<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For quarterly period ended: MARCH 31, 1997
OR
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________
Commission File No: 0-17089
BOSTON PRIVATE BANCORP, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
COMMONWEALTH OF MASSACHUSETTS 04-2976299
--------------------------------- -------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
TEN POST OFFICE SQUARE, BOSTON, MA 02109
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(Address of Principal Executive Offices)
(617) 912-1900
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes ( X ) No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of April 30, 1997:
Common Stock - Par Value $1.00 6,637,163 shares
------------------------------ -----------------
(class) (outstanding)
<PAGE> 2
BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
PAGE NUMBER
-----------
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 Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis or
Plan of Operations 7 - 12
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Default upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Signature Page 14
2
<PAGE> 3
BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 8,181 $ 7,646
Federal funds sold 4,700 6,950
Investment securities available for sale (amortized cost of $28,863 and
$26,738 at March 31, 1997 and December 31, 1996, respectively) 28,583 26,637
Investment securities held to maturity (market value of $ 6,323 and
$6,384 at March 31, 1997 and December 31, 1996, respectively) 6,359 6,387
Mortgage-backed securities available for sale (amortized cost of $
at March 31, 1997) -- --
Mortgage-backed securities held to maturity (market value of $23,172 and
$25,258 at March 31, 1997 and December 31, 1995, respectively) 23,358 25,289
Loans receivable:
Commercial 91,852 97,740
Residential mortgage 101,326 96,578
Home equity 12,168 11,481
Other 321 308
--------- ---------
Total loans 205,667 206,107
Less allowance for possible loan losses (2,622) (2,566)
--------- ---------
Net loans 203,045 203,541
Stock in Federal Home Loan Bank of Boston 3,317 3,317
Other real estate owned 85 85
Premises and equipment, net 2,114 1,437
Excess of costs over net assets acquired, net 3,988 4,068
Accrued interest receivable 1,953 1,745
Other assets 2,635 1,804
--------- ---------
Total assets $ 288,318 $ 288,906
========= =========
LIABILITIES:
Deposits $ 207,239 $ 209,302
Securities sold under agreements to repurchase 10,902 8,126
FHLB borrowings 44,046 45,533
Payable due to acquisition 515 1,035
Accrued interest payable 441 348
Other liabilities 1,558 1,626
--------- ---------
Total liabilities 264,701 265,970
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value per share;
shares authorized: 18,000,000;
shares issued: 6,634,163 in 1997 and 6,592,496 in 1996 6,634 6,592
Additional paid-in capital 14,817 14,709
Retained earnings 2,303 1,699
Unrealized gain (loss) on securities available for sale, net (137) (64)
--------- ---------
Total stockholders' equity 23,617 22,936
--------- ---------
Total liabilities and stockholders' equity $ 288,318 $ 288,906
========= =========
</TABLE>
3
<PAGE> 4
BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1997 1996
---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Interest and dividend income:
Commercial loans $ 2,219 $ 1,707
Residential mortgage loans 1,799 1,430
Home equity and other loans 251 178
Investment securities 409 507
Mortgage-backed securities 370 475
FHLB stock dividends 52 52
Federal funds sold 45 15
Deposits in banks 21 15
---------- ----------
Total interest and dividend income 5,166 4,379
---------- ----------
Interest expense:
NOW 59 49
Savings 29 32
Money market 809 657
Certificates of deposit 856 753
Federal funds purchased 49 43
Securities sold under agreements to repurchase 89 82
FHLB borrowings 685 615
Payable due to acquisition 7 20
---------- ----------
Total interest expense 2,583 2,251
---------- ----------
Net interest income 2,583 2,128
Provision for possible loan losses 38 67
---------- ----------
Net interest income after provision for possible loan losses 2,545 2,061
---------- ----------
Fees and other income:
Trust and investment management 974 733
Deposit account service charges 40 40
Gain (loss) on sale of loans 16 35
Gain (loss) on sale of investment securities 0 3
Gain (loss) on sale of mortgage-backed securities 0 (3)
Other 71 60
---------- ----------
Total fees and other income 1,101 868
---------- ----------
Operating expense:
Salaries and employee benefits 1,670 1,363
Occupancy 133 111
Equipment 88 87
Data processing 52 27
FDIC insurance premiums 6 --
Legal expense 74 49
Marketing 114 66
Amortization of intangibles 94 81
Other 574 391
---------- ----------
Total operating expense 2,805 2,175
---------- ----------
Income before income taxes 841 754
Income tax expense 238 253
========== ==========
Net income $ 603 $ 501
========== ==========
Net income per share $ 0.09 $ 0.08
========== ==========
Weighted average common and common equivalent shares outstanding 6,957,000 6,070,000
========== ==========
</TABLE>
4
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BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 603 $ 501
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization 167 165
(Gain) loss on sale of loans (16) (35)
Provision for possible loan losses 38 67
Payments received on other real estate owned -- --
Loans originated for sale (1,373) (4,822)
Proceeds from sale of loans 1,389 4,857
(Increase) decrease in:
Accrued interest receivable (208) (107)
Other assets (724) (267)
Increase (decrease) in:
Accrued interest payable 93 (7)
Other liabilities (69) (51)
-------- --------
Net cash provided (used) by operating activities (100) 301
-------- --------
Cash flows from investing activities:
Net decrease (increase) in fed funds sold 2,250 (2,100)
Investment securities available for sale:
Purchases (2,160) (11,136)
Sales 0 4,055
Maturities 55 1,719
Investment securities held to maturity:
Maturities 0 3,000
Mortgage-backed securities available for sale:
Sales 0 116
Mortgage-backed securities held to maturity:
Principal payments 1,922 1,107
Net decrease (increase) in loans 461 (3,618)
Recoveries on loans previously charged off 31 24
Capital expenditures (775) (48)
-------- --------
Net cash provided (used) by investing activities 1,784 (6,881)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits (2,062) (4,106)
Net increase (decrease) in repurchase agreements 2,776 7,746
FHLB advances:
Proceeds 23,120 31,000
Repayments (24,606) (29,681)
Net increase (decrease) in payable due to acquisition (377) (524)
Proceeds from issuance of common stock 0 162
-------- --------
Net cash provided (used) by financing activities (1,149) 4,597
-------- --------
Net increase (decrease) in cash and due from banks 535 (1,983)
Cash and due from banks at beginning of year 7,646 8,695
-------- --------
Cash and due from banks at end of period $ 8,181 $ 6,712
======== ========
Supplementary Disclosures:
Cash paid during the period for interest $ 2,483 $ 2,238
Cash paid during the period for income taxes 266 237
Non-cash transactions:
Increase (decrease) in unrealized gain (loss) on securities
available for sale, net of estimated income taxes (73) (212)
</TABLE>
5
<PAGE> 6
BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The consolidated financial statements include the accounts of Boston
Private Bancorp, Inc. (the "Company") and its wholly-owned subsidiaries, Boston
Private Bank & Trust Company (the "Bank"), BPB Securities Corporation, and
Boston Private Asset Management Corporation. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ from those estimates. Material estimates
that are particularly susceptible to change relate to the determination of the
allowance for possible loan losses and valuation of other real estate owned. In
connection with the determination of the allowance for possible loan losses and
the carrying value of other real estate owned, management obtains independent
appraisals for significant properties.
The unaudited interim consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles 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.
These interim financial statements should be read in conjunction with the
December 31, 1996 consolidated financial statements and accompanying notes
included in the Annual Report to Shareholders. The interim results of
consolidated operations are not necessarily indicative of the results for the
entire year.
(2) Earnings Per Share
The earnings per share calculation is based upon the weighted average
number of common shares and common share equivalents outstanding during the
period.
(3) Reclassifications
Certain fiscal 1996 information has been reclassified to conform with the
1997 presentation.
6
<PAGE> 7
BOSTON PRIVATE BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
Boston Private Bancorp, Inc., (the "Company"), is a one-bank holding
company which holds all of the issued and outstanding shares of capital stock of
Boston Private Bank & Trust Company (the "Bank"), a Massachusetts chartered
trust company. Of the 18,000,000 shares of common stock authorized, par value
$1.00, 6,634,163 shares of Boston Private Bancorp, Inc. common stock were issued
and outstanding at March 31, 1997.
