BOSTON PRIVATE FINANCIAL HOLDINGS INC - 10-Q Quarterly Report

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TABLE OF CONTENTS

As filed with the Securities and Exchange Commission on August 14, 2003

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission File Number: 0-17089

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

Commonwealth of Massachusetts (State or other jurisdiction of incorporation or organization)		04-2976299 (I.R.S. Employer Identification Number)
Ten Post Office Square Boston, Massachusetts (Address of principal executive offices)		02109 (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 ý No o

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act) Yes ý No o

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of July 31, 2003:

Common Stock—Par Value $1.00
(class)

22,726,227 shares
(outstanding)

BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
FORM 10-Q

TABLE OF CONTENTS

		PAGE
Cover Page		1
Index		2
PART I—FINANCIAL INFORMATION
Item 1 Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Changes in Stockholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7-14
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations		15-28
	Risk Factors and Factors Affecting Forward-Looking Statements	29-35
Item 3 Quantitative and Qualitative Disclosures about Market Risk		35
Item 4 Controls and Procedures		35
PART II—OTHER INFORMATION
Item 1 Legal Proceedings		36-37
Item 2 Changes in Securities and Use of Proceeds		37
Item 3 Defaults upon Senior Securities		38
Item 4 Submission of Matters to a Vote of Security Holders		38
Item 5 Other Information		38
Item 6 Exhibits and Reports on Form 8-K		39
Signature Page		40
Certifications		41-44

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

				June 30, 2003			December 31, 2002
				(Unaudited)
				(In thousands, except share data)
Assets:
	Cash and due from banks			$	70,950		$	53,032
	Federal funds sold and other short term investments				49,200			44,497

	Cash and cash equivalents				120,150			97,529
	Money market investments				30,200			35,200
	Investment securities available for sale (cost of $352,922 and $280,054, respectively)				360,260			287,534
	Loans held for sale				21,440			30,923
	Loans receivable:
		Commercial			764,225			676,189
		Residential mortgage			574,728			544,166
		Home equity and other consumer loans			77,708			81,371

			Total loans		1,416,661			1,301,726
	Less: allowance for loan losses				(18,488	)		(17,050	)

			Net loans		1,398,173			1,284,676
	Stock in the Federal Home Loan Bank				9,203			8,126
	Premises and equipment, net				14,182			13,528
	Goodwill				16,981			16,542
	Intangible Assets				2,400			1,465
	Fees receivable				9,077			6,880
	Accrued interest receivable				8,226			7,658
	Other assets				33,681			30,680

			Total assets	$	2,023,973		$	1,820,741

Liabilities:
	Deposits			$	1,569,846		$	1,400,333
	FHLB borrowings				167,610			145,339
	Securities sold under agreements to repurchase				77,700			73,050
	Accrued interest payable				1,998			2,171
	Other liabilities				31,041			32,466

			Total liabilities		1,848,195			1,653,359

Stockholders' equity:
	Common stock, $1.00 par value per share; authorized: 70,000,000 shares issued: 22,690,718 shares at June 30, 2003 and 22,548,591 shares at December 31, 2002				22,691			22,549
	Additional paid-in capital				76,515			74,342
	Retained earnings				72,026			65,725
	Accumulated other comprehensive income				4,546			4,766

			Total stockholders' equity		175,778			167,382

			Total liabilities and stockholders' equity	$	2,023,973		$	1,820,741

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

			Three Months Ended June 30,				Six Months Ended June 30,
			2003		2002		2003		2002
			(In thousands, except share and per share data)
Interest and dividend income:
	Loans		$	20,383	$	19,724	$	40,188	$	38,424
	Taxable investment securities			1,524		1,583		3,219		3,400
	Non-taxable investment securities			1,168		863		1,908		1,777
	Mortgage-backed securities			12		23		27		53
	FHLB stock dividends			78		55		139		123
	Federal funds sold and other			257		119		385		231

		Total interest and dividend income		23,422		22,367		45,866		44,008

Interest expense:
	Deposits			4,181		4,612		8,291		9,259
	FHLB borrowings			2,013		1,674		3,839		3,251
	Securities sold under agreements to repurchase and other			218		177		418		395

		Total interest expense		6,412		6,463		12,548		12,905

		Net interest income		17,010		15,904		33,318		31,103
Provision for loan losses				770		555		1,549		1,235

		Net interest income after provision for loan losses		16,240		15,349		31,769		29,868

Fees and other income:
	Investment management and trust			11,387		9,864		21,236		19,759
	Financial planning fees			1,765		1,571		3,302		3,046
	Equity in earnings of partnerships			55		—		150		(18	)
	Deposit account service charges			220		217		459		406
	Gain on sale of loans			793		610		1,584		881
	Gain on sale of investment securities			444		147		1,519		563
	Cash administration fees			162		193		376		414
	Other			637		505		1,325		1,111

		Total fees and other income		15,463		13,107		29,951		26,162

Operating expense:
	Salaries and employee benefits			14,985		12,813		29,266		25,645
	Occupancy and equipment			3,678		2,906		8,970		5,425
	Professional services			1,120		914		2,152		1,736
	Marketing and business development			938		904		1,854		1,734
	Contract services and processing			392		315		853		714
	Amortization of intangibles			48		5		88		10
	Other			1,470		1,243		3,584		2,932

		Total operating expense		22,631		19,100		46,767		38,196

		Income before income taxes		9,072		9,356		14,953		17,834
	Income tax expense			1,589		3,072		6,390		5,767

		Net income	$	7,483	$	6,284	$	8,563	$	12,067

Per share data:
	Basic earnings per share		$	0.33	$	0.28	$	0.38	$	0.54

	Diluted earnings per share		$	0.32	$	0.27	$	0.37	$	0.52

	Average common shares outstanding			22,659,682		22,376,940		22,639,090		22,342,268
	Average diluted shares outstanding			23,405,023		23,516,722		23,348,957		23,426,970

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDARIES

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

		Common Stock		Additional Paid-in Capital		Unearned Compensation			Retained Earnings			Accumulated Comprehensive Income (Loss)			Total
Balance at December 31, 2001		$	22,241	$	70,611	$	—		$	45,562		$	1,217		$	139,631
	Net income		—		—		—			12,067			—			12,067
	Comprehensive income, net:
	Change in unrealized gain (loss) on securities available for sale		—		—		—			—			1,381			1,381

	Total comprehensive income															13,448
	Dividends paid to shareholders		—		—		—			(1,785	)		—			(1,785	)
	Proceeds from issuance of 48,916 shares of common stock		49		563		—			—			—			612
	Stock options exercised		107		1,466		—			—			—			1,573

Balance at June 30, 2002		$	22,397	$	72,640	$	—		$	55,844		$	2,598		$	153,479

Balance at December 31, 2002		$	22,549	$	74,342	$	—		$	65,725		$	4,766		$	167,382
	Net income		—		—		—			8,563			—			8,563
Comprehensive income, net:
Change in unrealized gain (loss) on securities available for sale			—		—		—			—			(220	)		(220	)

	Total comprehensive income															8,343
	Dividends paid to shareholders		—		—		—			(2,262	)		—			(2,262	)
	Issuance of 61,012 shares of common stock		61		1,064		—			—			—			1,125
	Issuance of 43,900 shares of incentive common stock		43		706		(749	)								—
	Amortization of unearned compensation						97									97
	Stock options exercised		38		1,055					—			—			1,093

Balance at June 30, 2003		$	22,691	$	77,167	$	(652	)	$	72,026		$	4,546		$	175,778

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

				Six Months Ended June 30,
				2003			2002
				(In thousands)
Cash flows from operating activities:
	Net income
	Adjustments to reconcile net income to net cash from operating activities:			$	8,563		$	12,067
	Depreciation and amortization of fixed assets, intangible assets and unearned compensation				1,866			1,291
	Amortization of investment premiums (discounts) and loan origination costs (fees)				(3,203	)		206
	Gain on sale of loans				(1,584	)		(881	)
	Gain on sale of investment securities				(1,519	)		(563	)
	Provision for loan losses				1,549			1,235
	Distributed (undistributed) earnings of partnership investments				(7	)		113
	Loans originated for sale				(160,872	)		(69,301	)
	Proceeds from sale of loans held for sale				171,938			70,182
	(Increase) decrease in:
		Fees receivable			(2,197	)		—
		Accrued interest receivable			(568	)		(509	)
		Other assets			(3,074	)		(3,782	)
	Increase (decrease) in:
		Accrued interest payable			(173	)		(582	)
		Other liabilities			(2,889	)		(2,918	)

			Net cash provided (used) by operating activities		7,830			6,558

Cash flows from investing activities:
	Net decrease (increase) in money market mutual fund				5,000			34,151
	Investment securities available for sale:
		Purchases			(162,884	)		(77,640	)
		Sales			53,587			41,215
		Maturities			40,427			26,197
	Net decrease (increase) in loans				(114,288	)		(136,864	)
	Purchase of FHLB stock				(1,077	)		(455	)
	Charge-offs net of recoveries				(35	)		(25	)
	Capital expenditures				(2,335	)		(3,028	)

			Net cash provided (used) by investing activities		(181,605	)		(116,449	)

Cash flows from financing activities:
	Net increase (decrease) in deposits				169,513			181,360
	Net increase (decrease) in repurchase agreements				4,650			(5,500	)
	Net increase (decrease) in federal funds purchased				—			(5,606	)
	FHLB advance proceeds				24,000			23,362
	FHLB advance repayments				(1,729	)		(14,873	)
	Dividends paid to stockholders				(2,262	)		(1,785	)
	Proceeds from issuance of common stock				2,218			1,573

			Net cash provided (used) by financing activities		196,390			178,531

	Net increase (decrease) in cash and due from banks				22,615			68,640
	Cash and cash equivalents at beginning of year				97,530			58,281

	Cash and cash equivalents at end of period			$	120,145		$	126,921

Supplementary disclosures of cash flow information:
	Cash paid during the period for interest			$	12,721		$	11,578
	Cash paid during the period for income taxes				9,507			5,585

See accompanying notes to consolidated financial statements.

BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Basis of Presentation and Summary of Significant Accounting Policies

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 ("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, and Boston Private Preferred Capital Corporation. Borel's consolidated financial statements include the accounts of its wholly-owned subsidiary Borel Private Capital Corporation. In addition, the Company holds a 27% minority interest in Coldstream Holdings, Inc. ("Coldstream Holdings"). Coldstream Holdings is the parent of Coldstream Capital Management Inc., a registered investment advisor in Bellevue, Washington. The Company conducts substantially all of its business through its wholly-owned subsidiaries, Boston Private Bank, Borel (together, the "Banks"), Westfield, Sand Hill, BPVI and RINET. 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, 2002 Annual Report to Shareholders. Certain prior year information has been reclassified to conform to current year presentation.

The Company's significant accounting policies are described in Note 3 of the notes to the consolidated financial statements in its form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows the same significant accounting policies.

Incentive Plans

The Company applied APB No. 25 in accounting for stock options which measures compensation cost for stock based compensation plans as the difference between the exercise price of the options granted and the fair market value of the Company's stock at the grant date. This generally does not result in any compensation charged to earnings. Below, the Company discloses pro forma net income and earnings per share as if compensation was measured at the date of grant based on the fair value of the award and recognized over the service period. This is required by SFAS No. 123 for all companies that elect to continue using APB Opinion No. 25 for stock option grants. As further noted in "Recent Accounting Pronouncements", the Company has adopted certain provisions of SFAS No. 148, which is

an amendment to SFAS No. 123 and allows for alternative methods of adopting fair value based compensation on stock grant options.

		Three Months Ended				Six Months Ended
		June 30, 2003		June 30, 2002		June 30, 2003		June 30, 2002
Net income:
	As reported	$	7,483	$	6,284	$	8,563	$	12,067
	Stock-based employee and director compensation expense, net of related tax effects		721		577		1,240		1,623

	Pro-forma	$	6,762	$	5,707	$	7,323	$	10,444

Basic earnings per share:
	As reported	$	0.33	$	0.28	$	0.38	$	0.54
	Pro-forma	$	0.30	$	0.26	$	0.32	$	0.47
Diluted earnings per share:
	As reported	$	0.32	$	0.27	$	0.37	$	0.52
	Pro-forma	$	0.29	$	0.24	$	0.31	$	0.45

(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:

		Three Months Ended June 30,						Three Months Ended June 30,
		2003						2002
		Income		Shares	Per Share Amount			Income		Shares	Per Share Amount
		(In thousands, except per share amounts)
Basic EPS
	Net Income	$	7,483	22,660	$	0.33		$	6,284	22,377	$	0.28
Effect of Dilutive Securities
	Stock Options		—	745	($	0.01	)		—	1,140	($	0.01	)

Diluted EPS
	Net Income	$	7,483	23,405	$	0.32		$	6,284	23,517	$	0.27

		Six Months Ended June 30,						Six Months Ended June 30,
		2003						2002
		Income		Shares	Per Share Amount			Income		Shares	Per Share Amount
		(In thousands, except per share amounts)
Basic EPS
	Net Income	$	8,563	22,639	$	0.38		$	12,067	22,342	$	0.54
Effect of Dilutive Securities
	Stock Options		—	710	($	0.01	)		—	1,085	($	0.02	)

Diluted EPS
	Net Income	$	8,563	23,349	$	0.37		$	12,067	23,427	$	0.52

(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 offers its clients a broad range of basic deposit services, including checking and savings accounts, with automated teller machine access, and cash management services through sweep accounts and repurchase agreements. 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 safekeeping services, trust and estate administration and IRA and Keogh accounts.

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 serves the investment management needs of pension funds, endowments and foundations, mutual funds and high net worth individuals throughout the U.S. and abroad. Westfield specializes in separately managed domestic growth equity portfolios in all areas of the capitalization spectrum and acts as the investment manager for several limited partnerships.

Sand Hill provides wealth management services to high net worth investors and select institutions in Northern California. The firm manages investments covering a wide range of asset classes for both taxable and tax-exempt portfolios and has special expertise in transitional wealth counsel.

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

RINET provides fee-only financial planning, tax planning and investment management services 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 and mutual fund investing. It also provides an independent mutual fund rating service.

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.

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 June 30, 2003 and 2002.

			For the Three Months Ended June 30, 2003
Income statement data			For the Three Months Ended June 30, 2003
Income statement data			BPBTC		Borel		WCM		RINET			SHA			BPVI		BPFH			Inter-segment			Total
			(In thousands)
Revenues from customers
	Net interest income		$	11,553	$	5,397	$	10	$	(1	)	$	(3	)	$	1	$	53		$	—		$	17,010
	Non-interest income			4,246		1,097		6,482		1,713			949			997		(11	)		(10	)		15,463

		Total revenues		15,799		6,494		6,492		1,712			946			998		42			(10	)		32,473
Provision for loan loss				500		270		—		—			—			—		—			—			770
Non-interest expense				9,418		3,491		4,027		1,377			974			870		2,484			(10	)		22,631
Income Taxes				394		964		1,031		140			(18	)		54		(976	)		—			1,589

Segment Profit			$	5,487	$	1,769	$	1,434	$	195		$	(10	)	$	74	$	(1,466	)		—		$	7,483

Segment Assets			$	1,480,092	$	507,074	$	11,837	$	2,752		$	14,649		$	4,797	$	20,356		$	(17,584	)	$	2,023,973

			For the Three Months Ended June 30, 2002
Income statement data			For the Three Months Ended June 30, 2002
Income statement data			BPBTC		Borel		WCM		RINET			SHA		BPVI		BPFH			Inter-segment			Total
			(In thousands)
Revenues from customers
	Net interest income		$	11,273	$	4,616	$	9	$	(4	)	$	4	$	2	$	4		$	—		$	15,904
	Non-interest income			3,747		920		4,874		1,567			1,108		950		(59	)		—			13,107

		Total revenues		15,020		5,536		4,883		1,563			1,112		952		(55	)		—			29,011
Provision for loan loss				375		180		—		—			—		—		—			—			555
Non-interest expense				8,383		2,691		3,146		1,210			1,030		713		1,927			—			19,100
Income Taxes				1,774		1,042		726		145			47		94		(756	)		—			3,072

Segment Profit			$	4,488	$	1,623	$	1,011	$	208		$	35	$	145	$	(1,226	)		—		$	6,284

Balance Sheet Data:
Segment Assets			$	1,254,359	$	414,229	$	9,061	$	2,485		$	14,459	$	3,108	$	17,722		$	(15,819	)	$	1,699,604

The following tables are a reconciliation of the revenues, net income, assets, and other significant items of reportable segments as of and for the six months ended June 30, 2003 and 2002.

			For the Six Months Ended June 30, 2003
Income statement data			For the Six Months Ended June 30, 2003
Income statement data			BPBTC		Borel		WCM		RINET			SHA			BPVI		BPFH			Inter-segment			Total
			(In thousands)
Revenues from customers
	Net interest income		$	22,788	$	10,419	$	20	$	(1	)	$	(2	)	$	2	$	92		$	—		$	33,318
	Non-interest income			9,024		2,353		11,511		3,221			1,850			1,990		19			(17	)		29,951

		Total revenues		31,812		12,772		11,531		3,220			1,848			1,992		111			(17	)		63,269
Provision for loan loss				1,009		540		—		—			—			—		—			—			1,549
Non-Interest expense				19,177		6,723		7,462		2,734			2,119			1,694		6,875			(17	)		46,767
Income Taxes				5,146		1,937		1,702		203			(114	)		123		(2,607	)		—			6,390

Segment Profit			$	6,480	$	3,572	$	2,367	$	283		$	(157	)	$	175	$	(4,157	)		—		$	8,563

Segment Assets			$	1,480,092	$	507,074	$	11,837	$	2,752		$	14,649		$	4,797	$	20,356		$	(17,584	)	$	2,023,973

			For the Six Months Ended June 30, 2002
Income statement data			For the Six Months Ended June 30, 2002
Income statement data			BPBTC		Borel		WCM		RINET			SHA		BPVI		BPFH			Inter-segment			Total
			(In thousands)
Revenues from customers
	Net interest income		$	22,237	$	8,836	$	18	$	(8	)	$	7	$	4	$	9		$	—		$	31,103
	Non-interest income			7,378		1,931		9,738		3,041			2,242		1,889		(57	)		—			26,162

		Total revenues		29,615		10,767		9,756		3,033			2,249		1,893		(48	)		—			57,265
Provision for loan loss				875		360		—		—			—		—		—			—			1,235
Non-interest expense				16,431		5,120		6,332		2,456			2,093		1,425		4,339			—			38,196
Income Taxes				3,453		2,118		1,432		236			64		183		(1,719	)		—			5,767

Segment Profit			$	8,856	$	3,169	$	1,992	$	341		$	92	$	285	$	(2,668	)		—		$	12,067

Segment Assets			$	1,254,359	$	414,229	$	9,061	$	2,485		$	14,459	$	3,108	$	17,722		$	(15,819	)	$	1,699,604

4) Excess of Cost over Net Assets Acquired (Goodwill) and Intangible Assets

An analysis of the activity in goodwill and intangible assets:

	Identified Intangibles
	Identified Intangibles									Goodwill
				Boston Private Bank Other Intangibles						Goodwill
	Total Intangibles			Boston Private Bank Other Intangibles			BPVI Advisory Contracts			Total Goodwill			Boston Private Bank		Sand Hill			BPVI
	(In thousands)
Balance as of December 31, 2001	$	159		$	159			—		$	17,048		$	2,286	$	14,449		$	313
Adjust estimated deferred purchase price		—			—			—			(1,104	)		—		(1,104	)		—
Advisory contracts and business acquired		1,214			—			1,214			520			—		—			520
Amortization		(10	)		(10	)		—			—			—		—			—

Balance as of June 30, 2002	$	1,363		$	149		$	1,214		$	16,464		$	2,286	$	13,345		$	833

Balance as of December 31, 2002		1,465			141		$	1,324		$	16,542		$	2,286	$	13,345		$	911
Advisory contracts and business acquired		1,023			—			1,023			439			—		—			439
Amortization		(88	)		(10	)		(78	)		—			—		—			—

Balance as of June 20, 2003	$	2,400		$	131			2,269		$	16,981		$	2,286	$	13,345		$	1,350

Investment advisory contracts are being amortized on a straight-line basis over their estimated useful life of 10 years and other intangibles are being amortized over a 15 year life. The estimated annual amortization expense for the intangibles above for the next five years is $297,000 per year, an aggregate of $1.5 million over five years. The goodwill is expected to be deductible for tax purposes.

5) Recent Accounting Developments

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company adopted the provisions of Statement No. 146 for all disposal activities initiated after December 31, 2002. In the first quarter of 2003, the Company established a reserve of $1.3 million, after tax, or $.06 per share, for a current lease on Sand Hill Road in Menlo Park, California. The Company has consolidated its operations into a newer facility in Palo Alto. The lease on the Menlo Park space expires in 2008; the remaining payments will total $4.2 million. This charge-off reflects the Company's estimate of the fair value of these remaining lease payments reduced by the estimated sublease rental income that could reasonably be obtained for the property. In the second quarter of 2003, an agreement was reached with the landlord to purchase the lease and terminate the Company's lease agreement in Menlo Park, California. Additional lease abandonment costs of $226,000, net of tax, were incurred in connection with this agreement. This agreement will extinguish the reserve established in the first quarter of 2003. See Management's Discussion and Analysis of Financial Condition and Results of Operation—Lease Accrual.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others." Disclosures

related to this interpretation are effective for 2002 annual reports, and the accounting requirements are effective January 1, 2003, and require all guarantees and indemnifications within its scope to be recorded at fair value as liabilities, and the maximum possible loss under these guarantees and indemnifications to be disclosed.

The Banks have issued standby letters of credit where the Banks are required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met. At June 30, 2003 the maximum potential amount of future payments was $26.8 million. Of the total, 99.8% is covered by collateral.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability. Many of those instruments were previously classified as equity. SFAS 150 is generally effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.

6) Other Matters

In the second quarter of 2003, the Company reached a settlement agreement with the Commonwealth of Massachusetts relating to new legislation retroactively disallowing the deduction for dividends received from a real estate investment trust subsidiary (a "REIT"). The new legislation was enacted in the first quarter of 2003 and it amended existing Massachusetts law to expressly disallow the deduction for dividends received from a REIT. The legislative amendment applies retroactively to tax years ending on or after December 31, 1999. In connection with the new legislation, the Company originally recognized an expense of approximately $3.0 million, net of federal tax benefit and including interest, in the first quarter of 2003. Part of this accrual was reversed in connection with the settlement agreement during the second quarter. The Company ultimately recorded an expense of approximately $1.4 million or $0.06 per share for the first half of 2003 to reflect the final cost of the prior year tax adjustment.

In the second quarter of 2003, the Company reached an agreement with the landlord to purchase the lease and terminate the Company's lease agreement for office space in Menlo Park, California. In connection with this agreement the Company recorded an adjustment, net of taxes of approximately $1.5 million or $0.07 per share for the first half of 2003.

7) Subsequent Event

On July 10, 2003, the Company announced that it had signed a definitive agreement to acquire First State Bancorp, the holding company of First State Bank of California, a $174 million commercial bank situated in Los Angeles County. First State Bank of California has 20 years of banking experience and provides a wide range of commercial, depository, and consumer banking services to its upscale customers. In the merger, the Company will acquire 100% of First State's common stock with an aggregate transaction value of approximately $26.6 million. We anticipate financing the proposed acquisition of First State Bank of California in part with the issuance of debt and equity securities or a combination thereof. The transaction is subject to several conditions, including the approval by state and federal regulators as well as the approval of the shareholders of First State Bancorp.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Quarter Ended June 30, 2003

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, our ability to achieve improvements in our Bank Secrecy Act controls and procedures, 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. Reference to "we," "our," and "us" refer to the Company and its subsidiaries on a consolidated basis.

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.

During 1997, the Company acquired by merger Westfield, a Boston based company engaged in providing a range of investment management services to individual and institutional clients. During 1999, the Company acquired by merger RINET, a Boston based company engaged in providing financial planning and asset allocation services to high net worth individuals and families. On February 28, 2001, the Company acquired by merger BPVI, formerly E. R. Taylor Investments, Inc., a corporation engaged in providing value style investment advisory services to the wealth management market. On October 1, 2001, RINET acquired by merger Kanon Bloch Carré, a Boston-based independent mutual fund rating service and investment advisor. On November 30, 2001, the Company acquired by merger Borel, a private bank located in San Mateo, California, in exchange for 5,629,872 newly issued shares of the Company's common stock. In addition, the Company issued 230,000 stock options in exchange for Borel's previously issued stock options.

These mergers were initiated prior to June 30, 2001 and were accounted for as "poolings of interests." Accordingly, the results of operations of the Company reflect the financial position and results of operations including Westfield, RINET, Borel and BPVI on a consolidated basis for all periods presented.

On August 31, 2000, the Company purchased Sand Hill, an investment advisory firm servicing the wealth management market, primarily in Northern California. This acquisition was accounted for as a "purchase of a business" and, accordingly, the Company's results of operations and financial position include Sand Hill on a consolidated basis since the date of the acquisition.

On December 18, 2002 the Company acquired 26% of the outstanding capital stock of Coldstream Holdings, Inc. Coldstream Holdings, Inc. is the parent of Coldstream Capital Management, Inc. ("Coldstream Capital") of Bellevue, Washington. On April 30, 2003, the Company acquired an additional 1% of the outstanding stock of Coldstream Holdings, Inc. Coldstream Capital is a multi-client family office that provides comprehensive wealth management services to high net worth private clients.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies upon which our financial condition depends, and which involve the most complex or subjective decisions or assessments are as follows:

Allowance for Loan Losses: Arriving at an appropriate level of allowance for loan losses involves a high degree of judgment. The Company's allowance for loan losses provides for probable losses based upon evaluations of known, and inherent risks in the loan portfolio. Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. For a full discussion of the Company's methodology of assessing the adequacy of the allowance for loan losses, see "Financial Condition—Allowance for Loan Losses".

Valuation of Goodwill/Intangible Assets and Analysis for Impairment: For acquisitions under the purchase method, the Company is required to record assets acquired and liabilities assumed at their fair value which is an estimate determined by the use of internal or other valuation techniques. These valuation estimates are used to determine the amount of goodwill and other intangible assets recognized. Goodwill and intangible assets are subject to ongoing periodic impairment tests and are evaluated using various fair value techniques. 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.

Impact of Accounting Estimates

Management of the Company is required to make certain estimates and assumptions, including estimates for the critical accounting policies noted above, 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.

Financial Condition

Total Assets. Total assets increased $203.2 million, or 11.2%, to $2.0 billion at June 30, 2003 from $1.8 billion at December 31, 2002. This increase was primarily driven by deposit growth, which was used to fund new commercial loans, and to a lesser extent, to purchase additional investment securities.

Investments. Total investments (consisting of cash, federal funds sold and other short term investments, money market investments, investment securities, mortgage-backed securities, and stock in the FHLB) increased $91.4 million or 21.3% to $519.8 million, or 25.7% of total assets, at June 30, 2003, from $428.4 million, or 23.5% of total assets, at December 31, 2002. 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.

The following table is a summary of investment and mortgage-backed securities available for sale as of June 30, 2003 and December 31, 2002:

		Amortized Cost		Gains		Unrealized Losses			Market Value
		(in thousands)
At June 30, 2003
U.S. Government and agencies		$	155,838	$	3,638	$	—		$	159,476
Corporate bonds			18,396		133		(29	)		18,500
Municipal bonds			177,632		3,595		(18	)		181,209
Mortgage-backed securities			1,056		19		—			1,075

	Total investments	$	352,922	$	7,385	$	(47	)	$	360,260

At December 31, 2002
U.S. Government and agencies		$	163,730	$	4,390	$	—		$	168,120
Corporate bonds			15,887		280		(1	)		16,166
Municipal bonds			99,068		2,815		(23	)		101,860
Mortgage-backed securities			1,369		19		—			1,388

	Total investments	$	280,054	$	7,504	$	(24	)	$	287,534

Loans held for sale. Loans held for sale decreased $9.5 million, or 30.7%, during the first six months of 2003 to $21.4 million from $30.9 million. This decrease is due to the timing of loan sales. In the first half of 2003, there were $161.6 million of mortgage loans originated for sale offset by $171.1 million loans sold on the secondary market.

Loans. Total portfolio loans increased $114.9 million, or 8.8%, during the first six months of 2003 to $1.4 billion, or 70.0% of total assets, at June 30, 2003, from $1.3 billion, or 71.5% of total assets, at December 31, 2002. This increase was primarily driven by growth in the commercial loans portfolio which increased $88.0 million, or 13.0%. Residential mortgage loans increased $30.6 million, or 5.6%, during the first six months of 2003 as mortgage loan originations of variable rate loans of $120 million were partially offset by payoffs and refinancings.

Risk Elements. Total non-performing assets, which consist of non-accrual loans and other real estate owned, decreased by $32,000 during the first six months of 2003 to $1.0 million or 0.05% of total assets, at June 30, 2003, from $1.0 million, or 0.06% of total assets, at December 31, 2002. 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 June 30, 2003, loans with an aggregate balance of $2.0 million, or 0.13% of total loans, were 30 to 89 days past due, a decrease of $2.0 million as compared to $4.0 million, or 0.31% of total loans, as of December 31, 2002. Although these loans are generally secured, our success in keeping these borrowers current varies from month to month. It is uncertain whether available collateral would, in all cases, be adequate to cover the amounts owed with respect to these loans.

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. At June 30, 2003, loans with an aggregate balance of $1.0 million, or 0.07% of total loans, were 90 days past due.

Allowance for Loan Losses. The allowance for loan losses is established through a charge to operations. When management believes 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. 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 management's judgment. The specific component is established by allocating a portion of the allowance for loan losses to individual 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 rely to a great extent on the judgment and experience of management.

While management evaluates 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:

		Three Months Ended June 30,						Six Months Ended June 30,
		2003			2002			2003			2002
		(Dollars in thousands)						(Dollars in thousands)
Ending gross loans		$	1,416,661		$	1,238,239		$	1,416,661		$	1,238,239
Allowance for loan losses, beginning of period		$	17,736		$	15,200		$	17,050		$	14,521
	Provision for loan losses		770			555			1,549			1,235
	Charge offs		(18	)		(23	)		(112	)		(26	)
	Recoveries		—			—			1			2

Allowance for loan losses, end of period		$	18,488		$	15,732		$	18,488		$	15,732

Allowance for loan losses to ending gross loans			1.31	%		1.27	%		1.31	%		1.27	%

Deposits. We experienced an increase in total deposits of $169.5 million, or 12.1%, during the first six months of 2003, to $1.6 billion, or 77.5% of total assets, at June 30, 2003, from $1.4 billion, or 76.9% of total assets, at December 31, 2002. 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 six months of 2003. 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 June 30, 2003 and December 31, 2002:

		June 30, 2003				December 31, 2002
		Balance		As a % of Total		Balance		As a % of Total
Demand deposits		$	277,975	17.7	%	$	242,453	17.3	%
NOW			243,058	15.5			207,693	14.8
Savings			24,250	1.5			24,071	1.7
Money Market			774,108	49.3			675,105	48.2
Certificates of deposit under $100,000			84,427	5.4			81,829	5.9
Certificates of deposit $100,000 or greater			166,028	10.6			169,182	12.1

	Total	$	1,569,846	100.0	%	$	1,400,333	100.0	%

Borrowings. Total borrowings (consisting of federal funds purchased, FHLB borrowings, and securities sold under agreements to repurchase ("repurchase agreements")) increased $26.9 million, or 12.3%, during the first six months of 2003 to $245.3 million from $218.4 million at December 31, 2002. To better manage interest rate risk and to help protect our net interest margin, we utilize fixed rate FHLB 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 June 30, 2003, cash, federal funds sold and other short term investments, money market investments and securities available for sale amounted to $510.6 million, or 25.2% of total assets of the Company. This compares to $420.3 million, or 23.1% of total assets, at December 31, 2002.

Boston Private Financial Holdings' (the "Holding Company") primary sources of funds are dividends from our subsidiaries, issuance of our common stock and borrowings. The condensed balance sheet, statement of operations and statement of cash flows for the Holding Company are included in the footnotes of the Annual Report. We believe that the Holding Company has adequate liquidity to meet its commitments for the foreseeable future other than the financing necessary to complete the proposed acquisitions of Dalton, Greiner, Hartman, Maher & Co and First State Bancorp (see Item 5—other information). The Holding Company anticipates financing these acquisitions in part through the issuance of debt or equity securities or a combination thereof. In addition, negotiations are in process to replace the $15 million line of credit that expired in January 2003 with a new facility. Liquidity at the Holding Company is dependent upon the liquidity of its subsidiaries. The Company's non bank subsidiaries have adequate capital to meet their recurring operating commitments for the foreseeable future. The Holding Company may provide funds for acquisitions and leasehold improvements acquired by the subsidiaries. The bank subsidiaries are both well capitalized and maintain liquidity and have access to borrowings from the Federal Reserve Bank and other sources as more fully described in the Annual Report on Form 10-K.

Capital Resources. Our stockholders' equity at June 30, 2003 was $175.8 million, or 8.6% of total assets, compared to $167.4 million, or 9.2% of total assets at December 31, 2002. The dollar increase was the result of our net income for the first six months of 2003 of $8.6 million, combined with

proceeds from options exercised reduced by dividends paid to shareholders and the change in accumulated other comprehensive income.

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 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 June 30, 2003 and December 31, 2002:

			Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
			Amount		Ratio		Amount		Ratio			Amount		Ratio
			(Dollars in thousands)
As of June 30, 2003:
	Total risk-based capital
		Company	$	169,043	12.29	%	$	110,035		> 8.0	%	$	137,544		> 10.0	%
		Boston Private Bank		104,947	11.15			75,284		8.0			94,105		10.0
		Borel		44,634	10.78			33,131		8.0			41,414		10.0
	Tier I risk-based
		Company		151,843	11.04			55,017		4.0			82,526		6.0
		Boston Private Bank		93,171	9.90			37,642		4.0			56,463		6.0
		Borel		39,451	9.53			16,565		4.0			24,848		6.0
	Tier I leverage capital
		Company		151,843	7.62			79,726		4.0			99,657		5.0
		Boston Private Bank		93,171	6.29			59,230		4.0			74,037		5.0
		Borel		39,451	7.85			20,110		4.0			25,138		5.0
As of December 31, 2002:
	Total risk-based capital
		Company	$	160,178	12.95	%	$	98,989		> 8.0	%	$	123,736		> 10.0	%
		Boston Private Bank		97,395	11.36			68,607		8.0			85,759		10.0
		Borel		41,558	11.35			29,283		8.0			36,604		10.0
	Tier I risk-based
		Company		144,642	11.69			49,495		4.0			74,242		6.0
		Boston Private Bank		86,661	10.11			34,303		4.0			51,455		6.0
		Borel		36,975	10.10			14,642		4.0			21,962		6.0
	Tier I leverage capital
		Company		144,692	8.16			70,946		4.0			88,683		5.0
		Boston Private Bank		86,661	6.61			52,408		4.0			65,509		5.0
		Borel		36,975	8.20			18,041		4.0			22,552		5.0

Results of Operations for the Three Months Ended June 30, 2003

Net Income. The Company recorded net income of $7.5 million, or $0.32 per diluted share, for the quarter ended June 30, 2003, which includes income of approximately $0.07 per share related to the settlement of reserves taken in the first quarter of 2003 for the enactment of a retroactive Massachusetts tax increase and an income reduction of $0.01 per share for additional lease abandonment costs. Net income, excluding both of these special items, would have been $6.1 million, or $0.26 per share, as compared to $6.3 million, or $0.27 per diluted share for the quarter ended June 30, 2002. This represented a 3.4% decrease in net income and a 3.7% decrease in earnings per share.

Adjustment of REIT Tax Reserve Net income for the second quarter of 2003 was positively impacted by approximately $1.6 million or $0.07 per share as a result of reaching a settlement agreement with the Commonwealth of Massachusetts, and the Company's adjustment to a reserve of $3.0 million or $0.13 per share, recorded in the first quarter of 2003. This reserve was established in response to newly enacted legislation that retroactively disallowed the deduction for dividends received from a real estate investment trust subsidiary.

Lease Abandonment costs. The Company recorded lease abandonment costs which adversely affected net income by an amount equal to $.01 per diluted share, or $226,000, net of tax. Additional costs were recognized after reaching an agreement with the landlord in early July 2003 to purchase the lease and terminate the Company's lease agreement in Menlo Park, California. This agreement will extinguish the reserve established in the first quarter of 2003.

The chart below provides a reconciliation of net income and diluted earnings per share as determined in accordance with Generally Accepted Accounting Principles, ("GAAP") to adjust net income and earnings per share. To supplement its financial results prepared in accordance with GAAP, the Company has presented non-GAAP measures of earnings adjusted to exclude the REIT tax reserve and the lease abandonment costs which management believes are outside the Company's core operational results. The Company believes presentation of these adjusted earnings enhances an overall understanding of its historical financial performance and future prospects because management believes they are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating financial performance as well as for budgeting and forecasting of future periods. For these reasons the Company believes they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for net income or net income per diluted share prepared in accordance with GAAP.

	Three Months Ended June 30, 2003
	GAAP Earnings		Retroactive REIT Tax Adjustment			Lease Abandonment			Adjusted Earnings
Revenues	$	32,473	$	0		$	0		$	32,473
Provision for Loan Losses		770		0			0			770
Expenses		22,631		222			(347	)		22,506

Pre-Tax Income		9,072		(222	)		347			9,197
Income Tax Expense		1,589		1,419			121			3,129

Net Income	$	7,483	($	1,641	)	$	226		$	6,068

Diluted Earnings per share	$	0.32	($	0.07	)	$	0.01		$	0.26

Net Interest Income. For the quarter ended June 30, 2003, net interest income was $17.6 million, an increase of $1.3 million, or 8.1%, over the same period in 2002 on a fully taxable equivalent basis. This increase was attributable to growth of loans and deposits, offset by the effects of margin

compression. The Company's net interest margin was 3.70% for the second quarter of 2003, a decrease of 60 basis points compared to the same period last year.

				Three Months Ended June 30, 2003							Three Months Ended June 30, 2002
				Average Balance		Interest Earned/ Paid			Average Rate		Average Balance		Interest Earned/ Paid			Average Rate
Earning assets:
	Cash and Investments(1)			$	489,450	$	3,662		2.99	%	$	317,317	$	3,079		3.88	%
	Loans (2)
		Commercial (1)			755,076		11,551		6.07	%		570,175		9,843		6.84	%
		Residential mortgage			576,546		7,755		5.38	%		544,806		8,711		6.40	%
		Home equity and other			77,833		1,110		5.72	%		76,401		1,170		6.10	%

			Total loans		1,409,455		20,416		5.77	%		1,191,382		19,724		6.59	%
			Total earning assets		1,898,905		24,078		5.05	%		1,508,699		22,803		6.02	%
Interest-bearing liabilities:
	Deposits			$	1,302,014		4,181		1.29	%	$	1,041,796		4,612		1.78	%
	Borrowed funds				245,296		2,231		3.66	%		176,946		1,851		4.20	%

		Total interest-bearing liabilities			1,547,310		6,412		1.66	%		1,218,742		6,463		2.13	%

Net interest income (fully taxable equivalent basis)							17,666							16,340
Less: tax equivalent adjustment							(656	)						(436	)

Net interest income						$	17,010						$	15,905

Interest rate spread									3.39	%						3.89	%
Net interest margin									3.70	%						4.30	%

(1): Interest income on non-taxable investments and commercial loans is presented on a fully taxable-equivalent basis using the federal statutory rate.
(2): Includes loans held for sale.

Interest Income. During the second quarter of 2003, interest income was $24.1 million, an increase of $1.3 million, or 5.6%, compared to $22.8 million for the same period in 2002 on a fully taxable equivalent basis. Interest income on commercial loans increased 17.4% to $11.6 million for the quarter ended June 30, 2003, compared to $9.8 million for the same period in 2002. Interest income from residential mortgage loans decreased 11.0% to $7.8 million for the second quarter of 2003, compared to $8.7 million for the same period in 2002, and interest on home equity and other loans decreased 5.1% to $1.1 million for the second quarter of 2003, compared to $1.2 million, for the same period in 2002. The average balance of commercial loans increased 32.4% and the average rate decreased 11.3%, or 77 basis points to 6.07% for the quarter ended June 30, 2003. The average balance of residential mortgage loans increased 5.8%, and the average rate decreased 15.9%, or 102 basis points to 5.38% for the same period. The average balance of home equity and other consumer loans increased 1.9% and the average rate decreased 6.2%, or 38 basis points, to 5.72%.

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) increased $583,000, or 18.9%, to $3.7 million for the quarter ended June 30, 2003, compared to $3.1 million for the same period in 2002. This increase was primarily attributable to an increase in the average balance

of $172.1 million, or 54.2%, offset by a decrease in the average yield on investments of 89 basis points, or 22.9%, to 2.99% for the quarter ended June 30, 2003.

Interest Expense. During the second quarter of 2003, interest expense was $6.4 million, a decrease of $51,000, or 0.8%, compared to $6.5 million for the same period in 2002. This decrease in our interest expense was the result of a decrease in the average cost of interest-bearing liabilities of 47 basis points, or 22.1%, to 1.66% for the quarter ended June 30, 2003. This decrease was offset by an increase in the average balance of interest-bearing liabilities of $328.6 million, or 27.0%, between the two periods.

Provision for Loan Losses. The provision for loan losses was $770,000 for the quarter ended June 30, 2003, compared to $555,000 for the same period in 2002. These provisions reflect continued loan growth and excellent credit quality. 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 $19,000 during the first six months of 2003, compared to $23,000 for the same period in 2002.

Fees and Other Income. Fees and other income increased $2.4 million, or 18.0%, to $15.5 million for the three-month period ending June 30, 2003, compared to $13.1 million for the same period in 2002. The majority of fee income was attributable to investment management and trust fees earned on assets under management. These fees increased $1.5 million, or 15.4%, to $11.4 million for the second quarter of 2003, compared to $9.9 million for the same period in 2002. This increase is primarily attributable to increases in assets under management. Total assets under management increased $1.7 billion, or 26.9% to $8.251 billion as of June 30, 2003 compared to $6.504 billion as of June 30, 2002. In the past twelve months, we have seen an increase in assets under management of $164 million due to market appreciation, an increase of $1.4 billion contributed by new and existing clients and an increase of $190 million from assets acquired.

Financial planning fees increased $194,000, or 12.3%, to $1.8 million for the second quarter of 2003, compared to $1.6 million for the same period in 2002. This increase was mostly due to new business and special projects.

Gain on sale of investment securities was $444,000 for the second quarter of 2003 compared to $147,000 for the second quarter of 2002. The amount of securities 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 $183,000, or 30.0% to $793,000 for the second quarter of 2003 compared to $610,000 for the second quarter of 2002. In the second quarter of 2003, there were $91 million loans sold on the secondary market.

Cash administration fees, which consist primarily of cash management fees and liquid asset management fees, were $162,000 for the second quarter ended June 30, 2003 compared to $193,000 for the second quarter of 2002. 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, increased $132,000, or 26.1% to $637,000 for the second quarter of 2003. The majority of this increase was attributable to fees earned on commercial loans.

Operating Expense. Total operating expense for the second quarter of 2003 was $22.6 million. These operating expenses include an adjustment to net income of $222,000 for a partial reversal of the reserve for interest associated with the retroactive Massachusetts tax increase recorded in the first quarter and lease abandonment costs of $347,000. Excluding both of these special items operating expenses would have been $22.5 million an increase of $3.4 million, or 17.8% compared to $19.1 million for the same period in 2002. This increase was attributable to our continued growth and

expansion. We experienced a 19.1% increase in total balance sheet assets and a 6.0% increase in the number of employees from June 30, 2002 to June 30, 2003.

Salaries and benefits, the largest component of operating expense, increased $2.2 million, or 17.0%, to $15.0 million for the quarter ended June 30, 2003, from $12.8 million for the same period in 2002. This increase was due to the increased number of employees, normal salary increases, and increases in variable compensation, which are related to business performance and profits.

Occupancy and equipment expense was $3.7 million for the second quarter of 2003 compared to $2.9 million for the same period last year. Excluding the lease abandonment costs of $347,000, occupancy and equipment expenses would have been $3.3 million, a $425,000 or 14.6% increase over the second quarter of 2002. The increase was primarily attributable to new offices for the Company's private banking business as well as continued investments in technology.

Professional services include legal fees, consulting fees, and other professional services such as audit and tax preparation. These expenses increased $206,000, or 22.5%, to $1.1 million for the second quarter 2003. The largest component of the increase is due to improvements related to our Bank Secrecy Act Program. We anticipate additional professional services costs in the third and fourth quarters of 2003 as we continue to work with consultants to test historical data and improve our Bank Secrecy Act Program.

Marketing and business development increased $34,000, or 3.8%, to $938,000 for the second quarter of 2003 as a result of increased business development activity due to growth in sales staff.

Contract services and processing, which are the costs associated for custody and data processing, increased $77,000, or 24.4%, to $392,000 from the second quarter in 2002. This increase is primarily an increase in custody expenses associated with increases in assets under management as well as an adjustment to the prior year expense.

Amortization of intangibles was $48,000 for the second quarter of 2003, an increase of $43,000 from the second quarter of 2002. This increase was attributable to the amortization of the advisory contracts associated with acquisitions by BPVI.

Other expenses include insurance, supplies, telephone, mailing expense, publications and subscriptions, employee training, interest on deferred acquisition payments and other miscellaneous business expenses. Other expenses were $1.5 million in the second quarter of 2003 compared to $1.2 million for the same period in 2002. For the second quarter of 2003, other expenses include an adjustment which increased net income by $222,000 for a partial reversal of the reserve for interest associated with the retroactive Massachusetts tax increase recorded in the first quarter. Excluding this adjustment, other expenses would have been $1.7 million, an increase of $449,000 from the same period in 2002. This increase was primarily due to increased business volumes, and insurance expenses.

Income Tax Expense. We recorded income tax expense of $1.6 million for the second quarter of 2003 as compared to $3.1 million for the same period last year. Excluding the reversal of a portion of the tax reserves taken in the first quarter related to the retroactive Massachusetts tax increase, income tax expense would have been $3.0 million. The effective tax rate was 34.0% for the second quarter of 2003 excluding before the REIT adjustment and was 34.5% for the first quarter of 2003, excluding the $3.0 million reserve, net of taxes, taken for the retroactive tax increase. The effective tax rate for 2002 was 32.8%. See "Legal Proceedings."

