boston private: long-term value creation q1 2007 jonathan h. parker president, western region robert...

Boston Private:Long-Term Value Creation

Q1 2007

Jonathan H. ParkerPresident, Western Region

Robert J. WhelanChief Financial Officer

2 Enduring Excellence

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.


Agenda

1. Overview

2. Strategy

3. Results

4. Future

Conclusion

Overview

Boston Private Today

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

• Six regions• 13 affiliates• 41 offices• 1,060 employees

AUM/advisory: $33 billion Bank assets: $6 billion

Loans: $4 billion Deposits: $4 billion

Geography Balances

People Economics

• Experienced team in the field• Shared values and culture• Key Driver: client service

Revenues: $345 million Net income: $54 million EPS: GAAP – $1.43

Cash – $1.82

Market cap: $1 billion


Wealth Management Members

Private Banking Wealth Advisory Investment Management


Primary Focus: High Net Worth Market

Preserve, grow and transfer assets. . .

Private BankingTrust Services

Jumbo Mortgages

Business LoansInvestment Management

Estate Planning

Tax StrategiesFinancial Planning

Philanthropy

. . . and create a unique “customer experience”


Corporate Leadership Team

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

Extensive experience across business disciplines

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 StewardshipUnique

BusinessModel

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


Millionaire Households

49%

77%89%

$1 to $10 million $10 - $50 million > $50 million

U.S. HNW Individuals

$14T

$9T

2004 2009

Source: CapGemini; World Wealth Report 2005.

8.4% Annually

HNW Investable Assetsand Related Fee Income

Focus on HNW demographic and private companies

Percent of MillionairesWho Own Private Companies

Targeted Market Research

Source: VIP Forum

$45B $75B


Follow intellectual and investment capital

IntellectualCapital

InvestmentCapital

BusinessFormation

Infrastructure

Support

AttractiveRegions ForAcquisitions

WealthAccumulatio

n

Strategic Acquisitions


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


Adding Distribution Channels

•Small platform, high-touch environments

•Firms embedded in local communities

•Centers-of-influence

Wealth Advisory

PrivateBanking

Local

InvestmentManagemen

t

Diversify and expand business growth via sales/delivery systems

National

•National intermediaries― Broker/Dealers― Institutional consultants

•Managed accounts― Sub-advisory and SMA


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

Foundation of Support


Efficient cash management and capital deployment

HoldingCompany

External Capital

Dividends to Shareholders

Capital Stewardship

Capital UsersCapital Generators


Foundations &Endowments:11%

ERISA /Public:23%

High NetWorth:48%

Sub-Advisory:15%

Equity (Growth):39%

Equity (Value):31%

Fixed Income:8%

Corporate:3%

Alternative:8%

Balanced:14%

Banking Activity

DEPOSITS $4.1B

MMDA: 51%DDAs: 19%

CDs: 21%

Commercial: 58%

Residential Mortgage:

36%

NOW: 9%

Consumer &Home Equity:

6%

LOANS $4.3B

PrivateBanking:53%

Wealth Advisory:8%

InvestmentManagement:

39%

AUM By Client Type

AUM By Investment Style

New York:11%

Florida:17%

New England:48%

N. California:16%

Revenue By Geography

Revenue By Business Type

S. California:8%

Diversification Focus

Enables sustainable & non-volatile returns


Autonomy with strong governance

GovernanceCompliance

Capital

Market / Clients EmployeesOperations

Holding Company Affiliate Partners

Oversight Independence

Balanced Affiliate Management

Results

UniqueBusiness

Model

Overall Business Growth



Overall Revenue Growth

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Private Banking Investment Managers Wealth Advisors

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


1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Acquisition

Market Impact

Organic Growth

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


Overall Loan and Deposit Growth*

Loans Deposits

1996 2006

10 Year CAGR 36%

10 Year CAGR 35%

$206M

$4.3B

$209M

$4.1B

* Includes Acquisitions


Overall Net Income Growth

$5.5 $6.6 $7.7 $9.6$13.2

$16.7$21.2 $21.8

$33.6

$46.3

$54.4

$23.7

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

10 Year CAGR 23%


Overall Earnings Per Share Growth

10 Year CAGR 16% Cash Basis

Cash Basis

10 Year CAGR 15% GAAP Basis$1.82



Organic Growth After 3 Years Ownership

by Boston Private

Note: Based on Revenues


0%

93%

119%

176%

107%

2001 2006

Revenue Net Income AUM

Loans Deposits

Westfield AUM: +686%

Borel Net Income: +103%

Boston Private Bank

Assets: +2,860%


No acquisitionsduring this time

5 Year Organic Growth Record in New England

Organic Growth at AffiliatesSince Acquisition


Executive Retention Rates

* Absent normal retirements or forced terminations

Retention Rates Since Acquisition


$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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

PERFORMANCEINDICATORS

RESULT

MANAGEMENT FOCUS


Long-Term Value Creation

BPFH Total Return To Investors (12/1995 – 12/2006)

Future

Steps to additional Value Creation


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


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

• 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


4. Employ a Distinctive Brand Strategy

Members of Boston Private Wealth Management Group

Endorsement model unifies and distinguishes local brands

Enduring Excellence


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


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 creating long-term value for shareholders

Boston Private:Long-Term Value Creation

Q1 2007

Jonathan H. ParkerPresident, Western Region

Robert J. WhelanChief Financial Officer


Appendix

• Financial Performance― EPS― Revenue― Expenses

• Segment Financial Summary― Private Banking― Wealth Advisory― Investment Management

• Capital Management


Growth

Consistent long term EPS growth

$0.88$0.98 $1.04 $1.09

$1.37

$1.70

$1.82

5 Year CAGR Cash Earnings

13%

5 Year CAGR GAAP Earnings

12%


Operating Revenue

Dramatic revenue increases

($ Millions) 5 Year CAGR 27%


($ Millions)

Operating Expenses

Affiliates increasing in size and investing in future growth


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%


Private Banking Results

Loan Growth ($M)

$4,311$3,623

$2,248$1,613

$1,302$1,105$879$684

1999 2000 2001 2002 2003 2004 2005 2006

Acquisitions

Consolidated

Deposits ($M)

$4,078

$2,386

$1,658$1,400

$1,002 $1,145

$3,748

$706

1999 2000 2001 2002 2003 2004 2005 2006

Acquisitions

Consolidated 6 year deposit CAGR: 32%

• 6 year loans CAGR: 32%• Credit quality remains pristine

with non-performing at 0.23%

Robust loan growth with heightened competition for deposits


Core Net Interest Income and Margin

3.85%

Net interest margin experienced pressure in Q4 ‘06


Loan Portfolio

Residential Mortgage:

36%

Home Equity: 5% Commercial:

58%

Consumer: 1%

Diversified loan portfolio


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



Asset New Business Growth ($B)

$1.0 $0.9

$2.2

$0.6$0.3 $0.8$0.3

1999 2000 2001 2002 2003 2004 2005 2006

11%

27%

11%

14%

35%

8%

Assets Under Advisory ($B)

1999 2000 2001 2002 2003 2004 2005 2006

Unconsolidated

Acquired

Core

Cumulative Assets Acquired $17.8B

$30.7$23.7

$21.1

$11.5$6.9$6.5$6.8

$4.5

Wealth advisory growth less dependent on markets

$3.3 $4.1 $5.0 $5.9 $7.0 $7.9

$20.8

$19.1

1999 2000 2001 2002 2003 2004 2005 2006

Wealth Advisory Fees ($M)

Wealth Advisory and Investment Management Results

1.7%0.4%


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



Dividends from Affiliate Partners

HoldingCompany

Strong Capital Stewardship

UsesSources

• Reinvest in APs

• New Acquisitions

• Dividends

• Stock Repurchase

• Repay Debt

• Seed Capital

• HC Expenses

Sell Equity

Borrow

Cash generators finance strategic capital investment

Earnings


Banks Well Capitalized for Regulatory Requirements

Total Risk-based Capital Actual

To Be Well

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

boston private: long-term value creation q1 2007 jonathan h. parker president, western region robert...

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