Bank of America Smid Cap Conference

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  1. 1. Boston Private: Long-Term Value Creation Q2 2007 Timothy L. Vaill Chairman and Chief Executive Officer Walter M. Pressey President and Interim Chief Financial Officer
  2. 2. Forward Looking Statements
    • Statements in this presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These factors include, among others, strategic growth rates, the strength of the company's business, the quality of the companys loan portfolio, changes in the interest rate environment, adverse conditions in the capital markets and the impact of such conditions on Boston Privates asset management activities, competitive pressures from other financial institutions, the risk that goodwill and intangibles recorded in the Companys financial statements will become impaired, and risks related to the identification and implementation of acquisitions, as well as theother risks and uncertainties detailed in Boston Private's Annual Report on Form 10-K and other filings submitted to the Securities and Exchange Commission.Boston Private does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
  3. 3. Agenda
    • Overview
    • Strategy
    • Results
    • Future
    • Conclusion
  4. 4. Overview Boston Private Today
  5. 5. Boston Privates Mission: To provide wealth management solutions to successful people, their families, private companies and selected institutions through trusted relationships that help preserve, grow and transfer assets over the clients financial lifecycle.
  6. 6. Corporate Profile
    • Six regions
    • 14 affiliates
    • 45 offices
    • 1,039 employees
    AUM/advisory:$34 billion Bank assets:$5.6 billion Loans:$4.5 billion Deposits:$4.1 billion Geography Balances People Economics
    • Experienced team in the field
    • Shared values and culture
    • Key Driver: client service
    • Annualized Revenues: $368 million
    • Annualized Net income: $52 million
    • Q1 2007 EPS:GAAP $0.34
        • Cash $0.44
    • Market cap: $1 billion
    * Geography includes Charter.Economics and Balances exclude Charter.
  7. 7. Wealth Management Members Private Banking Wealth Advisory Investment Management
  8. 8. Recent Events
    • On March 5, 2007, Boston Private announced the acquisition of Charter Bank in Bellevue, Washington
    • Charter is a $320 million commercial bank with 4 locations in key demographic areas
    • Charter will work closely with Coldstream Capital Management to bring comprehensive wealth management services to the HNW and small business markets
  9. 9. Recent Events (cont)
    • Charter had double-digit growth over last 5 years in loans deposit and net income
    • Entire management team has been retained
    • The transaction will close in the third quarter
    38% 18% 16%
  10. 10. National Association of Corporate Directors Board of the Year Award
    • 30-year old national organization
    • Inaugural NACD Board of the Year Award
    • Honoring excellence across the Board
    • Outstanding contributions to the Company
    • Maintaining high levels of professional standards
  11. 11. Primary Focus:High Net Worth Market Preserve, grow and transfer assets. . . Private Banking Trust Services Jumbo Mortgages Business Loans Investment Management Estate Planning Tax Strategies Financial Planning Philanthropy . . . and create a unique customer experience
  12. 12. Corporate Leadership Team Extensive experience across business disciplines Edgar, Dunn Consulting 30+ President, Western Region Jon Parker State Street Global Advisors 20+ President, Eastern Region Jay Cromarty Lesavoy Financial Planning 10+ Corporate Development Katie Kearney Ropes & Gray, Loomis Sayles 20+ General Counsel Megan ChambersThe Boston Company 35+ President Walt Pressey The Boston Company35+ Chairman & CEO Tim Vaill Previous Years Title Executive
  13. 13. Strategy Capitalizing on a Unique Business Model
  14. 14. Boston Privates Strategic Vision: To build a national wealth management franchise that is broadly recognizedparticularly among the newly affluent--as the preferred place to have financial assets managed, and to generate an above average total return to our shareholders over the long-term
  15. 15. How are we different? Sustainable Organic Growth Capital Stewardship Unique Business Model Enabled by Strategic Acquisitions Targeted Market Research Adding Distribution Channels Guided by Foundation of HC Support Diversification Focus BalancedAffiliate Management In - Market Business Expansion
  16. 16. Targeted Market Research Source:CapGemini; World Wealth Report 2005.8.4% Annually HNW Investable Assets and Related Fee Income Focus on HNW demographic and private companies Percent of Millionaires Who Own Private Companies Source:VIP Forum $45B $75B
  17. 17. Strategic Acquisitions Follow intellectual and investment capital Intellectual Capital Investment Capital Business Formation Infrastructure Support Attractive Regions For Acquisitions Wealth Accumulation
  18. 18. In - Market Business Expansion
    • Fund expansion and growth in numerous ways
    • Local tie-in acquisitions
      • Encino, Kanon Bloch Carre, CH&P
    • Experienced team lift-outs with clients and AUM
    • New office development
      • Beverly, Hingham, Lexington, Los Altos, Naples, New York
    • Aggressive marketing and sales programs
      • Advertising campaigns, sales training
  19. 19. Adding Distribution Channels
    • Small platform, high-touch environments
    • Firms embedded in local communities
    • Centers-of-influence
    Wealth Advisory Private Banking Local Investment Management Diversify and expand business growth via sales/delivery systems National
    • National intermediaries
      • Broker/Dealers
      • Institutional consultants
    • Managed accounts
      • Sub-advisory and SMA
  20. 20. Foundation of Support
    • Intellectual Capital
    • Market research
    • Strategic advice and counsel
    • Legal, compliance, HR
    • Leadership/succession planning
    • Financial Strength
    • Access to public capital
    • Co-investing for business growth
    • Consolidated balance sheet
    • Liquidity for principals
    • Entrepreneurial Culture
    • Consultative advisor
    • Safety net enables risk taking
    • Support autonomy
    • Communications Network
    • Exchange of best practices
    • Professional forums
    • Internet/Intranet development
    Value added by the holding company
  21. 21. Capital Stewardship Efficient cash management and capital deployment Holding Company External Capital Dividends toShareholders Capital Users Capital Generators
  22. 22. Diversification Focus Foundations & Endowments:11% ERISA /Public: 23% High Net Worth: 49% Sub-Advisory: 14% Equity(Growth): 40% Equity (Value): 31% Fixed Income: 7% Corporate: 3% Alternative: 8% Balanced: 14% Banking Activity DEPOSITS$4.1B MMDA: 50% DDAs: 18% CDs: 23% Commercial:58% Residential Mortgage: 36% NOW: 9% Consumer & Home Equity: 6% LOANS$4.5B Private Banking: 50% Wealth Advisory: 8% Investment Management: 42% AUM By Client Type AUM By Investment Style New York: 8% Florida: 15% New England: 53% N. California: 16% Revenue By Geography Revenue By Business Type S. California: 8% Enables sustainable & non-volatile returns
  23. 23. Balanced Affiliate Management Autonomy with strong governance Governance Compliance Capital Market / ClientsEmployees Operations Holding Company Affiliate Partners Oversight Independence
  24. 24. Results Unique Business Model Overall Business Growth Sustainable Organic Growth
  25. 25. Overall Revenue Growth10 Year CAGR 25% $344.9 $263.3 $196.8 $116.0 $133.6 $82.5 $105.4 $66.3 $53.2 $36.6 $45.1 $30.4 Q1 07 Total Revenues:$92 million
  26. 26. Overall AUM Growth $2.2B $2.6B $3.7B $5.7B $6.5B $6.4B $11.0B $19.3B $21.3B $0.7B 10 Year CAGR 46% $29.8 Q1 07 Total AUM:$34 billion
  27. 27. Overall Loan and Deposit Growth* 10 Year CAGR 36% 10 Year CAGR 35% $206M $4.3B $209M $4.1B * Includes Acquisitions Q1 07 Total Loans and Deposits:$4.5 and $4.1 billion
  28. 28. Overall Net Income Growth 10 Year CAGR 23% Q1 07 Net Income:$13.1 million
  29. 29. Overall Earnings Per Share Growth 10 Year CAGR 16% Cash Basis Cash Basis 10 Year CAGR 15% GAAP Basis $1.82 Q1 07 Cash and GAAP EPS:$0.44 and $0.34
  30. 30. Sustainable Organic Growth Organic GrowthAfter 3 Years Ownershipby Boston Private Note:Based on Revenues
  31. 31. Sustainable Organic Growth Westfield AUM: +686% Borel Net Income: +103% Boston Private BankAssets:+2,860%No acquisitions during this time 5 Year Organic Growth Recordin New England Organic Growth at Affiliates Since Acquisition
  32. 32. Executive Retention Rates * Absent normal retirements or forced terminations Retention Rates Since Acquisition
  33. 33. Dividends Paid to Shareholders 6 Year CAGR 18% Commenced Dividendin 2000
  34. 34. Sustainable Growth MetricsPersonnel: Succession, Governance Existing Markets Growth Opportunities: Products, Distribution Industry Dynamics: Growth, Regulatory Environment, Demographic Changes Competitive Market Strategic Plan & Execution Financial:Capital Ratios, Cash, Debt Coverage, etc. Long Term EPS Growth Margins Return on Invested Capital Cost of Capital Total Return to Shareholders PERFORMANCE INDICATORS RESULT MANAGEMENTFOCUS
  35. 35. Long-Term Value Creation BPFH Total Return To Investors(12/1995 12/2006)
  36. 36. Future Steps to additional Value Creation
  37. 37. 1.Enhance Existing Platform
    • Co-invest with affiliates in marketing / sales to generate organic growth
    • Execute on in-market business growth opportunities
    • Fill out core capabilities in existing clusters
  38. 38. 2.Build-Out Wealth Management Franchise Existing location Potential location Be located in 15 of top 30 newly-affluent geographic regions European Theater? Asian Theater?