The Bank pursues a "private banking" mission and is principally engaged in
providing banking, investment and fiduciary products to successful individuals,
their families and their businesses as well as to foundations and institutional
clients. The Bank offers a full range of banking and investment management
services to its domestic and international clientele. The Bank's deposit
services include checking and savings accounts with automated teller machine
("ATM") access, and cash management services through sweep accounts and
repurchase agreements. The Bank also offers commercial, residential mortgage,
home equity and consumer loans and credit card services. In addition, it
provides investment advisory and asset management services, securities custody
and safekeeping services, trust and estate administration and IRA and Keogh
accounts.
In December 1996, the Company received $3.4 million of additional equity
capital from a Common Stock Offering. Substantially all of the proceeds were
subsequently invested in the Bank. On July 31, 1995, the Company acquired
substantially all of the assets and assumed certain liabilities of an investment
management business for a total purchase price of approximately $4.2 million, of
which $2.1 million, consisting of $1.5 million in cash and 166,667 shares of the
Company's common stock, was paid at closing. In each of January and July 1996
and January 1997, the Company made additional scheduled payments consisting of
$375,000 in cash and 41,667 shares of the Company's common stock. The balance of
the purchase price is payable in one remaining installment of $375,000 in cash
and 41,667 shares of the Company's common stock in July 1997. The acquisition
was accounted for as a purchase. Accordingly, the results of operations of the
acquired business have been included with those of the Company subsequent to the
date of acquisition.
LIQUIDITY AND CAPITAL RESOURCES
-- Liquidity. Liquidity is defined as the ability to meet current and
future financial obligations of a short-term nature. The Company further defines
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 deposit inflows, loan repayments, borrowed
funds, maturity of investment securities and sales of securities from the
available for sale portfolio. These sources fund the Company's lending and
investment activities.
Management is responsible for establishing and monitoring liquidity targets
as well as strategies and tactics to meet these targets. In general, the Company
maintains a high degree of liquidity. At March 31, 1997, cash, federal funds
sold and securities available for sale amounted to $36.8 million, or 12.7% of
total assets. This compares to $34.3 million, or 11.9% of total assets at
December 31, 1996. The Bank is a member of the Federal Home Loan Bank of Boston
("FHLB of Boston"), and as such has access to both short and long-term
borrowings. In addition, the Bank maintains a line of credit at the FHLB of
Boston as well as other lines of credit with several correspondent banks.
Management believes that the Bank has adequate liquidity to meet its
commitments.
In contrast to the Bank, the holding company maintains minimal liquidity
because substantially all of its assets consist of the stock of the Bank. The
holding company's primary potential sources of funds are dividends from the
Bank, issuance of additional common stock, and borrowings.
7
<PAGE> 8
-- Capital Resources. Total stockholders' equity of the Company at March
31, 1997 was $23.6 million, as compared to $22.9 million at December 31, 1996.
This increase was the result of the Company's net income for the quarter of
$603,000, plus the issuance of common stock relating to the acquisition of CH&P
Inc. and the exercise of stock options, less the change in the unrealized gain
(loss) on securities available for sale, net of estimated income tax benefit.
The Bank is subject to a number of regulatory capital measures. At March
31, 1997, the Bank's Tier I leverage capital ratio stood at 7.03%, compared to
6.65% at December 31, 1996. The Bank is also subject to a risk-based capital
measure. The risk-based capital guidelines include both a definition of capital
and a framework for calculating risk-weighted assets by assigning balance sheet
assets and off-balance sheet items to broad risk categories. According to these
standards, the Bank had a Tier I risk adjusted capital ratio of 11.91% and a
Total risk adjusted capital ratio of 13.16% at March 31, 1997. This compares to
a Tier I risk adjusted capital ratio of 11.00% and a Total risk adjusted capital
ratio of 12.25% at December 31, 1996. The minimum Tier I leverage, Tier I risk
adjusted, and Total risk adjusted capital ratios necessary to be classified for
regulatory purposes as a "well capitalized" institution are 5.00%, 6.00% and
10.00%, respectively. The Bank, therefore, is considered to be "well
capitalized."
BALANCE SHEETS
-- Total Assets. Total assets remained virtually flat at $288.3 million at
March 31, 1997 compared to $288.9 million at December 31, 1996 . An increase in
mortgage and home equity loans offset a reduction in total commercial loans to
close the first three months of 1997 with virtually no change from December 31,
1996.
-- Loans. Total loans were $203 million, or 70% of total assets, at March
31, 1997, compared to $203.5 million, or 70% of total assets, at December 31,
1996. Residential mortgage loans increased $4.7 million, or 4.9%, while
commercial loans decreased $5.9 million , or 6%, and home equity and other loans
increased $701,000, or 5.9%. The Company continues its efforts to identify
quality lending opportunities.
-- Investments. Total investments (consisting of cash, federal funds sold,
investment securities, mortgage-backed securities, and stock in the FHLB of
Boston) totaled $74.5 million, or 25.8% of total assets, at March 31, 1997,
compared to $76.2 million, or 26.4% of total assets, at December 31, 1996. Of
the total investment portfolio at March 31, 1997, $28.6 million were securities
identified as available for sale. The available for sale portfolio carried a
total of $280,000 in net unrealized losses at March 31, 1997.
-- Deposits and Borrowings. Total deposits decreased $2.0 million, or 1.0%,
during the first quarter of 1997, from $209.3 million, or 72.4% of total assets,
at December 31, 1996, to $207.2 million, or 71.9% of total assets, at March 31,
1997. This decrease was primarily attributable to the level of demand deposit,
savings and money market balances declining during the first quarter of 1997.
Total borrowings (consisting of securities sold under agreements to repurchase
("repurchase agreements"), and FHLB borrowings) increased $1.3 million, or 2.4%,
during the first three months of 1997. This increase was attributable to an
increase in repurchase agreements with cash management customers of the Company.
Management will from time to time take advantage of opportunities to fund asset
growth with borrowings, but on a long-term basis, the Company intends to replace
a portion of its borrowings with core deposits.
8
<PAGE> 9
ASSET QUALITY
-- Non-Performing Assets. The following table sets forth information
regarding non-performing loans, non-performing assets, and delinquent loans
30-89 days past due as to interest or principal at the dates indicated.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 394 $ 976
Loans past due 90 days or more, but still accruing 13 --
------ ------
Total non-performing loans 407 976
Other real estate owned 85 85
------ ------
Total non-performing assets $ 492 $1,061
====== ======
Delinquent loans 30-89 days past due 1,778 3,066
Non-performing loans as a percent of gross loans .20% .47%
Non-performing assets as a percent of total assets .17% .37%
Delinquent loans 30-89 days past due as a percent of gross loans .08% 1.49%
</TABLE>
At March 31, 1997, the Company had non-performing assets of $492 thousand,
which represented .17% of total assets. The Company's non-performing assets
consisted of four loans over 90 days past due and still accruing interest with
an aggregate principal balance of $13,119, nine nonaccruing loans with an
aggregate principal balance of $393,656, and one OREO property with total book
value of $85,000.
Non-performing assets decreased $572,000, or 53.8%, from $1,064,000 at
December 31, 1996, to $492,000 at March 31, 1997. The Company continues to
evaluate the underlying collateral and value of each of its non-performing
assets and pursues the collection of all amounts due. See "Allowance for
Possible Loan Losses."
-- Delinquencies. At March 31, 1997, loans with an aggregate balance of
$1.8 million were 30 to 89 days past due, an decrease of $3.6 million, or 67%,
from $5.4 million reported at December 31, 1996.
-- Allowance for Loan Losses. During the first three months of 1997, the
Company made provisions to the allowance for loan losses totaling $38,000 and
had $18,000 in recoveries net of charge offs, bringing the balance in the
allowance to $2,622,000, compared to $2,566,000 at December 31, 1996. The
allowance, expressed as a percentage of total loans, was 1.27% as of March 31,
1997, compared to 1.25% at December 31, 1996. The allowance for loan losses was
644.2% of non-performing loans at March 31, 1997, compared to 262.1% of
non-performing loans at December 31, 1996.
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. These agencies may require additions to
the allowances based on their own judgments about information available to them
at the time of their examination.
As the Company continues to be affected by changes in the risk
characteristics of the loan portfolio, levels of non-performing loans, trends in
delinquencies and charge-offs, and current economy, it will continue to evaluate
the adequacy of the allowance for loan losses. Notwithstanding these future
evaluations, management believes that the allowance for loan losses as of March
31, 1997 is adequate based upon the information currently available.
STATEMENTS OF INCOME, THREE MONTHS ENDED MARCH 31, 1997 and 1996
-- Net Income. The Company recorded net income of $603,042, or $.09 per
share, for the three months ended March 31, 1997, compared to $501,042, or $.08
per share, for the same period in 1996. Revenues generated by
9
<PAGE> 10
increases in investment management and lending were partially offset by
increases in funding costs and operating expense.
-- Net Interest Income. For the quarter ended March 31, 1997, net interest
income was $2.6 million, an increase of $455,000, or 21.4%, over the same period
in 1996. This increase was primarily attributable to an increase in the average
balance of earning assets, which was $41.6 million, or 18%, higher than during
the comparable period a year earlier. This increase in average earning assets
were funded in part by an increase in average interest bearing liabilities of
$35 million, or 17.5%.
-- Interest Income. Loans. Income on commercial loans was $2.2 million for
the three months ended March 31, 1997, compared to $1.7 million for the same
period in 1996. Income from residential mortgage loans was $1.8 million compared
to $1.4 million, and home equity and other loans was $251,000 compared to
$177,000, for the same periods, respectively. The average balances of commercial
and residential mortgage loans increased $21.9 million, or 30.2%, and $21.8
million, or 28.5%, compared to the first quarter of 1996, respectively.
-- Interest Income. Investments. Total investment income decreased to
$898,000 during the quarter ended March 31, 1997, compared to $1 million during
the same period in 1996. The decrease in total investment income of $177,000, or
14.4%, was primarily attributable to a decrease in the average balance of
investments of $6.20 million, or 8.5%.
-- Interest Expense. Deposits and Borrowings. Interest paid on deposits and
borrowings increased $332,000, or 14.8%, to $2.6 million for the three months
ended March 31, 1997, from $2.3 million for the same period during 1996. This
increase in the Company's interest expense reflects an increase in the average
balance of interest-bearing liabilities of $35 million, or 17.5%, between the
two periods. The overall cost of interest-bearing liabilities decreased 10 basis
points from 4.50% for the first quarter of 1996 to 4.40% for the first quarter
of 1997.
-- Provision for Loan Losses. The provision for loan losses was $38,000 for
the quarter ended March 31, 1997, compared to $67,000 for the same period in
1996. Management evaluates several factors including new loan originations,
estimated charge-offs, and risk characteristics of the loan portfolio when
determining the provision for the quarter. Also see discussion under "Balance
Sheets -- Allowance for Loan Losses."
-- Fees and Other Income. Fees and other income was $1.1million for the
three month period ending March 31, 1997, compared to $867,000 for the same
period in 1996. Trust and investment management fees totaled $974,000 for the
first quarter of 1997 compared to $733,000 for the same period in 1996.
-- Operating Expense. Total operating expense for the first quarter of 1997
increased $630,000, or 29% compared to the same period in 1996. This increase in
total operating expense was primarily attributable to the Company's continued
growth and expansion in its lending and deposit products. Specifically, the
following expenses increased: 1) salary and benefit expense increased $307,000,
or 22.5%, 2) occupancy and equipment expense increased $48,000, or 21.3%, and 3)
other operating expense increased $269,000, or 45.8%.
-- Income Tax Expense. The Company's effective tax rate for financial
statement purposes was 28.4% during the first quarter of 1997, compared to 33.6%
for the first quarter of 1995. For the foreseeable future the Company
anticipates remaining fully taxable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1994, the Bank became aware of a dispute among various parties
involved in a transaction in which it served as bank of deposit for certain
certificates stated to reflect debt obligations of a foreign bank. In December
1994, the party which allegedly purchased the certificates filed a complaint in
the United States District Court for the District of Massachusetts alleging
certain claims arising out of the transaction against numerous individuals and
entities, including the Bank and one of its former officers. The plaintiff
sought to recover compensatory damages of approximately $4 million.
In August 1995, the Bank filed for summary judgment against the plaintiff's
claims. The plaintiff also filed a motion for partial summary judgment on one of
its claims. On March 19, 1996, the court granted the Bank's summary judgment
10
<PAGE> 11
motion and denied the plaintiff's motion, resulting in the dismissal of all
claims against the Bank. The plaintiff sought reconsideration of its motion, and
on November 26, 1996, the court denied plaintiff's motion for reconsideration of
the summary judgment previously granted in favor of the Bank.
Notwithstanding the Court's dismissal of the principal underlying claims
against the Bank and its denial of the plaintiff's motion for reconsideration,
litigation continues among other parties, and the Bank has been named as
third-party defendant by another party defendant to the original case. The Bank
continues to believe it has valid defenses to, and is vigorously defending, all
claims and allegations of wrongdoing in connection with the transaction. The
Company has previously incurred legal expenses of approximately $320,000, a
portion of which is recoverable under an insurance policy. No further estimate
of any loss can be made at this time.
On December 6, 1995, Robert S. Lappin, Esq., a depositor, filed a complaint
in Suffolk Superior Court (Civil Action No. 95-6207-B). As part of the
complaint, Mr. Lappin included counts against the Bank (and five other financial
institutions) alleging that he had sustained losses from his client funds
account at the Bank and from other funds of clients maintained in separate
deposit accounts by him as Trustee, due to the misappropriation of these funds
by a former secretary. Mr. Lappin alleged that the Bank was liable for these
misappropriated funds due to the fact that the Bank had cleared numerous checks
on Mr. Lappin's various accounts at the Bank which had unauthorized signatures
and/or endorsements.
On January 19, 1996, Dorothy Wallace and others filed a separate action in
the Suffolk Superior Court, (Civil Action No. 96-0330-B). In this action, the
Wallaces alleged that most of the misappropriated funds referred to by Mr.
Lappin in his complaint were in fact funds belonging to the Wallaces. The
Wallaces allege that Mr. Lappin was responsible for all of the misappropriated
funds due to his breach of fiduciary responsibilities as attorney and trustee to
the Wallaces. The Wallaces allege that the Bank was also liable for the
misappropriations due to the fact that the Bank cleared numerous instruments
bearing unauthorized endorsements and in some cases accepted deposits without
proper endorsements. The Wallaces included similar counts against two other
Boston banks.
In September, 1996, Suffolk Superior Court entered an Order consolidating
the two civil actions referred to above. The Wallaces filed an Amended
Consolidated Complaint, on October 1, 1996, in which they reiterated their
allegations made in Civil Action No. 96-0330-B and added another count against
the three banks alleging that the banks aided and abetted Mr. Lappin in the
breach of his fiduciary responsibilities by clearing instruments and accepting
deposits without proper authorization.
On October 29, 1996, the Bank answered the Wallace's Amended Consolidated
Complaint denying all claims and allegations of wrongdoing against it, setting
forth substantial defenses in connection with the matter and filing claims
against Mr. Lappin for negligence and breach of duty, and seeking funds owed to
it as a result of an overdraft and related costs. The Bank believes it has valid
defenses to, and is vigorously defending, all claims and allegations of
wrongdoing in connection with this matter. This matter is in the early stages of
discovery and therefore it is not possible to estimate any loss at this time.
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. CHANGE IN SECURITIES
No changes in security holders' rights have taken place.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
No defaults upon senior securities have taken place.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
No matters submitted to a vote of security holders.
11
<PAGE> 12
ITEM 5. OTHER INFORMATION
No information to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No information to report.
12
<PAGE> 13
BOSTON PRIVATE BANCORP, INC.
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 BANCORP, INC.
(Registrant)
May 15, 1997 /s/ Timothy L. Vaill
- ------------- ------------------------------
(Date) Timothy L. Vaill
President and Chief
Executive Officer
May 15, 1997 /s/ Walter M. Pressey
- ------------- ------------------------------
(Date) Walter M. Pressey
Senior Vice President and
Chief Financial Officer
13
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