425 1 w63464e425.txt 425 Filed by Banknorth Group, Inc. (Commission File No. 0-16947) Pursuant to Rule 425 under the Securities Act of 1933 Date: August 22, 2002 BANKNORTH GROUP, INC. ANNOUNCES THE ACQUISITION OF: AMERICAN FINANCIAL HOLDINGS, INC. SIGNIFICANTLY EXPANDING ITS CONNECTICUT FRANCHISE August 22, 2002 NOTE ON FORWARD-LOOKING INFORMATION This presentation contains forward-looking statements with respect to the financial condition, results of operations and business of Banknorth upon consummation of the acquisition of American Financial, including statements relating to: (a) the estimated cost savings and accretion to reported earnings that will be realized from the acquisition and (b) the merger charges expected to be incurred in connection with the acquisition. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) estimated cost savings from the acquisition cannot be fully realized within the expected time frame; (2) revenues following the acquisition are lower than expected; (3) competitive pressure among depository institutions increases significantly; (4) costs or difficulties related to the integration of the businesses of Banknorth and American Financial are greater than expected; (5) changes in the interest rate environment reduce interest margins; (6) general economic conditions, either nationally or in the markets in which Banknorth will be doing business, are less favorable than expected; or (7) legislation or changes in regulatory requirements adversely affect the businesses in which Banknorth would be engaged. 2 [BANKNORTH GROUP, INC. LOGO] A SUBSTANTIAL STEP FORWARD [ ] Compelling strategic fit: - Quality institution with solid earnings - Materially strengthens Connecticut market presence - High asset quality and strong core deposit base [ ] Brings Banknorth model to American's customers - - more products and services. [ ] Satisfies investment criteria - GAAP and cash EPS accretive in 2003. [ ] Strong asset quality does not add credit risk. --> AMERICAN IS EXACTLY THE TYPE OF ACQUISITION THAT WE HAVE CONSISTENTLY AND SUCCESSFULLY EXECUTED THROUGHOUT OUR HISTORY. 3 [BANKNORTH GROUP, INC. LOGO] FAVORABLE TRANSACTION [ ] Strong asset quality. [ ] Consistent with our long term strategic plan. [ ] Substantially expands our Connecticut footprint. [ ] American's franchise is well-known to Banknorth and we have been following them for several years. [ ] American is a "clean" institution with transparent accounting and familiar business lines. [ ] This transaction is small relative to the current size of Banknorth. [ ] Straightforward, low risk integration - Manageable sized deal - Experienced Banknorth integration team [BANKNORTH GROUP, INC. LOGO] 4 TRANSACTION OVERVIEW - EXTENDING A WINNING STRATEGY Financial data for quarter ended 6/30/02 in millions [ ] Consistent with Banknorth's acquisition philosophy of targeting high quality banks and thrifts in complementary markets.
AMERICAN FINANCIAL ------------------ Assets $ 2,895 Loans $ 1,677 Deposits $ 1,918 Branches 34 Return on Assets 1.42% Return on Equity 9.10% Net Interest Margin 3.39% Efficiency Ratio 46.5% Fee Revenue / Total Revenue* 15.6% NPLs / Loans 0.27% NPAs / Assets 0.16% Loan Loss Reserve / Loans 1.04% *Excludes gain on sale of securities
[BANKNORTH GROUP, INC. LOGO] 5 TRANSACTION OVERVIEW - EXTENDING A WINNING STRATEGY Financial data as of 6/30/02; pro forma for American Financial, Ipswich, Bancorp Connecticut, and Warren [ ] Banknorth's franchise is diversified through Southern New England, Northern New England and Upstate New York. [ ] Over 50% of Banknorth's loans and deposits are in Massachusetts and Connecticut.
LOANS DEPOSITS Massachusetts 43% Massachusetts 35% Maine 17% New Hampshire 19% Connecticut 15% Maine 16% New Hampshire 12% Connecticut 15% Vermont 8% Vermont 9% New York 5% New York 6%
[BANKNORTH GROUP, INC. LOGO] 6 TRANSACTION OVERVIEW - EXTENDING A WINNING STRATEGY [ ] Provides significant cross-sell opportunities from the addition of Banknorth's broad array of products: - Commercial business lending - Small business lending - Insurance sales - Asset based lending and leasing services - Investment management services - Consumer lending - Cash management - Merchant credit card processing [ ] Conservative cost savings assumptions of 25% of American's G&A expense. [ ] Accretive to GAAP and cash earnings per share. 7 [BANKNORTH GROUP, INC. LOGO] BUILDING THE DOMINANT COMMUNITY BANKING FRANCHISE IN MA, AND NOW CT [ ] Significantly increases Banknorth's Connecticut market presence. [ ] 5th largest deposit market share in Connecticut. [ ] Extends branch distribution system within the attractive Hartford MSA. [MAP OF NEW ENGLAND SHOWING BRANCH LOCATIONS OF BANKNORTH GROUP AND AMERICAN FINANCIAL HOLDINGS] 8 [BANKNORTH GROUP, INC. LOGO] BUILDING THE DOMINANT COMMUNITY BANKING FRANCHISE IN MA, AND NOW CT [MAP OF CONNECTICUT SHOWING BRANCH LOCATIONS OF BANKNORTH GROUP AND AMERICAN FINANCIAL HOLDINGS] 9 [BANKNORTH GROUP, INC. LOGO] CONNECTICUT DEPOSIT MARKET SHARE [ ] Connecticut has the second highest state per capita income in the nation.
TOTAL TOTAL DEPOSITS MARKET BRANCH IN MARKET SHARE RANK INSTITUTION TYPE COUNT ($000) (%) ---- ----------- ---- ----- ------ --- 1 FleetBoston Financial Corp. (MA) Bank 183 $13,984,945 23.16% 2 People's Mutual Holding Co. (CT) Bank 145 7,781,760 12.89 3 Webster Financial Corp. (CT) Thrift 114 6,988,941 11.57 4 Wachovia Corp. (NC) Bank 87 4,500,384 7.45 ------------------------------------------------------------------------------------------ 5 PRO FORMA-BANKNORTH BANK 46 2,621,913 4.34 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ 5 American Financial Holdings (CT) Thrift 34 1,967,285 3.26 ------------------------------------------------------------------------------------------ 6 Royal Bank of Scotland Group Bank 42 1,952,668 3.23 7 Hudson United Bancorp (NJ) Bank 43 1,950,729 3.23 8 J.P. Morgan Chase & Co. (NY) Bank 29 1,921,428 3.18 9 New Haven Savings Bank (CT) Savings Bank 36 1,713,578 2.84 10 Connecticut Bancshares Inc. (CT) Thrift 36 1,636,599 2.71 11 Sovereign Bancorp Inc. (PA) Thrift 37 1,592,670 2.64 12 Liberty Bank (CT) Savings Bank 33 1,520,189 2.52 13 Union Savings Bank (CT) Savings Bank 15 688,585 1.14 ------------------------------------------------------------------------------------------ 14 Banknorth Group, Inc. (ME) Bank 12 654,628 1.08 ------------------------------------------------------------------------------------------ 15 Citigroup Inc. (NY) Bank 7 644,877 1.07 16 First County Bank (CT) Savings Bank 10 591,960 0.98 17 Farmington Savings Bank (CT) Savings Bank 10 490,395 0.81 18 Bank of New York Co. (NY) Bank 10 482,251 0.80 19 Torrington Savings Bank (CT) Savings Bank 6 476,479 0.79 20 NewMil Bancorp Inc. (CT) Bank 19 472,745 0.78 ==================================== TOP 10 749 $44,398,317 73.52% TOP 20 908 $52,013,096 86.13% TOTALS (1-72) 1,145 $60,386,766 100.00%
Source: SNL Financial Data as of June 2001 10 [BANKNORTH GROUP, INC. LOGO] ENHANCED PRESENCE IN DESIRABLE MARKETS Deposits in thousands
PRO FORMA ---------------------------------------------- EXISTING PRO FORMA RANK DEPOSITS BRANCHES MARKET SHARE RANK ---- ---------------------------------------------- Connecticut 14 $2,621,913 46 4.34% 5 ---------------------------------------------------------------------------- Hartford County 7 $1,723,157 23 9.54% 3 New Haven County 19 $569,702 13 4.55% 7 Middlesex County 11 $43,971 2 1.88% 9 New London County 12 $23,969 1 .75% 12 Litchfield County NA $210,163 6 6.44% 8 Tolland County NA $50,951 1 3.17% 9
Source: SNL Financial Data as of June 2001 11 [BANKNORTH GROUP, INC. LOGO] DIVERSIFIED LOAN PORTFOLIO Financial data as of 6/30/02, in millions LOANS
% OF % OF % OF % OF % OF BKNG/IPSW TOTAL BKCT TOTAL WRNB TOTAL AMFH TOTAL PRO FORMA TOTAL --------- ----- ---- ----- ---- ----- ---- ----- --------- ----- Residential Real Estate $2,659 20% $114 32% $43 13% $1,057 63% $3,873 25% Commercial Real Estate (1) $4,327 33% $56 16% $221 64% $113 7% $4,717 30% Consumer $3,581 27% $93 26% $32 9% $446 27% $4,152 27% Commercial Loans & Leases $2,679 20% $89 25% $49 14% $61 4% $2,878 18% ------- ----- ----- ------ ------- $13,246 $351 $345 $1,677 $15,620 ======= ==== ==== ====== =======
(1) Includes construction and land 12 [BANKNORTH GROUP, INC. LOGO] COMPLEMENTARY DEPOSIT MIX Financial data as of 6/30/02, in millions DEPOSITS
% OF % OF % OF % OF % OF BKNG/IPSW TOTAL BKCT TOTAL WRNB TOTAL AMFH TOTAL PRO FORMA TOTAL ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Demand $2,732 19% $48 11% $38 10% $87 5% $2,905 17% Regular Savings $1,773 12% $83 19% $117 30% $367 19% $2,340 13% NOW & Money Market $5,473 37% $108 25% $117 30% $518 27% $6,215 36% Certificates of Deposit $4,636 32% $190 44% $123 31% $946 49% $5,895 34% Brokered Deposits $42 0% $0 0% $0 0% $0 0% $42 0% ------- ------- ------- ------- ------- $14,655 $429 $394 $1,918 $17,396 ======= ======= ======= ======= ======= Net Interest Margin 4.21% 3.77% 4.44% 3.38% 4.10% [BANKNORTH GROUP, INC. LOGO]
13 STRONG ASSET QUALITY Financial data as of 6/30/02, in thousands ASSET QUALITY
BKNG/IPSW BKCT WRNB AMFH PRO FORMA --------- ---- ---- ---- --------- Gross Loans $13,245,842 $351,291 $345,283 $1,677,262 $15,619,678 Reserves $195,610 $5,645 $4,992 $17,248 $223,495 Non Performing Loans $67,076 $819 $84 $4,534 $72,513 Other Real Estate Owned $5,281 - - $95 $5,376 ----------- ----------- ----------- ----------- ----------- Total Non Performing Assets $72,357 $819 $84 $4,629 $77,889 =========== =========== =========== =========== =========== ASSET QUALITY RATIOS: -------------------- Reserves/Loans 1.48% 1.61% 1.45% 1.03% 1.43% Reserves/NPLs 292% 689% 5943% 380% 308% NPA / Loans + OREO 0.55% 0.23% 0.02% 0.28% 0.50% [BANKNORTH GROUP, INC. LOGO]
14 AMERICAN FINANCIAL HOLDINGS, INC. TRANSACTION SUMMARY Aggregate transaction value: $709.3 million (1) Total shares issued: Fixed at approximately 13.3 million BKNG shares, based on a fixed exchange ratio of 1.220x for 50% of AMFH fully diluted shares outstanding Cash issued: $32.00 per share for 50% of AMFH fully diluted shares outstanding Double trigger walkaway: 20% decline in BKNG stock price & 20% decline relative to the NASDAQ Bank Index Breakup fee: $28.0 million Estimated one time merger charge: $48.3 million (2) --------------------- (1) Equity component value based on BKNG closing price of $27.21 on August 21, 2002. (2) Exclusive of unallocated ESOP shares, which are reflected in transaction value. [BANKNORTH GROUP, INC. LOGO] 15 TRANSACTION MULTIPLES PRICE PER SHARE (1): $32.00 PREMIUM TO MARKET (2): 3.0% PRICE / STATED 6/30/02 BOOK VALUE PER SHARE: 161% PRICE / 6/30/02 TANGIBLE BOOK VALUE PER SHARE: 208% PRICE / 2002 ESTIMATED EARNINGS PER SHARE (3): 18.7x PRICE / 2003 ESTIMATED EARNINGS PER SHARE (3): 16.5x OWNERSHIP: 8.1%
(1) Based on cash price per share of $32.00 (2) Based on August 21, 2002 closing stock price of $31.08 for AMFH (3) Based on I/B/E/S consolidated earnings estimates 16 [BANKNORTH GROUP, INC. LOGO] TRANSACTION TIMETABLE EXPECTED SHAREHOLDER APPROVALS (1): Q4 - 2002 EXPECTED CLOSING: Q1 - 2003 EXPECTED SYSTEMS CONVERSION: Q1 - 2003
(1) Shareholder approval required for American; Banknorth does not require shareholder approval 17 [BANKNORTH GROUP, INC. LOGO] SUMMARY FINANCIAL OVERVIEW Financial data as of 6/30/02, in millions; pro forma capital ratios are projected for 12/31/02 based on consensus estimate of retained earnings
BKNG/IPSW BKCT WRNB AMFH PRO FORMA ------------------------------------------------------------- Assets $21,616 $671 $460 $2,895 $26,148 Loans $13,246 $351 $345 $1,677 $15,620 Loan Loss Reserves $196 $6 $5 $17 $223 Intangibles $488 - - $100 $1,121 Deposits $14,655 $429 $394 $1,918 $17,396 Common Equity $1,838 $62 $44 $444 $2,257 Book Value Per Share $12.31 $11.88 $5.98 $19.84 $13.77 Tangible BV Per Share $9.04 $11.88 $5.98 $15.36 $6.93 Leverage Ratio 7.29% 9.20% 9.00% 11.87% 6.12% Tier 1 Risk Based Capital Ratio 9.97% 13.15% 11.20% 17.87% 8.29% Total Risk Based Capital Ratio 12.41% 14.41% 12.45% 18.77% 10.62%
18 [BANKNORTH GROUP, INC. LOGO] SOLID EARNINGS ACCRETION - GAAP Financial data in thousands
2003 ---- Banknorth Earnings (a) $341,250 American Earnings (a) $41,000 Cost Savings (assumes 25%) $7,475 Financing Costs ($11,575) --------- PRO FORMA EARNINGS $378,150 Fully Diluted Shares Outstanding (b) 150,575 Shares Issued 13,274 --------- PRO FORMA SHARES OUTSTANDING 163,849 -------------------------------------------------------------- PRO FORMA GAAP EARNINGS PER SHARE $2.31 STAND ALONE GAAP EARNINGS PER SHARE $2.27 GAAP ACCRETION 1.8% -------------------------------------------------------------- Pro Forma Return on Average Assets 1.40% Pro Forma Return on Average Equity 15.77%
(a) Based on I/B/E/S consensus estimates (b) Shares outstanding pro forma for Ipswich and Warren 19 [BANKNORTH GROUP, INC. LOGO] SOLID EARNINGS ACCRETION - CASH Financial data in thousands
2003 ---- Banknorth Earnings (a) $353,400 American Earnings (a) $41,000 Cost Savings (assumes 25%) $7,475 CDI Amortization $4,075 Financing Costs ($11,575) --------- PRO FORMA CASH EARNINGS $394,375 Fully Diluted Shares Outstanding (b) 150,575 Shares Issued 13,274 --------- PRO FORMA SHARES OUTSTANDING 163,849 ------------------------------------------------------------------------ PRO FORMA CASH EARNINGS PER SHARE $2.41 STAND ALONE CASH EARNINGS PER SHARE $2.35 CASH EARNINGS ACCRETION 2.6% ------------------------------------------------------------------------ Pro Forma Cash Return on Average Tangible Assets 1.52% Pro Forma Cash Return on Average Tangible Equity 30.90%
(a) Based on I/B/E/S consensus estimates (b) Shares outstanding pro forma for Ipswich and Warren 20 [BANKNORTH GROUP, INC. LOGO] SUMMARY [ ] Solid, profitable franchise with sound asset quality. [ ] Great strategic fit and geographic enhancement. [ ] Consistent with our strategy of pursuing in-market or contiguous acquisitions of high quality companies. [ ] Low execution risk and conservative cost savings projections. [ ] Attractive cross sell opportunities. [ ] Solid earnings accretion. [BANKNORTH GROUP, INC. LOGO] 21