We take a comprehensive approach to wealth management. Collectively, our affiliates can provide strategies for managing and accumulating wealth now…and planning for future transitions – a financial lifecycle of solutions. Each offers a different piece of the cycle. Cross-sell over the financial lifecycle. Boston Private “quarterbacks” all the services.
Strong management team with breadth and depth Seasoned, veteran team All disciplines represented (banking, investments, financial planning) Future -- Vaill Acquisitions – Pressey (not CFO anymore), with Kearney Financials and Communications - Whelan Legal and compliance oversight - Chambers Drive organic growth - Parker & Cromarty
Favorable demographic trends ahead HNW Market is significant Affluent US Households trending up –10% per year --fastest growing segment Significant growth in Over-55 population – 77 million Americans born between 1946 and 1964 are nearing end of work lives and hold bulk of US HH Net Worth Private Companies represent tremendous opportunity ( VIP Forum) 85% private clients derive wealth from private business 50% HH with $1-10M are private business owners 56% of all businesses will be sold in next 10 years – new liquid wealth 57% of business owners do not have a solid financial plan Result? Growing investable assets and potential fee income
“ Intellectual Capital” paradigm determines geographic targets Intellectual capital investment capital business formation wealth accumulation infrastructure support wealth management needs Proprietary analysis done by economy.com which ranks and assesses indicators of wealth and vitality to guide target markets locations Acquisition Team scouts and conducts due diligence Conduct in-depth financial analysis Long courtships -- ensure right cultural fit Look for profitable businesses with proven management Accretive within 18 months Meet standards of excellence Filter for diversification – want to acquire new product and distribution Integration team assimilates firm
Three disciplines – two delivery models Local service delivery – private banking and wealth advisory National platform – investment management
Firms benefit from the resources and scale of a national and public firm. Provide financial support for business development and acquisitions by our partners Provide intellectual resources: Marketing, sales, public relations Research Legal & Compliance HR – recruiting, people development Each firm ultimately benefits from the scale and diversity while also contributing to the partnership. This support drives organic growth
Oversight and autonomy balanced with high level of independence creates an entrepreneurial environment which attracts and retains the very best talent.
Introduce diversification strategy == superior results Exceed peer performance
Be located in 15 of the top 30 newly-affluent geographic regions in the US, as validated by Economy.com, with 12 regions on a “fully loaded” basis (i.e. with all of Boston Private’s wealth management core competencies represented within the next 10 years.
Create a cooperative to provide Affiliate Partner access to the “best of breed” in all investment asset categories, including the international and alternative sectors, by having a very robust open architecture asset allocation capability. Have private banking, family office and philanthropic services available on a nationwide basis, with appropriate “linkage” among our Affiliate Partners to deliver and support these components.
Affiliate partner brands will lead in the local markets. They will be targeting consumers. Their brands will resonate with their clients. They will even reach COIs. Our brand will be most important to employees – serving as true north and uniting employees across the country. Next we will influence investors, reinforcing our strong growth story and unique business model. We will approach the media with our brand to drive 3 rd party endorsement. Our brand will be very meaningful to potential affiliate partners. When it comes to media spending…. Centers-of-Influence (COI’s) represent best target for media spending because: Represent high potential market segments - primary target for banking products/services Key intermediaries for client referral to Affiliate Partners COI’s defined as: CPA’s – with tax orientation Lawyers – with orientation around Estate Planning, Divorce, M&A Financial Planners Management Consultants Venture Capital Firms Insurance agents
Boston Private is effectively using it’s unique business model to not only grow shareholder value over the long-term, but also to build a world-class wealth management company dedicated to financial sustainability and enduring excellence.
Bank of America Smid Cap Conference
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
Forward Looking Statements <ul><li>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. </li></ul>
Boston Private’s 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 client’s financial lifecycle.
Corporate Profile <ul><li>Six regions </li></ul><ul><li>14 affiliates </li></ul><ul><li>45 offices </li></ul><ul><li>1,039 employees </li></ul>AUM/advisory: $34 billion Bank assets: $5.6 billion Loans: $4.5 billion Deposits: $4.1 billion Geography Balances People Economics <ul><li>Experienced team in the field </li></ul><ul><li>Shared values and culture </li></ul><ul><li>Key Driver: client service </li></ul><ul><li> Annualized Revenues: $368 million </li></ul><ul><li>Annualized Net income: $52 million </li></ul><ul><li> Q1 2007 EPS: GAAP – $0.34 </li></ul><ul><ul><ul><li>Cash – $0.44 </li></ul></ul></ul><ul><li> Market cap: $1 billion </li></ul>* Geography includes Charter. Economics and Balances exclude Charter.
Wealth Management Members Private Banking Wealth Advisory Investment Management
Recent Events <ul><li>On March 5, 2007, Boston Private announced the acquisition of Charter Bank in Bellevue, Washington </li></ul><ul><li>Charter is a $320 million commercial bank with 4 locations in key demographic areas </li></ul><ul><li>Charter will work closely with Coldstream Capital Management to bring comprehensive wealth management services to the HNW and small business markets </li></ul>
Recent Events (con’t) <ul><li>Charter had double-digit growth over last 5 years in loans deposit and net income </li></ul><ul><li>Entire management team has been retained </li></ul><ul><li>The transaction will close in the third quarter </li></ul>38% 18% 16%
National Association of Corporate Directors Board of the Year Award <ul><li>30-year old national organization </li></ul><ul><li>Inaugural NACD Board of the Year Award </li></ul><ul><li>Honoring excellence across the Board </li></ul><ul><li>Outstanding contributions to the Company </li></ul><ul><li>Maintaining high levels of professional standards </li></ul>
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”
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 Chambers The Boston Company 35+ President Walt Pressey The Boston Company 35+ Chairman & CEO Tim Vaill Previous Years Title Executive
Strategy Capitalizing on a Unique Business Model
Boston Private’s Strategic Vision: To build a national wealth management franchise that is broadly recognized ― particularly 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
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 Balanced Affiliate Management In - Market Business Expansion
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
Strategic Acquisitions Follow intellectual and investment capital Intellectual Capital Investment Capital Business Formation Infrastructure Support Attractive Regions For Acquisitions Wealth Accumulation
In - Market Business Expansion <ul><li>Fund expansion and growth in numerous ways </li></ul><ul><li>Local tie-in acquisitions </li></ul><ul><ul><li>Encino, Kanon Bloch Carre, CH&P </li></ul></ul><ul><li>Experienced team lift-outs with clients and AUM </li></ul><ul><li>New office development </li></ul><ul><ul><li>Beverly, Hingham, Lexington, Los Altos, Naples, New York </li></ul></ul><ul><li>Aggressive marketing and sales programs </li></ul><ul><ul><li>Advertising campaigns, sales training </li></ul></ul>
Adding Distribution Channels <ul><li>Small platform, high-touch environments </li></ul><ul><li>Firms embedded in local communities </li></ul><ul><li>Centers-of-influence </li></ul>Wealth Advisory Private Banking Local Investment Management Diversify and expand business growth via sales/delivery systems National <ul><li>National intermediaries </li></ul><ul><ul><li>Broker/Dealers </li></ul></ul><ul><ul><li>Institutional consultants </li></ul></ul><ul><li>Managed accounts </li></ul><ul><ul><li>Sub-advisory and SMA </li></ul></ul>
Foundation of Support <ul><li>Intellectual Capital </li></ul><ul><li>Market research </li></ul><ul><li>Strategic advice and counsel </li></ul><ul><li>Legal, compliance, HR </li></ul><ul><li>Leadership/succession planning </li></ul><ul><li>Financial Strength </li></ul><ul><li>Access to public capital </li></ul><ul><li>Co-investing for business growth </li></ul><ul><li>Consolidated balance sheet </li></ul><ul><li>Liquidity for principals </li></ul><ul><li>Entrepreneurial Culture </li></ul><ul><li>Consultative advisor </li></ul><ul><li>Safety net enables risk taking </li></ul><ul><li>Support autonomy </li></ul><ul><li>Communications Network </li></ul><ul><li>Exchange of best practices </li></ul><ul><li>Professional forums </li></ul><ul><li>Internet/Intranet development </li></ul>Value added by the holding company
Capital Stewardship Efficient cash management and capital deployment Holding Company External Capital Dividends to Shareholders Capital Users Capital Generators
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
Balanced Affiliate Management Autonomy with strong governance Governance Compliance Capital Market / Clients Employees Operations Holding Company Affiliate Partners Oversight Independence
Results Unique Business Model Overall Business Growth Sustainable Organic Growth
Overall Revenue Growth 10 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
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
Overall Net Income Growth 10 Year CAGR 23% Q1 07 Net Income: $13.1 million
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
Sustainable Organic Growth Organic Growth After 3 Years Ownership by Boston Private Note: Based on Revenues
Sustainable Organic Growth Westfield AUM: +686% Borel Net Income: +103% Boston Private Bank Assets: +2,860% No acquisitions during this time 5 Year Organic Growth Record in New England Organic Growth at Affiliates Since Acquisition
Executive Retention Rates * Absent normal retirements or forced terminations Retention Rates Since Acquisition
Dividends Paid to Shareholders 6 Year CAGR 18% Commenced Dividend in 2000
Sustainable Growth Metrics Personnel: 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 MANAGEMENT FOCUS
Long-Term Value Creation BPFH Total Return To Investors (12/1995 – 12/2006)
1. Enhance Existing Platform <ul><li>Co-invest with affiliates in marketing / sales to generate organic growth </li></ul><ul><li>Execute on in-market business growth opportunities </li></ul><ul><li>Fill out core capabilities in existing clusters </li></ul>
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?
3. Expand Product & Distribution <ul><li>Provide affiliates access to “best of breed” in all investment categories </li></ul><ul><li>Private banking, family office and philanthropic services nationwide </li></ul><ul><li>National platform – broad scale distribution of proprietary products </li></ul><ul><li>More products through existing distribution channels </li></ul>Build broad-scale access to products and national distribution
4. Employ a Distinctive Brand Strategy Endorsement model unifies and distinguishes local brands Enduring Excellence Members of Boston Private Wealth Management Group
5. Attract and Retain Top Talent <ul><li>Foster culture of values, opportunity and respect </li></ul><ul><li>Communicate with clarity and consistency </li></ul><ul><li>Emphasize the complete person = skills + cultural fit </li></ul><ul><li>Provide creative compensation programs </li></ul><ul><li>Actively endorse entrepreneurship </li></ul>
Conclusion <ul><li>Unique and validated business model </li></ul><ul><li>Demonstrated acquisition success and organic growth </li></ul><ul><li>Financial sustainability through diversification </li></ul><ul><li>Uncompromising commitment to entrepreneurial environment which attracts and retains superior professionals </li></ul><ul><li>Attractive total returns to shareholders over ten- year period </li></ul>Boston Private is creating long-term value for shareholders
Boston Private: Long-Term Value Creation Q2 2007 Timothy L. Vaill Chairman and Chief Executive Officer
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: