Beacon Financial Corporation · NYSE:BBT
Beacon Financial — Berkshire Hills Bancorp — Friedman, Billings, Ramsey & Co. New England in November "Un-conference" 2005
36 slides from Beacon Financial's conference presentation, Nov 10, 2005
Slide 1: New England in November "Un-conference"
Friedman, Billings, Ramsey & Co. New England in November “Un-conference” Michael P. Daly, President & Chief Executive Officer Wayne F. Patenaude, CFA Senior Vice President & Chief Financial Officer L. Alexandra Dest – Investor Relations Vice President & Senior Investment Officer Boston, Massachusett
Slide 2: Cautionary Statement
Cautionary Statement Statements contained in this presentation contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and expectations of management as well as the assumptions made using information cur
Slide 3: Berkshire Hills Bancorp
Berkshire Hills Bancorp Profile Strategic Actions Financial Report Interest Rate Risk Asset Quality Creating Value
Slide 4: Profile
Profile State chartered savings bank with commercial bank balance sheet Market capitalization - approximately $291 million at September 30, 2005 Ownership structure as of September 30, 2005 Insiders (not including options) 26% Berkshire Bank Foundation 7% Institutional holders 39%
Slide 5: Profile
Profile At September 30, 2005 Assets $2 billion Loans $1.4 billion Deposits $1.35 billion Operations 24 full-service branches; 10 free standing ATMs
Slide 6: Original BHL Franchise
Original BHL Franchise
Slide 7: Current Franchise
Current Franchise Clifton Park
Slide 8: Strategic Actions
Strategic Actions Proven ability to execute October 2002 Management changes December 2002 Sold $69.7 mm in sub-prime auto loans March 2003 Performance benchmarks announced December 2003 Sold $9.9 mm in sub-prime auto loans January 2004 Six Sigma initiative implemented June 2004 Sold 60% ownership of
Slide 9: Strategic Actions
Strategic Actions Proven ability to execute October 2004 Purchased branch in Oriskany Falls, NY – Allowing de novo branching in NY December 2004 Purchased Berkshire Financial Planning June 2005 Opened Albany and Clifton Park, NY branches June 2005 Acquired Woronoco Bancorp creating a $2 billion inst
Slide 10: Differentiating Factors
Differentiating Factors No silos – keep it simple Strong board of directors Culture of enthusiasm, teamwork, energy and cross-selling Ability to attract and maintain the best Six Sigma culture
Slide 11: Efficiency Ratio and Non-Interest Expense to Average Assets
Efficiency Ratio and Non-Interest Expense to Average Assets (1)Exclusive of merger & conversion expenses and other non-recurring items (2)In addition to note 1, also excludes amortization of intangible assets
Slide 12: Quality Loan Growth
Quality Loan Growth Compound growth rate since 2002 ex Woronoco and sub-prime = 9% Compound growth rate since 2002 = 28% $1,412
Slide 13: Loan Portfolio Composition
Loan Portfolio Composition Commercial bank focus At September 30, 2005 At December 31, 2004
Slide 14: Commercial Loans
Commercial Loans Compound growth rate since 2002 exclusive of Woronoco = 11% Compound growth rate since 2002 = 22% $559
Slide 15: Commercial Loans
Commercial Loans At September 30, 2005 67% of portfolio re-prices within 1 year Only 14% re-prices beyond 3 years 24% floating with prime or other short-term indexes At December 31, 2004
Slide 16: Credit Profile - Commercial Loans
Credit Profile - Commercial Loans Lending criteria with few exceptions: Personal guarantees required Maximum loan to value 80% Minimum debt service coverage 1.25X Delinquency ratio Net-charge-offs (recoveries) 0.43% 0.84% 0.96% 9/30/05 0.02% 0.05% 0.08% 9/30/05
Slide 17: Consumer Loans
Consumer Loans Compound growth rate since 2002 exclusive of Woronoco and sub-prime auto loans = 16% Compound growth rate since 2002 = 26% Portfolio’s average FICO at 715 at 9/30/05 $159 $302
Slide 18: Consumer Loans
Consumer Loans At September 30, 2005 Duration of auto loans = 2.25 years Nearly all home equity loans float with prime At December 31, 2004
Slide 19: Credit Profile - Residential/Consumer Loans
Credit Profile - Residential/Consumer Loans Prime auto loans – At September 30, 2005 0.42% Net charge-offs (annualized) 0.47% Delinquency none Sub-prime loans FICO Score – Originations 2005 FICO Score – Portfolio Avg.
Slide 20: Credit Profile-Home Equity Lines of Credit
Credit Profile-Home Equity Lines of Credit None Losses (2002 – 2005) 0.25% Delinquency None LTV > 80% 55% Average LTV FICO Score – Originations (2 yrs) Home Equity Line of Credit – At September 30, 2005
Slide 21: Residential Mortgage Portfolio Mix
Residential Mortgage Portfolio Mix Prior to acquisition, sold $90mm in fixed rate WRO loans
Slide 22: Credit Profile – Residential Loans
Credit Profile – Residential Loans Residential 1-4 family mortgages – At September 30, 2005 None Losses (2002 – 2005) 0.12% Delinquency None Uninsured loans w/LTV > 80% None Interest only product 61% Average LTV FICO Score – Originations (2 yrs)
Slide 23: Asset Quality
Asset Quality Percent except NPA and NPL totals 0.11% 0.06% 0.01% Net loan charge-offs/average loans Average FICO Score 0.67% 0.37% 0.24% Loan delinquency/total loans 250% 811% 841% Allowance/NPL’s 1.13% 1.13% 0.93% Allowance/total loans 0.40% 0.14% 0.11% NPA/total loans and REO 4Q03 4Q04 3Q05 Solid
Slide 24: Interest Rate Risk Management
Interest Rate Risk Management Stable margins against rising rates and flattening yield curve
Slide 25: Total Deposits
Total Deposits Core deposits consist of demand, NOW, savings and money market accounts $782 $830 $845 $1,348 Core deposit compound growth rate = 23% Core deposit compound growth rate excluding Woronoco = 6%
Slide 26: Non-Interest Income (NII) Ex. Security Gains
Non-Interest Income (NII) Ex. Security Gains Main drivers of non-interest income: wealth management, insurance, loan service and customer service fees
Slide 27: Wealth Management
Wealth Management 11.1% asset growth $398 mm under management 92% new money to Berkshire Bank 98% retention ratio 11.2% revenue growth
Slide 28: Wealth Management Asset Growth
Wealth Management Asset Growth Assets under management compounded growth rate = 18% $253.3 $302.3 $357.9 $397.8
Slide 29: EPS/Net Interest Margin
EPS/Net Interest Margin Lower margins more than offset by strong credit quality and expense control Well positioned for rising rate environment
Slide 30: Performance Benchmarks
Performance Benchmarks 0.80% 0.89% 0.92% ROA 62.73% 60.66% 55.32% Efficiency Ratio 7.94% 9.68% 13.45% ROE-Tangible 2003 2004 3Q05 Annualized Actual Results Benchmarks announced in March 2003 Within 3 years: Double digit ROE 1.0% ROA Efficiency ratio below 60%
Slide 31: Creating Value
Creating Value Successful WRO integration Achieved 36% cost saves vs. 30% target On target to provide accretion to earnings Integrated 2 cultures seamlessly Improved non-interest income Double digit organic growth in all business lines Diligent expense management Strong asset quality Effective capit
Slide 32: Creating Value
Creating Value Attractive commercial & community bank franchise Motivate & retain the best quality people Drive organic loan & deposit growth; relationship building Continue to expand fee based income Consumer & commercial fee based business Wealth management Private banking Insurance Cross-selling
Slide 33: Creating Value
Creating Value Join us December 1 st in New York City for more details… On the move
Slide 34: Appendix: Reconciliation of GAAP and Core Income
Appendix: Reconciliation of GAAP and Core Income - Add: Disallowance of the dividend received deduction on the Bank’s REIT 9,211 1,107 Add: Net losses and expenses on sale of sub-prime auto loans, net of tax 5,258 Add: Net other non-recurring, net of tax $0.36 $1.57 $2.01 $1.45 $0.48 $0.54 Diluted e
Slide 35: November 8 & 9, 2005
Investor Presentation November 8 & 9, 2005 If you have any questions, please contact: Wayne F. Patenaude, CFA Senior Vice President and CFO (413) 236-3195 wpatenaude@berkshirebank.com OR L. Alexandra Dest, Investor Relations Vice President and Senior Investment Officer (413) 236-3163 adest@berkshire
Slide 36: Loan Portfolio Characteristics
Loan Portfolio Characteristics At September 30, 2005 Positioned for rising rates Less reliant on earnings from the securities portfolio