Boston Private: Long-Term Value Creation

Transcription

1 Boston Private: Long-Term Value Creation Timothy L. Vaill Chairman and CEO Walter M. Pressey President David J. Kaye Chief Financial Officer Q3 2007

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 company s loan portfolio, changes in the interest rate environment, adverse conditions in the capital markets and the impact of such conditions on Boston Private s asset management activities, competitive pressures from other financial institutions, the risk that goodwill and intangibles recorded in the Company s financial statements will become impaired, and risks related to the identification and implementation of acquisitions, as well as the other 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. 2

3 Agenda 1. Company Overview 2. Business Strategy 3. Financial Results 4. Future Plans Conclusion 3

4 Company Overview What does Boston Private look like Today?

5 Boston Private s Business We provide wealth management services to HNW families, private companies and selected institutions through independently managed affiliates who form trusted relationships that preserve, grow and transfer client assets over a lifetime. We have three key disciplines: - Private Banking - Wealth Advisory (w/financial Planning) - Investment Management

6 Distinguishing Characteristics How is Boston Private different? Non-Integrated Business Model Local Platform Service Delivery Entrepreneurial Work Environment Centralized Support Where Appropriate Significant Revenue Diversification 6

7 Primary Target: High Net Worth Market Preserve, grow and transfer assets... Financial Planning Jumbo Mortgages Business Loans Private Banking Tax Strategies Philanthropy Estate Planning Investment Management Trust Services... and create a unique client experience 7

8 Wealth Management Group Members Private Banking Wealth Advisory Investment Management 8

9 Current Corporate Profile Geography Client Assets Six regions 14 affiliates 41 offices 1,137 employees AUM/advisory: Bank B/S: Loans: Deposits: $37 billion $6.3 billion $5.0 billion $4.3 billion People Experienced leadership teams Shared values and culture Entrepreneurially driven Client service focus Economics Annualized Revenues: $420 million Annualized Net income: $70 million Q Operating EPS: GAAP $0.44 Cash $0.54 Market cap: $1 billion 9

10 Business Strategy How Do We Create Marketplace Differentiation?

11 Boston Private s Strategic Vision We are building a national wealth management company that is broadly recognized particularly among first generation wealth -- as the preferred place to have assets managed. Our goal is to generate a superior Total Shareholder Return over the long-term

12 Marketplace Differentiation Q: How do we create differentiation in a very crowded marketplace and truly deliver an exceptional Client Experience (which everybody wants to do)? A: By executing through a unique business model which supports - Accessibility - Responsiveness - Creativity and delivers sustainable organic growth 12

13 Marketplace Differentiation Driven by Guided by Targeted Market Research Support from the Center Unique Business Model Strategic Acquisitions Post- Acquisition Expansion Capital Stewardship Diversification Planning = Sustainable Organic Growth New Products and Distribution Balanced Affiliate Management 13

14 Targeted Market Research Focus on HNW demographic and private companies HNW Investable Assets and Related Fee Income U.S. HNW Individuals Percent of Millionaires Who Own Private Companies Millionaire Households $9T 8.4% Annually $14T 77% 89% 49% $45B $75B $1 to $10 million $10 - $50 million > $50 million Source: CapGemini; World Wealth Report Source: VIP Forum 14

15 Strategic Acquisitions Follow intellectual and investment capital... Intellectual Capital Investment Capital Business Formation Wealth Accumulation Infrastructure Support... to find Affiliate Partners to join the group = Attractive Regions For Acquisitions 15

16 Post-Acquisition Expansion Help Affiliate Partners grow locally: Co-Invest & provide incentives Aggressive marketing and sales programs Advertising campaigns, sales training Cross-sale opportunities/synergies Local tie-in acquisitions/lift-outs Encino, CH&P New office development Los Altos, Naples, New York, Beverly 16

17 New Products & Distribution Diversify and expand Affiliate Partner businesses: Local National Private Banking Wealth Advisory Investment Management Philanthropic products Centers-of-Influence Community involvement National intermediaries Broker/Dealers Institutional consultants Managed accounts Sub-advisory and SMA 17

18 Support from the Center The Holding Company provides: Financial Strength Access to public capital Co-investing for business growth Consolidated balance sheet On-going liquidity/safety Net Intellectual Capital Market research/marketing Strategic consulting Legal, compliance, HR Financial Analysis Communication Networks Sharing of best practices Professional forums Internet/Intranet development Technology guidance Leadership Support Key personnel development Consultative advisor Succession planning 18

19 Capital Stewardship Efficient cash management and capital deployment: Capital Sources External Capital Capital Users Holding Company Dividends to Shareholders 19

20 Diversification Planning Provide sustainable & non-volatile growth: Banking Activity Revenue By Business Type AUM By Client Type DEPOSITS $4.3B NOW: 9% CDs: 26% Wealth Advisory: 10% Corporate: 3% Foundations & Endowments: 10% Sub-Advisory: 13% MMDA: 47% DDAs: 18% Investment Management: 40% Private Banking: 50% ERISA /Public: 20% SMA: 21% High Net Worth: 33% LOANS $5.0B Revenue By Geography AUM By Investment Style Consumer & Home Equity: 6% Residential Mortgage: 35% Commercial: 59% S. California: 7% Florida: 14% New York: 7% N. California: 16% Pacific NW: 4% New England: 52% Balanced: 15% Alternative: 7% Fixed Income: 10% Equity (Value): 26% Equity (Growth): 42% 20

21 Balanced Affiliate Management Autonomy with strong governance: Holding Company Oversight Governance Compliance Capital Affiliate Partners Independence Market / Clients Employees Operations 21

22 Sustainable Organic Growth Organic Growth After 3 Years Ownership by Boston Private: 105% 75% 71% 45% Aggregate Wealth Advisory Investment Management Private Ban k i n g Note: Based on Revenues 22

23 Organic Growth: A Case Study 5 Year Organic Growth Record in New England No acquisitions during this time 176% 119% 107% 93% 0% AUM Revenue Net Income Loans Deposits 23

24 Executive Retention Rates In addition, the Boston Private Environment has proven to be attractive for our professionals: Retention Rates Since Acquisition 100% 80% 60% 40% 20% 95% 90% 91% 100% 0% Aggregate Wealth Advisory Investment Management Private Bank ing * Absent normal retirements or forced terminations 24

25 Financial Results How well have we performed for our Shareholders?

26 Overall EPS Growth 10 Year CAGR 16% Cash Basis 10 Year CAGR 15% GAAP Basis $0.88 $0.74 $1.04 $1.09 $0.98 $1.37 $1.70 $ $0.34 $0.41 $0.45 $ YTD '07 Cash Basis Q3 07 Cash and GAAP EPS: $0.54 and $

27 Overall Revenue Growth $ Year CAGR 25% $196.8 $263.3 $294.1 $82.5 $105.4 $116.0 $133.6 $36.6 $45.1 $53.2 $ Y TD '07 Private Banking Investment Managers Wealth Advisors Q3 07 Total Revenues: $106 million 27

28 Overall AUM Growth $37.0B $29.8B 10 Year CAGR 46% $19.3B $21.3B $11.0B $0.7B $2.2B $2.6B $3.7B $5.7B $6.5B $6.4B Y TD '07 Private Banking Investment Managers Wealth Advisors Q3 07 Total AUM: $37 billion 28

29 Loans 10 Year CAGR 36% $3.6B $4.3B $5.0B $2.2B $1.3B $1.6B $0.2B $0.3B $0.3B $0.5B $0.9B $1.1B Y TD '07 New England N. Cal S. Cal Florida Pac N.W. Q3 07 Total Loans: $5.0 billion 29

30 Deposits 10 Year CAGR 35% $3.7B $4.1B $4.3B $2.4B $0.7B $1.1B $1.4B $1.7B $0.2B $0.3B $0.3B $0.4B Y TD '07 Checking Savings CDs Q3 07 Total Deposits: $4.3 billion 30

31 Loan Quality Trends 0.70% 0.60% 0.50% 0.40% 0.46% 0.45% 0.50% 0.30% 0.20% 0.40% 0.10% 0.00% -0.10% Q3 ' % 0.00% 0.00% -0.01% 0.00% Q4 '06 Q1 '07 Industry trend for net charge-offs as a % of total loans Q2 '07 Q3 '07 Net charge-offs as a % of total loans 31

32 Long-Term Value Creation BPFH Total Return Performance (9/1997 9/2007) Data source: SNL 32

33 Future Plans What steps will we take to create additional value?

34 1. Enhance Existing Platforms Fill out key disciplines in existing geographies Identify complementary lift-out opportunities Look for attractive fold-in acquisitions for existing affiliates Co-invest with affiliates in marketing / sales to generate organic growth 34

