK MAY OWE ADDITIONAL MASSACHUSETTS STATE TAXES

Boston Private Preferred Capital Corporation is a real estate investment
trust, 99.9% of which is owned by Boston Private Bank. Boston Private Bank
has received notice of assessment from the DOR for tax years ended December
31, 1999, 2000 and 2001. We are aware that the DOR has sent similar notices
to numerous other financial institutions in Massachusetts that reported a
deduction for dividends received from a real estate investment trust on their
Massachusetts financial institution excise tax returns.

28

The DOR contends that dividend distributions by Boston Private Preferred
Capital Corporation to Boston Private Bank are fully taxable in Massachusetts.
We believe that the Massachusetts statute that provides for a dividends received
deduction equal to 95% of certain dividend distributions applies to the
distributions made by Boston Private Preferred Capital Corporation to Boston
Private Bank. Accordingly, we have made no provision in our financial statements
for the amounts assessed or additional amounts that might be assessed in the
future. If the DOR is able to assess such additional state excise taxes or The
Commonwealth of Massachusetts amends the relevant state tax laws, Boston Private
Bank's results of operations may be adversely affected. We intend to vigorously
appeal the assessment and to pursue all available means to defend our position.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

For information related to this item, see the Company's December 31, 2001
Form 10-K, Item 7A - Interest Rate Sensitivity and Market Risk. No material
changes have occurred since that date.

ITEM 4. CONTROLS AND PROCEDURES

(a) BPFH has established and maintains disclosure controls and procedures
designed to ensure that the information required to be disclosed in
its filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported on a timely basis. Within 90 days
prior to the filing date of this report, under the supervision and
with the participation of BPFH's Chief Executive Officer and the Chief
Financial Officer, BPFH has evaluated the effectiveness of its
disclosure controls and procedures. Based on that evaluation, the CEO
and CFO concluded that BPFH's disclosure controls and procedures were
effective as of the date of evaluation.

(b) There were no significant changes in BPFH's internal controls or in
other factors that could significantly affect those controls
subsequent to the date of the evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 7, 2000, Westfield received correspondence on behalf of a former
client, the Retirement Board of Allegheny County (the "plaintiff"), claiming
that Westfield is responsible for investment underperformance of allegedly $5.1
million when compared to the plaintiff's performance targets. On January 11,
2001, a pleading was filed in Pennsylvania state court on behalf of the
plaintiff stating that an action has been commenced against the subsidiary, but
containing no allegations.

On or around May 3, 2002, over a year following the filing of the praecipe
(a writ), and three years after the relevant events alleged in the Complaint,
the Retirement Board of Allegheny County filed a complaint against Westfield,
among others, alleging breach of contract and other common law duties. The
complaint alleges that a former employee of Westfield failed to uphold his
contractual and common law obligations to invest Allegheny County retirement
funds with proper care and diligence, resulting in an alleged opportunity loss
of approximately $4 million due to under-performance of a benchmark in 1998.
Notwithstanding that the fund managed by Westfield under the terms of the
governing contract made significant gains above the Board's initial investment,
the Board brought the action for an alleged opportunity loss. The complaint does
not identify what conduct constituted the alleged breach. Westfield moved to
dismiss the Complaint on the ground, inter alia, that the Complaint contains no
allegations as to how the former employee breached the contract between the
parties or his fiduciary duty to the Board. The Complaint merely contains
conclusory allegations of a breach without alleging what conduct constituted the
breach. Hearing on the motion took place on August 27, 2002. Motion was granted,
in part. The plantiff's unfair trade practices claim, by which treble damages
are potentially available, was dismissed. Westfield will continue to defend this
claim vigorously.

Since 1984, Borel has served as the trustee of a private family trust known
as the Andre LeRoy Trust. There have been three actions involving Borel relating
to the management and proposed sale of certain real property (known as the
Guadalupe Oil Field), owned by the Andre LeRoy Trust and another private family
trust (for which Bankers Trust is the trustee). In the first action ("Removal
Action"), certain beneficiaries of the Andre LeRoy Trust, petitioned for removal
of Borel as trustee, claiming that Borel had breached its fiduciary duties
concerning the management of oil and gas leases, and, following discovery of
environmental contamination of the property, negotiating a proposed Settlement
Agreement and

29

Purchase and Sale Agreement to sell the Guadalupe Oil Field to Union Oil Company
of California (d/b/a UNOCAL), the operator of the Guadalupe Oil Field.

