Sandler O'Neill

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Sandler O'Neill

  1. 1. Boston Private: Long-Term Value Creation Robert J. Whelan Jonathan H. Parker Chief Financial Officer President, Western Region Q1 2007
  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 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 Enduring Excellence
  3. 3. Agenda 1. Overview 2. Strategy 3. Results 4. Future Conclusion 3 Enduring Excellence
  4. 4. Overview Boston Private Today
  5. 5. 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.
  6. 6. Corporate Profile Geography Balances AUM/advisory: $33 billion • Six regions Bank assets: $6 billion • 13 affiliates Loans: $4 billion • 41 offices Deposits: $4 billion • 1,060 employees People Economics Revenues: $345 million • Experienced team in the field Net income: $54 million • Shared values and culture EPS: GAAP – $1.43 • Key Driver: client service Cash – $1.82 Market cap: $1 billion 6 Enduring Excellence
  7. 7. Wealth Management Members Private Banking Wealth Advisory Investment Management 7 Enduring Excellence
  8. 8. Primary Focus: High Net Worth Market Preserve, grow and transfer assets. . . Tax Strategies Financial Planning Philanthropy Jumbo Mortgages Estate Planning Business Loans Investment Management Private Banking Trust Services . . . and create a unique “customer experience” 8 Enduring Excellence
  9. 9. Corporate Leadership Team Extensive experience across business disciplines Executive Title Years Previous Tim Vaill Chairman & CEO 35+ The Boston Company Walt Pressey President 35+ The Boston Company Jon Parker President, Western Region 30+ Edgar, Dunn Consulting Jay Cromarty President, Eastern Region 20+ State Street Global Advisors Megan Chambers General Counsel 20+ Ropes & Gray, Loomis Sayles Bob Whelan Chief Financial Officer 20+ MFS Investment Management Katie Kearney Corporate Development 10+ Lesavoy Financial Planning 9 Enduring Excellence
  10. 10. Strategy Capitalizing on a Unique Business Model
  11. 11. 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
  12. 12. How are we different? Enabled by Guided by Targeted Foundation of Market HC Support Research Strategic Capital Acquisitions Stewardship Unique Business Sustainable Model Organic Growth In - Market Diversification Business Focus Expansion Adding Balanced Distribution Affiliate Channels Management 12 Enduring Excellence
  13. 13. Targeted Market Research Focus on HNW demographic and private companies HNW Investable Assets Percent of Millionaires and Related Fee Income Who Own Private Companies U.S. HNW Individuals M illionaire Households $14T 89% 77% $9T 49% $45B $75B 2004 2009 $1 to $10 m illion $10 - $50 m illion > $50 m illion Source: CapGemini; World Wealth Report 2005. Source: VIP Forum 13 Enduring Excellence
  14. 14. Strategic Acquisitions Follow intellectual and investment capital Intellectual Capital Investment Capital Business Formation Wealth Accumulation Infrastructure Support Attractive Regions For Acquisitions 14 Enduring Excellence
  15. 15. 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 ― Hingham, Los Altos, Naples, New York • Aggressive marketing and sales programs ― Advertising campaigns, sales training 15 Enduring Excellence
  16. 16. Adding Distribution Channels Diversify and expand business growth via sales/delivery systems Local National Private Wealth Banking Advisory Investment Management • Small platform, high-touch • National intermediaries environments ― Broker/Dealers • Firms embedded in local ― Institutional consultants communities • Managed accounts • Centers-of-influence ― Sub-advisory and SMA 16 Enduring Excellence
  17. 17. Foundation of Support Value added by the holding company Financial Strength Intellectual Capital • Access to public capital • Market research • Co-investing for business growth • Strategic advice and counsel • Consolidated balance sheet • Legal, compliance, HR • Liquidity for principals • Leadership/succession planning Communications Network Entrepreneurial Culture • Exchange of best practices • Consultative advisor • Professional forums • Safety net enables risk taking • Internet/Intranet development • Support autonomy 17 Enduring Excellence
  18. 18. Capital Stewardship Efficient cash management and capital deployment External Capital Capital Generators Capital Users Holding Company Dividends to Shareholders 18 Enduring Excellence