35 2. Expand National Franchise Pursue additional Affiliate Partners in other geographic regions: Existing locations Desirable markets 35

36 3. Investigate New Products & Distribution Channels Provide affiliates access to best of breed in all investment categories Explore family office and philanthropic services nationwide More products through existing distribution channels Specialized fund products to meet growing client needs 36

37 4. Build a Distinctive Corporate Brand Foundation approach unifies and distinguishes local brands: Members of Boston Private Wealth Management Group 37

38 5. Focus on Leadership Development Implement Leadership Development Program Build effective and lasting communication skills Foster culture of values, opportunity and respect 38

39 Summary Continue to build on past success and take additional steps to expand the business and create additional value 39

40 Concluding Comments: Boston Private is creating long-term value for shareholders Unique and validated business model Demonstrated acquisition success and organic growth Financial sustainability through diversification Commitment to entrepreneurial environment which attracts and retains superior professionals Attractive total returns to shareholders over tenyear period 40

41 Boston Private: Long-Term Value Creation Timothy L. Vaill Chairman and CEO Walter M. Pressey President David J. Kaye Chief Financial Officer Q3 2007

42 Appendix Segment Financial Summary Private Banking Wealth Advisory Investment Management Capital Management 42

43 Private Banking Core Strengths: Lending, Deposits, Mortgages and Cash Management Partners: Assets ($M) Loans Deposits Boston Private Bank & Trust $2,601 $1,960 $1,825 Gibraltar Private Bank & Trust 1,589 1, Borel Private Bank & Trust 1, First Private Bank & Trust Charter Bank $217 Total: $6,292 $5,036 $4,342 Percentage of Revenue: 50% 43

44 Net Interest Income and Margin $55, % $50,000 Change from Q2 07 Addition of Charter 8 bps $45,000 $40,000 $35,000 $30,000 Debt replacement 6 bps Stock buyback and acquisition financing (2) bps 3.76% 4.50% 4.00% $25,000 $20,000 $15,000 $10, % 3.50% 3.59% 3.00% Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Net Interest Income Net Interest Margin 44

45 Loan Portfolio Diversified loan portfolio Consumer: 2% Home Equity: 4% Commercial: 59% Commercial Real Estate Unsecured Construction Commercial & Industrial Secured by Cash, Marketable Securities Residential Investment Properties 3% 43% 27% Residential Mortgage: 35% 11% 5% 11% 45

46 Wealth Advisory Core Strengths: Fee-based financial planning, tax strategies and asset allocation Partners: KLS Professional Advisors Group Bingham, Osborn & Scarborough RINET Company Sand Hill Advisors Coldstream Capital Total: Assets Under Advisory ($B) $ $10.2 Percentage of Revenue: 10% 46

47 Wealth Advisory and Investment Management Results Wealth advisory growth less dependent on markets Wealth Advisory Fees ($M) $19.1 $20.8 $10.1 $5.0 $5.9 $7.0 $7.9 $ Q3 07 Asset New Business Growth ($B) 35% 14% $2.2 8% 11 $ % % $ % 1.7% $0.3 $ $ $ Q3 '07 Assets Under Advisory ($B) Unconsolidated $37.2 $30.7 Acquired $23.7 Core $21.1 $11.5 $6.5 $ Q3 '07 Cumulative Assets Acquired $17.8B 47

48 Investment Management Core Strengths: Full spectrum of portfolio management products and services Partners: Westfield Capital Management Anchor Dalton Greiner Boston Private Value Investors Boston Private Bank Gibraltar Private Bank Borel Private Bank Total Assets Managed: Core Style US Growth US Value US Value Large Cap Value Balanced Growth & Income Fixed Income AUM ($B) $ $27.2 Percentage of Revenue: 40% 48

49 Capital as Viewed by Regulators and Bankers TANGIBLE EQUITY TO TANGIBLE ASSETS RATIO ($ Millions) 09/30/07 GAAP Calculation Regulatory View Credit Syndicate TANGIBLE EQUITY GAAP Equity $690 $600 $690 Less: Goodwill/Intangible $490 $447 $490 $200 $153 $200 ADD Trust Preferred 50% $115 $115 ADD Tax Adjusted Goodwill $34 $200 $315 $349 TANGIBLE ASSETS Total Assets $6,596 $6,596 $6,596 LESS Goodwill/Intangible $490 $490 $490 $6,106 $6,106 $6,106 RATIO TE/TA 3.78% 5.16% 5.72% 49