Results of Operations for the Six Months Ended June 30, 2003

Net Income. The Company recorded net income of $8.6 million, or $0.37 per diluted share, for the six months ended June 30, 2003, which includes costs of approximately $0.06 per share related to the enactment of a retroactive Massachusetts tax increase and a reduction of $0.07 per share for lease abandonment costs. Net income, excluding both of these special items, would have been $11.5 million, or $0.50 per share, as compared to $12.1 million, or $0.52 per diluted share for the six months ended June 30, 2002. This represented a 4.3% decrease in net income and a 3.8% decrease in earnings per share.

REIT Tax Charge. In the second quarter of 2003, the Company reached a settlement agreement with the Commonwealth of Massachusetts relating to new legislation retroactively disallowing the deduction for dividends received from a real estate investment trust subsidiary (a "REIT"). The new legislation amends existing Massachusetts law to expressly disallow the deduction for dividends received from a REIT. The legislative amendment applies retroactively to tax years ending on or after December 31, 1999. In connection with this agreement the Company recorded a charge of approximately $1.4 million or $0.06 per share, net of taxes.

Lease Abandonment. In the second quarter of 2003, the Company reached an agreement with the landlord to purchase the lease and terminate the Company's lease agreement in Menlo Park, California. In connection with this agreement the Company recorded an expense of approximately $1.5 million or $0.07 per share.

The chart below provides a reconciliation of net income and diluted earnings per share as determined in accordance with GAAP to adjust net income and earnings per share. To supplement its financial results prepared in accordance with GAAP, the Company has presented non-GAAP measures of earnings adjusted to exclude the REIT tax reserve and the lease abandonment costs which management believes are outside the Company's core operational results. The Company believes presentation of these adjusted earnings enhances an overall understanding of its historical financial performance and future prospects because management believes they are an indication of the performance of our base business. Management uses these non-GAAP measures as a basis for evaluating financial performance as well as for budgeting and forecasting of future periods. For these reasons the Company believes they can be useful to investors. The presentation of this additional information should not be considered in isolation or as a substitute for net income or net income per diluted share prepared in accordance with GAAP.

	For the six months ended June 30, 2003
	GAAP Earnings		Retroactive REIT Tax Adjustment			Lease Abandonment			Adjusted Earnings
Revenues	$	63,269	$	0		$	0		$	63,269
Provision for Loan Losses		1,549		0			0			1,549
Expenses		46,767		(244	)		(2,375	)		44,148

Pre-Tax Income		14,953		244			2,375			17,572
Income Tax Expense		6,390		(1,194	)		831			6,027

Net Income	$	8,563	$	1,438		$	1,544		$	11,545

Diluted Earnings per share	$	0.37	$	0.06		$	0.07		$	0.50

Net Interest Income. For the six months ended June 30, 2003, net interest income was $34.4 million, an increase of $2.4 million, or 7.4%, over the same period in 2002 on a fully taxable equivalent basis. 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 3.74% for the first half of 2003, a decrease of 57 basis points compared to the same period last year.

				Six Months Ended June 30, 2003						Six Months Ended June 30, 2002
				Average Balance		Interest Earned/ Paid		Average Rate		Average Balance		Interest Earned/ Paid		Average Rate
Earning assets:
	Cash and Investments(1)			$	454,060	$	6,697	2.95	%	$	323,469	$	6,490	4.01	%
	Loans(2)
		Commercial(1)			726,582		22,412	6.15	%		551,324		19,163	6.93	%
		Residential mortgage			569,852		15,567	5.46	%		523,597		16,865	6.44	%
		Home equity and other			78,483		2,261	5.73	%		77,555		2,396	6.19	%

			Total loans		1,374,917		40,240	5.84	%		1,152,476		38,424	6.66	%
			Total earning assets		1,828,977		46,937	5.12	%		1,475,945		44,914	6.08	%

Interest bearing liabilities:
	Deposits			$	1,253,179		8,291	1.33	%	$	1,022,961		9,259	1.82	%
	Borrowed funds				233,807		4,257	3.68	%		177,107		3,646	4.15	%

			Total interest-bearing liabilities		1,486,986		12,548	1.70	%		1,200,068		12,905	2.17	%

Net interest income (fully taxable equivalent basis)							34,389						32,009
Less: tax equivalent adjustment							1,071						906

Net interest income						$	33,318					$	31,103

Interest rate spread								3.42	%					3.91	%
Net interest margin								3.74	%					4.31	%

(1): Interest income on non-taxable investments and loans is presented on a fully taxable-equivalent basis using the federal statutory rate.
(2): Includes loans held for sale.

Interest Income. During the first six months of 2003, interest income was $46.9 million, an increase of $2.0 million, or 4.5%, compared to $44.9 million for the same period in 2002 on a fully taxable equivalent basis. Interest income on commercial loans increased 17.0% to $22.4 million for the six months ended June 30, 2003, compared to $19.2 million for the same period in 2002. Interest income from residential mortgage loans decreased 7.7% to $15.6 million for the first six months of 2003, compared to $16.9 million for the same period in 2002, and interest on home equity and other loans decreased 5.6% to $2.3 million for the first six months of 2003, compared to $2.4 million for the same period in 2002. The average balance of commercial loans increased 31.8% and the average rate decreased 11.3%, or 78 basis points to 6.15% for the six months ended June 30, 2003. The average balance of residential mortgage loans increased 8.8%, and the average rate decreased 15.2%, or 98 basis points to 5.46% for the same period. The average balance of home equity and other loans increased 1.2% and the average rate decreased 7.4% or 46 basis points to 5.73%.

Total investment income (consisting of interest and dividend income from cash, federal funds sold, investment securities, mortgage-backed securities, and FHLB stock dividends) increased $207,000, or 3.2% to $6.7 million for the six months ended June 30, 2003, compared to $6.5 million for the same period in 2002. This increase was primarily attributable to the increase in the average balance of

$130.6 million, or 40.4%, offset by a decrease in the average yield on investments of 106 basis points, or 26.4%, to 2.95% for the six months ended June 30, 2003.

Interest Expense. During the first six months of 2003, interest expense was $12.5 million, a decrease of $357,000, or 2.8%, compared to $12.9 million for the same period in 2002. This decrease in our interest expense was the result of a decrease in the average cost of interest-bearing liabilities of 47 basis points, or 40.2%, to 1.70% for the six months ended June 30, 2003, offset by an increase in the average balance of $286.9 million, or 23.9%, between the two periods.

Provision for Loan Losses. The provision for loan losses was $1.5 million for the six months ended June 30, 2003, compared to $1.2 million for the same period in 2002. These provisions reflect continued loan growth and excellent credit quality. 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 $111,000 during the first six months of 2003, compared to $24,000 for the same period in 2002.

Fees and Other Income. Fees and other income increased $3.8 million, or 14.4%, to $30.0 million for the six month period ending June 30, 2003, compared to $26.2 million for the same period in 2002. The majority of fee income was attributable to investment management and trust fees earned on assets under management. These fees increased $1.5 million, or 7.4% to $21.2 million for the first six months of 2003, compared to $19.8 million for the same period in 2002. This increase is attributable to increases in assets under management.

Financial planning fees increased $256,000, or 8.4% to $3.3 million for the first six months of 2003, compared to $3.0 million for the same period in 2002. RINET had strong new business in the first half of this year as well as a number of special projects that accounted for the majority of the increase.

Gain on sale of investment securities increased $956,000 to $1.5 million for the first half of 2003. 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 $703,000, or 79.8% to $1.6 million for the first six months of 2003 compared to $881,000 for the same period in 2002. In the first six months of 2003, there were $171 million loans sold on the secondary market

Cash administrative fees, which consists of cash management fees and liquid asset management fees, were $376,000 for the six months ended 2003 compared to $414,000 for the same period in 2002. 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 $214,000 to $1.3 million for the first half of 2003. The majority of this increase was attributable to fees earned on commercial loans.

Operating Expense. Total operating expense for the first six months of 2003 was $46.8 million. For the first half of 2003, operating expenses include a reserve for $244,000 for interest associated with the retroactive Massachusetts Tax increase and lease abandonment costs of $2.4 million. Excluding both of these special items operating expenses would have been $44.1 million an increase of $6.0 million, or 15.6% compared to $38.2 million for the same period in 2002. This increase is due to our continued growth and expansion. We experienced a 19.1% increase in total balance sheet assets, and a 6.0% increase in the number of employees from June 30, 2002 to June 30, 2003.

Salaries and benefits, the largest component of operating expense, increased $3.6 million, or 14.1%, to $29.3 million for the six months ended June 30, 2003, from $25.6 million for the same period in 2002. This increase was due to a 6.0% increase in the number of employees, a higher level of

employee incentive-based compensation, normal salary increases, and the related taxes and benefits thereon.

Occupancy and equipment expenses were $9.0 million for the first six months of 2003. Excluding the lease abandonment costs of $2.4 million, occupancy and equipment expenses would have been $6.6 million, a $1.2 million, or 21.6% increase over the first quarter of 2002. The increase was primarily attributable to new offices for the Company's private banking business as well as continued investments in technology.

Professional services include legal fees, consulting fees, and other professional services such as audit and tax preparation. These expenses increased $416,000, or 23.9% to 2.2 million. This is a result of increased expenditures among a number of different professional services.

Marketing and business development increased $120,000, or 6.9%, to $1.9 million for the first half of 2003 as a result of increased business development activity due to growth in sales staff.

Contract services and processing, which are the costs associated for custody and data processing, increased $139,000, for the six months ended June 30, 2003, or 19.5%. This increase is due to higher assets under management.

Amortization of intangibles increased $78,000 to $87,000 for the second half of 2003. This increase is attributable to the amortization of the advisory contracts associated with the acquisitions by BPVI.

Other expenses include insurance, supplies, telephone, mailing expense, publications and subscriptions, employee training, imputed interest on deferred acquisition payments and other miscellaneous business expenses. These expenses were $3.6 million for the first six months of 2003. For the first half of 2003, other expenses include a reserve for $244,000 for interest associated with the retroactive Massachusetts Tax increase. Excluding these expenses, other expenses would have been $3.3 million, an increase of $591,000 from the same period in 2002. This increase is primarily due to increased business volumes, and insurance expenses.

Income Tax Expense. We recorded income tax expense of $6.4 million for the first half of 2003 as compared to $5.8 million for the same period last year. Excluding the charge related to the retroactive Massachusetts tax increase, income tax expense would have been $5.2 million. The effective tax rate was 34.2% for the first half of 2003 excluding the charge for the retroactive tax increase. The effective tax rate for 2002 was 32.3%.

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. The Company'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 The Company'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 The Company 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 the Banks to attract and retain banking customers. The Banks 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; and
•: non-bank financial service companies serving eastern Massachusetts, Northern California and their respective adjoining areas.

In particular, the Banks' 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. The Banks also face competition from out-of-state financial intermediaries which have opened low-end production offices or which solicit deposits in their respective market areas.

Because the Banks 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 Banks' current commercial banking customers may seek alternative banking sources as they develop needs for credit facilities larger than the Banks can accommodate.

If the Banks are unable to attract and retain banking customers, they may be unable to continue their loan growth and their 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 and our relatively short history and limited record of performance in the investment management business, Boston Private Bank 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;

•: 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 in Northern California. Many of our competitors have greater resources than we have.

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, client services and marketing and distribution capabilities. If we are not successful, our results from operations and financial position may be negatively impacted.

For the quarter ended June 30, 2003, approximately 34.5% of our revenues were derived from investment management contracts which are typically terminable upon less than 30 days' notice. Most of our clients may withdraw funds from accounts under management generally in their sole discretion.

Moreover, Westfield receives some performance-based fees. The amount of these 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. During the past three years, the performance fees earned by Westfield have not been material. 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 the Banks' customers may negatively impact their businesses. A borrower's default on its obligations under one or more of the Banks' 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.

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

The Banks' respective management periodically makes a determination of an allowance for loan losses based on available information, including the quality of its loan portfolio, certain economic conditions, the value of the underlying collateral and the level of its non-accruing loans. Provisions to 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, the Banks may incur additional expenses.

In addition, bank regulatory agencies periodically review the Banks' allowances for loan losses and the values they attribute to real estate acquired through foreclosure or other similar remedies. Such regulatory agencies may require the Banks to adjust their determination of the value for these items. These adjustments could negatively impact the Banks' 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 the Banks 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 the Banks' customers to repay their loans is impacted by the economic conditions in these areas. Furthermore, current negative economic trends, including the recession, increased unemployment in Northern California and New England, as well as ongoing economic uncertainty created by the September 11, 2001 terrorist attacks on the World Trade Center and the Pentagon, and the United States' war on terrorism will likely continue to negatively impact businesses in Northern California and New England. While we are currently uncertain as to the long-term effects of these events, they could adversely affect general economic conditions, consumer confidence and market liquidity, or result in changes in interest rates, any of which may have a negative impact on the banking business of the Banks. The Banks' 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.

The Banks' 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). Consequently, the Banks' 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 the Banks. Substantially all of the Banks' residential mortgage and home equity loans are secured by residential property in eastern Massachusetts and Northern California. Also, due to the recent concerns with power supplies in the State of California, Borel could be materially and adversely affected either directly or indirectly by a severe power shortage, if any of its critical computer systems or equipment fails, if the local infrastructure, such as electric power, phone system, or water system, fails, if its significant vendors are adversely impacted, or it its borrowers or depositors are adversely impacted by their internal systems or those of their customers and suppliers. As a result, conditions in the real estate markets specifically, and the Massachusetts and California economies generally, can materially impact the ability of the Banks' 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, the Banks 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, or the respective Bank, 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 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 the Banks. The Banks' main source of income from operations is 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 the Banks' control, including general economic conditions, both domestic and foreign, and the monetary and fiscal policies of various governmental and regulatory authorities. The Banks' net interest income can be affected significantly by changes in market interest rates. Changes in relative interest rates may reduce the Banks' net interest income as the difference between interest income and interest expense decreases. As a result, the Banks have adopted asset and liability management policies to minimize the potential adverse effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of loans, investments and funding sources. However, even with these policies in place, we cannot assure you that a decrease in interest rates will not negatively impact our results from operations or financial position. Specifically, Borel is currently asset sensitive, which means that its interest bearing liabilities mature, or otherwise reprice, at a slower rate than its interest earning assets. As a result, in a period of declining interest rates, Borel will experience a shrinking of its interest margin as its floating rate loans will reprice immediately, while its fixed rate deposits will reprice over the course of a year. This reduction in interest rate may adversely affect Borel's earnings.

An increase in interest rates could also have a negative impact on the Banks' 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 the Banks' allowances for loan losses.

Our Cost of Funds for Banking Operations May Increase as a Result of General Economic Conditions, Interest Rates and Competitive Pressures

Our cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures. The Banks 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, the Banks have had a higher percentage of its 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 the Banks decrease relative to their overall banking operations, the Banks may have to rely more heavily on borrowings as a source of funds in the future.

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 the investment management industry in general have experienced record performance and record growth in recent years. The financial markets and businesses operating in the securities industry, however, 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, reducing both management and performance fees. 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 from which they have yet to recover. The world financial

and securities markets 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.

In addition, Westfield's, BPVI's, Sand Hill's and a portion of RINET's management contracts generally provide for fees payable for investment management services based on the market value of assets under management, although a portion of Westfield's contracts also provide for the payment of fees based on investment performance in addition to a base fee. Because most contracts provide for a fee 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. 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.

Westfield, Sand Hill, BPVI, RINET, and Coldstream Capital are registered investment advisers under the Investment Advisers Act. The Investment Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary, record keeping, operational and disclosure obligations. These subsidiaries, as investment advisers, are also subject to regulation under the federal and state securities laws and the fiduciary laws of certain states. In addition, Westfield and Sand Hill act as sub-advisers to mutual funds which are registered under the 1940 Act and are subject to that act's provisions and regulations.

We are also subject to the provisions and regulations of ERISA to the extent we 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 certain transactions involving the assets of each ERISA plan which is a client of ours, as well as certain transactions by the fiduciaries (and certain other related parties) to such plans.

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

The Company does not directly manage investments for clients, does not directly provide any investment management services and, therefore, is not a registered investment adviser. Boston Private Bank and Borel are exempt from the regulatory requirements of the Investment Advisors Act, but are subject to extensive regulation by the FDIC and the Commissioner of Banks of the Commonwealth of Massachusetts and the California Department of Financial Institutions (the "DFI").

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. The Company is subject to the BHCA, 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 DFI 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, 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 the Banks 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 FRB. Changes in monetary or legislative policies may affect the interest rates the Banks 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 the Banks.

Our ability to obtain regulatory approvals for our pending acquisitions may be adversely impacted by the timely completion of required improvements to our Bank Secrecy Act Program

In June 2003, Boston Private Bank entered into an informal agreement with the Massachusetts Division of Banks and the FDIC to enhance its Bank Secrecy Act controls and procedures. Boston Private Bank is currently in the process of making such improvements and is working closely with the regulatory agencies to address the issues raised in the informal agreement. The Company's regulators have indicated that substantial achievement of these improvements will be necessary prior to obtaining approvals for the pending acquisitions of DGHM and First State Bancorp. As a result, the completion of these acquisitions may be adversely impacted by the timely completion of such improvements to the satisfaction of the Company's regulators. In this regard, the acquisition of DGHM may be terminated by either party if the closing has not occurred on or prior to September 30, 2003. As a result, a delay in the achievement of the required improvements to Bank Secrecy Act Program may subject the DGHM acquisition to renegotiation or termination.

To the Extent that We Acquire Other Companies in the Future, Our Business May Be Negatively Impacted by Certain Risks Inherent with such Acquisitions

We have in the past acquired, and expect in the future to continue to acquire other banking and investment management companies consistent with our institutions strategy. To the extent that we acquire other companies in the future, our business may be negatively impacted by certain risks inherent with such acquisitions.

These risks include the following:

•: 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;
•: 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 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.

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 several 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; however, the appeals court has remanded that case to the trial court for limited further proceedings. The third case 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 the Banks. Further, in May of 2002, a complaint was filed against Westfield which alleges that Westfield failed to uphold its contractual and common law obligations to invest the plaintiff's funds with proper care and diligence. Although the unfair trade practices claim was dismissed, discovery on the remaining claims is now in progress and there can be no assurances that Westfield will be successful in defending these claims. Adverse developments in the Westfield litigation could have a material adverse effect on Westfield's business. For a more detailed description of this litigation, see Item 1 "Legal Proceedings."

Item 3. Qualitative and Quantitative Disclosures about Market Risk

For information related to this item, see the Company's December 31, 2002 Form 10-K, Item 7A—Interest Rate Sensitivity and Market Risk. No material changes have occurred since that date.

Item 4. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's management conducted an evaluation with the participation of the Company's Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the Company's disclosure controls and procedures, as of the end of the last fiscal quarter. In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that they believe the Company's disclosure controls and procedures are reasonably effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. We intend to continue to review and document our disclosure controls and procedures, and our internal controls and procedures for financial reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance their effectiveness and to ensure that our systems evolve with our business.

PART II. Other Information

Item 1. Legal Proceedings

A. Investment Management Litigation

On or about May 3, 2002, the Retirement Board of Allegheny County (the "plaintiff") filed a civil complaint against Westfield in the Allegheny County Court of Common Pleas in Pittsburgh, Pennsylvania. The complaint alleges that Westfield failed to uphold its 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. Westfield moved to dismiss the complaint on the ground that the complaint contains no allegations as to what investment decisions or practices constituted a breach of the contract between the parties or Westfield's fiduciary duty to the Board. The motion was granted, in part, and the plaintiff's unfair trade practices claim, by which treble damages are potentially available, was dismissed. Discovery is now in progress, and Westfield will continue to defend this claim vigorously.

B. Trust Litigation

Since 1984, Borel has served as the trustee of a private family trust known as the Andre LeRoy Trust. There have been several actions involving Borel and certain beneficiaries of the Andre LeRoy Trust concerning the management and proposed sale of a certain real property known as the Guadalupe Oil Field. The property was jointly owned by the Andre LeRoy Trust and another private family trust, for which Bankers Trust (now Deutsche Bank) is the trustee. In the first action ("Removal Action"), initiated in 1994, certain beneficiaries of the Andre LeRoy Trust petitioned for removal of Borel as trustee, claiming that Borel had breached its fiduciary duties in managing oil and gas leases on the Guadalupe Oil Field and, following the discovery of environmental contamination on the property, in negotiating a proposed Settlement Agreement and Purchase and Sale Agreement to sell the property to Union Oil Company of California (d/b/a UNOCAL), the operator of the oil field. In the second action ("Approval Action"), initiated in 1995, Borel petitioned for court approval of the proposed Settlement Agreement and Purchase and Sale Agreement. The same group of beneficiaries that filed the Removal Action opposed the Approval Action.

Borel prevailed in the trial court in the Removal Action in 1994 and in the Approval Action in 1995; however, in 1997 the Court of Appeal reversed the order in the Removal Action and remanded both actions for further proceedings. A trial took place in 1998. Borel again prevailed in both actions, and again the beneficiary group appealed. In February 2001, the Court of Appeal affirmed the order denying the petition for removal of Borel as trustee, and that order is now deemed final for all purposes. The Court of Appeal also remanded the Approval Action for limited reconsideration by the trial court. In March 2002, the trial court completed that reconsideration and issued an order again granting Borel's petition for approval of the Settlement and Purchase and Sale agreements. The beneficiary group filed a motion for a new trial, which was denied. In May 2002, the beneficiary group also filed a new petition ("Disapproval Action") seeking an order disapproving the Settlement and Purchase and Sale agreements as they had been recently amended, and on the basis of that new petition, sought a preliminary injunction to block the consummation of the amended agreements. The motion for a preliminary injunction was denied, as was the group's petition to the Court of Appeal for a writ of supersedeas. On July 2, 2002, the Settlement Agreement and the Purchase and Sale Agreement were consummated.

There are three appeals by the beneficiary group currently pending: (1) an appeal from the March 2002 order approving the agreements; (2) an appeal from the denial of the motion for a new trial; and (3) an appeal from the denial of the motion for a preliminary injunction (which would now

appear to be moot). These appeals have been consolidated. Briefing is now complete. No hearing date has been set.

Another action was filed in December 1996 ("Damages Action") in which the same group of beneficiaries sought damages against Borel and Bankers Trust (now Deutsche Bank) for alleged mismanagement of the jointly owned Guadalupe Oil Field and for negotiating with UNOCAL for the sale of the property and settlement of UNOCAL's liability to the trust. In the Damages Action, the plaintiff beneficiaries claimed damages of $234.2 million, but that amount was unsubstantiated, and the component elements of damages they identified did not add up to that amount. In the trial of the Removal Action in 1998, the plaintiff beneficiaries submitted expert testimony of damages in the amount of $102 million. The trial court found this testimony unpersuasive. The Damages Action was stayed by the trial court in 1997 pending resolution of the Removal Action and the Approval Action. It remains stayed at the present time.

The Disapproval Action filed in May 2002 was amended in December 2002. It seeks, among other things, the unwinding of the Settlement and Purchase and Sale agreements, the return of the Guadalupe Oil Field to the trusts, and unspecified damages for loss of the property. The amended petition repeats many of the same allegations made in this litigation since 1994. All proceedings in the disapproval action have been stayed pending resolutions of the consolidated appeals.

The same group of dissenting beneficiaries filed yet another petition ("Distribution Petition") in October 2002 seeking full distribution of the proceeds of the Settlement and Purchase and Sale agreements and final wrapping up and dissolution of the Andre LeRoy Trust. It does not seek damages. The plaintiff beneficiaries have done nothing to date to pursue the Distribution Petition.

Borel will continue to litigate the remaining matters vigorously. While the ultimate outcome 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.

C. Massachusetts Tax Legislation

In the second quarter of 2003, the Company reached a settlement agreement with the Commonwealth of Massachusetts relating to new legislation retroactively disallowing the deduction for dividends received from a real estate investment trust subsidiary (a "REIT"). The new legislation was enacted in the first quarter of 2003 and it amended existing Massachusetts law to expressly disallow the deduction for dividends received from a REIT. The legislative amendment applies retroactively to tax years ending on or after December 31, 1999. The Company originally recognized an expense of approximately $3.0 million, net of federal tax benefit and including interest, in the first quarter of 2003. Part of this accrual was reversed in connection with the settlement agreement during the second quarter. The Company ultimately recorded an expense of approximately $1.4 million or $0.06 per share for the first half of 2003 to reflect the final cost of the prior year tax adjustment.

D. Other

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.

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

At the Annual Meeting of Stockholders held on April 30, 2003, stockholders of the Company approved proposals to:

(1): elect four Class III directors of the Company to serve until the 2006 annual meeting and until their successors are duly elected and qualified. The votes for such proposal were as follows:

	FOR	ABSTAIN
Herbert S. Alexander	19,021,279	343,794
Lynn Thompson Hoffman	19,106,097	258,976
Richard N. Thielen	18,816,347	548,726
Richard I. Morris Jr.	19,105,892	259,181

The term of office of each of Eugene S. Colangelo, Harold A. Fick, Allen Sinai, Timothy L. Vaill, Arthur J. Bauernfeind, Peter C. Bennett, Walter M. Pressey as directors of the Company continued after the annual meeting. C. Michael Hazard retired as of April 30, 2003. Kathy M. Graveline was elected by the board to serve out the remainder of Mr. Hazard's term.

Item 5. Other Information

On May 2, 2003, The Company announced it has signed a definitive agreement to acquire an 80% interest in Dalton, Greiner, Hartman, Maher & Co. ("DGHM") of New York, NY. DGHM, founded in 1990 and managing approximately $2.2 billion of client assets, is a value style manager specializing in small-cap equities. The remaining 20% interest in the firm will be retained by members of the DGHM management team. This transaction is expected to be immediately accretive on a cash basis to BPFH and accretive on a GAAP basis within the first 12-month period.

On July 10, 2003, The Company announced that it has signed a definitive agreement to acquire First State Bancorp, the holding company of First State Bank of California, a $174 million commercial bank situated in Los Angeles County. First State Bank of California has 20 years of banking experience and provides a wide range of commercial, depository, and consumer banking services to its upscale customers. In the merger, The Company will acquire 100% of First State's common stock with an aggregate transaction value of approximately $26.6 million.

Both of these transactions are subject to several conditions, including the approval by state and federal regulators, and in the case of First State Bancorp, the approval of its shareholders.

The Company announced earlier in the second quarter that its wholly-owned subsidiary, Boston Private Bank, entered into an informal agreement with the Massachusetts Division of Banks and the FDIC to enhance its Bank Secrecy Act Program. The Company is currently in the process of making such improvements and is working closely with the regulatory agencies to address the issues raised in the informal agreement. The Company's regulators have indicated that substantial achievement of these improvements will be necessary prior to obtaining approvals for the pending acquisitions of DGHM and First State Bancorp. As a result, the completion of these acquisitions may be adversely impacted by the timely completion of the such improvements to satisfaction of the Company's regulators.

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits.

31.1—Certification of Chief Executive Officer pursuant to Rule 13(a)—14(a) /15(d)—14(a) under the Securities Exchange Act of 1934.

31.2—Certification of Chief Financial Officer pursuant to Rule 13(a)—14(a) /15(d)—14(a) under the Securities Exchange Act of 1934.

32.1—Certification of the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2—Certification of the Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b): Reports on Form 8-K

On April 24, 2003, the Company furnished a Current Report, dated April 16, 2003, on Form 8-K regarding its earnings press release for the fiscal quarter ended March 31, 2003.

On May 2, 2003, the Company filed a Current Report, dated the same date, on Form 8-K regarding the Company's signing of a definitive agreement to acquire an 80% interest in Dalton, Greiner, Hartman, Maher & Co. of New York, NY.

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)
August 14, 2003		/s/ TIMOTHY L. VAILL Timothy L. Vaill Chairman and Chief Executive Officer
August 14, 2003		/s/ WALTER M. PRESSEY Walter M. Pressey President and Chief Financial Officer