Beacon Financial Corporation · NYSE:BBT
Beacon Financial — Berkshire Hills Bancorp — Keefe, Bruyette & Woods investor conference, Boston and New York, June 2006
50 slides from Beacon Financial's conference presentation, Jun 15, 2006
Slide 1: Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc. Michael P. Daly President and Chief Executive Officer Boston, June 15, 2006 New York, June 16, 2006 Exhibit 99.1
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: Fundamentals
Fundamentals Culture and people Balance sheet growth Asset liability management Non-interest income growth Efficiencies Asset quality Capital allocation
Slide 4: Culture and People
Culture and People Attract and retain the best people Strengthen team, stay focused, stretch, pay for performance Continually strengthen board Instill culture of enthusiasm, teamwork and energy “Recognizing the people within our organization and giving our employees the latitude to make decisions an
Slide 5: Profile
Profile State chartered savings bank with commercial bank balance sheet Ownership profile – March 31, 2006 Institutional holders 37% Insiders* 10% Individuals 47% Foundation 6% Corporate profile – March 31, 2006 Market capitalization $300 million Assets $2.1 billion Loans $1.44 billion Deposits $1.4
Slide 6: Primary Market Area
Primary Market Area $1,451 $67 $511 $873 3/31/06 Deposits (millions) 12/31/05 Branches $41 New York State $1,371 Total 12/31/05 Deposits (millions) 6/15/06 Branches Market $473 $857 Pioneer Valley Berkshire County Our values will drive our success in expanded markets
Slide 7: Total Deposit Growth
Total Deposit Growth 24% 23% 21% 22% 22% 7% CAGR prior to expanded market 63% 61% 58% 56% 58% 20% 19% 16% 17% 19% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 3/31/2006 Core Time <$100 Time >$100 $830 $782 $846 $1,371 $1,451 21% Total deposit compound annual growth rate 7% Total deposit
Slide 8: Total Deposits – Actual vs. Plan
Total Deposits – Actual vs. Plan 13% 15% 13% Plan CAGR through $1,134 11% $817 $796 Total core $1,662 20% $1,160 $1,104 Total gross core $2,000 23% $1,451 $1,371 Total deposits Plan 12/31/2008 Annualized growth 1Q2006 Actual 3/31/2006 Actual 12/31/2005 Millions 23% Total deposits annualized growth t
Slide 9: Total Loan Growth
Total Loan Growth 38% 39% 28% 34% 33% Relationship building 41% 40% 50% 47% 45% 22% 19% 22% 21% 21% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 3/31/2006 Commercial Residential Consumer $1,416 $723 $792 $828 $1,449 24% Total loan compound annual growth rate 9% Total loan compound annual growt
Slide 10: Total Loans – Actual vs. Plan
Total Loans – Actual vs. Plan 19% CAGR 2005-2008 9% Total loans annualized growth through 3/31/06 13% $792 4% $556 $549 Residential 25% 16% 19% Plan CAGR through $1,110 14% $589 $570 Commercial $459 9% $304 $297 Consumer $2,361 9% $1,449 $1,416 Total loans Plan 12/31/2008 Annualized growth 1Q2006 Ac
Slide 11: yua2lad
yua2lad IETS! BE
Slide 12: Non-Interest Income – Historic Growth
$4,998 $5,431 $14,376 $13,660 $6,362 Non-Interest Income – Historic Growth 10.91% 12.63% 18.50% 13.62% 19.75% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 4Q05 Annualized 1Q06 Annualized 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% NII ex. of security gains NII ex security g
Slide 13: Non-Interest Income – Actual vs. Plan
Non-Interest Income – Actual vs. Plan 19% CAGR 2005-2008 21% Annualized growth through 3/31/06 $22,926 $18,735 $16,162 $13,660 $0 $2,500 $5,000 $7,500 $10,000 $12,500 $15,000 $17,500 $20,000 $22,500 $25,000 Actual $14,376 Note: Quarterly income annualized, exclusive of security gains
Slide 14: Operating Efficiencies
Operating Efficiencies 57.48% 57.03% 60.66% 62.73% 64.55% Reorganization Sale of sub-prime loans Sale of EastPoint Technologies (1) Exclusive of merger and conversion expenses, other non-recurring items, and amortization of intangible assets (2) Exclusive of merger and conversion expenses and other
Slide 15: Slide 15
Slide 16: Asset Quality
Asset Quality Reduce credit risk Portfolio well protected… Positioned for growth 2.22% 2.22% 2.21% 2.02% 2.04% C&I Allowance/Loans 0.90% 0.92% 1.13% 1.13% 1.43% Total Allowance/Loans 0.07% 10.96X% 1.44% 0.08% $1,186 0.15% 8.10X% 1.47% 0.14% $1,152 0.35% 2.80X% 1.43% 0.40% $3,199 0.87% 2.76X% 1.17% 0
Slide 17: Strategic Capital Allocation
Strategic Capital Allocation Expansion Woronoco acquisition De novo branches Fee income Divested sub-prime auto loans 2000 - Divested technology company 2004 Stock buybacks Invested for future growth and returned capital to shareholders
Slide 18: Strategic Capital Allocation
Strategic Capital Allocation Effectively employed excess capital 10.63% 7.56% 9.35% 9.55% $1.31 $1.57 $2.11 $1.92 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 $2.20 Tangible equity/tangible assets Core diluted earnings per share core
Slide 19: Where We Are Now
Where We Are Now 57.48 57.00 60.66 62.73 64.55 Efficiency ratio % 3/31/06* 12/31/05* 3.36 7.89 13.49 0.96 1.02 0.98 0.87 0.81 0.76 Core Tangible ROA % 7.64 9.06 7.28 1.54 ROE 0.94 0.89 0.80 0.20 ROA 3.61 7.97 Key Measures ** *Annualized **Please see appendix for reconciliation of non-GAAP financial
Slide 20: Competition
Competition Capital Region Under $1.5 Billion 48 banks & CUs $30 Billion + 6 - B of A, Citizens HSBC, Key, M&T, & Banknorth Berkshire County Under $1.5 Billion 19 banks & CUs $30 Billion + 2- Citizens & Banknorth Regional bank niche opportunity $1.5 - $30 Billion 4 – First Niagara, NBT, Trustco & Be
Slide 21: Retail Banking
Retail Banking $4,000 $3,500 $800 Mortgage originations (2004) (millions) 2,801 3,185 2,418 Population/ branch $13,900 $9,100 $2,700 Deposits 6/05 (millions) 3.46% 2.23% -1.65% 5 Year projected growth $49,634 Pioneer Valley Capital Region Berkshire County $46,954 $51,351 Median HH income Population
Slide 22: Regional Growth
Regional Growth Extend our success beyond Berkshire County Market area includes multi-state region Building market share in attractive, under-served markets >$30 billion $1.5 - $30 billion <$1.5 billion C/Us Banks of Regional Banks with headquarters in this market: Berkshire Bank
Slide 23: Retail Banking – Deposit Gathering
Retail Banking – Deposit Gathering Double number of branches by 2008 De novo branching Only regional bank headquartered in expanded market area v 6/15/06 12/31/06 Plan Total Berkshire County 12/31/05 Pioneer Valley New York 12/31/08 Plan Projected Yr End
Slide 24: Retail Banking – Deposit Gathering
Retail Banking – Deposit Gathering Strategy and goals Maintain Berkshire County dominance Branding Centers of influence Improve calling effort Municipal banking Deposit insurance fund Double Pioneer Valley market share Gain 3% market share in Capital Region
Slide 25: Retail Banking - Deposit Gathering
Retail Banking - Deposit Gathering 13% $2,000 $1,451 $1,371 Total 102% $338 $ 67 $ 41 New York State $748 $914 Plan Deposits (millions) $511 $873 Deposits 3/31/06 (millions) Plan CAGR through Deposits 12/31/05 (millions) Market $473 $857 17% 2% Pioneer Valley Berkshire County Regional growth 13% CAG
Slide 26: Retail Banking - Mortgages
Retail Banking - Mortgages 12% $781 $556 $549 Total 92% 10% 4% $141 $361 $291 $21 $263 $20 $272 $271 Plan Mortgages 2005-2008 (millions) 3/31/06 (millions) Plan CAGR through 2008 Mortgages 12/31/05 (millions) Market $258 Capital Region Pioneer Valley Berkshire County Regional growth 12% CAGR
Slide 27: Retail Banking - Mortgages
Retail Banking - Mortgages Strategy and goals Engage branch personnel Triple outside origination staff Capitalize on second home market and metropolitan relocation
Slide 28: Retail Banking – Consumer Lending
Retail Banking – Consumer Lending 10% $169 $129 $128 Total 126% 4% 6% $23 $71 $75 $4 $60 $2 $65 $63 Plan Equity Lines 2005-2008 (millions) 3/31/06 (millions) Plan CAGR through Equity Lines 12/31/05 (millions) Market $63 Capital Region Pioneer Valley Berkshire County Equity Lines Regional growth 10%
Slide 29: Retail Banking – Real Estate Loan Quality
Retail Banking – Real Estate Loan Quality 0.02% 0.23% Delinquency 3/31/06 0.14% 0.22% Average delinquency 2005 55% 61% Average LTV None None Mortgages HELOCs Average FICO 2004 – None Losses 2000 – None Uninsured LTV > 80% Strong loan quality Maintain credit standards
Slide 30: Retail Banking - Mortgages
Retail Banking - Mortgages 19% Albany 20% Pittsfield 20% Springfield 44% Long Island 43% Cape Cod % Overvalued Market Overvalued Real Estate * Source National City Bank st Qtr Credit risk partially protected from bubble Berkshire Bank average down payment 37%
Slide 31: Retail Banking - Consumer Lending
Retail Banking - Consumer Lending Indirect Auto Regional growth opportunity Active BHLB Dealers 23% 36% 8% 78% Penetration 3/31/06 27% Southern Vermont 45% Capital Region 29% 94% Penetration Active BHLB Dealers 3/31/06 # of Dealers Market Pioneer Valley Berkshire County Opportunity in contiguous mar
Slide 32: Retail Banking - Consumer Lending
Retail Banking - Consumer Lending Strategy and goals Use brand Benefit from Six Sigma principles Response in 30 minutes Payments to dealers same day Call program on high quality dealers Utilization of branch network Continue personal contact…people dealing with people Absolutely no subprime loans
Slide 33: Retail Banking - Consumer Lending
Retail Banking - Consumer Lending Maintain credit standards Indirect Lending Maintain credit quality Sub-prime loans since 2001: None Average FICO of portfolio: 716 Average FICO 2005 originations: 732 Losses 2005: 0.43% Average delinquency 2005: 0.45% Delinquency 3/31/06: 0.35%
Slide 34: Commercial Banking
Commercial Banking Why we have been successful Only regional bank headquartered in primary market area Not a priority for large banks Smaller banks have been acquired Mid-cap borrowers prefer local relationship Community involvement leads to business Corporate commitment to commercial banking Growth
Slide 35: Commercial Banking
Commercial Banking 1% 3% 35% BHLB estimated market share $85 $128 $357 BHLB commercial loans (millions) 12/31/05 $47,926 $32,216 $7,781 Total business revenues (millions) $4,250 23,736 Pioneer Valley Capital Region Berkshire County $1,025 6,984 $6,300 31,434 Estimated commercial loans (millions) Tot
Slide 36: Commercial Banking
Commercial Banking Deposits (billion) Sales (billion) Businesses Median HH Income Projected Growth Population (000s) Market $76.9 $7.7 $19.1 $2.7 50,207 6,984 2.74% -1.65% 1,039 $60,534 $46,954 Northern Connecticut Berkshire County Potential growth in northern Connecticut
Slide 37: Commercial Banking
Commercial Banking Deposits (billion) Sales (billion) Businesses Median HH Income Projected Growth Population (000s) Market $5.3 $7.7 $1.5 $2.7 5,241 6,984 1.07% -1.65% $43,769 $46,954 Southern Vermont Berkshire County Potential growth in southern Vermont
Slide 38: Commercial Banking
Commercial Banking 25% $1,109 $589 $570 Totals 60% 29% $345 $275 $100 $133 $489 Plan Commercial Loans 2008 (millions) $356 3/31/06 (millions) 11% Plan CAGR through 2008 Commercial Loans 12/31/05 (millions) Market $85 $128 $357 Capital Region Pioneer Valley Berkshire County 13% Annualized growth thro
Slide 39: Wealth Management Asset Growth
Wealth Management Asset Growth $246 $288 $378 $355 $319 Consistent growth and investment results $39 $63 $63 $15 $7 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 1Q06 Asset Management/Trust Investment services Assets under management compounded growth rate = 19% $418 $253 $303 $358 Total $441
Slide 40: Wealth Management
Wealth Management Client centered/consultative wealth management relationship Financial planning platform with 5 CFPs Investment management capabilities are not outsourced Credible investment results – 10 year history Emphasis on personal investment management “Trust” department credibility Strategy
Slide 41: Wealth Management
Wealth Management 24% $795 $441 $418 Total $186 $84 $525 Plan AUM 2008 (millions) $13 $32 $396 3/31/06 (millions) Plan Growth through 2008 AUM 12/31/05 (millions) Market $2 $23 $393 110% 38% 11% Capital Region Pioneer Valley Berkshire County 22% Annualized growth AUM through 3/31/06 24% CAGR
Slide 42: Insurance – An Emerging Business
Insurance – An Emerging Business Referral source of over 400 people Captive audience with existing customers Qualified leads through lending activities Additional lines of business Life Disability Health Expect 15 - 20% pretax profit margin within 3 years Overview
Slide 43: Capital Management
Capital Management Remain well capitalized Execute de novo branching and commercial banking strategy without raising capital Capital alternatives Trust preferred Subordinated debt 10.7% 7.8% 7.6% 3/31/2006 10.1% 11.1% Total risk based capital (bank) 7.4% 7.8% Tier 1 leverage capital (bank) 7.0% 7.6%
Slide 44: Wrap up Financial Highlights
Wrap up Financial Highlights 0.96% 0.94% 0.96% Return on assets 9.41% 7.64% 7.89% Return on equity 3.27% 57.48% 0.98% 12.63% 3/31/06 1.03% 1.02% Core return on tangible assets 3.36% 57.00% 13.49% Actual 12/31/05 Annualized Plan 12/31/08 3.49% Net interest margin 57.62% Efficiency ratio 14.10% Core r
Slide 45: Wrap up Core EPS Growth
Wrap up Core EPS Growth Historic compound annual core diluted EPS growth 2002 – 17% Proforma annual core diluted EPS growth accelerating to 18% in 2008 Note: Proforma growth does not include any significant acquisitions, which would be expected to be accretive to EPS growth.
Slide 46: Wrap up Strategic Highlights
Wrap up Strategic Highlights Summary Significant organic growth Double branch network size Double commercial loans Double size of wealth management Emerging insurance business 68% increase in non-interest income 46% increase in deposits 55% increase in consumer loans 44% increase in mortgages
Slide 47: Keefe, Bruyette & Woods, Inc.
Keefe, Bruyette & Woods, Inc. June 15 - 16, 2006 For questions, please contact: Wayne F. Patenaude CFO (413) 236-3195 wpatenaude@berkshirebank.com Company website: www.berkshirebank.com
Slide 48: Appendix
Appendix
Slide 49: Years ended December ($ in thousands)
Years ended December 31 ($ in thousands) Q4 2005 Net income 4,838 $ 11,509 $ 8,965 $ 2,097 $ Less: Gain on sale of securities, net (882) (1,402) (3,077) (15,143) Plus: Termination of ESOP - - 10,702 Plus: Merger and conversion expense - - - Plus: Sale of sub-prime auto loans - - 1,854 - Plus: Other,
Slide 50: Quarterly non-GAAP reconciliation
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, (Dollars in thousands, except per share data) Net income 4,818 $ 4,838 $ 4,746 $ (4,608) $ 3,252 $ Less: Gain on sale of securities, net (497) (882) (832) (1,388) (429) Plus: Termination of ESOP - - 8,667 - Plus: Merger and conversion expense - - Adj: In