  19. 19. Diversification Focus Enables sustainable & non-volatile returns Banking Activity Revenue By Business Type AUM By Client Type DEPOSITS $4.1B Wealth Advisory: Corporate: 8% 3% Sub-Advisory: NOW: 9% Foundations & CDs: 21% Endowments:11% 15% Investment High Net Management: Private ERISA /Public: Worth: DDAs: 19% Banking: 23% 39% 48% MMDA: 51% 53% LOANS $4.3B Revenue By Geography AUM By Investment Style Consumer & Commercial: S. California: Home Equity: 6% New England: Balanced: 58% 8% 48% 14% Equity Florida: 17% (Value): Alternative: 31% 8% Residential Mortgage: 36% Fixed Income: Equity New York: N. California: 8% (Growth): 11% 16% 39% 19 Enduring Excellence
  20. 20. Balanced Affiliate Management Autonomy with strong governance Holding Company Affiliate Partners Oversight Independence Governance Market / Clients Compliance Employees Capital Operations 20 Enduring Excellence
  21. 21. Results Unique Overall Sustainable Business Business Organic Model Growth Growth
  22. 22. Overall Revenue Growth $344.9 $263.3 $196.8 $133.6 $82.5 $105.4 $116.0 $53.2 $66.3 $30.4 $45.1 $36.6 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Private Banking Investment Managers Wealth Advisors 22 Enduring Excellence
  23. 23. Overall AUM Growth $29.8 Acquisition M arket Im pact $21.3B Organic Growth $19.3B $11.0B $6.5B $6.4B $5.7B $3.7B $2.2B $2.6B $0.7B 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 23 Enduring Excellence
  24. 24. Overall Loan and Deposit Growth* 10 Year CAGR 36% 10 Year CAGR 35% $4.3B $4.1B $206M $209M Loan s Dep osits 1996 2006 * Includes Acquisitions 24 Enduring Excellence
  25. 25. Overall Net Income Growth $54.4 $46.3 $33.6 $23.7 $21.2 $21.8 $16.7 $13.2 $9.6 $6.6 $7.7 $5.5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 25 Enduring Excellence
  26. 26. Overall Earnings Per Share Growth 1.82 $1.82 $1.70 $1.37 $1.04 $1.09 $0.98 $0.88 $0.74 $0.55 $0.41 $0.45 $0.34 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Cash Basis 26 Enduring Excellence
  27. 27. Sustainable Organic Growth Organic Growth After 3 Years Ownership by Boston Private 105% 75% 71% 45% Aggregate Banking Wealth Advisory Investment Management Note: Based on Revenues 27 Enduring Excellence
  28. 28. Sustainable Organic Growth 5 Year Organic Growth Record Organic Growth at Affiliates in New England Since Acquisition No acquisitions Westfield AUM: +686% during this time 176% Borel Net Income: +103% 119% 107% Boston Private Bank 93% Assets: +2,860% 0% 2001 2006 Revenue Net Incom e AUM Loans Deposit s 28 Enduring Excellence
  29. 29. Executive Retention Rates Retention Rates Since Acquisition 95% 100% 90% 91% 100% 80% 60% 40% 20% 0% Aggregate Banking Wealth Advisory Investment Management * Absent normal retirements or forced terminations 29 Enduring Excellence
  30. 30. Dividends Paid to Shareholders 6 Year CAGR 18% $0.35 $0.30 Commenced Dividend $0.25 in 2000 $0.20 $0.15 $0.10 $0.05 $0.00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 30 Enduring Excellence
  31. 31. Sustainable Growth Metrics MANAGEMENT PERFORMANCE FOCUS INDICATORS Personnel: Succession, Governance Long Term EPS Growth Existing Markets Growth Opportunities: Products, Distribution Margins RESULT Industry Dynamics: Growth, Regulatory Environment, Demographic Changes Total Return to Shareholders Return on Competitive Market Invested Capital Strategic Plan & Execution Financial: Cost of Capital Ratios, Cash, Debt Capital Coverage, etc. 31 Enduring Excellence
  32. 32. Long-Term Value Creation BPFH Total Return To Investors (12/1995 – 12/2006) 32 Enduring Excellence
  33. 33. Future Steps to additional Value Creation
  34. 34. 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 34 Enduring Excellence
  35. 35. 2. Build-Out Wealth Management Franchise Be located in 15 of top 30 newly-affluent geographic regions Asian Theater? European Theater? Existing location Potential location 35 Enduring Excellence
  36. 36. 3. Expand Product & Distribution Build broad-scale access to products and national 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 36 Enduring Excellence
  37. 37. 4. Employ a Distinctive Brand Strategy Endorsement model unifies and distinguishes local brands Enduring Excellence Members of Boston Private Wealth Management Group 37 Enduring Excellence
  38. 38. 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 38 Enduring Excellence
  39. 39. Conclusion Boston Private is creating long-term value for shareholders • 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 39 Enduring Excellence
  40. 40. Boston Private: Long-Term Value Creation Robert J. Whelan Jonathan H. Parker Chief Financial Officer President, Western Region Q1 2007
  41. 41. Appendix • Financial Performance ― EPS ― Revenue ― Expenses • Segment Financial Summary ― Private Banking ― Wealth Advisory ― Investment Management • Capital Management 41 Enduring Excellence
  42. 42. Growth Consistent long term EPS growth $1.82 $1.70 $1.38 $1.43 $1.37 $1.10 $1.09 $1.04 $0.98 $0.88 $0.90 $0.82 $0.43 $0.79 2000 2001 2002 2003 2004 2005 2006 42 Enduring Excellence
  43. 43. Operating Revenue Dramatic revenue increases $344.9 $263.3 ($ Millions) $196.8 $133.6 $115.9 $105.4 $82.5 2000 2001 2002 2003 2004 2005 2006 43 Enduring Excellence
  44. 44. Operating Expenses Affiliates increasing in size and investing in future growth $250.4 $181.8 ($ Millions) $139.2 $95.9 $83.2 $78.8 $54.8 2000 2001 2002 2003 2004 2005 2006 44 Enduring Excellence
  45. 45. Private Banking Core Strengths: Lending, Deposits, Mortgages and Cash Management Partners: Assets ($M) Loans Deposits Boston Private Bank & Trust $2,456 $1, 783 $1,8224 Gibraltar Private Bank & Trust 1,483 1,217 952 Borel Private Bank & Trust 965 888 865 First Private Bank & Trust 553 418 459 Total: $5,457 $4,308 $4,098 Percentage of Revenue: 51% 45 Enduring Excellence
  46. 46. Private Banking Results Robust loan growth with heightened competition for deposits Deposits ($M) Acquisitions $3,748 $4,078 Consolidated $2,386 6 year deposit CAGR: 32% $1,658 $1,400 $1,002 $1,145 $706 1999 2000 2001 2002 2003 2004 2005 2006 Loan Growth ($M) $3,623 $4,311 Acquisitions • 6 year loans CAGR: 32% Consolidated $2,248 • Credit quality remains pristine $1,613 $684 $879 $1,105 $1,302 with non-performing at 0.23% 1999 2000 2001 2002 2003 2004 2005 2006 46 Enduring Excellence
  47. 47. Core Net Interest Income and Margin Net interest margin experienced pressure in Q4 ‘06 $45,000 5.00% $40,000 3.85% 4.50% $35,000 $30,000 4.00% $25,000 $20,000 3.50% $15,000 $10,000 3.00% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 '02 '02 '02 '03 '03 '03 '03 '04 '04 '04 '04 '05 '05 '05 '05 '06 '06 '06 '06 Net Int erest Incom e Net Int erest Margin 47 Enduring Excellence
  48. 48. Loan Portfolio Diversified loan portfolio Com m ercial Real Est at e Unsecured Const ruct ion Com m ercial & Indust rial Secured by Cash, Market able Securit ies Resident ial Invest m ent Propert ies Consumer: 1% Home Equity: 5% 53% 2% Commercial: 58% 22% Residential Mortgage: 36% 10% 8% 5% 48 Enduring Excellence
  49. 49. Wealth Advisory Core Strengths: Fee-based financial planning, tax strategies and asset allocation Partners: Assets Under Advisory ($B) KLS Professional Advisors Group $3.7 Bingham, Osborn & Scarborough 1.8 RINET Company 1.3 Sand Hill Advisors 1.0 Coldstream Capital 1.1 Total: $8.9 Percentage of Revenue: 8% 49 Enduring Excellence
  50. 50. Wealth Advisory and Investment Management Results Wealth advisory growth Wealth Advisory Fees ($M) less dependent on markets $19.1 $20.8 $7.0 $7.9 $5.0 $5.9 $3.3 $4.1 1999 2000 2001 2002 2003 2004 2005 2006 Asset New Business Growth ($B) Assets Under Advisory ($B) 35% Unconsolidated $30.7 $23.7 Acquired $21.1 $2.2 Core 27% $11.5 14% 8% $1.0 $6.8 $6.5 $6.9 $0.9 11% 11% $0.6 1.7% $4.5 $0.3 $0.3 0.4% $0.8 1999 2000 2001 2002 2003 2004 2005 2006 1999 2000 2001 2002 2003 2004 2005 2006 Cumulative Assets Acquired $17.8B 50 Enduring Excellence
  51. 51. Investment Management Core Strengths: Full spectrum of portfolio management products and services Partners: Core Style AUM ($B) Westfield Capital Management US Growth $10.1 Anchor US Value 6.4 Dalton Greiner US Value 2.3 Boston Private Value Investors Large Cap Value 1.0 Boston Private Bank Balanced 2.4 Gibraltar Private Bank Growth & Income 0.9 Borel Private Bank Fixed Income 0.7 Total Assets Managed: $23.8 Percentage of Revenue: 39% 51 Enduring Excellence
  52. 52. Strong Capital Stewardship Cash generators finance strategic capital investment Sources Uses Dividends from • Reinvest in APs Affiliate Partners • New Acquisitions Sell Equity • Dividends Holding • Stock Repurchase Company Borrow • Repay Debt • Seed Capital Earnings • HC Expenses 52 Enduring Excellence
  53. 53. Banks Well Capitalized for Regulatory Requirements To Be Well Total Risk-based Capital Actual Capitalized Boston Private Bank 11.41% 10.00% Borel Private Bank 11.02% 10.00% First Private Bank 12.65% 10.00% Gibraltar Private Bank 11.17% 10.00% BPFH 12.73% 10.00% As of 9/30/06 53 Enduring Excellence

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