In the second action ("Approval Action"), Borel requested court approval of
the proposed Settlement Agreement and Purchase and Sale Agreement. Borel
prevailed in both the Removal Action and Approval Action in the trial court, and
plaintiffs appealed those decisions. In February 2001, the California Court of
Appeals affirmed the findings and decisions of the trial court in the Removal
Action and remanded the Approval Action for limited reconsideration by the trial
court. Final judgment in the Removal Action was entered in favor of Borel in
March 2001. Following the trial court's decision, plaintiff beneficiaries made a
number of filings (1) a motion for a new trial, which was denied by the trial
court; (2) a notice of appeal from the judgment on the merits in the Approval
Action (3) a motion for preliminary injunction seeking to enjoin the closing of
the settlement with UNOCAL and the sale of the Guadalupe Oil Field to UNOCAL,
which was denied by the trial court as well; (4) a notice of appeal from the
denial of the preliminary injunction; and (5) a Petition for a Writ of
Supersedeas seeking the same injunction, in effect, from the Court of Appeals,
which was denied. The transactions contemplated by the Purchase and Sale
Agreement and Settlement Agreement with UNOCAL closed on July 2, 2002, which
rendered the appeal from the denial of the injunction moot. Plaintiff's appeal
from the adverse judgment on the merits in the trial court remains pending.

On March 18, 2002, on remand in the Approval Action, the trial court issued
a statement of decision confirming its decision in favor of Borel approving the
proposed Settlement Agreement and Purchase and Sale Agreement. On April 23,
2002, the plaintiff beneficiaries filed a notice of intention to file for a new
trial. No date for a hearing or decision has been yet scheduled.

In the third action ("Damages Action"), the same plaintiff beneficiaries
claimed damages against Borel and Deutsche Bank for alleged mismanagement of the
Andre LeRoy Trust and the other family trust in connection with oil and gas
leases and the proposed sale of the Guadalupe Oil Field. In the Damages Action,
plaintiffs claimed damages of $234.2 million, but that amount was
unsubstantiated and the component elements of damages plaintiffs identified did
not total that amount. In the trial of the Approval Action, plaintiffs submitted
expert testimony of damages in the amount of $102 million, but the court found
such evidence unpersuasive.

Borel will continue to vigorously litigate the remaining matters. While the
ultimate results of these proceedings cannot be predicted with certainty, at the
present time, Borel's management, based on consultation with legal counsel,
believes there is no basis to conclude that liability with respect to these
matters is probable or that such liability can be reasonably estimated.

The Company is also involved in routine legal proceedings occurring in the
ordinary course of business. In the opinion of management, final disposition of
these proceedings will not have a material adverse effect on the financial
condition or results of operations of the Company.

Boston Private Bank has received assessment notices from the DOR for tax
years ended December 31, 1999, 2000 and 2001. The DOR contents that, under
Massachusetts law, dividend distributions to Boston Private Bank from its
REIT are fully taxable. We are aware that the DOR has sent similar notices to
numerous other financial institutions in Massachusetts that reported a
deduction for dividends received from a real estate investment trust on their
respective 1999 and 2000 Massachusetts financial institution excise tax
returns. Assessed amounts (including interest) ultimately paid, if any, would
be deductible expenses for federal income tax purposes. We intend to
vigorously appeal the assessment and to pursue all available means to defend
our position.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS

None

30

ITEM 5. OTHER INFORMATION

On September 19, 2002 the Company announced that it had entered into a
definitive agreement to purchase a 26.4% interest in Coldstream Capital
Management, Inc. of Bellevue, Washington. Coldstream Capital is a multi-client
family office that provides comprehensive wealth management services to high net
worth private clients. Coldstream's managing directors - Kevin Fitzwilson, Don
Gher and Roger Reynolds - will continue to lead the company. Boston Private's
vice chairman, C. Michael Hazard, will represent Boston Private on Coldstream's
board of directors. The closing of this transaction is subject to customary
closing conditions for transactions of this type, including regulatory approvals
and is expected to occur in the fourth quarter of 2002.

Founded in 1996, Coldstream Capital Management, Inc. directly managed over
$400 million in client assets as of August 31, 2002. Coldstream's comprehensive
wealth management platform integrates internal investment management, asset
allocation and financial planning expertise with external service providers such
as CPA firms and estate planners to deliver an integrated solution to their
clients' financial objectives.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.
None.

(b) Reports on Form 8-K
None

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
(Registrant)

November 13, 2002 /s/ Timothy L. Vaill
---------------------------------------
Timothy L. Vaill
Chairman and Chief
Executive Officer

November 13, 2002 /s/ Walter M. Pressey
---------------------------------------
Walter M. Pressey
President and
Chief Financial Officer

32

CERTIFICATIONS

I, Timothy L Vaill, Chairman and Chief Executive Officer of Boston Private
Financial Holdings, Inc. certify that:

1. I have reviewed this quarterly report on Form 10-Q of Boston Private
Financial Holdings, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002 By: /s/ Timothy L. Vaill
--------------------
Timothy L. Vaill
Chairman and Chief
Executive Officer

33

I, Walter M. Pressey, President and Chief Financial Officer of Boston Private
Financial Holdings, Inc. certify that:

1. I have reviewed this quarterly report on Form 10-Q of Boston Private
Financial Holdings, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and

c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a. All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002 By: /s/ Walter M. Pressey
---------------------
Walter M. Pressey
President and
Chief Financial Officer

34