  39. 39. 3.Expand Product & Distribution
    • Provide affiliates access to best of breed in all investment categories
    • Private banking, family office and philanthropic services nationwide
    • National platform broad scale distribution of proprietary products
    • More products through existing distribution channels
    Build broad-scale access to products and national distribution
  40. 40. 4. Employ a Distinctive Brand Strategy Endorsement model unifies and distinguishes local brands Enduring Excellence Members of Boston Private Wealth Management Group
  41. 41. 5. Attract and Retain Top Talent
    • Foster culture of values, opportunity and respect
    • Communicate with clarity and consistency
    • Emphasize the complete person = skills + cultural fit
    • Provide creative compensation programs
    • Actively endorse entrepreneurship
  42. 42. Conclusion
    • Unique and validated business model
    • Demonstrated acquisition success and organic growth
    • Financial sustainability through diversification
    • Uncompromising commitment to entrepreneurial environment which attracts and retains superior professionals
    • Attractive total returns to shareholders over ten- year period
    Boston Private is creatinglong-term value for shareholders
  43. 43. Boston Private: Long-Term Value Creation Q2 2007 Timothy L. Vaill Chairman and Chief Executive Officer
  44. 44. Appendix
    • Financial Performance
      • EPS
      • Revenue
      • Expenses
    • Segment Financial Summary
      • Private Banking
      • Wealth Advisory
      • Investment Management
    • Capital Management
  45. 45. Growth Consistent long term EPS growth $0.44 $1.04 $1.09 $1.37 $1.70 $1.82 5 Year CAGR Cash Earnings 13% 5 Year CAGR GAAP Earnings 12% $0.98 $0.34
  46. 46. Operating RevenueDramatic revenue increases ($ Millions) 5 Year CAGR 27%
  47. 47. Operating Expenses ($ Millions) Affiliates increasing in size and investing in future growth
  48. 48. Private Banking * Total and Percentage of Revenue exclude Charter. 249 220 320 Charter Bank 941 1,245 1,513 Gibraltar Private Bank & Trust 50% $5,905 559 1,702 $2,441 Assets ($M) Lending, Deposits, Mortgages and Cash Management Core Strengths: $4,661 433 934 1,844 Loans $4,370 467 964 1,749 Deposits *Percentage of Revenue: *Total: First Private Bank & Trust Borel Private Bank & Trust Boston Private Bank & Trust Partners:
  49. 49. Private Banking Results Loan Growth($M) Deposits($M) 5 year deposit CAGR: 29%
    • 5 year loans CAGR:31%
    • Credit quality remains pristine with non-performing at 0.21%
    Robust loan growth with heightened competition for deposits $2,386 $1,400 $1,658 $3,748 $1,145 2001 2002 2003 2004 2005 2006 Q1 2007 Acquisitions Consolidated $4,078 $4,101
  50. 50. Core Net Interest Income and Margin 3.76% Net interest margin experienced pressure in Q1 07
  51. 51. Loan Portfolio Residential Mortgage: 36% Home Equity: 5% Commercial: 58% Consumer: 1% Diversified loan portfolio
  52. 52. Wealth Advisory 1.3 Sand Hill Advisors 1.2 RINET Company $3.9 KLS Professional Advisors Group 1.9 Bingham, Osborn & Scarborough 8% $9.4 1.1 Assets Under Advisory ($B) Percentage of Revenue: Total: Coldstream Capital Partners: Fee-based financial planning, tax strategies and asset allocation Core Strengths:
  53. 53. Wealth Advisory and Investment Management Results Asset New Business Growth($B) 11% 14% 35% 8% Assets Under Advisory($B) Cumulative Assets Acquired $17.8B $30.7 $23.7 $21.1 $11.5 $6.9 $6.5 Wealth advisory growthless dependent on markets Wealth Advisory Fees($M) 1.7% 0.4% $5.0 $5.9 $7.0 $7.9 $8.3 $20.8 $19.1 2001 2002 2003 2004 2005 2006 Q1 2007 $7.3 0.5% $33.9
  54. 54. Investment Management 6.9 US Value Anchor 1.0 Growth & Income Gibraltar Private Bank $24.5 Total Assets Managed: Full spectrum of portfolio management products and services 0.7 2.4 1.0 2.0 $10.5 AUM ($B) Large Cap Value Boston Private Value Investors Balanced Boston Private Bank Fixed Income Borel Private Bank 42% US Value US Growth Core Style Percentage of Revenue: Dalton Greiner Westfield Capital Management Partners: Core Strengths: