Boston Private Financial Holdings (BPFH)

Wealth Advisory Segment impairment: $10.8 million at Sand Hill and a $1.5 million true-up at BOS:

The Company performed the step one goodwill impairment analysis using an average of the income approach, the market approach, and the cost approach and determined that the goodwill was impaired. The income approach utilized a discounted cash flow model which was based on the expectation that Sand Hill’s net AUM flows will remain weak throughout 2009 with a recovery beginning in 2010. The resulting operating earnings are expected to grow at a 26.4% compounded annual growth rate over the projected period. The terminal growth rate was estimated at 5.0% and the cash flows were discounted at an 18.0% cost of capital. Based on these inputs and assumptions, the income approach resulted in a $15.4 million valuation.

The market approach utilized revenue and EBITDA multiples from a peer group of nine publicly traded comparable investment management firms. The comparables were chosen based on similar growth prospects and risks to that of the reporting units. A price to revenue multiple of 2.0x was selected and a price to EBITDA multiple of 10.0x was selected. Control premiums were considered and determined to be 0%. The average of the price to revenue multiple method and the price to EBITDA multiple method resulted in a $13.4 million valuation.

The cost approach approximates the value of the business based on the cost to replace it with another of similar utility. Based on market conditions, adjustments were made to this estimate to reflect losses in value resulting from functional and economic obsolescence. The cost approach resulted in a $5.8 million valuation.

The weighted average of the income, market, and cost approaches indicated a fair value of approximately $10.1 million.

In the fourth quarter, the Company performed a detailed two step goodwill impairment analysis which refuted the validity of the goodwill write-down recorded in Q3’08. This resulted in a $1.5 million reversal of the impairment charge estimate taken during Q3’08. The following describes the details of this testing.

The Company performed the step one goodwill impairment analysis using an average of the discounted cash flow method and comparable market multiples method and determined that the goodwill was impaired. The income approach utilized a discounted cash flow which was based on the expectation that BOS’s net AUM flows will remain weak throughout 2009 with a recovery beginning in 2010. The resulting operating earnings are expected to grow at a 18.0% compounded annual growth rate over the projected period. The terminal growth rate was estimated at 5.0% and the cash flows were discounted at a 17.0% cost of capital. Based on these inputs and assumptions, the income approach resulted in a $31.9 million valuation.

The market approach utilized revenue and EBITDA multiples from a peer group of nine publicly traded comparable investment management firms. The comparables were chosen based on similar growth prospects and risks to that of the reporting units. A price to revenue multiple of 2.5x was selected and a price to EBITDA multiple of 7.5x was selected. Control premiums were considered and determined to be 0%. The average of the price to revenue multiple method and the price to EBITDA multiple method resulted in a $32.5 million valuation.

The weighted average of the income and market approaches indicated a fair value of approximately $32.0 million.

113

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Wealth Advisory Segment impairment: $10.8 million at Sand Hill and a $1.5 million true-up at BOS:

The Company performed the
step one goodwill impairment analysis using an average of the income approach, the market approach, and the cost approach and determined that the goodwill was impaired. The income approach utilized a discounted cash flow model which was based on the
expectation that Sand Hill’s net AUM flows will remain weak throughout 2009 with a recovery beginning in 2010. The resulting operating earnings are expected to grow at a 26.4% compounded annual growth rate over the projected period. The
terminal growth rate was estimated at 5.0% and the cash flows were discounted at an 18.0% cost of capital. Based on these inputs and assumptions, the income approach resulted in a $15.4 million valuation.